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

You Won't Believe How This Couple Retired Early With $500k+

• Ari Taublieb, CFP®, MBA • Episode 219

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Imagine retiring early and living comfortably on just $500,000 in liquid assets. How did one couple manage to make this dream a reality without being investment experts? In this episode, I uncover their inspiring journey, where strategic lifestyle choices played a crucial role in their financial independence. Despite some initial hesitations to reveal their story, the couple offered valuable insights into how they achieved early retirement by aligning their financial resources with their lifestyle goals. This episode is a testament to the fact that financial freedom isn't reserved just for millionaires, but is attainable for those who prioritize their values and make thoughtful, deliberate choices.

As we continue, another story unfolds featuring a couple in Oxnard, California, who are paving their path to retirement with nearly a million in net worth and a budget of $3,500 a month. Without the burden of a mortgage and plans to tap into Social Security, their primary concern remains healthcare costs. Their story highlights the diversity of retirement strategies and underscores the importance of aligning one's personal values with their spending habits. Listen in as we contrast their modest yet comfortable approach with others who have significantly different financial goals, and discover how these varied strategies can help you rethink your own retirement planning.

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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:

I have some case studies with clients that have $20 million and I have case studies with clients that have a million dollars. This is different. Today is going to be a real case study. I begged this couple to come on the show, but they're uncomfortable with it. In the future they might come on or be willing to come on, but I want to tell you guys their story. They are retiring early with $500,000. They are just not your traditional couple. So I think it's really powerful what they had to say and there's lots of things I want to share. They said that I could explain the situation and they might come on in the future. So hopefully this resonates enough that we can get them to come on if they are willing to. Of course, there's no pressure, but I beg my clients that have awesome stories to either let me share them or say, hey, come on the live. I've brought on my clients in the past. If you are watching this on YouTube, you can click this right here to hear me talk to my current clients.

Speaker 1:

These were clients that wanted to retire early as well, but were unsure if they could do it because of their assets and different things like that, and they are more than happy right now, and then if you want, of course, to see some more in-depth case studies, because you go, yeah, I have 2 million or 5 or 10 or 20. I've got all those as well. Today's a different spin. So welcome back, as always, to the podcast. I love getting to do this, but I rely on your feedback. So if you have questions or things you want to submit for me to answer, go ahead to my website earlyretirementpodcastcom slash, submit your question and you will be able to go ahead and do so. You can also just go to the early retirement podcastcom. If you are watching this right now on YouTube, hello and you can see me and this is awesome, why I love doing this. If you are listening on the podcast app, totally cool as well. It's not going anywhere.

Speaker 1:

I want to make content for wherever you like to digest your information. So this couple has $500,000 in liquid assets. I'll explain. They don't have a mortgage. I'll explain more about their finances in a second, but the overall message that I hope you take away today, if I had to pick one, is it's about lifestyle in retirement.

Speaker 1:

Now, how cliche does that sound? That's like going to the doctor and they go. You know you should be more healthy. You're like, hey, that's great. Like what should I eat based on my blood type and what I'm looking for, and you get my point. That was a bad example, but you get it. So this is what I'm going to go through today. I'm going to show you the case study. So if you're on YouTube, you're going to be able to watch me show you the variables and how it being on different programs. So, with that being said, programs really ages me right there saying that it's like you're going to put the program on the TiVo tonight. Only some of you guys will know that reference, but anyways.

Speaker 1:

So if you don't already know, this is all for fun, educational, informational content. I try to be as helpful as I can and I love this. This please, please, be smart about this. Don't go execute some strategy just because you heard it on a YouTube video or a podcast. And my name is Ari Taublieb, if you don't know. I'm a certified financial planner. I'm the host of the Early Retirement Podcast and these are some important disclosures. Please be smart about this. None of this should be construed as financial advice, educational, informational purposes only. With that being said, let's hop in.

Speaker 1:

So this was a couple that reached out years ago and this individual I'm not going to say his name was a really nice guy and he was not financially literate like a lot of you are and that's not me being mean and he explains this. But he did not grow up talking about money consistently and he's an awesome person You're going to learn why but he didn't grow up going yeah, I'm going to max my Roth IRA out. Tell my kids about compound interest. That wasn't his world. His world was about working hard, save money, try not to spend money. That's kind of the extent. So there was not a lot of investing going on. Now, very nice couple. I'm going to show you and explain their assets.

