Early Retirement - Financial Freedom (Investing, Tax Planning, Retirement Strategy, Personal Finance)

5 Signs It’s Time To Consider Retiring Early

August 05, 2024 • Ari Taublieb, CFP®, MBA • Episode 192

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What if you could choose to work not because you have to, but because you genuinely want to?

I want to ensure you don't work longer than necessary, without working too long!

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Ari Taublieb, CFP ®, MBA is the Vice President of Root Financial Partners and a Fiduciary Financial Planner specializing in helping clients retire early with confidence.

Speaker 1:

How would you feel if you knew you did not have to be working? Now, I know some of you would actually be like I like working. I just would feel better knowing I don't actually have to be here. I'm here because I want to and if I have a bad day I could find another role. Or actually, some of you are like, hey, I actually have a business I'd love to run, I just don't have the time and capacity.

Speaker 1:

And I'm worried because financially, I want to make sure I can retire early one day and I don't want to work forever doing what I'm doing. So I see both sides. What I want to make sure all of you are not doing is working unnecessarily and you would be surprised how often I see that, while also being the meanest financial advisor and when I say that I'm not actually mean, a lot of you know that. But I just care that you do not run the risk of running out and I care that. I do not want you to be mad at me when you have $10 million at age 90 going, why didn't I work essentially less when I did not need to be working and why was I beating myself up working so hard for that promotion. When it turns out I'm already in a fine position. Maybe I did not need that level of responsibility. So most of my clients I think some of you know this they don't actually retire early. They go wow, really good to know I don't need to keep working. Now some clients I have absolutely are like I just if I didn't have to work, I wouldn't be working, I'd be traveling and doing other fun stuff. But a large majority actually continue working. They're just doing something they enjoy a whole lot more, and sometimes it's their volunteering and they're deferring, you know, their spouse's compensation into a different retirement account. Sometimes both spouses go volunteer. Sometimes one spouse opens up a business that they really love. So today I'm going to be discussing what are the signs to consider if you actually should retire. We're going to be discussing it financially as well as how to actually create purpose and fulfillment.

Speaker 1:

Now, as always, I'm going to be starting with. I have one fun review of the week, and then I also have another interesting comment I want to share with you all. So my name is Ari Taublieb, I'm a certified financial planner, I'm the host of the Early Retirement Podcast and I'm the vice president at Root. So if you're watching this on YouTube. I invite you to subscribe for more content. If you are listening on the podcast app, I encourage you to continue listening. Some of you tell me that you listen while you work out. You've actually sent me a few images of you listening to the podcast with the logo pulled up on your phone saying yep, I'm working out listening. Kudos to you. I feel like I have to really concentrate just to get my points across. And if you're able to actually listen to me talk about Roth conversions and what account you should withdraw from while you're doing some dumbbell presses. Well, kudos to you.

Speaker 1:

So the first comment guys, I really love going over. This is just for fun. I try to keep. Yes, some of you are like listen, just give me the information. Enough of this fluff stuff. I don't do fluff content. I do not believe in fluff content. At least that's how I feel.

Speaker 1:

Like when you go to the doctor and they go, you know how are you feeling? I go? Well, not too good. I kind of need help because my stomach or whatever they go, oh, you know it really depends like what I should give you. I go. I know it depends, but I need help. I need more than that. So I do as much as I can in this podcast to give you actionable advice and guidance so you can go. Yes, I learned something and I can actually implement this, but I also wanna keep it entertaining because it's one fun for me, but two, hopefully, fun for you to hear.

