Show Notes

• 00:00 – Intro: This Week on the YMYW Podcast
• 00:48 – In Our 40s and Haven’t Hit a Million Yet. Are We On Track for Retirement? (Martin & Caterina, Green Bay – voice)
• 10:29 – We Have Over $5M. Can We Retire Today at 50 and 57 and Still Build Wealth for Our Kids? (Piggie & Kermit, CA)
• 18:24 – Watch Don’t Make These 10 Will and Trust Mistakes on YMYW TV and Download the Estate Planning Organizer
• 19:08 – We’re 56 and 52 With $500K. Can I Retire Early at 62? (Galahad and Zoot, Chicago)
• 25:36 – We’re 61 and 56 With $600K. Have We Saved Enough for Retirement? (Bo & Daisy, upstate NY)
• 33:49 – Calculate Your Free Financial Blueprint
• 34:12 – We’re 61 and 58 With $1.5M. How Much Can We Spend in Retirement, When Should We Claim Social Security? (Hefwannabe and Jane, OK)
• 42:19 – If You Can Retire Early, Why Wouldn’t You? (Chuck, SC)
• 48:11 – YMYW Podcast Outro

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Transcription

Intro: This Week on the YMYW Podcast

Andi: Martin and Caterina in Green Bay are in their 40s and haven’t yet saved a million bucks. Are they on track to retire at age 58? Can Piggy and Kermit in California retire today at ages 50 and 57 and still build wealth for their children? Can Galahad and Zoot in Chicago retire early in their 50s, or do they need to keep working? And do Bo and Daisy have enough saved to retire now at 61 and 56? Spitballing early retirement, today on Your Money, Your Wealth® podcast number 520. I’m Executive Producer Andi Last with the hosts of Your Money, Your Wealth®, Joe Anderson, CFP® and Big Al Clopine, CPA. If you’ve got money questions or want a retirement spitball analysis of your own, click or tap Ask Joe and Big Al in the episode description and send us an email or a voice message, like this one:

In Our 40s and Haven’t Hit a Million Yet. Are We On Track for Retirement? (Martin & Caterina, Green Bay – voice)

“Thanks for taking our spitball, Joe, Big Al, and Andi. We love your show. I never miss an episode. I’m hoping that our spitball will be useful to some others out there who are saving hard but haven’t yet hit a million dollars. Here’s our details: you can call us Martin and Caterina. I’m 44 and she’s 42. We live in the frozen tundra, home of the Green Bay Packers. I drive a Honda and she drives a Kia. Both cars are paid off.  Neither of us are daily drinkers, but I love a strong bourbon old-fashioned with extra cherries, and she’s a sucker for red wine. Here are our assets. We’ve got about:

• $15,000 in cash
• high yield, which is our emergency savings, of $50,000
• Brokerage account was $125,000
• Tax deferred retirement accounts – $405,000
• Roth IRAs – $99,000
• HSA – $5000
• 529 – $25,000
• Inherited IRA – $43,000

That’s a total, if my math is right, of $767,000. Our total debt is $50,000 – we’ve only got the mortgage.  We spread out our annual savings between the different accounts as follows: HSA – about $7230 per year, 529 – $1200 per year, Roth IRAs – $14,000 per year, brokerage – $6000 per year, tax deferred – $8400 per year, for a total annual savings of $36,842, which is about 27% of our annual income. Our employers contribute another $8000 per year, which brings our total annual savings to $44,828.  We’d both like to be able to retire by age 58, but we’re open to working longer if we’re in a good work situation and healthy. We think we need about $90,000 per year to live on in retirement, post-tax.  We’ll likely receive up to $500,000 inheritance over the next 10 years, which will go straight into the brokerage unless you want to suggest an alternative. We never count on any Social Security, but if that’s still a thing, then we’ll both take it at 70, and I estimate about $5000 per month. Our son is about to go to college and we have a plan to pay for it as he goes without changing our savings. So that’s our financial life in a nutshell, thanks for spit balling.”

Joe: No idea. I guaranteed most people either got off the show, turned it off, fast forwarded it. What was that?

Al: It’s a little, it was a little tough to understand. Well, he’s, he told us his assets. He wants to retire at 58 and wants to know if he’s on track.  So, I will recap what I think I heard.

Joe: Okay. Well, he wants to spend $90,000, right? Is that? I heard that.

Al: Yeah.

Joe: And that’s in today’s dollars, or?

Al: Yeah, but I’m assuming it’s today’s dollars, so just by doing a little math, Joe, if you take his $767,000.

Joe: Let me do it the other way real quick.

Al: Okay.

Joe: So, he wants $90,000. When does he want to retire?

Al: 14 years.

Joe: 14 years, let’s call 3.5% inflation.

Al: Okay.

Joe: So he needs $145,000. He doesn’t believe in Social Security. It’s not going to be there. Yeah, right. Yeah. And then so .04%, he needs $3,700,000.

Al: Yeah, and by using his numbers at a 6% rate of return over 14 years, he’ll have $2,700,000.

Joe: So he’s short.

Al: A little bit.

Joe: The robot is short.

Al: A little bit, a little bit short. It’s close though.

Joe: How does a robot even need to spend this money?

Al: That’s a good question.

Andi: I’m not sure this one was actually a robot. I think this one had a little bit of personality to it, but still, he was very, monotone for most of it.

Joe: You don’t think that was AI?

Andi: I don’t think so.  Not that one.

Joe: Now I feel like a jerk.

Andi: I would have said let’s not use it if it was AI.

Al: So I will, I’ll say it a slightly different way. So I just used the 3 % for-

Joe: I can’t even concentrate. I just feel so bad.

