June 9, 2025 • 15 mins
You don’t need $2 to $3 million to retire unless your lifestyle truly requires it. In this episode, we break down why your retirement number should be built around your personal spending needs, not a one-size-fits-all benchmark.
With a well-diversified $1.5 million portfolio, many retirees can support $60,000 to $75,000 per year in spending, especially when using flexible withdrawal strategies that adjust with market conditions. We dive into how spending can adapt over time and how Social Security benefits can reduce the burden on your investments.
We also explore a real-world retirement budget to show how far your money can go, including housing, healthcare, travel, and more. Plus, we discuss one of the most overlooked issues: retirees often underspend out of fear, even when their financial plan says they’re in the clear.
Whether you’re years away or nearing the transition, this episode helps you shift from anxiety to clarity and reminds you that retirement isn’t just a number, it’s a strategy.
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Advisory services are offered through Root Financial Partners, LLC, an SEC registered investment adviser. This content is intended for informational and educational purposes only and should not be considered personalized investment, tax, or legal advice. Viewing this content does not create an advisory relationship. We do not provide tax preparation or legal services. Always consult your CPA or attorney regarding your specific situation.
The strategies, case studies, and examples discussed may not be suitable for everyone. They are hypothetical and for illustrative and educational purposes only. They do not reflect actual client results and are not guarantees of future performance. All investments involve risk, including the potential loss of principal.
Comments reflect the views of individual users and do not necessarily represent the views of Root Financial. They are not verified, may not be accurate, and should not be considered testimonials or endorsements.
Participation in the Retirement Planning Academy or Early Retirement Academy does not create an advisory relationship with Root Financial. These programs are educational in nature and are not a substitute for personalized financial advice. Advisory services are offered only under a written agreement with Root Financial.
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Ari Taublieb, CFP ®, MBA is the Chief Growth Officer of Root Financial Partners and a Fiduciary Financial Planner specializing in helping clients retire early with confidence.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
You may think you need $2 million to retire.
You might think you need $3million.
You might actually not know howmuch you need to retire, but
the reality is none of thatactually applies to you.
Now, I know that's not superhelpful, so what I'm going to do
on this episode is tell youthat, if you have about $1.5
million, or if you're on trackfor $1.5 million, what that
could mean for you if you wereto stop working tomorrow.
(00:22):
Now, most of the time when Ispeak to someone and they're
interested in retiring early,it's not necessarily, hey, I'm
trying to do that tomorrow, butit's mainly I would love to know
if I'm working because I wantto or because I have to, because
if I really had enough money, Iprobably wouldn't keep working
at the rate that I'm workingbecause it's really impacting my
health, time with family orfriends or relationships.
(00:44):
So I just want to know when isit possible?
Now, the idea that you need amillion or 5 million or 10
million none of that applies toyou.
You need to make sure you haveenough money to live the life
you want to live.
Why is that important?
I had a client who and I oftenwill share stories when I record
these different podcasts orYouTube videos because I find
(01:07):
this is the most fun way tolearn.
I watch YouTube videos myselfand this is how I like to engage
content, so I make YouTubevideos and I watch a lot of
YouTube videos, so I hope thisresonates with you.
But this person reached out andsaid hey, I really don't think
I can retire early.
I only have about $1.2 million.
My neighbor actually has.
I know more than that becausewe're very transparent with
(01:29):
finances and I asked them totell me how much.
And they said it's just morethan that.
That's all you need to know.
And I said why are you hesitantto retire?
And they said well, becausethey have more than me and they
don't seem like they're anywhereclose to retiring.
And I said that is completehead trash.
You don't know if they want tospend 50,000 a month.
You don't know if there's threekids that they're supporting.
You don't know if there's asecond home they want to buy.
(01:51):
They might have completelydifferent goals.
And the fact that you'reconsidering not retiring even
though you're actually in apretty good spot to make it
happen pretty soon, that's justtotal head trash.
And once they heard that, theywent oh my gosh, like I just
kind of needed to just hear itonce.