Speaker 1:

So this is a comment. It's a little blurry on my screen here because I took a screenshot, so sorry about that, but you can see. It's from Jal J-A-L-1-0-5-0-0, who commented very full flight. Lol, I've been saying there's no such thing for years. On a previous video of mine, I discussed something my dad always says where the and forget. I don't do accents or any, you know improv or anything like that, but when you go and you're on a flight and they go excuse me everyone, it's gonna be a very full flight. Today, my dad always stops me and goes there's no such thing as a very full flight. It it is either full or it is not full. It cannot be very full, and so I said that in the episode and this person picked up on it and goes LOL, I've been saying that for years, so some of you might think a little differently. Every time you're about to take off and they go. We have a very full flight today. No such thing. So full or not full. So that's the first one, and the second one is a big one.

Speaker 1:

This is in relation to last week's podcast where I discussed Roth conversions and should you implement them and when should you not, and so I just liked this comment. It comes from the first real chewy who says before you run off and start converting your tax deferred money to Roth, make sure you actually need to and that it's worth it. Remember that RMDs required minimum distributions is a problem, only that it's worth it. Remember that RMDs required minimum distributions is a problem only if it's forcing you to take out more money than you need, meaning some of you are investing and you have a healthy pension and you've got some required distributions that are gonna begin, but they're gonna be minimal. Maybe it's 15,000 a year, maybe it's 20,000 a year. You have to take and you're like well, my pension brings in 60, my social security brings in 40, that's 100. And so a required distribution of 20,000, well, that's just going to go to my travel. So should I do Roth conversions? Probably not. There are many instances where I say do not do Roth conversions, and there are many instances where I say please do them or you are going to get annihilated. So if you want more information on Roth conversions, check out last week's episode.

Speaker 1:

Now, this week's episode is all about what are the signs to consider when it comes to retirement. Well, my favorite story here is a client came to me and they said Ari, you know, I really feel like I should start thinking about retirement before I get there. I go, I'm with you, I agree. How are you going to do that? And they're like what do you mean? I go, well, you told me you've got three kids. How are you going to do that? And they're like what do you mean? I go, well, you told me you've got three kids. They're all still in high school. You also told me that you still prioritize your health and you do your best and that you miss date night with your wife.

Speaker 1:

So when are we going to be able to think about retirement when you're working and doing all of these things? They're like yeah, I know, I just been feeling bad because one day I don't know exactly what I'm going to want to do and I feel like I haven't thought it through and I go. It's impossible. You are putting so much pressure on yourself right now. It's outrageous. How could you possibly know what you want to do before you get there? And they're like huh, I guess maybe I shouldn't feel bad about myself. I go, you shouldn't.

Speaker 1:

There will be times when I tell you you need to save more or you need to invest differently, or're going to do it. This is not that instance. This is an instance where I went to the client and said I really need you to stop worrying, I need you to start thinking about it, and I have an exercise and a worksheet that is going to help you out, where in one hour, you're going to be able to think about these things differently. It's called our post career purpose finder and many of my clients go through that and feel a whole lot better. But the point is you don't feel right now.

Speaker 1:

If you're going, you know, yeah, I don't love what I do right now, or I do love, but maybe I should stop one day. I don't know exactly what I'm going to do. Am I going to want to play golf? Am I going to want to hang with friends? But what if they're not retired? And what if it turns out? You know I plan traveling, but you know I don't want you to feel you have to have it completely figured out.

Speaker 1:

If you came to me and said I've got it dialed in, I know exactly what I'm gonna do, I'd say, great, let's talk about it. Because even if you think you do, you don't. Because I can't tell you how many people come to me going can't wait to travel and I'm going to spend all these times doing this trip and that. And then they like it, but not to the degree that they thought. And now they're bored and they miss their coworkers and now they consider going back to work in an unhealthy environment where they did not prioritize their health, because they're like, oh, maybe I spent too much and maybe I'm not going to actually be able to spend what I want the next 30 years. I should just work another year or two years or three years.