Al: So, so I got $136,000 of spending. I think a 4% distribution rate at $2,700,000 is about $108,000. So he’s about $30,000 short-ish. Now that’s without considering Social Security and you know, that anytime you’re that far out from retirement, you know, 14, 15, 20, 30 years, there’s so many variables that can happen that could change everything, but just based upon these numbers, I would say, it’s close, but it seems to be like $30,000 or $40,000 short. Maybe if you really do want to retire 58, then maybe you get a part time job. So maybe that would close the gap. But again when you’re looking this far out it’s just kind of numbers on a paper to- you’re in the ballpark I would say Joe, but you know, it’s there’s so many things that could happen that could change it.

Joe: So here’s a- Martin I apologize if that wasn’t to an AI machine, we get a lot of those lately.

Al: We do.

Joe: You have $800,000 at 42 years of age, or 44 years of age and your wife is 42.

Al: Yeah.

Joe: You’re saving like $50,000 a year.

Al: Yeah.

Joe: You’re in the top 1%. So, I mean, I think you’ll be able to do whatever you want to do. If you want to retire a little bit early at age 58, you know, that’s right around the corner.  You’re saving enough. We’re using a fairly conservative growth rate on the overall assets. We’re using a fairly high inflation rate on the living expenses. So, there’s a ton of variables. So, over a 14 year, if you continue to save what you’re saving, and as long as you don’t make any huge mistakes and blow this thing up, I think you’re sitting in a really good situation.

Al: Yeah, I think that’s a good way to say it. Plus, you get to 58, you know, you’re still healthy, right? So maybe you keep working a little bit longer, or maybe you do want to retire, and you want to adjust your spending a little bit better, because, or a little bit downward, if that’s, in fact what happens, maybe that’s worth it to you. So, it’s, yeah, there’s a lot of variables here. Rate of return is, huge. I mean, I just used the 6%, which is pretty conservative. Could you earn more? Yes. Could it be worse? Yes. It’s just hard to say.

Joe: But I think I like the diversification from a savings perspective, you got $14,000 going into Roth, you’re putting money into a brokerage account. Most people don’t save into a brokerage account, especially on a monthly or annual basis. That’s usually stock options, RSUs, inheritance. things of that nature. We usually see a big bulk up of cash and they don’t necessarily know how to invest it, but then they see huge, we see huge balances in, in retirement accounts. So I liked the fact you’re disciplined enough to put money into a brokerage account, that’s very uncommon.  And you know, you’re diversified in your savings. So I think as you approach retirement, you already have $100,000 in Roth, you’re putting $14,000 away a year into the Roths.  Yeah, I think, you know, from a spitball perspective, you’re doing a lot of things right. Of course, we could, you know, take a deeper dive in what are you actually invested in.  You know, probably stay globally diversified, low cost. And make sure that you manage the risk and you can tax manage the accounts. And when markets are going to go bad, I don’t know when they’re going to go bad, but they’re going to go bad at some point. That’s maybe when you double down and save a little bit more or do Roth conversions. But you just got to stay disciplined over the next several years. And I think, money will not be a worry. It’s like, where you want to spend the money, I think it’s going to be the worry.

Al: Yeah, I think that’s a good point. You talked about the market. The market will correct. And when it does, just keep on investing. In fact, that’s as, as Joe just said, that’s when you double down, that’s when you invest more, even though it feels like it’s the wrong time to invest. That’s when you double down because the market’s lower. Wouldn’t you want to rather buy the market or stocks or mutual funds while they’re on sale, while they’re cheaper? And the answer is yes. The tendency, when the market goes down, people stop investing because, oh, this doesn’t work anymore. I’m going to wait until it works again. And you kind of want to do just the opposite. I’ll say one more quick thing, and that is-

Joe: Oh, I can’t wait.

Al: – Social Security. Now, my dad, rest his soul, he would have been 93 this year, and he told me probably, he was probably in his late 50s, Joe, and he said, I don’t expect to get any Social Security. And he got decades of Social Security. It’s my belief is it’s going to be around. Who knows in what form. But there’s too many people that depend upon it. So it will be around in some, shape or form, I believe.

Joe: Yeah. I think Social Security is probably one of the largest asset that most retirees have as they go into retirement. If you take the present value of what their, you know, cash flows are. Like your dad.  So he lived until, what?

Al: Yeah, he was 90, actually almost 91 when he died.

Joe: 91 and he collected probably around, what, 62, 65?

Al: Yeah, yeah.

Joe: Almost 30 years of payments?

Al: And he used to complain about, he was having Social Security withheld, and it was paying for his mother-in-law.

Joe: Well, he loved his mother-in-law.

Al: Well, he did, but that was just, it was a frustration because he didn’t feel like he’d ever get to see a penny.

Joe: Got it. Got it. Got it. Got it.  All right. Let’s switch gears.

We Have Over $5M. Can We Retire Today at 50 and 57 and Still Build Wealth for Our Kids? (Piggy & Kermit, CA)

Joe: We got Piggy and Kermit.  “Hello. Just discovered your podcast a few weeks ago and I’ve already binged many episodes. Thank you for your high level content and humor. We are Piggy and Kermit from California. I’m 50, husband’s 57. We both drive Toyota hybrids. I love a cappuccino. My husband likes a Pilsner.  We would like to pivot to working less or choose not to work. Ideally, we’d like to spend more time with our kids, 10 and 14, get more exercise, and pursue personal interests.” Oh, God. “Here’s what we got.”

Al: What do they got, Joe?

Joe: $4,000,000 in a brokerage account.” Okay, Piggy and Kermit. Where’s Fozzie? You can probably have him join you. “$500,000 in a Roth, $750,000 in pre-tax IRAs and 401(k)s.” You’re 50, 57. All right. Got $5,500,000.  “We are both self-employed and earn roughly $350,000 in pre-tax income combined. However, we pay out of pocket for health care and dental, our kids activities, camps-“

Andi: Orthodontia-“

Joe: “- orthodontia.”

