Show Notes

• 00:00 – Intro: This Week on the YMYW Podcast
• 01:06 – Is Retiring at 53 With No Pension a Smart Move or a Risky Bet? (George, South Carolina)
• 11:59 – High Income, High Spend, Early Retirement: Does the Math Still Work? (Joe, MA)
• 18:39 – At 26, Should I Go All In on a 457 to Retire Way Early? (Jonathan, Florida)
• 26:41 – Can I Retire Early and Still Cover Health Care and Long Term Care Costs? (Kris, California)
• 33:33 – I’m a Widowed Parent. Can I Retire at 57 and Still Fund College and Legacy Goals? (Rojo, California)
• 43:08 – Outro: Next Week on the YMYW Podcast

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Transcription

(NOTE: Transcriptions are an approximation and may not be entirely correct)

Intro: This Week on the YMYW Podcast

Andi: If you plan to punch the clock for the final time decades before “standard” retirement age, you need a financial strategy that goes beyond just saving. Joe and Big Al spitball five different early retirement plans to see whose numbers are tight and who is ready to go for it, today on Your Money, Your Wealth® podcast number 571. George in South Carolina wants to retire in 8 years at 53. Does he have enough in his brokerage account to bridge the gap to Social Security? Joe in Massachusetts is saving a staggering $200,000 a year, but will his high-spending lifestyle make a multi-million dollar nest egg look small? The fellas help 26-year-old Jonathan in Florida map out a path to retire in his 40s using his 457 plan, and they spitball on whether early exit strategies for both Kris and Rojo in California are a “green light” or a reality check. Plus, Joe explains why the “Rule of 55” and Roth conversions might be some of the most important tools in your early retirement toolbox. I’m Executive Producer Andi Last, and here are the hosts of Your Money, Your Wealth®, Joe Anderson, CFP® and Big Al Clopine, CPA.

Is Retiring at 53 With No Pension a Smart Move or a Risky Bet? (George, South Carolina)

Joe: We’re gonna go to George in South Carolina.

Al: Yep.

Joe: My question, can my wife and I retire early at age 53. All right. We are both 45 years old, yo. Wife does not work outside of the home. Annual income of roughly $250,000. Our current thought is use taxable brokerage account of roughly 950. Alright, target future value at 53 to cover our expenses from age 53 to 60. Our current spending is roughly $96,000 per year. $300,000 home is paid for. We have $1.2 million in retirement funds.

80,000 of those funds are in Roth. We invest roughly $20,000 per year in the 401(k)s stashing half of that in Roth 401(k) option. We will now have, we will not have any pension in retirement or any other income. We are projected for $3,000 a month in Social Security for myself and 1600 for her or my wife.

If she pulls at age 67, we have one daughter, 11 yo. We have $125,000 in education savings. Which should grove to cover her college years. I’ve listened to several financial podcasts and enjoy your show the most. By far.

Al: By far. Okay.

Joe: Wow. Look at that. I listen nearly every day on my drive every day.

Al: How about that?

Joe: Every day. Listen to this. I drive a 2022 Fort F-150. I drink a choice. It’s gotta be. Little Busch Light. What have we got?

Al: Oh no, IPA?

Joe: No, that’s IPA.

Al: Oh, it doesn’t match.

Joe: Jack Dan. Alright. Okay. Let’s see. And my wife, she drives a 2021 Acura, RDXI love IPA in a cold pin glass and my wife is my designated driver for life.

Al: Hmm.

Joe: Okay. Alright, cool. Alright. George, South Carolina.

Al: Yeah.

Joe: He retire at 53 years old,

Al: so that’s eight years from now, Joe.

Joe: All right.

Al: And I’m gonna say they got two, 2.2 million to start, saving about 20,000.

Joe: Who? One and a half million dollars. They had 45.

Al: That, that’s phenomenal. Right? Right. add 20,000 a year, eight years, 6%.

They end up with about 3.7 million. Okay. Spending 96,000, inflate that at 3% for eight years.

Joe: A hundred.

Al: It’s about 121. That’s a 3.3% distribution rate. That’s, that’s pretty close. You know, at age 53 maybe we might want you to be closer to 3%, but I think that’s, I think that’s pretty darn close. And that doesn’t include Social Security coming in later to help this.

Of course, that’s not for another 14 years. this is, this is one where I’d say it, it’s, it’s. It could be okay, but it’s pretty close. it, it would make, it would probably make me a little nervous. I, I think,

Joe: yeah, he’s got $950,000 in, in a brokerage account, right. He’s gonna retire at 53. He’s got seven years to bridge the gap at $120,000 a year.

Al: Yeah, yeah. Yeah.

Joe: That’s – it’s tricky.

Al: Yeah. I mean, it’s, it’s possible. But, you know, I, I think right now we’re, we are complacent on the market, we just keep thinking it’s gonna go up and that’s not necessarily gonna be the case.

Joe: Right.

Al: I don’t know, seven years.

Joe: To take money, you’re gonna totally deplete your brokerage account then.

Now you’re 60, you got two and a half million dollars and it’s all in retirement accounts because I don’t think he’s got enough liquidity right now to retire at 53 to pay the taxes on any conversions.

Al: Right?

Joe: Yeah, you absolutely would wanna do some conversions as you’re taking money from your, but I don’t know what the gain is in that brokerage account.

Al: Yeah, so then it’s that that whole capital gains versus conversion.