Speaker 1:

I don't want you to do that, I don't want you to worry, but the truth is no one really, in my opinion, can actually start thinking deeply about how they're going to spend their time in retirement unless they financially know they are going to be okay in retirement. So once you know and you have the headspace to go, oh, I'm not going to run out of money. I'm on a good path. Not meaning you're retiring tomorrow, but ooh, if I keep doing what I'm doing the next five to 10 years, it is clear I'm in a really comfortable position, even if you can see you're in a comfortable position in five years from now. Do I see that I'm on track? Great, now let me start considering to think about. What are these things that I should think about and how should I think through those? So number one is financial. Okay, and the truth is, you can always make more money. I'm not saying it's easy, but you always can.

Speaker 1:

And too many people come to me doing what's called goal post planning. It's not a real term. I made it up when you go. Yeah, I think I'm good, I think I'm going to retire. Just one more year. Wait a second. One more bonus. Just give me two more years. Babe, imagine you're talking to your spouse. I, I'm about to call it and then I'm going to stop working and you keep pushing back and moving the goalpost Yep, one more bonus. Yep, once I have two million, two and a half million, three million, I'm done. And now years go by and you're like why didn't I retire Now I've got plenty of money and I wish I would have actually retired earlier.

Speaker 1:

Now I have people that come to me hoping that I'm going to tell them they can retire and I go. I hope you work seven more years and they're like I was going to retire next year. I go. Well, you can, but if you want to spend what you say you want to spend and you want to do it sustainably, this is what I recommend. So they don't always love my answer, but I'm going to give it to them straight, and that's because they're not paying me to be their best friend. They're paying me for the honest, transparent guidance, which is naturally difficult for an advisor who I can tell you because they used to be me. Go, you know, I really want to tell them. I can tell they don't love their job. Yes, I want to tell them they can retire when in reality they should. Not. They should give you the tough love. It's just not always easy for advisors to do so. So the point here is you can always make more money and I will be the first person to say please work six more months because it's going to allow you to spend what you actually want the rest of your life and I'll be the next person to say why are you working? So, thinking about time and understanding time is the non-renewable currency and I do not want you working unnecessarily.

Speaker 1:

Number two this is a big one for me, maybe the biggest one I thought about. Putting it as number one is about health. Someone came to me and said hey, quantify for me, should I retire now or in a few years? I go. How about you quantify for me? I said it with less attitude okay, but how about you quantify for me your health on a spreadsheet? And they're like I can't do that, I go. No one can. I'm not actually expecting you to, but too often people come and they go oh, I think I'm in a good spot to retire, but I don't know. Is it kind of close? I go.

Speaker 1:

Well, if you don't retire and start taking care of your health, all the things you actually want to do the hiking, the travel you're not going to actually have the ability to do any of these things because you're going to be so busy worrying about oh my gosh, am I physically going to be able to do these things? And then there's going to be a day where you're not going to be able to do those things, maybe to the extent you'd like. And now we're in real trouble. Not trouble in terms of going to run out of money, but trouble in terms of, wow, we can't really do the things we've been saving and investing for and that's a real risk to me. So I cannot tell you that the five most common ones I see not fun, and a lot of you sometimes I wish I'm like how could all of you see what I'm actually feeling every time I'm having these conversations?

Speaker 1:

But the amount of depression, anxiety, heart disease, high blood pressure, strokes if these are not managed well, it will take years away from your life. So I don't want you to work an extra year of a really stressful job so you feel a little bit more financially comfortable when I would rather you retire earlier. Either stop working if you're in a good spot to do so, you can always go back to work or you might go. You know what turns out, ari, I'm in a great spot and I believe you, I'm not going to go back to work. I have x degrees of confidence based on our projections. And what if I do live longer? And what if I do spend more? And what if healthcare goes up and taxes go up and turns out all these things occur. If I'm really unlucky, do I still have to go back to work? And I find most people just want to know that. They just want to know what's called their recreational employment. Are they working because they want to or because they have to? Now I recognize everything I'm saying is easier said than done. I'm just saying it.