Al: That’s coming in your life.

Joe: What the hell does that mean? That’s like braces?

Andi: Braces, yes.

Joe: But that’s not an activity.

Al: No, but it’s a cost.

Joe: Got it.  Alright. “Thus, we spend about $200,000, $225,000 a year and save the remainder in our pre-tax accounts. Got a little other info. We have approximately $1,000,000 of equity in our primary residence and $400,000 equity in our rental.  The income and expenses from our rental property is included in our stated income and expenses. We are on track with saving for kids’ college. Saved about $400,000 for each child.” That’s it, huh?

Andi: Gonna get a good education.

Joe: Yeah, where are they going? Stanford?  “Because we want to set up our kids for success in educational life, we anticipate giving them money and maxing out annual gift contributions or paying for education or health related expenses for at least 10 years. Thus, we don’t anticipate our current expenses declining anytime soon. Two questions. Could we retire today, given our expenses and desire to build wealth for our kids?  If not, what net worth do you think we need to make the described financial scenario be viable? We’d love any thoughts on a part time work or cutting expenses to make our next phase dreams happen ASAP. Thanks in advance.”  Oh boy. Okay.

Al: Can they make it work with $5,000,000?

Joe: Get a little bit more exercise.

Al: Yeah. Right.

Joe: Okay. They’re going to stop working and they’re going to hit the gym.  And then after a week, they’re going to be like, well, this sucks.

Al: Maybe not. Maybe they’ll like it.

Joe: Come on.

Al: Anyway, you know what, when you have in this case, $5,250,000-

Joe: Yeah, that’s what I think about too, man, if you know, when I stop working, I’m just going to exercise, go to the gym, just dial in my golf game that much more.

Al: You’re going to start volunteering all the time.

Joe: Guess what?

Al: Eating better?

Joe: I’m going to start cracking cocktails at 8am.

Andi: How would it be spending 24/7 with your kids, Joe?

Joe: Well, yeah, well, you know, 10 and 14, maybe when the kids are 10 and 14.

Al: Yeah, that’s your-

Joe: That’s my goal is Piggy and Kermit.

Al: Yeah, there you go. Right?

Joe: They live in California. Maybe we can, right.  Right. Well, what do they got? $5,000,000, $5,700,000.

Al: Yeah. $5,250,000. They want to spend $200,000 to $220,000, $225,000, $200,000 a year would be a 3.8% distribution rate.  Good enough.

Joe: Yeah, at 50, 57.

Al: But that’s not even including Social Security, which they didn’t give us. Right. And you know what, I think I’ll just go back almost like the last one. It’s like, when you have a certain amount of dollars, you’re going to make it work. If you end up spending a little bit too much, you’re going to see your money going down. Well, maybe you spend a little bit less, but you can make it work.

Joe: At 50, 57. So I wonder what they do self-employed wise.

Al: Good question.

Joe: I wonder if you could parlay some of that, you know, you just hire an employee where you still get a little bit of income or-

Al: Yeah, it depends what kind of business, right?

Joe: Yeah. Because they make a ton of cash.

Al: A lot of people, a lot of people do that. They’ve got self-employed business and then-

Joe: They keep the business alive.

Al: Right. And they have employees or they have a couple of trusted employees that, that run it or run a lot of it.

Joe: For tax write offs.

Al: Yeah. And they still stay involved, but not near as much. They travel more. Maybe that would be a good way to go. But there’s plenty of assets here to make something work.

Joe: Yeah, I’m not sure what they do. They’re just both self-employed and making a lot of money. They’ve done a phenomenal job of saving some cash. $4,000,000 in a brokerage account. $500,000 in a Roth, $750,000 in the IRAs and 401(k)s. 50 and 57. So they’re spending $225,000 plus tax though, right?  Plus tax, plus the cost of living.  So if I’m like, yeah, $225,000 And, well, most of it’s a brokerage account, so the tax isn’t going to be all that much. At 4%, they need $5,600,000.  They probably need it-

Al: If they spend $225,000.

Joe: Yeah, at $225,000, a 3% distribution is $7,000,000.

Al: Yeah. So I think the number, I think they should spend closer to $200,000. I think they would feel safer with that. Or even $175,000. But I think $200,000.

Joe: They’re exercising.  That costs a lot of money.  And they’re gonna pursue personal interest.

Al: No, no, no, no. You can get, like for $18 a home gym.

Joe: Whatever. Whatever. Like an app?  I just saw like, I lost-

Al: or chair yoga?

Joe: Chair yoga?

Andi: Or they could just run up and down their stairs like Al.

Al: There ya go.

Joe: It was like, yeah, I was like 240 pounds. Now I weigh 189 pounds by walking, but yeah, about 3 minutes a day for the last two weeks. Like what the hell. Remember that commercial where you sprinkled salt?

Al: Yeah, the salt shaker. That’s exactly what I was thinking when you said that. I don’t even have to walk. I put a little salt on my food and I lose weight like crazy. It’s ridiculous.

Joe: I’m going to do chair yoga and I’m going to have-

Al: – the magic salt.

Joe: The magic salt and the walking app, you know, get the walking app.

Al: Yeah, yeah.

Joe: So, yeah, great. Yeah, they’re pretty close. I don’t know. It sounds like they want to leave like a larger legacy. They want to hang out with the kids. They’re gonna travel. They’re gonna do other things They’re probably gonna spoil them a little bit more. They’re gonna spend on more things. If you give up that business, you’re self-employed. Can you go back to the business? Let’s say you take a 5-year hiatus or a couple year hiatus and now the kids are in, in college, right? You got one at 14, so that kid’s in college and, you know, 3 to 4 years. So then, it’s just the 3 of them.  And that kid’s 14, 15 and he’s like, oh my God, that enough?