Joe: What do you wanna take advantage of the 0% capital gains rate? Or do you want to do a, you know, some conversions to get that money out of the, the deferred account to get it into the Roth? Because then when you’re, you know, claiming Social Security and a lot of your dollars are in Roth, then your Social Security could be tax free. So, I mean, there’s a lot, a lot of meat on the bone here, but yeah, just back of the envelope. I don’t think he can.

Al: It’s close. If it were me, Joe, well first of all, I would, I would probably try to get a part-time job and make a couple thousand. So 24,000 make 20 to $30,000 a month on top of this. I think it, I think this is a lot closer. and then I would,

Joe: but there’s so many assumptions too. He, he’s not gonna retire tomorrow. He is retiring in seven, eight years too.

Al: I mean, we’re, we’re assuming a straight line. I mean, which is all we can ever do,

Joe: right?

Al: Right. So these, every time we answer a question like this, it’s contingent upon the market. Market’s not gonna earn 6%. Compound year in, year out, or

Joe: seven or eight or four, or

Al: it might be two, it might be minus four. We, it just, we, we, we don’t know. I mean, so, so yeah, it’s pretty close. So, so when we say it’s close, it’s, it, it might work, but it’s it’s close enough that it, it, it.

That’s why I said I would feel a little uncomfortable doing this. If you’re really ready to retire and you wanna get out, go for it. But I just think you need a little bit more income somehow, maybe 30,000 a year on doing something. But the truth is, this is today with today’s assumptions, in eight years from now, you really, then you have to assess where you’re at and can, does this still work?

Or as you get closer to that? But yeah, it’s, it’s, it’s, it could work, but it’s a little tight, I think.

Joe: and the issue too is who knows what’s gonna happen over the next seven years, and he might be in a lot better position. So what are the steps that he needs to make to today to get, make sure that he’s on track at, at 53?

Is that all right, well, you got a home that’s paid for you make good income, you know, can you reduce a little bit of the spending today? you have 11-year-old daughter, right? So college is paid for now. Can you save a little bit more? Now, what rate of return are you gonna be generating? He’s at two 50, you’re in the 22% tax bracket.

Does it make sense to, to do a little bit of Roth? Right now he’s only got $80,000 in a Roth, so can he be more diversified from a tax perspective over the next eight years on where he wants to place his contributions, right? If the markets go down. Does it make sense to do conversions at that point?

Because then you’re converting the same amount of shares, but at a lower price to really leverage, you know, the volatility in the market. So, you know, there’s so many things that you wanna make sure that you’re looking at. but it’s close. I think he’s done a great job at 45, at two, $2.2 million.

Al: Phenomenal.

Joe: but the problem is, is that we’re living a heck of a lot longer. You’re gonna retire at 53, which is super young. And I don’t know, it’s when. You might get bored too. I don’t know. Guys making a ton of money.

Al: Yeah. Right. Well, and and another way to think about this, I think is, is if you just, let’s say you reduce the spending by 10, 10%.

I don’t know if they can do it, but let’s just say 10%, call it $10,000. So instead of spending 96,000, you’re spending 86 and that extra 10,000. Goes into savings. So not only does your savings gonna be higher than what I calculated, your spending is lower. And these ratios work out quite a bit better. So if, if eight years, and I, I think I know seven years they did that because their daughter’s gonna go to college and that their empty nesters and so they wanna have fun.

And I, I get it. Like I say, I think you’re close. It’s, it makes me a little nervous, but you, if you do, can do a. Couple tweaks or one tweak. One is spend less and save that. A second would be just do what you’re doing, but consider you may have to have a part-time job or here’s yet another one. Maybe you work an extra three years and you retire 55 or 56 instead of 53. Maybe this works better.

Joe: Yep. Well, I would retire 55. Then you have the rule of 55 that you can take money from your 401(k) plan without any penalties.

Al: Yeah, good point.

Joe: So you’re not gonna drain a hundred percent of your brokerage account,

Al: then you don’t have to do 72.

Joe: Yeah. Right. You don’t have to do all that bs.

Al: Yeah.

Joe: At 55, then it’s like, okay, well now I have access to my 401(k) plan where I can take distributions. If you retire at 53, you’re gonna have to wait until 59 and a half to get access to it. So you’re gonna deplete a hundred percent of your brokerage account.

Al: Okay. I like that. So you worked, you worked till 55.

Let’s try to cut spending by 500 a month. 6,000. So you’re spending 90 save that.

Joe: I don’t, yeah, I think if he retires at 55, he doesn’t have to pinch. Pinch pennies.

Al: It’s better. It’s better. But I think the more you can do the

Joe: No, of course,

Al: the better.

Joe: Yeah. I mean, there’s so many levers that you pull, right?

So this is why you wanna look at this on an ongoing basis. What does this year look like versus next? You know what, next year you might spend $140,000 and save less, but the following year you might only spend $80,000. So you save all of that, you know, life. There’s changes Al.

Al: It does, doesn’t it.

Joe: Throws you a little curve balls. Life is like a what box of chocolates or something.

Andi: If you’re lucky.

Joe: If you’re lucky. Okie dokey.