It's like one of those momentswhere it just clicks.
So what I'm going to do is walkyou through.
If you have one and a halfmillion dollars, here's how much
(02:12):
you could spend realistically,knowing that you would not run
out of money, assuming you dothe right things, of course,
which I'll walk you throughtoday.
If you're not familiar, my nameis Ari Taublieb.
I am a certified financialplanner.
I am the host of this podcast,the Early Retirement Podcast,
and I'm the chief growth officerhere at Root.
Now, these videos are posted onYouTube as well as on the
(02:34):
podcast app, so, depending onwhere you're engaging this
content, I encourage peopleengaging with this content.
Should I say I encourage peopleto check out my YouTube channel
because that's where I'll oftengive visuals that can help with
some really tactical thingsthat I'll discuss, whether that
be a Roth conversion or taxharvesting or a withdrawal
strategy.
(02:55):
Today's episode this is totallycool.
If you're listening on thepodcast app, great.
If you're watching on YouTube,even better.
I just have a favor If you'rewatching, please comment below
how much money do you want toretire with Now?
Don't say $10 million.
Okay, be realistic here.
Some people like, hey, mygoal's 2 million, my goal's 3
million, my goal's 5 million.
Some people say, my goal's800,000, and I'm retiring next
(03:18):
year.
If you guys don't mindcommenting, it helps.
Don't mind commenting, it helpsother people who watch this
video to realize and go hey, I'mnot alone.
I have $800,000.
And here's 10 other people thatare also going to retire.
I thought I was nuts and that Iwas going to have to work 10
more years.
What am I thinking?
Here's a bunch of other peoplethat seem really smart as well
and they're going to retire.
Maybe I could retire earlier.
(03:39):
It's one thing to hear it fromme, it's another thing to hear
it from others.
So I encourage you to commentbelow and even if you're not
planning to retire soon, pleaselet me know.
It's fun to hear what kind ofcontent resonates with you.
So let's hop in.
So, is one and a half millionenough to retire?
The answer is yes.
If the answer is always yes.
If it depends, it depends howmuch you want to spend.
(04:01):
If you said, ari, I would loveto spend $100,000 every single
month, I'd go.
Then no, because you'll run outof money in less than two years
.
But if you go, no, you knowwhat I really would love to
spend.
Let's call it $50,000 a year.
I'd go, then it's possible.
Maybe your home is paid off,maybe you're not a big spender,
maybe if you had $4,000 a monthevery month after taxes adjusted
(04:22):
for inflation, that you couldreally live the life you want to
live.
Now many of you I know, becauseyou're my client who will say
hey, I, 4,000 a month, like whatwould that even look like?
Well, let me give you anexample 4,000 a month.
I'm actually going to go alittle bit more aggressive,
because one and a half milliondollars.
If you were to use the 4% ruleand many of you know, know, I
don't like the 4% rule, I preferthe guardrails approach.
(04:45):
The 4% rule is based off a30-year retirement and the
guardrails approach is based offa 40-year retirement, which is
oftentimes much more applicable.
But 4% of $1.5 million is$60,000 a year.
Now that's not including SocialSecurity or inheritance or
rental income or healthcarecosts.
So there's a lot missing.
But to keep it simple, let'sassume I said here's $60,000 a
(05:08):
year.
I'm gonna use John and Jane asan example John, Jane, 60,000 a
year or 5,000 a month.
Here's what that would looklike.
Let's pretend, for example, youhave a mortgage still and it's
$1,500 a month, and you need tobe able to pay for healthcare on
a monthly basis.
That's another $500 a month,which, by the way, most of the
time healthcare can be.
(05:28):
I have one client that pays $11a month because they're
optimizing their healthcareplanning, which you can
absolutely do if you're smartabout it, and I have other
clients that spend $1,000 amonth on healthcare.
So I'm just giving out somebasics of what would a $60,000 a
year retirement really looklike.