Al: Well I’m wondering if they, they have, a business or maybe they sold their business to get all that brokerage. Maybe they just work in the business. I don’t know, who knows, but yeah, there’s lots of ways to spend the-

Joe: Well you got $5,000,000, you’re going to be fine.

Al: That’s what I’m saying. Lots of ways to skin the cat on this. If it were me, I would probably just based upon the straight numbers, I would probably spend around $200,000, not $225,000, but then I would watch the dollars depending upon, is it shrinking too quickly? Then I might readjust or, whatever.

Joe: Pull back a little bit. Yep.  Okay, here we go.

Watch Don’t Make These 10 Will and Trust Mistakes on YMYW TV and Download the Estate Planning Organizer

Andi: You’ve spent your entire life saving for the future. After all that discipline and effort, don’t let the courts decide what happens to your money when you’re gone! Learn how to avoid common will and trust mistakes that can lead to an expensive and overly complicated estate plan. Watch 10 Will and Trust Mistakes to Avoid on Your Money, Your Wealth TV, with Joe Anderson, CFP®, and special guest Allison Alley, CFP®, sitting in for Big Al. Plus, download the Estate Planning Organizer and Survivor’s Guide for free from the podcast show notes to make things as easy as possible for your loved ones. Fill it out, give them a copy, and don’t forget to update it for them regularly. Click or tap the links in the episode description to watch YMYW TV, and to download the Estate Planning Organizer for free.

We’re 56 and 52 With $500K. Can I Retire Early at 62? (Galahad and Zoot, Chicago)

Joe: Next up. “Hey Joe, Big Al, and Andi, this is Galahad and Zoot. We’re in the northwest suburb of Chicago. Zoot thinks my Monty Python reference makes me sound like a dipsh*t.” Yeah, I’m with Zoot, for sure. “But she’s a Python hater, so I’m good rolling with it.” I like that term.  Dipsh*t.

Al: You do?

Joe: Yeah.

Al: Do you use it a lot?

Joe: No.

Al: Not enough.

Joe: I haven’t really heard it.

Andi: No. It’s gonna be dip bleep.

Joe: It’s gonna be part of the repertoire.

Al: Got it.

Joe: Wow.

Al: Got it.

Joe: It’s coming back though.

Al: Yeah. Making a comeback.

Joe: It’s definitely making a comeback.  “Been listening for about 6 months. Really enjoy the show and hoping for a quick spitball.” All right. Here you go.  “I currently plan to work until I’m 65, and I’m reasonably sure we’re fine if that happens. Since I’m an older person, 56 in the tech field, and younger people are cheaper, I’m not certain I’ll make it to 65 with my current employer. If I get laid off at 62, can I get by with retiring early and taking part time work, maybe $15,000, $20,000 a year? Or should I consider going back to work full time since my plan is to delay my Social Security until I’m 65? My drink of choice is a light beer and Zoot prefers Pinot.  I have two kids, 14 and 17. Snooky Doodle-“

Andi: a schnoodle.

Joe: Well, I like Snooky Doodle.

Al: A little Snooky doodle. That’s good. All right.

Joe: “We have 3 cars. They’re all paid off. She drives our 2018 Sienna. My daughter drives a 2010 Outlander and I drive a piece of crap 2008 Abio that  I bought a cheap- that I bought cheap to use when Zoot is at work and my daughter’s at school. I work from home. Our Castle Anthrax-“

Andi: Monty Python reference.

Al: Yeah, these are all Monty Python references.

Joe: “- and the $400,000 mortgage at 3.25% is appraised at $750,000. We have $50,000 in debt, loans and credit cards. We were triple whammy in 2009, 2010, when the market crashed, my wife was taking time off to stay at home with the kids and I lost my job. This took a huge toll on our retirement savings. I’m 56, Zoot’s 52. She currently makes $165,000, will retire at 57 with a $145,000 pension, transferable to me if something horrible happens to her. COLA starts at 62 and plans to get a part time job with a hotel chain or airline for travel benefits once retired.  We’re thinking about $15,000 to $20,000 a year.”  So far, this sounds pretty good, Al.

Al: There you go.

Joe: $150,000 pension.

Al: Yeah, I like that.

Joe: Alright. “She’s currently eligible for Social Security. I make $140,000. I currently have $200,000 in a traditional IRA, $10,000 in a Roth, $200,000 in a traditional IRA, $40,000 in a Roth. I’m contributing $12,000 a year to my Roth 401(k), $6000 a year to my traditional 401(k), and I’m converting $20,000 a year from my traditional to my Roth and paying the taxes through payroll deductions.  We have $2000 of brokerage account, $5000 of savings account, and $40,000 of 529 plan.  Okay, I view the pension as our fixed income savings. So over 95% of my retirement is put between various stock index funds. We currently spend $15,000 each per month.  We would like to spend $200,000 after taxes adjusted for inflation when I retire. The plan is to pay off the $50,000 in debt over the next 5 years, but since we’ll probably replace it with the student loan debt for the kids or a car loan, I’d like to keep the payments there for spitball purpose. Open up a Roth IRA contributing $1000 a year and a brokerage account contributing $500 a year for my 17 yo and we’ll do the same for my 14 yo when he starts working.”  Wow.  “This will be their inheritance if Zoot and I have the luck of longevity and run through all of our cash. We plan on our home covering any long-term care needs at a glance. Does this sound like this will pass the sniff test? Thanks for sharing the spit ball in an unofficially and totally on non-binding way.”  All right.  He wants to spend $200,000 a year. They’re going to have $150,000 pension. He’s 56. She’s going to retire at age 57, so that money is going to come in. He makes $140,000, and he wants to retire at when?