Andi: Are you among the 49% of retirees making the same mistake that quietly costs thousands every single year? When it comes to retirement withdrawals, you may think you’re doing everything right, but this mistake can quietly cost thousands of dollars over time. The good news is, it can be fixed with a little clarity and some thoughtful planning. This week on a brand new episode of YMYW TV, Joe and Big Al look at the #1 Spending Mistake Ruining Retirements. They’ll break down real life examples and show you how retirement income, taxes, RMDs, and timing all work together. They’ll show you how a thoughtful withdrawal strategy can help your money last longer and reduce unnecessary tax surprises. Plus, download the companion Withdrawal Strategy Guide for free. Learn how to think about retirement distributions how to calculate how much you’ll actually need, how to compare different withdrawal approaches, and how to understand your probability of success based on your asset mix. It also explains the difference between traditional withdrawal sequencing and more proportional, tax-smart strategies that can help reduce RMDs and long-term tax drag. Click or tap the links in the episode description to watch YMYW TV and to download the Withdrawal Strategy Guide.

High Income, High Spend, Early Retirement: Does the Math Still Work? (Joe, MA)

Joe: Let’s move on to Joe in Massachusetts. Hey boys and Andi, long time listener. Repeat caller. Love the show. 48. My wife’s 45. We are hoping to retire when I turn 55 and she’s 53. We have three and a half million dollars saved for retirement. Way to go, Joe.

Al: That’s good. That’s really good.

Joe: Of which million dollars is in Roth accounts 2.2 in tax deferred. We also have six 50 saved in a taxable brokerage account. We make seven to seven 50 per year and spend about $25,000 per month. All our retirement contributions are Roth. We contribute 14,000 to our backdoor Roth IRA.

And we both max out a total of $70,000 into the 401(k) contributions via the Megatron.

Al: Wow. That’s a lot of savings.

Joe: That is a ton of savings. All right. We also contribute $50,000 annually to the brokerage account. Our Social Security estimate is 50 or $5,000 starting at each 62. I’m eligible for small pensions of about a thousand dollars per month.

Are we in good shape to retire? 55 and 53. My plan is to live out the brokerage account from age 55 to 60 and do Roth conversions during that five year period. Would that make sense? If I want to retire before 55, should I divert contributions from the 401(k) to the brokerage account? Would it ever make sense to forego the tax benefits of the Roth to do that?

Thanks for taking my questions. I drink any ice cold beer you put in front of me. I drive a 2024 Chevy Silverado, Joe.

Al: Okay, so let’s do a little math there, Joe.

Joe: I think, he’s doing okay.

Al: I think it’s, based upon this current spending, I think it’s a little tight.

Joe: Okay. Let’s see.

Al: 3.85 million. That’s our starting point. Seven years, 6% add 200,000 a year. That’s a lot of savings.

Joe: A ton

Al: end up with about seven and a half million.

Joe: Seven and a half million at age 55.

Al: Yeah, but they wanna spend 300,000 at 3% inflation. That’s three 70. That’s about a 5% distribution rate of 55. It’s, it’s too much. So here, here’s a great example of this is a lot of money, a lot, great savings, great accumulation.

You can have kind of almost the retirement of your dreams, but you do have to be cognizant of your spend, right? Versus what you have. I think at, you know, at that, at that age, you, you probably could spend maybe 240, 250, but not 350,

Joe: no.

Al: So I would, I would cut the spending down from 25 grand a month to 20.

And that, that’s close to doing it. Maybe a little bit more, but somewhere in there.

so I think it, I don’t, I don’t think it works. I think it, I think they have a great retirement, but just not at the level they at, they’re currently spending.

Joe: That’s what they’re spending today though. Right?

Al: I know, but he, that’s what, that was his question. Yeah. Are we in good shape to retire 55 and 53 given our high spending levels.

Joe: Ugh,

Al: tight.

Joe: It’s, yeah. All right, so I. With that spending level from 50. So you got five years to bridge the gap. He’s got a million dollars or something like that in in non-retirement.

Al: Yeah. Yeah. A million. He’s, and he is adding, he’s adding another 50 grand to that per year for another seven years.

Joe: That’s gonna be tight.

Al: Yeah.

Joe: You’re gonna blow through all of that as well.

Al: Yeah. Yeah.

Joe: People. It’s one thing to say that the math works, but then in reality, when people start executing it, I know, you know, you see that brokerage account go down to zero.

Al: Yeah, yeah.

Joe: People don’t like that. Yeah.

Al: So I, I think

Joe: that your retirement is implode.

yeah. I don’t know. I guess you’re right. At $300,000, it’s tight, a little bit less. Sure.

Al: I mean it if you, if, if this, if this is right, let, if my numbers are right, these are just assumptions and I’ll say it again. These are just assumptions. So we don’t know how close this will be, but this is 3.85 million today, seven years at 6% rate of return, adding 200,000 a year.

The math says you’ll end up with about seven and a half. Million. I’m gonna say my comfort level at around, 53 would be about a 3% distribution rate. That would be 225,000 of spending.

Joe: Well, he needs $10 million.

Al: Yeah.

Joe: At a 3% burn rate. If you’re gonna spend 300,000,

Al: right.

Joe: Well, it’s gonna be less than that.

Call it eight and a half, because you gotta, you he’s bridging the gap to, to Social Security.

Al: Yeah, that’s right. And I haven’t even factored that.

Joe: I don’t know. So let’s say he needs $8 million.

Al: I think he needs more than that.

Joe: Eight. Well, it’s maybe eight and a half.

Al: I don’t know. I think ten’s probably closer at this spending level.

Joe: Well,

Al: because don’t forget, I’m spending will be three 70 by the time he gets there. ’cause of inflation.

Joe: Got it. And so then the Social Security’s just gonna take up the. You’re probably right. It’s between nine and 10.

Al: I think it’s a great retirement. I just don’t think it’s at this level,

Joe: but if he’s got or so if, if he.