It would be $1,500 for mortgage, $500 for healthcare, another
$500 for groceries, $400 fortransportation that's car gas.
(05:52):
$250 for utilities andentertainment, $400 for dining
and entertainment, $300 fortravel I know that's not a ton
for travel, that's 300 a month,so 3,600 a year, another 500 for
buffer.
Once again, you don't need tosave more money because you're
retired, so you don't have toworry about 401k contributions,
but 500 bucks a month and thenanother 150 for giving, so 1800
(06:15):
bucks a year.
Now, would that be tight in NewYork or San Francisco or LA?
Yeah, that would be tight.
But some people are like, hey,I'm a simple guy, and if that
means I don't need to keepworking.
Well, that's worth it to me.
So geography matters, lifestylechoices matter, healthcare
matters.
These are big things.
So the three questions to askyourself is how much would you
(06:37):
love to spend?
If you're like I know me, I knowme, I'm going to want to spend
$100,000 a month, excuse me,$100,000 a year, and I want to
make sure I'm planning forhealthcare, and I might want to
travel more at the beginning ofmy retirement because I'm in
good health, and I'm probablygoing to want to help a kid with
a down payment and I'm going towant to do a home remodel, okay
.
Well, the reality is, then, youwant to make sure you're saving
(06:59):
more.
A rule of thumb is that 4% rule.
So if I were to take 0.04 anddivide that and I just want once
again, I'm just, it's notperfect, okay, but I want to
make sure that you get to spenda hundred thousand a month, a
hundred thousand a year, excuseme.
Well, I want to make sure thatyou don't, first of all, ever
run the risk of running out ofmoney.
(07:20):
I'm going to use the guardrailsapproach, though, because that's
the approach that I personallyresonate with.
So I'm going to use a reallysimple example.
Let's pretend you have $2million.
Now let's not get too into thedetails of is that in a Roth IRA
or a 401k or a brokerageaccount.
But that is important.
But that is important $2million.
(07:42):
If you follow the guardrailsapproach, you could take out
between five and five and a halfpercent of your portfolio and
be rest assured that money wouldlast for about 40 plus years.
So now, that's assuming you'redoing all the right things along
the way.
But $2 million If you took 5%out of that, that's a hundred
thousand dollars, not rocketscience and really basic math
here.
The reason I want to show youall this is when you're thinking
(08:02):
about planning, don'tovercomplicate it.
I have so many people that gooh my gosh, travel and
healthcare and my kids incollege.
There's no way I can retireearly.
You are cheating on yourself bysaying that.
So this is my tough love.
I will say often on my YouTubevideos I am the meanest
financial advisor.
I promise I'm not mean.
My dad used to say growing upI'm the meanest dad.
(08:25):
Because I would say can I hangout with my friends or stay out
late or do these things?
And he'd go nope, too bad.
I say why?
He'd say, because I'm themeanest.
So I'm telling you guys, I'mnot the meanest, but I don't.
I retire earlier.
I was in a fine spot.
Yeah, I had kids in college,but I had enough money through
my employment to pay for that.
I had enough money to pay forhealthcare.
(08:47):
It was a lot, but I had enoughto pay for it.
So if you have enough to do thethings you want to do, what I
find is a lot of people go.
I've never had no paycheckbefore, so that's scary.
And now you want me to spendmore money than when I was
working.
Yeah, that's scaring me todeath.
And then all of a sudden, you'rein your seventies, your health
isn't exactly where you thoughtit was going to be Not saying
(09:08):
that to you, but I see that alot and that's you cheating on
yourself.
So this is my tough love not tosay go retire, but to say, hey,
really run the planningprojections, really find out
when would work become optional?
Because the earlier you findout you can stop working, the
better you're going to feelabout life, about what you want
to do.
So this example of if you hadone and a half million dollars
(09:31):
and you used my guardrailsapproach, which I didn't invent
this.
This is done by someone namedJohn Guyton, who created this
guardrails approach, where hetalks about if you, for example,
are living in retirement,markets are doing well, maybe
you take out a little bit more.