Al: Well, he’s planning to work until 65, but he’s afraid being in the tech industry might get laid off by 62. So he wants to know, can he really, can he retire at 62? So that’s 6 years from now.

Joe: So 62, he’s going to get $15,000 to $20,000 and Social Security at 62 at $65,000, he’s got $36,000, $40,000, $150,000, $36,000, he’s got how much saved? About $600,000?

Al: Yeah, about $500,000.

Joe: $500,000?

Al: Yeah, if you just-

Joe: Yeah, you’re fine.

Al: You take his savings-

Joe: He’s got a $150,000 pension.

Al: I know.

Joe: If you can’t live off of that-

Al: Might not be able to spend $200,000 though. I mean, just follow this math. So I started with-

Joe: Well he needs another $1,200,000, so he needs, what, $700,000?

Al: Yeah. So I’ve got with what he has at a 6% rate of return, 6 years, adding $18,000 a year, he ends up with about $800,000. Okay, 4% is $32,000. You add that to the $145,000 plus she’s going to make $15,000 or $20,000 just from being working in the travel industry. So it’s really close. It’s just a tad short. I mean, if you just go by straight numbers, but, and, of course I’m using, I didn’t really index expenses for inflation. So that could be more, but it’s pretty close.

Joe: $145,000 pension. I think you’re going to be fine.

Al: There’s a lot to work with.

Joe: Most people don’t even, can’t even snif that. So if you want to snif test, it smells pretty good. It smells all right to me.  All right.

Okay.

Joe: All right. What do we got here? For a dipsh*t, he married good.

Al: He did, didn’t he?

We’re 61 and 56 With $600K. Have We Saved Enough for Retirement? (Bo & Daisy, upstate NY)

Joe: “Good morning. This is Bo and Daisy.  We’d like to know if we’ve saved enough for retirement.”  Alright, Bo and Daisy. Is that Bo and Daisy Duke?

Andi: I think it’s probably from, yeah, from the-

Joe: John Snyder?

Andi: Dukes of Hazzard. Yeah, was Bo, yeah, he was the blonde, right?

Al: Yeah. Yeah. Yeah. That’s right.

Andi: Luke was the dark haired one.

Joe: Jessie.

Andi: Yeah. But now weren’t they brothers and sisters? So if this is- That’s a little weird.

Joe: Oh, no, they’re cousins.

Andi: Oh, cousins. That’s it. Still weird, but okay.

Joe: Cousins. Come on. Cousins.  “I like bourbon on the rocks.”

Andi: I like the accent you picked up.

Joe: Yeah.  So my wife was watching- I don’t know what the hell it was, but there was some, good old boys.  Okay. Got home from the office pretty late last night.

Al: Right.

Joe: She’s watching. I was like, oh, you’re watching some family videos.

Al: I bet she didn’t like that comment.

Joe: Yeah, she didn’t really care for that. Yeah. She lived in Arkansas. “I like a little bourbon on the rocks and the wife, a margarita. I’m 61, wife’s 56. We live in upstate New York. We have two pensions. One, I’m drawing from now, which is $2400 a month with health insurance paid for me and my wife by the employer. The wife will draw 62 at $650 a month in pension. I work part time and bring in $28,000 a year, and the wife is working and brings in $27,000 a year. Social Security, for me, willl be at retirement, which is, age 67 for $3100 per month, and the wife at 62, which will be half of mine. I have $410,000 in an IRA, $155,000 in a Roth, and the wife has $50,000 in a 403(b), and another $30,000 in a Roth. Our expenses are around $3200 a month, and we have no debt. My house is paid for, and we’d like to retire at age 62.  My wife wants to retire at 59. I’d like to draw about $36,000 per year from my investments, mostly from my traditional IRA for about 5 years until Social Security kicks in.  Then the wife at 62. Would like to hear your spitball. Thanks, Bo.”  Okay?

Al: Okay, so-

Joe: We gotta annualize some of this stuff.

Al: Yeah. So the way I read it, he’s getting about a $29,000 pension right now.

Andi: It’s annualized in the green part at the top.

Al: Yeah, and he wants to pull out another $36,000, so that’s $55,000. So my guess is he’s spending $55,000, not $38,000, which is what he said. So at $55,000, I guess the real question is, can he pull out $36,000 from his portfolio? Because he’s got that $650,000-

Joe: Yeah, like round up $700,000.

Al: Yeah. Round up. So, so yeah-

Joe: percent is 28%.

Al: Yeah, it would be, it’d be probably closer to 5% distribution rate, but that’s not including her pension or their Social Security. So I, I think that’s probably fine.

Joe: Yeah. The total fixed income is, what, it’s goin to be $92,000?

Al: Once it all comes in.

Joe: Once it all comes in and they want to spend-

Al: Well-

Joe: $80,000 a year?

Al: Yeah. Yeah, but-

Joe: That’s on top. He wants to draw $36,000 a year from his investment.

Al: Yeah, that’s what I’m saying. If he spent, if he wants to, he says, well, he’s making $29,000 right now from this pension and he wants to draw $36,000. So I think he wants to spend $55,000 or $60,000 is, what I’m sort of reading between the lines here.

Joe: Yeah. I don’t know. That’s rich in my blood.

Al: Well, but it’s not rich when you think about that doesn’t include her pension coming and their Social Security coming.  I think it’s probably okay.

Joe: Yeah, if he just wants to draw a lot of that down, but he’s still young. I mean, they’re 61 and 56.

Al: I mean, by the time all the fixed income comes in, it more than covers what they want to spend.  I think that’s what they want to spend.

Joe: The math makes sense. Real life, it’s a little sketchy.