The market does 8%. He’s probably right there.

Al: Right? Yeah. I, I don’t disagree with that.

Joe: Yeah.

Al: Yeah. It, it depends.

Joe: So what depends on your assumptions and what, how conservative and how aggressive that you wanna be in your assumptions. But you’re not gonna re, you’re not, he’s not putting in his two weeks notice today.

Al: No.

Joe: To say, Hey, I’m gonna retire in seven years.

Al: Yeah. And I think that’s the way you have to think about all of these. It’s like, I’ve got a target. I can relax. I’ve got, I know what I’m trying to do, but as time goes on, if the market conditions are not cooperating, it’s okay. Right. You just work another year or two or whatever. And I will say this, Joe, a lot of people when they’re in their forties, and I was this way too

Joe: Sure.

Al: You, you were around me, I wanna retire. 47, I’ve had enough.

Joe: Yep.

Al: And then you get to the point where it’s like, oh, well actually, you know what, there’s some benefits to working besides income. It’s your identity.

It’s your, it’s your community. It’s, it’s keeping your brain fresh. Yeah. All these things that you realize in your fifties. Oh, it’s okay. Maybe I can’t, maybe I should work a little bit more.

Joe: Yep. Yep.

Al: And here I am still today.

Joe: Still today. Grinding it out, the gal.

Al: Although I have to say I’m not working that hard,

Joe: I would concur.

Andi: I’m just glad you do the show prep. Thank you for that.

Al: I do the show prep. You’re right.

At 26, Should I Go All In on a 457 to Retire Way Early? (Jonathan, Florida)

Joe: We got Jonathan from South Florida. Hello Joe, Big Al and team, I’ve quickly become a fan of the channel after finding it on a random whim. Wow. I break things down in a way that actually makes sense in a fun way. I want to know how to utilize my 4 57 account for a potential early retirement.

I’m in a position to either max it out completely on a pre-tax basis, mostly max it out on a Roth basis, and can also have fun doing a mix of the strategy if need be. I’m 26 and currently make about $67,000 per year. Expensing roughly $20,000 in a LOCL area. Low

Al: L-O-C-L. I’m not sure what that means.

Andi: Low cost of living area.

Joe: Low.

Al: Oh, there you go. Look at Andi. Low cost of

Andi: instead of HCOL, it’s

Joe: L-C-O-L-L-O-C-L.

Al: Low cost of living. Okay.

Andi: I guess it would be low of cost living.

Joe: Low of cost. Cost of living.

Al: Low. Low cost living.

Joe: Got it.

Al: I see local (LOCL).

Joe: Local, local area. All right?

Al: Yeah.

Joe: So he’s expensing roughly $20,000 in a LOCL area. Right now I’ve got just under $70,000 saved for retirement, about $19,000 in a 4 0 1 a where about $7,800 per year Gross. In is, being contributed, between myself and my employer. There is $1,800 in my current employer’s government pre-tax 4 57 plan, and another 13,000 just sitting in my pre-tax 457 from a former employer,

Al: the 457 from a former employee, also a government account, on the Roth side.

Joe: I got it. All right, got it. On the Roth side, I’ve got about $3,400 in Roth, 4 57. Worked through in $26,000 in a Roth IRA that I plan to max out every year. I’ve also got a brokerage account with about $5,600 in it that I’m not currently contributing to. Outside of that, I keep that year of expenses in a high yield savings account for my emergency fund. I don’t have a pension or annuity, and I haven’t really dug into what Social Security might look like for me down the road. I’m just assuming it’s something, but not relying on it.

Ideally, I like to retire somewhere between the ages of 40 and 50. Though it’s less about hitting a specific age and more about having flexibility. Every investment dollars currently in some sort of s and p 500 index fund, depending on this, servicer, I foresee an ideal future spend of $65,000 a year in today’s dollars to live on, though that could change depending on life.

I’m single right now, no kids yet, and I’d like to own a home eventually. I’m in Florida. For now, but plan to move to Minnesota in the future.

Al: Wow.

Joe: Wow.

Al: How about that? What do you think of that?

Joe: I don’t know. I did the opposite.

Al: You did do the opposite, didn’t you?

Joe: No, I grew up in Minnesota. And then moved to Florida for school.

Al: Yeah. You wanna move back to Minnesota?

Joe: I did. And I didn’t like it. That’s why I’m in California.

Al: Yeah.

Andi: You didn’t wanna go back to Florida?

Joe: no. I liked Florida a lot. but it was like, here, I’ve been there, done that.

Al: Yeah. Yeah. Try something

Joe: different. Yeah. Let’s try something new.

Al: Yeah. And it stuck.

Joe: Yeah.

Al: Yeah.

Joe: And then, yeah, California is, been

Al: good to you.

Joe: Yeah, it’s been nice. I like the weather.

Al: Yeah.

Joe: I was in Miami just recently.

Al: Oh, you,

Joe: it  was cold.

Al: Yeah, that’s

Joe: right. It’s 80 degrees here in, in Southern California. And I, yeah, I was in Miami. It was like, it was cool. Fifties.

Al: That’s unusual.

Joe: The week before that, they said it was in the thirties.

Al: Oh, well, cold spell risk. Yep. Well, so a couple things at 26, it’s hard to, you know, the thinking about retirement is a little bit, it’s still a little too early, but

Joe: yeah, I think it’s like, alright, well how do I be financially independent here?