Speaker 1:

To actually do it is a different story. I believe you can actually do it when you see. What are you on track for? So those of you that are listening that are current clients, you know we're showing these projections, you know you have access. You have that clarity. If you're not a client, well I do have. If you don't have $2 million yet, which is the current minimum to work with us, or you feel like you will have that one day but you just don't have it quite yet. Or alternatively, if you just feel you're your own advisor and don't need guidance, I do have and this is because I wanna help as many people as possible an academy. There's no one-on-one guidance, but it allows you to start running these projections on your own in case you wish to really see. Do I need to do conversions, and do I need to keep working? And? And do I need to keep working and start to present these ideas financially so you can think about the other things, purpose and fulfillment? How do you actually want to spend your time? And yes, there's an optimal way of thinking through those things.

Speaker 1:

Number three here spend more time with friends and family. This is easier said than done as well, but I see a lot of people that go, oh, I'm at about $1.4 million and if I just keep saving, investing, I'm going to be at my $2 million goal pretty soon. They take some more responsibility at work and they spend less time with friends and less time with family, and they never discuss with friends and family their retirement goals. And so I encourage you inside your community to go hey, what are we all thinking for retirement? Not because you're all going to retire at the same time I know you won't but so that you go, ooh, this feels interesting. Okay, so you're thinking about retiring a little earlier and you're not. And I think I'm probably going to spend more time when I'm in retirement hanging out with you because I like you more, and so maybe I do keep working, because if I retire and you know this guy wants to hang out, but I don't really want to hang out with him that much. And you know I want to be with my spouse but she doesn't want me all the time or he doesn't want me all the time. I really don't know how I am going to fulfill my time. Now some of you are like this sounds silly. What the heck does this have to do with financial planning? But it actually has a lot to do with it. And you'd leads me to number four.

Speaker 1:

aA lot of people wish that they would have given more. Meaning they come to me and go. Hey, ari, I really wish I would have given more throughout my life and I'm in my 70s and I still have plenty of life left but I still wish I would have given more throughout my lifetime, because I'm now in a fine spot and I have plenty of money, but it's really not worth this much. I should have given and helped more along the way I go. What's your definition of giving they go. I wish I paid for my friend's flights who did not want to come on trips and they were too frugal. Some of them had plenty of money, but they were too frugal to spend the money on the trips, and others truly did not have the money and would have been embarrassed if I spent the money for them, but I could have done it in a sly way and I regret it. I go. Well, that's very, very powerful stuff and I want to share that with my audience. Is that okay? And they said please do so. That's number four is giving Now this I kind of said it as number one already.

Speaker 1:

But financial readiness Are you financially actually able to retire? Like, what are the signs to retire? Well, do you need to keep working? Now, when it comes to the financial readiness, it's not as simple as okay. Does the math kind of pan out here? Because we might be discussing you not working and needing income for 40 plus years? Do not feel you need to have it all figured out. You could not, even if you tried. But if you are 55, thinking about an early retirement in the next few years, if you're in your early 40s, thinking about what might retirement look like, maybe you've sold a very concentrated position and you have a lot of equity and you're still interested in financial planning and you want to optimize. But you don't know, should you stop working? All of these different factors are coming up.

Speaker 1:

Well, the truth is, you've been working for a very long time. That's why you have what you have today, and you're going to struggle with the biggest thing, which is how am I going to spend this money? Because you're naturally understanding the value of saving, of investing. Well, that's what got you to where you are today, and I do not expect someone to just flip that switch and, all of a sudden, no longer have that desire to save. That's not how it works. What happens is you actually need to become a successful spender. Too many people are underspenders or overspenders, not successful spenders, and a good advisor should come to you and go here's the most amount of money that I want you to spend this year. If you don't at least spend this amount, I'm gonna be angry, because I told you and you told me specifically to keep you accountable, based on your feedback, of your financial goals, which were, if you remember, to not die with $10 million. That was not your goal, but now you're only spending this amount, and so if you keep only spending this amount, you're gonna be on track for this amount. Is that what you want? They go. Oh, no, no, no, I go.