Al: Well you never, see because we’re not 100% clear, really on what you want to spend, but just trying to read between the lines. That’s what I came up with. You want to spend closer to $55,000, $60,000. It’s a higher distribution rate than we would like, but that’s not including her pension and your Social Security. So I think when you factor that in, I think it’s probably okay.

Joe: So he’s working part time making $28,000 a year. And then his Social Security, let me just kind of see if I can kind of read between some of these lines here.

Al: Yeah, right, right.

Joe: So if he’s working part time at $28,000, his Social Security at age 67 is $36,000 a year.  $37,000? Right. So, okay, I’m guessing, and then hers is, she’s going to take the spousal benefit?

Al: Well, he thinks it’s half of his, but that’s not how it works.

Joe: Well, let’s just assume, I think he’s stating that she’s going to take the spousal benefit. Would you agree with that?

Al: Yeah, but she won’t get half of his benefit.

Joe: If he takes it at 62.

Al: Well, or if she takes it at 62, it’ll be about 30% reduced.

Joe: Yeah. So, all right, if I’m just trying to read between the lines on their spending, Alan, is what I’m trying to do. So let’s say he is 61, she is 56. If she’s going to take the spousal benefit, his Social Security is $36,000 a year.  So if I’ve maxed out my Social Security payments or the tax or FICA tax, your top benefit is probably what, $45,000 a year. So he’s at $36,000. So I’m guessing he’s probably made $100,000.

Al: Yeah. Up to the max probably each year.

Joe: No, he’s below the max.

Al: Yeah, but close.  I would say maybe a little bit less than that. Because the max would be closer to $45,000. He’s at $36,000.  I’m guessing, I’m just kind of going off the top of my head. But let’s say if he makes $100,000 and she wasn’t working and they’ve saved $700,000 a year, I guarantee their living expenses are low where they would be totally fine. If her benefit was the same as his and she didn’t have any savings, then I would assume that they’re, because he doesn’t give us what his living expenses are. He’s like, here, I want to take $36,000 out for 5 years to bridge the gap.

Al: He said his expenses are $3200 a month, which is $38,000.

Joe: Total?

Al: Yeah, that’s why I don’t trust that.

Joe: Yeah, I don’t, well maybe, if that’s really the case, then yeah, by all means, Bo and Daisy will pick up Luke.

Al: But he wants to retire.

Joe: Uncle Jesse.

Al: He wants to retire.

Joe: It’s a little moonshine.

Al: He wants to retire right now. He’s already making $29,000 pension.

Joe: Go for it.

Al: Then he wants to take another $36,000 out. That’s why I think he’s spending $55,000 or $60,000, at least.

Joe: Roscoe P. Coltrane?

Al: Yeah.

Joe: Boss Hogg?

Al: I did watch that show.

Joe: Let’s see.

Andi: What was the dog’s name?

Joe: What?

Al: I don’t remember.

Andi: What was the dog’s name?

Joe: Dog?

Andi: Yeah.

Joe: Enos? No, that’s the other cop.

Andi: Yeah.

Al: That’s right.

Joe: What’s, what is the dog’s name? Huh.  come here Cocoa.

Andi: Oh no, the, yeah, the Bassett Hound named Flash.

Joe: Flash.

Al: Flash.

Joe: Yeah.

Al: That I wouldn’t have got.

Joe: Flash. What was the name of the bar?

Andi: Oh boy.

Al: Dunno. Do you know?

Joe: Yes. The Boar’s Nest.

Andi: The Boars Nest.

Al: Oh wow.

Joe: Oh gosh.

Al: Look at that.

Joe: Steel trap.

Al: You still got it.

Joe: I still got it. I haven’t seen that show in 20 years.

Calculate Your Financial Blueprint

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We’re 61 and 58 With $1.5M. How Much Can We Spend in Retirement, When Should We Claim Social Security? (Hefwannabe and Jane, OK)

Joe: Okay. “Please use aliases Hefawannabe and Jane from Oklahoma.”  That’s the aliases that they came up with, or that’s what you pick?

Andi: That’s what they came up with, and I think it’s Hefwannabe, which sounds like he wants to be Hefeweizen? I don’t know.

Joe: Hefwannabe and Jane from Oklahoma.

Andi: Yep.

Joe: Alright, “I’d like a spitball please. I drive a 2023 Tesla. Jane drives a 2014 Ford Explorer. I’m 61, Jane’s 58, no pets. Favorite drink is bourbon, which is my main question.  How far financially can I step up my bourbon game?  Getting tired of the cheap stuff. Wanna retire at 62. Wife will be retired 4 years.  Here’s the numbers. 401(k), $830,000. Jane’s 401(k), $330,000. Jane’s rollover is $333,000. Pension for me is $1700. Survivor’s $850. My Social Security’s $2463. We’re $3500 or $4300. Jane’s Social Security’s $2000, $3000 or $4000.  I have health care through the VA. No debt, house paid off.  We’d like to move in the next couple of years. Guessing we would need another $100,000 on that. We spend-“  come on folks. Let’s go annually.

Andi: It’s in the green. “Spending. $120,000 a year. $93,460 a year currently.

Joe: “$7789 a month.

Al: $93,000.

Joe: Alright, everyone always tells you what they spend a month.  Oh, my God. I would, “Everyone always tells you what they spend a month, but I want you to know how much we can spend a month.”

Andi: “Everyone tells you what they want to spend a month, but I want to know how much we can spend a month.”

Joe: No, they don’t tell me how much they can spend a month. They tell me how much they can spend a year.

Al: Easier to follow. You gotta, it’s a lot easier. They’ve given me monthly numbers.

Joe: All right. He wants to know. “It’s $10,000 a month, $120,000 reasonable.  Bourbon can be expensive.” What kind of bourbon do you like?