Al: Here’s a couple things I would say. I would say save 20% of your gross income. Just do that year and it looks like you’re already doing that or you’re close to it, right? So that’s a good goal for anyone, particularly a young person. You’ve got all this time. Save. Save 20% of your income, number one. Number two, when you’re young, it should all go into the Roth ’cause your income is probably lower now than it will be later.

Get that money to the Roth and have that growth tax free. I think those are the two things I would suggest in this situation that, you know, if you do that, you’ll have a lot more choices and flexibility. Maybe you can retire early and if you wanna retire, you know, let’s say closer to 40, maybe you save 30% or 40%, these things can be done. But I would say for most people, if you can, if you can work up to saving 20% of your gross income, you should be in pretty good shape.

Joe: So what does he have total? He is got about a hundred thousand dollars. Call it?

Al: Yeah. At at 26. I mean, that’s phenomenal.

Joe: He needs two and a half million dollars if he wants to spend $65,000.

Al: Yeah.

Joe: So

Al: in in today’s, in today’s dollars.

Joe: In today’s dollars,

Al: yep.

Joe: so I don’t know. Let’s see. What if he continues to save, let’s say he’s gonna, how much is he saving total?

Al: I didn’t really say.

Joe: He is got, yeah,

Al: he, he’s saving 7,800 between him and his employer, but I’m not sure what else he’s saving. If

Joe: anything, I think he’s saving, let’s go up 15,000.

and he’s 26.

Al: Mm-hmm.

Joe: All right. So let’s say he is got 20, 20 years.

Al: Yeah. Sounds good.

Joe: Okay. God, this calculator sucks. 15. Alright. And then he is got 20, let’s go at eight. All right. So if he keeps doing what he’s doing, at a hundred thousand dollars, he’s gonna have about one and half at eight and a half percent over 20 years.

Al: Mm-hmm. And the 67 spending will be more like a hundred probably at that point ish. Maybe after five.

Joe: Yeah. Retiring at 40.

Al: Yeah.

Joe: Is hard.

Al: It’s hard. Yeah.

Joe: You gotta, you live in your parents’ basement.

Al: Well,

Joe: and eat ramen noodles, like all these FIRE people.

Al: Yeah, that’s, well that’s what they do.

Joe: I know.

Al: Yeah.

Joe: It’s like, I’m gonna spend $3 a month and save a hundred percent of my income. And you know, that’s, or, or they have these side hustles, side gigs that is covering a lot.

Al: And the thing is, at 26, I mean, you may buy a home, you may get married,

Joe: you have kids. He’s moving to Minnesota from Florida. Why I you, you gotta buy coats and boots.

Al: Yeah. But housing’s probably cheaper, right? Unless you’re right in the city.

Joe: Well, it depends.

Al: Yeah. I suppose,

Joe: I don’t know. There’s, I dunno, there’s areas in Florida that are, if you’re thinking of Miami, west Palm, and, you know, I suppose find in South Beach that’s pretty expensive. but I think there’s pockets in Florida that are reasonably priced and same with yeah, pockets of, of Minnesota as well.

Al: Higher heating costs maybe.

Joe: Yeah. Your electricity, well, I guess you got AC in Florida.

Al: Yeah. True. Yeah.

Joe: Depending on how you deal with the humidity and the heat.

Al: Yeah. Right.

Joe: yeah. Polar opposites.

Al: Mm-hmm. Right.

Joe: But yeah. 26. Keep saving, keep doing what you’re doing. Yep. Save as much as you possibly can. Max out the Roth IRA, stay in the S&P500. Keep grinding and taking a look at, you know, the opportunities that you have in front of you each and every year.

Al: yeah. By the way, saving 20% of 67 grand, that’s 13,000 a year, so get to that point. Even do more if you can, but that would be kind of a good. Place to be. Do that year in, year out, keep it invested and then good things will happen down the road.

And you don’t really even hardly have to think about what I’m gonna spend. ’cause you don’t really, you don’t really know right. At this point, it’s just what you’re currently spending, but save 20% or more if you can. And then you’ll be in a position to have flexibility and choices in the future.

Joe: Cool. Congrats. Keep doing it.

Can I Retire Early and Still Cover Health Care and Long-Term Care Costs? (Kris, California)

Joe: Okay, let’s go to Kris in California. Hi, longtime listener. Enjoy the podcast. We are both 58, live in SoCal, and we have paid off homes. Three kids, two have graduated college and more or less off the payroll. And let’s see, one, a college sophomore with a fully funded college fund. We are starting to think about retiring earlier than what we originally thought and just worried that we don’t have enough to last, especially seeing what my elderly parents are going through in their older years. But the cost of assisted living, we don’t have long-term care insurance. We currently had a combined, we currently have a combined income of about $350,000 gross. We max out retirement and now shifting all excess funds to our taxable brokerage. 401(k)s are $1.7M. Roth IRAs are 400. Brokerage is 300. Home is worth about 800. We live pretty low to the ground.

Al: Okay. I think that means they don’t spend a lot to live.

Joe: Where are these people from? They’re from California.

Al: They’re in caves.

Joe: I’ve never heard that saying before. We live pretty low to the ground.

Andi: So they’re not flying high. They’re not spending lavishly.

Al: Yeah, that’s what I get out of it, but I’ve never heard it said that way either.

Joe: Yeah. Aaron, do you live pretty low to the ground?

Al: He’s, he’s not a, yes,

Joe: He’s underground. Estimating our annual expenses to be about $80,000 a year, maybe less, depends on how fancy our vacation and hobbies are. Plan to take our Social Security at 62 with a combined annual amount of approximately $60,000. That’s based on our current Social Security statements. Biggest concern is if we do decide to retire early, covering the gap of health insurance for us and our two kids.