Speaker 1:

Well, here's what we need to have happen. We need you to be spending a whole lot more, and there will be other times where I'm gonna ask you to spend less For really well. I'm going to ask my clients hey, that's that trip you've been talking to me about. I need you to go, take it. I want you to enjoy it. I don't want you to think twice and if you want to see an extra week, please do. There will be other times where you're going to go I want to take extra trips and buy a car this year and get a new hot tub and do this and I go great. You can like not enough, like I feel like I want more than that I go great.

Speaker 1:

Then your other option is to spend less, go back to work or invest differently. Which of these resonates most with you? And more often than not, they go. Oh, I like my investment strategy right now. I understand the approach. I do want to make sure I'm tweaking things the right way, but I don't want to go back to work, so maybe I should just spend a little bit less and I'll go, not forever, just for these few months while markets are down. We do this tax strategy. Here's what it could mean you could spend next year and you be intentional about that process.

Speaker 1:

I want you to think about your portfolio like a business. If your business is doing well, you might go out and hire, you might buy more equipment. You're probably not going to do those things if your business is not doing well. That's what most people do, regardless. Most people retire, take income whether markets do well or not do well, close their eyes and hope it turns out. Now I recognize you still need income, don't get me wrong. But I don't want you to feel that you just get to spend the same amount every single month for the rest of your life, because life doesn't work that way. You are a human, not a robot. At same time, there are going to be times I'm going to want you to spend more, so you're going to love me. There's going to be times I want you to spend a little less not forever, but temporarily, and you don't have to.

Speaker 1:

For example, I once came to a client and asked them to cut their expenses from $9,000 a month to $8,200, so $ bucks less for three months to execute a tax strategy. They did not want to. They said that's okay. Here's the impact it would have on your plan? And they said, ari, before you show me the number, will I still be okay? Is me cutting 9,000, 8,200 going to mean I retire comfortably and run out of money? Excuse me, and not run out of money, or that I run out of money? I said, no, you're still going to be okay. We're just optimizing here. This is just. It would be the equivalent of having about 70 to 80,000 more dollars for future years to spend.

Speaker 1:

They said, well, good to know, these few months I've got a really important wedding for my child. I'm using the extra money. I said, great, go do it. So I want my clients to spend and enjoy their lives. I just need them to understand the trade-off. So someone said to me once what is your philosophy in one sentence as an advisor? And I said my job is to quantify trade-offs so my clients understand the magnitude before they make a decision. And that's my job, and it's to keep them accountable and make sure they don't pay more than they need to in taxes. So, guys, that is it for today's episode.

Speaker 1:

If you're looking for more guidance like this, please do rate and review the show. My only ask is that you share it with those that you enjoy listening to podcasts with, if there are any friends that you do so, and then, of course, if you are looking for one-on-one guidance, this is what we do here at Root. At the same time, you can go ahead and get my early retirement academy If you are looking for specific guidance for your situation. Now it doesn't come with one-on-one support from me. This is very much built for those that don't have $2 million yet will one day, or those that want to be their own advisor. So not perfect for everyone, but it's a solution that's an available one if you, of course, are still looking for that next level of support while listening to the podcast. So hopefully, you guys all enjoy these and I will see you next week.

Speaker 1:

Thank you for listening to another episode of the Early Retirement Show. If you have a question that you want answered in a future episode, you can always go to my website, earlyretirementpodcastcom. That's earlyretirementpodcastcom, and you can go ahead and submit a question that I'll look to answer in a future episode. Thank you all for listening. Please do rate it, review it and share it with someone who you think would benefit from this information. If there's anyone out there that you know, I certainly appreciate it and I will see you all each week. Hey guys, it's me again. Please be smart about this. Nothing in this podcast should be construed as financial, tax or legal advice. Consult with your tax preparer or financial advisor before taking any action. This podcast is for informational purposes only, thank you.