Andi: Probably Pappy.

Joe: “Grandkids are out of state.  A little Pappy.” You want to get a little Pappy in you.  “So maybe more traveling if we do not move.  When should we take Social Security? No health issues. When using the Fidelity’s retirement planning tool, if we both wait until age 67 for Social Security, our withdrawal rates hit 4.8% for 4 years until Jane starts drawing. Is that a problem? Is this a reliable tool?  Thanks for the spitball.”  Okay, that was confusing.  So, alright. Hefawannabe is 61 years old.

Al: So he-

Joe:  Hefwannabe wants to retire when?

Al: At 62.

Joe: All right. Next year.

Al: Yep.

Joe: Okay.

Al: And they got, they have about $1,500,000 right now.

Joe: $1,500,000. Okay. So $1,500,000.

Al: And pension right now is about $20,000 plus.  Yeah. So if you look at just. This is just one way you could look at it. So it’s pension’s $20,000, Social Security, if he took it at 62, which I’m not recommending, but let’s say he did,  that’d be another $27,000. So, so $47,000 plus if you just take $1,500,000 at 4%, that’s 60, I get 107, I think that’s roughly-

Joe: Close to $10,000 a month?

Al: Yeah, close. But I haven’t really factored in higher Social Security or her Social Security. But yeah, I think $120,000 is in the ballpark.  The question sometimes we get is if 4.8% distribution, is it too high? Well, it feels a little bit too high, but that doesn’t include then your future Social Security. It’s okay to have a little-

Joe: No, what he’s saying is that this 4.8% distribution rate is only for a few years until it bridges the gap to Social Security.

Al: That’s what I’m saying. Yeah, exactly. So, so a short term 4.8% to bridge a gap to Social Security. And if you’re much, you’re a lot lower than I’m generally okay with that.

Joe: So is a Fidelity retirement plan a good tool?  I don’t know, I suppose. I’ve never used it, but here’s the deal. With any of these tools or any of shows like this, this is nonsense. Right, we’re giving you, like, a ballpark figure in regards to how much money that you have to see, hey, do you have enough in liquid assets or savings that potentially could produce enough income for you long term. And so we use distribution rates depending on your age, so if you are 60 years old,  you know, we might use, let’s say, don’t take out any more than 4% out of the portfolio. If you’re younger than that, maybe it’s don’t take out any more than 3%. There’s many studies out there, 3% is probably a better number.  But it really depends on how the portfolio is managed, or I guess what target rate of return that you’re generating. Is it more equities? Is it more cash? Is it more bonds? Is it a globally diversified portfolio? How much stocks versus how much bonds that you have? And then you have to consider your fixed income. What is your Social Security? What is your pension going to be? Do you have real estate income? And then you have to consider taxes. What’s the tax bill going to be on the income that you need? So if most of your dollars that stays in a retirement account, if you want to spend $120,000 a year, and most of that is going to be taxed at ordinary income rates, Okay, well at $120,000 some of that is going to be taxed at 12%, some of it’s going to be taxed at 22%. So you gotta consider, alright, well what is going to be the tax bill? What state do you live in? You live in Oklahoma, so what is the state tax on top of that? So that 4% could just be the dollar amount that you need to live off of. But then you have to pay, you know, federal tax, state tax, and there’s also health care, there’s IRMAA, there’s all sorts of different things that you really want to get dialed in regards to this. So when you’re online and you’re playing with computers and they’re telling you it’s a 4%, 4.8% distribution rate for 4 years, I can guarantee you that is wrong. It’s either going to be zero or it’s going to be 7%.  We don’t know what the market’s gonna do. We don’t know what your spending is gonna do. You’re in really good health today. Could something happen? You slip and fall, you have too much really good bourbon, and then you break a hip. I don’t know. I mean, just life happens. So these calculators help to see, alright, do you have enough money at a certain level? But that means nothing in regards to once you retire, your paycheck stops. So then you’ve got to create your own paycheck.  So are you ready to do that? And then when the market turns, do you have enough confidence to say, you know what, I trust that the markets are going to come back when you don’t have a paycheck coming in? That’s when things get dicey.

Al: Yeah, I think that’s well said. I think when you think about it this way, the, so the 4% rule is just kind of a guideline to see if you have enough. But the fact is, nothing ever works out. You know, this is based upon like a 6% or 7%, we’ll call it 6% rate of return, flat over the rest of your life and your spending is consistent. These things never happen, right? So the thing to think about this is the market goes up and down at different points. You may have to adjust your spending. If you see your portfolio going down too quickly, you may want to spend less for a little while, or maybe get a little part time job for a little bit, a while. And then things turn around and then you’re more comfortable again. It’s a dynamic process. So when we run numbers like this, it’s only just to give you a guideline if you’re close. I think that’s well said.

Joe: Yeah. And you know, the retirement calculator, Fidelity calculator. Sure. Whatever, you know, I’m sure the numbers add up. You put your stuff in there. It’s going to calculate like Fidelity is a pretty good company. Yeah.  All right. Good luck.

If You Can Retire Early, Why Wouldn’t You? (Chuck, SC)

Joe: Let’s go to Chuck from South Carolina. “Hey Big Al, Joe, Andi, long time listener. Love the show. Thank you for producing it.”  Thank you, Andi, for producing it.

Andi: Sure.

Joe: Thank you, Aaron, for doing whatever you do. “I wrote in about a year and a half ago, shortly after I retired, at the age of 46.”

Al: There you go.