And, we will run out in our elderly years should we need long-term care. All the projections I run say we should be in good shape. But worry. I enjoy a little margarita and my husband likes,

Al: kombucha.

Joe: Kombucha.

Andi: Yep.

Joe: Yeah, I’ve had that before.

Al: Yeah,

Joe: he doesn’t it.

Al: Do you like it?

Joe: No,

Al: me neither.

Joe: No,

Al: it’s terrible.

Joe: Yeah, it’s very healthy though, right?

Al: I don’t know. Maybe may. But anything that tastes that bad must be.

Joe: It must be. and we have a very cutie dog. Or very cute doggy. Wow.

Andi: Or cutie dog. That works too. That’s adorable.

Joe: How did I get that? Like backwards.

Al: Well, yeah,

Andi: You’ve got word dyslexia.

Joe: Very, yeah. Maybe It’s definitely coming out.

Al: It’s ’cause you weren’t paying attention in junior high.

Joe: Yeah, I know – Carl.

Andi: At Sandberg.

Joe: The Kombucha got me.

Al: Yeah.

Joe: All right. Thanks for the spitball.

Al: Well, I ran a couple numbers here. So, they wanna, they’re both 58 Joe, they wanna retire at 62, so that’s four years from now. They got 2.4 million. And I just, I don’t quite know how much they’re saving. They’re maxing out 401(k)s and they’re saving whatever’s extra in the brokerage. So I just said 30 plus, 30 plus 10. So I’d come up with 70 grand. 70 grand.

Joe: Okay.

Al: Put that in, in four years, they end up with 3.4 million.

Joe: Mm-hmm.

Al: Okay. Then, at that 62, I feel quite comfortable in doing a 3% distribution.

You could probably do more, but being conservative, that’s about a hundred thousand of income from the portfolio.

Joe: And they look pretty low to the ground.

Al: Right. Plus they got about 60,000 social securities you mentioned. So I think they can spend about one 60, they’re spending 80 Joe, and, and, even in four years with inflation, that’d be like 90,000. So I think this looks really good. I think go for it. If you’re concerned about long-term care, which I think we all are, then put money aside. or get insurance for it.

Joe: They got $1.7 million in a brokerage account, right?

Al: Yeah. Yeah.

Joe: If they take their Social Security early, they’re taking $20,000 outta 3 million bucks.

Al: Right. It’s not very much.

Joe: Right. So that’s a couple percent that, let’s say the, the. Those dollars are gonna continue to grow.

Al: Yeah. I, what I’m suggesting is they’re not not gonna be spending enough. Their estate’s just gonna keep growing.

Joe: And I think they’ll have plenty of capital to probably pay for long-term care.

Al: Right. Yep. Yep. I might recommend one thing though, and that is maybe since they’ve got enough cash flow and assets, maybe, one of the two of you takes Social Security at 62 and the other one delays. Just because when one of you survives the other you’ll get the higher benefit. It might be something to at least consider.

Joe: Yeah, that’s a good point. They don’t need the money.

Al: Yeah. I mean, I get what it feels good to take it and, and I’m fine, but if I was gonna take it, I would just do one spouse taking it and the other spouse may be waiting.

Joe: And how old are their parents? So they’re 60 and their parents are still alive, or they remember their parents being elderly?

Al: Yeah. I don’t, I’m not sure they said, yeah. Well, at least said are going through. So I think they’re still alive.

Joe: Yeah. So they’re probably So they have liked the

Al: yeah.

Joe: The longevity.

Al: Yeah. They’re probably in their eighties, right?

Joe: Yeah, sure. so

Al: yeah,

Joe: I don’t see anything that’s glaring here.

Al: I don’t either. I think it looks great, I think. Go for it.

Joe: Nope. Alright.

Andi: Long-term care planning is one of those topics people either avoid completely or assume it is just about buying insurance, so good on Kris for considering this fairly early. That said, there are a lot of moving pieces. Traditional long term care insurance, hybrid life policies, annuities with care benefits, using a HELOC or reverse mortgage, self funding with investments, even Medicaid planning. And if you’re like a lot of us, you’re not sure what fits where. Our brand new Long-Term Care Planning Guide lays out all of your options side by side, including the pros, the tradeoffs, and who each strategy may be appropriate for. It’s designed to help you think through this before a health event forces the decision. If like Kris you’re starting to think about long-term care insurance, do yourself and your family a favor. Click or tap the link in the episode description and download the Long-Term Care Planning Guide for free. Start building a plan now, so you’re not scrambling later. Yours free courtesy of Your Money, Your Wealth and Pure Financial Advisors. And side note, Pure does not sell long-term care insurance, or any investment or financial products for that matter, so this guide truly is an unbiased look at your planning options for the future.

I’m a Widowed Parent. Can I Retire at 57 and Still Fund College and Legacy Goals? (Rojo, California)

Joe: We got, let’s see, Rojo from Los Angeles, the City of Angels.

Al: Wow. You pronounce that right? You didn’t say Rojo.

Joe: Rojo. Go Joe. Rojo. Rojo Rojo. Hi Joe. All. Wow. They’re just Ro ro, ro Rojos.

Just calling me out here. Hi Joe, all

Andi: Joe and all. So is that. It’s Joe and the rest of us.

Joe: Alright.