Speaker 1:

But this is a couple that when we talked about their goals and how much they want to spend, they told me they want to spend $3,500 in retirement. Guys, they want to spend $3,500 in retirement. So I said, hey, are you telling me $42,000 a year is all you need? They go yeah, well, we don't have a mortgage. I don't even know if we would need $3,500. I said, okay, tell me more about this, because some of the people I speak to say they couldn't retire without spending 20,000 a month. And some go yeah, I don't need 20,000 a month, but 10 to 15, don't need twenty thousand a month, but ten to fifteen. You know that's gonna let us live the life we want to live, want to travel, want to have fun, and I'm all about encouraging that.

Speaker 1:

But it's interesting when I come across a couple like this, because what I don't want you guys to do and this is what I was worried about talking to this couple is I don't want them going. Oh yeah, we're retired but we're kind of walking on eggshells here because we're not really spending what we want to spend. And the easy fix not always fun, but easy is keep working and keep working. And so I told this couple hey guys, I think if you're willing to keep working, you can certainly spend like forty five hundred to six thousand a month if you want to do this. And they go hey, like respectfully I don't think you're hearing me Like I don't. I don't know if thirty five500 a month is what I'm going to need and he said tell me more. And they're like, to be honest, we're not big travelers, we like to camp. We believe our child should have to work hard. Because we had to work hard. We want to support them. But we're now in a spot where we're comfortable. Social Security, we know in the future is going to help us from an income perspective. We've been paying into it for a long time.

Speaker 1:

One I like you guys. You guys are cool because you're transparent with me and it's refreshing because I selfishly, like personally, I get lost sometimes talking to people with $10, $15, $60 million, $100 million, who are like oh yeah, I just cannot believe about this tax issue with RMDs and my estate planning issue, and isn't this horrible? And I kind of get into it with them. I go you're right, this is horrible. Like look at the tax liability you're going to get Now we can fix it, but we got to do X, y, z. And this guy's like that I'm talking to right now would be like hey, why is that guy worried? Like we have plenty of money, we're going to be fine. That guy should be grateful. Like he would talk like that. And I'm like this is refreshing to hear.

Speaker 1:

Like Costco and they live in Oxnard, california. I am allowed to say that I asked them that we go to Costco to shop, we like to camp, we're very simple people and we're going to have social security between both of us. It doesn't come in for a few years, but they want to turn on as early as they can at 62. That was not my recommendation, but when they first came to me, that's what they wanted to do and I was like, guys, I totally get it. You turn on Social Security. Less needs to come from your portfolio. That's meeting a lot of your living expenses.

Speaker 1:

They grew up going look, we're going to pay off that mortgage as fast as possible. We don't like debt. They did not do the comparison of, hey, should we maybe just pay down the minimum and invest the rest, because that was not even on their radar, excuse me. And then, just to better understand their assets and situation, they have a home, um, a very small home. Okay, they rent. They rented for many years. Then they got a home and they worked for a certain family and so now they own a small piece of land, but 340 000 very small in oxnard, if you know what that will get you, um. And then their investments about 545 000. They have 45 000 of it in a brokerage account the superhero. They have 413 000 that's inherited and then they have 87 000 in their 401k and a little over 100 000 in cash.

Speaker 1:

So their net worth is approaching a million dollars and they were very clear about which they wanted to spend in retirement and their biggest concern was health care. And they're like, well, that's kind of what we're up against and I feel like by the time Social Security gets turned on, that's going to help out a lot. So they were putting a lot of effort into Social Security. Social Security, I said guys, I do think Social Security will be there, maybe not to the extent you think so, but that's a different conversation. And so we modeled out hey, what if Social Security was reduced? How would that change their plan? And it was significant. It opened their eyes, but they weren't like, well, I'm just going to keep working any longer.

Speaker 1:

So for this couple, they have 550,000 liquid assets today and they saw what they were on track for, which, when we did planning, was at 90 to have about two and a half million dollars. They never thought they'd have a million dollars and because of that, their whole mindset is very different to a lot of you sometimes refreshing, sometimes different. So I just want to share it, because in a previous case study I had brought up a couple. I forget exactly how much money they had. I think it was about $2 million and they wanted to spend 7,000 a month. And then they wanted to take vacations and get massages, and go first class and pay for kids, grandkids, and do a lot of stuff, awesome stuff that I want you to do If that's important to you.

Speaker 1:

Let me be clear. I'm not saying don't do those things. I personally don't want to live on $3,500 a month. I probably want to be in the $8,000 to $10,000 a month range. That's me. Some of you guys might be way more, some might be way less, but I want you to really put weight into this expense number because it's really easy not mad at any of you guys but it's really easy to go.

