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

3 Tips To Retire On Your Own Terms

• Ari Taublieb, CFP®, MBA • Episode 200

Share episode

You should stop working when you decide it's time and here are the 3 biggest tips to know when that time has come.

Create Your Custom Early Retirement Strategy Here

Get access to the same software I use for my clients and join the Early Retirement Academy here

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:

Some of you are like I just need you to tell me, financially, do I need to keep working? And if the answer is no, I am out of here. Others of you are like, no, even if I knew financially I was good to go, I probably wouldn't stop working. Maybe I'd do something else, maybe it would just feel better going to work. I'm probably not gonna stop, but it would feel nice.

Speaker 1:

Now, there's a wide spectrum there, but what I'm going to talk about today is how can you retire on your own terms, because the last thing you want is to be working, because you have to be working, which no one wants. But really is where someone I'm not saying this would happen to all of you or that it's happened to many of you, but it's happened to a few of my clients and it's not fun when all of a sudden, boss changes and all of a sudden now you've worked for someone for 10-15 years the politics of the office, what have you? It's just different. And now you're like look, I don't know if, financially, I can retire. I don't know if I really want another job at another company because I've been here for so long or I've just got that reputation that I want to uphold and I kind of like the work I'm doing, but the environment I don't love. And what happens is now, all of a sudden, you're really working because you're forced to, and then sometimes I've seen it where people go retire anyways and they're not retiring on their own terms. They're just retiring because they don't like the situation at work and they feel that they might be able to get away with it, and then maybe in a few years they find something else that helps bring in more income. You don't wanna do that. It just does not make for a successful retirement. So I'm gonna talk today about how to retire on your own terms, and no one of you said Ari, it's really simple. If it's just not working out with your boss, you just go horrible boss's style on them. Get a few friends, take out each other's boss. I go a funny concept, but no, don't do that. Okay, so I had some funny clients. Now I'm going to walk through this with you.

Speaker 1:

There's one comment I want to make at the beginning, though, and this is that term that I talk about called recreational employment, which is the fact that I believe most of you actually like working. I just think, whether it's the work you're doing now or there's something else out there that you're going to find more fulfilling and you're wondering can I actually do that or do I actually need to work at all? The difference here versus what traditional retirement looks like is retire 65,. Two kids, white picket fence, die at 95. That's not the majority of people I'm talking to. The people that I help are between the ages of 50 to 65 going.

Speaker 1:

Look, I don't know how much longer I need to keep working. Definitely don't want to retire too early and run the risk of going back to work wishing I worked two more years so I actually could have done everything I wanted to do. But I don't know how much longer is too long, and I talked to a lot of people that do what's called a goalpost planning. It's not a real term. I made it up where people go oh yeah, I'm about to retire, just give me six more months. Oh yeah, one more bonus, two more years, I'm almost done.

Speaker 1:

And then five years go by and then their spouse goes hey, I thought we were going to spend more time together. So what's going on here? I thought we were going to take more trips, I thought that we had enough money, and now you're saying we need $10 million, and before we had 5 million and that wasn't enough and how much is enough? And that, how much is enough? That eats at a lot of people. So I'm going to walk you through a few ways to think through retiring on your own terms, even if, technically, you're still working, because I view my life like I'm retired, because I'm getting to do everything I want to do and I love it. And some of you are like, hey, it's the same with me. Others of you are going no, I'm truly working because it's a paycheck and I don't know what else I would do.

Speaker 1:

So, with that being said, if you don't know already, my name is Ari Taublieb, I'm a certified financial planner, I'm the host of the Early Retirement Podcast that you're listening to right now, and I'm the vice president here at Root. So this comment that I want to reference comes from James Chavez5723, who made the following comment. He said Ari, I cannot emphasize enough how much work changed for me when I cut my hours in half. I always thought I would retire early, but currently I'm okay continuing to work. This is a gigantic trend that people come to me and do not think that they're going to say they go, no, no, no, ari, I'm just telling you, financially, make sure I'm not going to run out of money. Then they see that, then they believe it, then they understand all of our what-if scenario testing all the tax, the withdrawal, the healthcare and go. You know what? I am okay and I think I was just stressed because, financially, I thought I had to be here. Now that I know I am truly here every day because I want to, maybe I'm not going to work on Fridays. Maybe I'm going to tell my partner or my clients that, hey, I'm now going to continue working with you, but it's in this different capacity. And if you have a job that has flexibility, well, you're the dream client of mine because now in early retirement can look really creative.

Speaker 1:

And the example I share here is a client that came to me and they said you're not going to be happy, I'm only going to bring in 30,000 this year. And I said I'm over the moon. And they're like well, I'm confused because you told me when I was bringing in 350,000 two years ago that wasn't enough and I said it wasn't, I was not happy. Then they go. Then what changed? I go. Well, now your portfolio is at a really healthy position. I don't need you to save more money Every time. You're bringing in 30,000 this year, that's 30,000 less that I need to send you from your portfolio, which will let that keep growing and compounding Versus.