Joe: “Currently, working to get all my savings rolled over to the Roth. Thank you for the spitball suggestion. In a recent episode, you had a few people writing in that are thinking about retiring in their 40s. You made the comments, why? What are you gonna do? You’re gonna get bored.”  I was just kind of thinking about myself and my bias.  My bias were coming out. Because I was putting myself in their shoes. And I was thinking of myself being retired. Because I want to retire everyday, Chuck.  But then I think to myself, what would I do? I’d get bored. So then I would share my experience.  No, sir. “It’s been amazing.  For decades. I’ve measured my life at success by how much money I can make and accrue, how many promotions I can get at work. Now my perspective on what success is has changed.” Oh, this is getting deep.

Al: It is.

Joe: I like it. Yeah.  Bring it home. I’m in. “Since retiring and becoming a stay-at-home dad, I get to make my girls lunches, take them to school. Build new friendships. Play new sports, like pickle ball, get involved in church, work and lead charities, grocery shop, and cook amazing dinners, attend my kids activities, volunteer in their schools, make them snacks for when they get home.” Oh, this guy is a saint!

Al: Can you see yourself in there right now?

Joe: I mean, this is picture, this is exactly what I’m gonna do. I mean, to a T.

Andi: With old fashioned in hand.

Joe: I can’t wait to make my kids’ snacks.  “During the day so I can spend time with my family on the weekends. He does yard work during the days-

Al: – while they’re school-

Joe: – he visits colleges after he makes those snacks for the kids. Just a few of the freedoms that come with retiring younger and honestly, one of the very best is when I get sick I can actually lay in bed and just rest without guilt and stress of missing work or working through an illness. I’m a happier, healthier, and holistic person since retiring early.”  Well, I mean, that’s impressive.

Al: It is. I mean, that checks you in all right. Chuck is checking a lot of boxes in life here.

Joe: He sure is. There’s a few boxes. I mean, this sounds like you, Big Al. This is definitely you.  “My question is-“

Al: I could see you doing this for a week. Maybe?

Joe: The snacks for the kids.

Al: That’s what got you.

Joe: Grocery shopping, just panic attack with those lights.

Al: I’d love to come over and get your amazing dinners.

Joe: Oh yeah.  It’s called takeout, Uber Eats.

Al: Yeah. Yeah.

Joe: “If you have the skills, knowledge and discipline to save enough and live within your means to retire early and experience all these things, why wouldn’t you? Thank you for taking the time and taking my question and again, putting out such a great show. Long time listener.” Well, Chuck, appreciate the very nice sentiment.

Al: It’s a different perspective than what we talked about.

Joe: Yeah, you know, I don’t know, it’s, I get it, he probably worked a pretty stressful job, he saved enough money, can retire in his 40s, and you know, he can do yard work during the week, so he’s got free time on the weekend. He makes little snacks.

Al: Yeah. I think this is fantastic. I would say, the only thing I would say is, Chuck, write us back in 5 years and hopefully you still feel the same and if not, that’s okay too. It’s okay to go back to work.

Joe: I mean, if he’s leading charities, I mean, this guy is going to do some really cool things and help out a lot of really, you know, people in need.

Al: Right.  yeah.

Joe: Yeah. I think if-  He’s got the energy, he’s young.  46, man. Congrats.

Al: So yeah, it’s a great story. All right Well, I might change my perspective. This could be seen-

Andi: First step, take a cooking class.

Joe: Yeah, I gotta take a cooking class and I gotta figure out how to get over my anxiety of going into a grocery store.

Andi: You can have groceries delivered, you know.

Joe: Oh, okay.

Al: Well, there you go.

Joe: There you go. But then-

Al: Great. I’d love to see you make lunches in the morning.

Andi: Totally.

Al: What are you going to make? Like peanut butter and jelly?

Joe: No, I can make PB& J. No problem.  No problem at all.

Al: Throw a little apple in there. A little Rice Krispies treat. Call it good. Yeah, and you can play pickleball.

Joe: I don’t know. I kind of like the challenges that I have every day. Even though some days are harder than others. Sure.  Just making my kids’ snacks.

Al: Wouldn’t quite do it for you?

Joe: No, I don’t think it will just get me going.  So, but-

Al: I’d love to have you retire for a year and then you write us with your experience.

Joe: Yeah. Soon to come. Yeah. Okay. Netflix special.

Al: Okay. Perfect. All right. That’s it for us. Andi. Wonderful job. Thank you, Aaron. Great as always for just sitting there.  Big Al. Wonderful job.

Al: And back at you.

Joe: We’ll see you guys next time. Show’s called Your Money, Your Wealth®.

YMYW Podcast Outro

Andi: This is Your Money, Your Wealth, your podcast! If you enjoy YMYW, tell your friends and help us reach more listeners and viewers like you. And don’t forget to leave your honest reviews, comments, and ratings for Your Money, Your Wealth in Apple Podcasts, on YouTube, and in all the other apps that let you do that like Amazon, Audible, Castbox, Goodpods, Pandora, PlayerFM, Podcast Addict, Podchaser, and Podknife. We’re on all of ‘em!

Your Money, Your Wealth is presented by Pure Financial Advisors. To really learn how to make the most of your money and your wealth in  retirement, you need more than a spitball: schedule a free, no obligation, comprehensive financial assessment with the experienced professionals on Joe and Big Al’s team here at Pure. Click the Free Financial Assessment link in the episode description, or call 888-994-6257 to book yours. You ceet in person at any of our locations around the country – we’re growing every day – or online, right from your couch. No matter where you are, the Pure team will work with you to create a detailed plan tailored to meet your needs and goals in retirement.

Pure Financial Advisors is a registered investment advisor. This show does not intend to provide personalized investment advice through this podcast and does not represent that the securities or services discussed are suitable for any investor. As rules and regulations change, podcast content may become outdated. Investors are advised not to rely on any information contained in the podcast in the process of making a full and informed investment decision.

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