Al: Okay. All right. Well, we’ll, I’ll accept that.

Joe: It’s fine. Okay. I enjoy listening to your YouTube content. I’m 52, widowed with two children. Age 2117. I’m debt free with a paid off mortgage here in Los Angeles, suburb of California. I wanna retire by 57. My financial snapshot is as follows. Here’s the asset breakdown. Paid off house 900 grand, 401(k) in Roth IRA’s, 200 traditional 401(k) and traditional IRA 1.4 million cash. 70 grand brokerage. 4 55 29. College savings is 116,000. Got other assets, vehicles, RV guitars.

Al: There you go. Must be some nice ones.

Joe: Yeah. Rojo just jamming on the guitar in the rv,

Al: I think so.

Joe: He’s got the vehicles towing in the back. Here’s the goals. Retirement annual expenses in today’s dollar is 82,000. Annual retirement health cost. prior to Medicare it’s gonna be 12,000 guesstimate.

Al: Okay.

Joe: Annual lifestyle vacations, 8,007 year recurring car fund, 40 grand.

Additional college fund, 40 grand. One time LASIK surgery. Six grand facelift a hundred grand. No, I’m kidding.

Al: That was made up

Joe: that that was made up, wedding and never one time LASIK surgery. All right.

Al: Yeah.

Joe: Wedding gifts for children $10,000 each.

Al: Planning ahead.

Joe: All right.

Al: Yep.

Joe: Legacy inheritance for children.

Al: Okay.

Joe: Pre-retirement income breakdown. Annual employment salary is 140,000. Okay. Social Security minor, monthly survivor benefit. Until March of 2026 is $2,600 post-retirement income breakdown, we got Social Security annual spouse. Survivor benefit from 60 to 67 is 24,000. Social Security annual full retirement benefit itself from 67 to end of life is 43 2.

Maxing out my Roth 401(k) contribution with ketchup, $500 a month towards the company stock program. My current investment allocation is about 80% equities. My first son just graduated from college without any student loans, nor parent plus loans. My second son is expected to enter college the summer of 2026 with the estimated cost of 40,000 per year.

Plan to use the 5 29. Save, through cashflow, through cash flow flow with any shortage. All right. I plan a claim Social Security annual spousal survivor benefit at age 60 and expect to receive about 24,000 annually. This is under the assumption that I will not remarry before the age 60, otherwise, I’ll forfeit this benefit.

I want to earmark and use this to fund my pre. My pre-Medicare,

Andi: I think that’s supposed to be Medicare.

Joe: Sure. My pre-Medicare health insurance and long-term care insurance. Given my good overall health, I’m assuming a life expectancy of 92. Given my financial snapshot, can I retire comfortably at 57? Thanks for your insight.

Al: Okay, well here’s, he’s 52. That’s five years from now, Joe.

Joe: Okay.

Al: I got about 2.1 million. based upon what he’s saving, I come up conservatively with about 38,000 per year. 6% ends up with about 3 million at 57 and at 57, if you look at his spending is wrong.

Joe: Who? Girl or a guy?

Al: well, good question. I, I assumed him, but maybe it’s her.

You look at

Andi: if it was a her, I think it would be Roja.

Al: Oh yeah.

Andi: So I believe Rojo is male.

Al: Rojo, see, I’m thinking Espanol, fending 82,000, estimating additional medical insurance. $12,000 vacations. 8,000. That’s 102,000. Joe. I did a five year 3% inflation. I get one 18, so I take one 18 from 57 to 60.

Joe: One 18 Of what?

Al: Of spending shortfall

Joe: thank you

Al: into 3 million. I get 3.9%.

Joe: Mm-hmm.

Al: So it’s a little tight, but on the other hand it’s 60. There’s 24,000 of fixed income. Now the shortfall is about 94,000. It’s about a 3.1% distribution rate, and that’s even before bigger Social Security. So I, I think this probably works.

Tight. It’s, it’s, it’s, it’s always tight when you retire in your fifties.

Joe: Yes.

Al: Unless you got just a big pile of money.

Joe: Mm-hmm. Or you spend w way low to the ground. True.

Al: I, I think it works, but, you know, it’s, it’s one of those

Joe: where if you were Rojo when you retired 57, given the snapshot,

Al: I’d probably go to 60 personally.

Joe: Yeah.

Al: To, to get to the 24,000,

Joe: I would definitely go to

Al: 60 as well. Yeah. If it were me. You know, if, if you want to, if you wanna get out, I, I,

Joe: I suppose, how miserable are you?

Al: Yeah. Right, right, right. So

Joe: could you hold on for another three years or is that three years gonna put,

Al: or, or maybe

Joe: 10 years

Al: on me. Or maybe just you don’t do the bigger vacations until 60 when you get more income.

I, I don’t know. There’s ways you could do it.

Joe: Yeah. I don’t know. 57. That’s young.

Al: It is young.

Joe: And you, she’s, roho is making 150 grand. That one 50 fixed income goes to 24. That’s a big difference. Big. And then you start spending your money look at all these goals too.

Al: Yeah, yeah. Yeah.

Joe: It’s like I love that they’re mapping things out, you know, one time lasik

Al: Yep.

Joe: Winning gifts.

Al: No, I didn’t

count legacy inheritance.

I didn’t count any of that. And, and at, at this level, I’m not so sure there’s a big inheritance

Joe: for the kid there. Yeah. Unless.

Al: The market,

Joe: the market keeps

Al: going.

Joe: Yeah.

Al: Yeah.