Speaker 1:

If you were bringing in 300,000, you wouldn't be able to spend time with your family. And at this point I need you investing really well. A few years ago, when you didn't have enough investments, I needed you to be saving and investing a ton, because if we invested really well, it wasn't going to hold the same weight as you saving more. And so now they're in the opposite spot. In the same way, when a child comes to me and they're all focused on returns, I say, hey, don't worry about your returns, just max out your 401k. But your parents because I talk to a lot of children of clients I'll say parents, you guys are in the opposite spot. You having $2 million get a 10% return. That's $200,000. So you maxing out your 401k is nice, but it doesn't hold the same weight.

Speaker 1:

So in this example here, I don't even want you to just think about it, because I don't believe in the following that I'm going to say. But I'm going to give you some insight here, because a common phrase is just practice retirement and once you get there, you're going to be good. Hey, that sounds good. I want to practice retirement, but I don't know if I'm going to run out of money. So I really can't think about how I'm going to fulfill my retirement until I'm actually there.

Speaker 1:

So the point of this, and why I'm bringing up this comment from James Chavez and why I like it, is not asking you to know the future, I'm asking you to go. Okay, if I really knew financially I did not have to keep working, would I be doing what I'm doing right now? And if the answer is yes, then great. If the answer is no, still great. You could still be working. But now what I need you to do is get really intentional on your financial strategy so that that can become an option. So now I want to get into the real three ways to retire on your own terms. Like, how do you really think through this? So what I'm going to do now is so everything that. So I've been sharing my screen just so you could see that comment there. So, once again, all of this on the podcast app going to continue to post all of these here. If you want to listen on YouTube, you can, of course, see that there.

Speaker 1:

So the reason that I have that early retirement academy, which many of you are already enrolled in. But I want to mention it because some of you are going look, I want to know if I can retire early, but I don't know. And what if I get unlucky? And what if markets don't perform well? What if it turns out inflation is way higher? What if healthcare costs go up? I will tell clients. I want to run the most in-depth what-if scenarios, not to increase your anxiety.

Speaker 1:

Some people go do you just do this for fun? I go no, I don't do this for fun, I do this. Well, I do everything I do for fun. Yes, but I'm doing this because I want to make sure that you go whoa. So if, like, all of these things happen and I'm like so unlucky, I'm still going to be okay, I go yes, and they're like great. And then I'll also say look, this is why you don't want to retire early, even if you're thinking next year's the year, because what if all these expenses occur at once? So I'm going to go through, I'm going to tell them to you and then I'll give you logic behind each one.

Speaker 1:

So the first one is retirement timing. I'm going to pretend right now this is the same exercise I would do with a client. I would say you can retire tomorrow. What does it look like? And most clients go well, I don't know. I kind of have a project I got to wrap up. I say I would retire tomorrow, but not actually tomorrow. I would say, okay, when would it actually happen? And they go, you know, probably six months, probably a year. I'm not going to just leave my team out to dry. Like I'm a good person, I go okay. Other people go, could care less about my company. I have no ties here. Get me out of there tomorrow, I'd be happy to do it.

Speaker 1:

So really ask yourself, like if you were to retire, what would that even look like? Because I want you to just even mentally start to go okay, what would the timing based on my circumstances look like? Some of you are like, hey, I'm a physician, I would turn it off tomorrow. Others of you go look, I'm part of a big sales team and that would take some time to tamper off. It doesn't change the financial planning projections, but what it does, it allows you to go okay, I'm going to retire on my own terms, because a lot of people will go yeah, I'm going to retire 20 years of service. You know I started January, I end in January. It's kind of nice. So, yes, you can do that.

Speaker 1:

But I would rather a client come to me because I'll have clients say, hey, what's the most optimal time to retire this year? And more often than not, the answer is at the beginning of the year, because if you retire in January, maybe you get some bonus payouts and PTO. So January, maybe you get some bonus payouts and PTO, so incomes come in the door. You can still do conversions and planning that are often required for the rest of the year, versus if you retire in October, which is still okay I'm not saying don't retire, don't work three more months, so it's slightly more optimal. But if you do retire in October, more often than not, there's just not a lot of planning opportunities that might exist that year.

Speaker 1:

And 2025 is a really important year. So next year, because tax brackets are going to be changing more than likely in 2026 when they sunset. So 2025 is a big year. So if you're listening right now like thinking, hey, I think I retire in the near future, you're going to want to start thinking about doing it sooner than later because of tax reasons. So number one, number two this is a big one. I thought about putting this as number one, but number two is what I need you to prevent in an early retirement is a big mistake. Where you retire early, we're paying for healthcare, we're paying for travel, maybe we're doing a remodel. At the same time You're like, hey, I don't have those 401k contributions I'm doing anymore and markets go down.