Speaker 1:

All right, tell me about the Roth conversion and yeah, yeah, healthcare. Tell me about that. And then, by the way, what's the withdrawal rate we're going to use? And hey, don't we need a trust or a will and medical directives? And oh, by the way, when it comes to insurance, how much do it? And it's the financial things that we want it, because that's in our control. We can try to limit the umbrella insurance, but you know it's also in our control how much we spend and that's the biggest variable that impacts your retirement. Now, if you have $5 million, how much you spend can be, of course, a lot larger. But don't make the mistake of just trying to go right to optimal harvesting and conversions and, admittedly, things that I like talking about, which makes it difficult for you as a listener.

Speaker 1:

But I encourage you to really sit down and think about your dream spending. Dream Like. I asked this couple to dream and they were like mad at me. They're like what am I gonna do with $3,500 a month? Like I don't even know what I would do. I said okay, you really are dreaming. I can tell Others of you are like look, that $3,500 a month is like I could maybe spend that in a week. So I need 12,000 a month. Good, I'd rather you spend 12,000 a month and enjoy your retirement than retire tomorrow at 40 and spend $3,500 a month.

Speaker 1:

It's all about perspective. So I'm sharing this just as a refreshing taste, and I have a couple that really gave me great perspective by saying Ari, when I have required distributions that start at 75 and they force me to take up more money than I'll ever need, that's when I know I made it, because it will tell me essentially I did too good. Now, yes, do I want to pay taxes? No, like I want to limit the amount I pay in taxes. But it also told me I'm in a good spot. Same thing with this couple here. What you can see is from 58 to 63 in this example, their investments decreased from 745,000 to about 700,000. So I asked them if that worried them. They said no, because, look, it's going to rise way back up when Social Security is helping out, and they had great perspective. Now some of you guys are not going to collect Social Security at 62. Some of you want to wait until 70. Some of you want to wait because if something happens to you, you don't want your spouse to get the larger amount. Social Security is another conversation I'll do my next video on. But this is really refreshing where, if you have $500,000, you're wondering, hey, could it happen? It could and it could actually happen earlier, if some of you out there go.

Speaker 1:

I know there's someone called Mr Money Mustache. If you don't know him. He was on a recent TEDx event. He has a podcast as well and he always talks about the FIRE movement and he personally lives on 35,000 a year and has been retired for many, many years. He believes that you don't need to keep up with the Joneses, and it's really easy to do that Now.

Speaker 1:

I'm of the belief that you should dream big. So I'm not one of these guys like, hey, you should retire early and spend $3,500 a month. That's not me, and I actually struggled in the conversation with this couple, which is why I want them to come on so you guys can see me struggle and how the conversation occurred, because it is recorded. But they don't want to release it and I don't blame them. All good, but the real thing here that I hope you take away is your expenses matter and they change over time.

Speaker 1:

So if $3,500 a month was your base, like hey, that allows us to live. What about dreaming? How often are we buying new cars? What about healthcare? What about insurance? How much do you want to leave children with? When I told this couple they would be leaving their one child with $2.3 million, they were like huh, I don't know. They were like so uncomfortable because they never thought they'd even have a million dollars. They go well. I don't want them to like not work hard, but I also don't want them to, just like you know, feel bad and now like, start spending like crazy, so like they were uncomfortable because they never thought about it.

Speaker 1:

So the questions I would encourage you to ask yourself and your partner is truly I would start with how much do we love spending? Don't retire too early and go ah, we could get by on eggs and top ramen. Don't do that. So how much would you love spending? For a lot of you it's going to be $10,000 a month and then you're going to want an extra $30,000 a year on vacations, but probably not forever, maybe the first 10, 15 years. Then add in new cars, then add in how much you want to give to kids, then add in legacy goals. So really dive into the expenses. That's going to really help your retirement.

Speaker 1:

Then use a projection software like this one or anyone on the internet. I like this one because it integrates everything the taxes, the education, the estate, the investments. It really does a good job, but there's lots of good ones out there, so I'm not married to this one. If you, of course, want to work with us on an ongoing basis, a lot of you, I know, are like what do you mean? This couple works with you. You know $500,000. I go look, there's a lot of people that we work with that joined us four or five years ago and we're not like, oh, you can't be a client anymore, it's just new clients. $2 million the current minimum. We hope to decrease that in the future. We do offer the software and tools like this in the meantime to be able to play around and once again, our goal is to decrease the minimum. So hopefully this video was helpful. Once again, drop in the comments below if you guys have any questions on this, but hopefully this was helpful If you're on the podcast app listening to it.

Speaker 1:

Hope it was insightful. See you guys next time. Thank you guys. 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.