Joe: but you can’t really count on that. I don’t know. This is, you gotta admit, they’re, I think they’re, they’re raw Spending a little bit more.

Come on. You got vehicles, RVs, guitars.

Al: Yeah.

Joe: You think there’s more guitars in the future?

Al: Yeah, but he, they’ve already, he’s already saved 2.1 million.

Andi: Every guitar player has GAS, gear acquisition syndrome, so yes, I bet there probably is more guitars in Rojo’s future.

Joe: Yep. I guaranteed.

Al: so anyway, so that’s our thought.

Maybe it worked till 60. I think it could work. but I’d be even more comfortable at age 60, I think.

Joe: I think so too. There’s great job. First off.

Al: Oh yeah. Fantastic.

Joe: A lot of assets,

Al: a lot of, lot of

great

Joe: goals, no debt. spending 82,000 not over your skis.

Al: Right.

Joe: You, you’ve already mapped out some of these goals.

You, you, you’re thinking about the future. 57 is just a little bit, they’re, it’s a long retirement. That, that retirement is gonna be almost as long or longer than your working years

Al: almost. Yeah. Yep.

Joe: so

Al: maybe that’s okay.

Joe: Yeah. And, you know, widowed. Widowed,

Al: yep.

Joe: Like, Hey, I’m gonna, I want to have fun.

Life is short.

Al: Mm-hmm.

Joe: and so, yeah, I think you throw real life in there. Maybe you go ahead and do it

Al: right,

Joe: because you can always tone, tone it down.

Al: You can always turn it down,

Joe: very little debt and there’s no debt. So.

Al: Yeah. Right. And the, and like he says, the vacation, that, that’s just an add-on. Right.

Doesn’t have to happen.

Joe: Right. You got an rv? Just sit in the rv, play a guitar.

Al: Yeah, take your guitar. Just go drive to the nearest park. All good.

Joe: That’d be great.

Al: Yeah.

Joe: Wouldn’t it? That’s, that’s definitely my retirement. Did you watch Super Bowl now?

Al: I sure did. Defensive game didn’t, wouldn’t it?

Joe: Did you enjoy it?

Al: I did.

Joe: Okay.

Al: I was, rooting for the Seahawks. How about you? You were, yeah. Did you have, did you care?

Joe: No, I didn’t care.

Al: You didn’t care?

Joe: No.

Al: Okay.

Andi: Did you watch?

Joe: yeah, I was.

Al: I good,

Joe: boring.

Al: I watched, I watched with Anne and then, I was watching the football game and then every time a commercial, I commercial alert and then she paid attention and then

Joe: got it.

Al: That’s how we did it.

Joe: Did you have a favorite commercial?

Al: Yeah, I, gosh, I, there was a couple, I like the one about the farm, the, the, the daughter getting the farm from the father. That was pretty touching, I thought.

Joe: Oh, the potato farm?

Al: Yeah. Yeah. Okay. I thought that was cute.

Joe: All right.

Al: You know, I like happy.

Joe: I know. Let’s just take one last being little girl. Let’s do it together.

Al: That’s right.

Joe: Okay. all right. Let’s go to, back to Joe here. And that’s it. That’s it for us.

Andi: Excellent. Thank you very much. That was a lot. You helped a lot of people retire early or gave them some pragmatic things to think about before they do so.

Joe: I’m exhausted. I think I wanna retire.

Al: I think, I think I’m, I think I’m, I’m mostly retired. I think,

Joe: I aspire to be you Someday, Al

Al: you’ll get there.

Joe: All right. That’s it for us. We’ll see you again next week. Show’s called Your Money, Your Wealth®.

Outro: Next Week on the YMYW Podcast

Andi: Next week on Your Money, Your Wealth®, Carl and Jane need a spitball on a 130/30 strategy for their $8 million portfolio. Tyrone and Tova wonder if they really need to do Roth conversions if they never need their retirement accounts at all? How can Mark in San Diego balance Roth conversions, IRMAA, and Social Security timing without blowing up his tax bill? And how should Boat Drinks structure payouts from his big non-qualified deferred comp plan before it turns into a tax nightmare?

YMYW is your podcast, and this show wouldn’t be a show without you. So let’s spread the knowledge and humor. Tell a friend about us. Leave your honest ratings and reviews for Your Money, Your Wealth in Apple Podcasts, Amazon, Audible, Castbox, Goodpods, Pandora, PlayerFM, Podcast Addict, or Podchaser. Or all of ‘em. I ain’t stoppin’ ya. And find us on YouTube, subscribe, turn on notifications, and comment on our content. You can like or dislike it there too – again, I ain’t stoppin’ ya.

To see how tax-efficient and practical your financial plan really is, whether you want to retire early or late, a free assessment with Joe and Big Al’s team at Pure Financial Advisors is a much deeper and more accurate dive into your finances than a quick YMYW spitball. They’ll arm you with a plan that’s personalized just for you, and tailored for your needs and goals in retirement. You can meet with the Pure team via Zoom no matter where you are, or in person, face to face at one of the Pure Financial offices in San Diego, Woodland Hills in the Los Angeles area, Irvine and Brea in Orange County, California, Davis in the Sacramento area, Redmond and Mercer Island in the Seattle area, Greenwood Village in the Denver area, Prescott in the Phoenix area, Lehi in the Salt Lake City area, Wheaton and Northbrook in the Chicago area, and Franklin in the Nashville area. Click or tap the Free Financial Assessment link in the episode description or call 888-994-6257 and book your assessment today.

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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