Speaker 1:

If you have like five or six things that go against you in the first year of an early retirement, it's a fancy. There's a fancy phrase in our world that advisors use just so we get to feel smart, called sequence of return risk. Which is what if you get unlucky and you retire, markets don't do? Well, you've also got added expenses. Well, that might not mean you're not okay. It just might mean you're not gonna be able to spend what you actually want the rest of your life. So I don't want you to get unlucky and have luck determine the quality of your retirement because of that while you're still working.

Speaker 1:

More often than not, clients come to me and go yeah, you know, I'd like to spend 15,000 a year on travel for vacation, and I say no, you won't. And they go well, you're wrong, you don't. You might spend 20 the first five years, then maybe five in a year and then maybe 15 the next year. And if we knew that you wanted to spend, like guaranteed, you know, 30,000 a year on travel. Have a ton of fun the first three years, but then after that you're like look, my health's just not going to be in the spot, it's going to be, or my spouse isn't going to be. So we're just not going to be able to spend on travel the same way. I mean, maybe we buy a new car instead or do something, but we're just not going to spend the same degree. Well, that might be us targeting a Roth conversion year in four years. That might be us targeting a charitable distribution. It might allow your advisor to do heavy tax planning based on your circumstances, desired spending and things like that.

Speaker 1:

So ultimately, I just want you always to feel you're in control. There's a lot that you're out of control of. It's not up to you oftentimes how markets are going to perform. You can determine how well you invest, but you can not determine the outcome in a single year. You can determine your savings rate, but you can't always determine what your employer is going to pay you. So there's things that are not in your control. Well, what's in your control? You can run what-if scenarios. You can determine how much spending you'd like.

Speaker 1:

I do not. I mentioned this in the past. I do not want you to go. I think I could get away with spending $6,000 a month in retirement. Retirement is not about getting away with anything. Retirement is about going. What would I love to do and how do I make that happen?

Speaker 1:

And sometimes it's working three more years and me being the mean guy that says I want you to do it and at the same time it's me saying look, this is the year to go retire. You've pushed it back for two years because of the bonus, because you have hesitancy or regard what you're going to actually do in retirement, because of health care, and you have the pieces to make it happen and you're never going to feel 100% confident because no one can guarantee anything. And before I let someone really go retire, I don't really say let someone because it's their choice, but before I ever give them my green light I'll say, hey, I need you to think about it like a business. I need you to understand your portfolio is a baby, it is a human baby and there will be times where that baby's like I need to be fed, I need to nap, I need yada yada. There'll be other times where it's like, look, I'm passed out, okay, and I don't want to be bothered. And so the point here of the baby story is your baby. The best way to think about it is imagine now it's not a baby, but it's a business and your business is doing well. You might go buy more equipment, you might go hire more employees. If your business is not doing that well, you're probably not going to do those things.

Speaker 1:

Most people take 10,000 a month in retirement every month and close their eyes or their number and they hope it works out okay. I don't recommend hope as an investment strategy. So when that baby needs to be fed, you might not even might you're going to be like, look, I need to feed it, to shut it up because it's hungry and it's crying and yada, yada. And I'm only dealing with that right now because I have a friend who has a baby and I told them this example. I go it's kind of like having a portfolio and they're like of course you would relate this to finance and I'm like look, if your portfolio is doing well, I might want you to take extra that month and go enjoy retirement.

Speaker 1:

If your portfolio is not doing well, I might say, look, this is not the month to take extra income from your portfolio, and here's why. Here's what we're going to do instead. If that baby is still crying, you might go look, I need to feed it, I just need to. But if that baby is sleeping really smoothly and there's no issues going on, you're probably not going to go out and just say, hey, let me try to feed it right now. That wouldn't make any sense, but a lot of people do that just with their portfolio. They're still taking out income when they shouldn't or they're not taking out enough when they should. I will do both sides of those coins. So hopefully this is a helpful episode, not baby's analogies, not a perfect one. The business one's a little better. But I'm only trying out new stuff because you know I'm always trying to think what stories might resonate, so hopefully this was helpful.

Speaker 1:

Guys, if you want to retire early with someone, please share it with them. I have two options, excuse me to work with us, so you can work with us and our team directly. That is our holistic, ongoing, proactive planning where we do everything for you. It's all taken care of Now. There's a wait list for that, so you can get on that wait list and fill out an additional questionnaire. If you want to get moved up the line, there's a $2 million minimum because that's where we see we can add value. If you don't have 2 million, but you still want help, you still want to run all the what if? Scenarios. That's why I have my academy and you can go ahead and enroll in that right now in the description calls, not for a few months with us. I recommend enrolling in that so that you get to start playing around with your own figures, and then we refund that cost to you if, of course, you end up working with us. So hopefully this was helpful and I'll see you guys next time.

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.