But on the flip side, whenmarkets aren't doing as well,
maybe you scale back a littlebit.
So, rather than it's a certainamount every year, no matter
(09:52):
what, it's a percentage which Ipersonally resonate with If
you're going to take 5% of thatone and.5 million, that's
$75,000 a year.
Now here's what's really cool Ifyou retire early, all of your
money.
Let's pretend you retire at 55,you're living off your
portfolio.
That's how you're going to live.
But when Social Security getsturned on, you're going to have
(10:12):
additional income.
That's helping out.
So maybe you retire at 55 andyou've got $75,000 of living
expenses.
That all is coming from yourportfolio.
From a $1.5 million portfolio,you can see that's about 5%.
And you want to spend $75,000when you're 55 and when you're
65.
But when you're 65, you have$2,000 a month coming in from
(10:35):
Social Security.
Well, that's a big deal.
That's $24,000 fewer dollars.
So now you're that's only$51,000 that you need from your
portfolio.
Ideally, your portfolio wouldhave grown.
So now let's pretend you have$2 million instead of having
$1.5 million and once again, youdon't need $75,000.
(10:56):
You need $51,000 because SocialSecurity is helping you out.
So what we want to get a clearunderstanding here is okay, how
much could I spend then?
The reality is most people Ifind are under spending when
they are in a fine spot toactually spend more.
They just don't reallyrecognize that.
So what we want to understandis okay, what would our
(11:17):
withdrawal rate essentially beif, let's pretend, once again,
your portfolio grew from one anda half million to $2 million
and now you only need to spendabout, let's call it, $51,000 a
month?
Well, what I can do is I cantake that $51,000, divide that
by my $2 million.
That's a 2.5% withdrawal rate.
(11:38):
That's extremely sustainableand, I would argue, too low.
Because what happens is if youunderspend, then all of a sudden
your assets grow and if youhave pre-tax money so 401ks,
iras those monies eventually aregoing to be taxed at your
highest marginal bracket.
Those are called requiredminimum distributions.
Those don't begin for most ofyou until you're 75, so you
(12:00):
don't have to worry about it fortoday.
But it's something that you'regoing to want to plan around.
So do you have a plan forhealthcare, for inflation, for
market downturns?
Do you have buffer?
One and a half million dollars?
Reasonably, to keep it simple,if you follow the 4% rule,
you're going to be able togenerate 60,000 a year.
I think.
If you're doing all the rightthings along the way, you could
probably generate closer to75,000 a year, and that's for 40
(12:23):
plus years.
So if you retired at 60 withone and a half million and
you're doing all the rightthings, this research would show
that you will not run out ofmoney until age 100 at the
earliest.
So that's, once again, assumingyou do all the right things.
I have other videos where I talkabout the actual withdrawal
strategy, meaning which accountdo you pull from, what's the
timing of it.
If you want to check that out,go to my videos.
(12:44):
The most popular videos areabout that withdrawal strategy,
because that's a common question.
But hopefully this was helpful,at least to make sure that
you're aware that you don't needtwo or three or five or $10
million.
But I also want to make sureyou know hey, it's about how
much you'd love to spend.
If you're someone that wants tospend $10,000 a month, awesome,
make sure that you have $2.5,$3 million so that you can do so
(13:07):
without worrying about, hey, ifmarkets don't do well or if
inflation goes up or ifhealthcare changes, I have to go
back to work.
I don't want you to have tothink that way.
So that's it for this podcastepisode.
Thank you, as always, forsupporting the channel.
If you want to download andactually run your own scenarios,
I have what's called the EarlyRetirement Academy.
You can find information onthis in the description of this
(13:29):
video.
That is where you can go buildyour own custom plan.
You can actually find out hey,what tax strategy should I use?
Which account should I pullfrom?
It's a few hundred bucks for areason.
You don't get one-on-oneguidance from me, but you can go
build your own plan.
That's a good starting spotfrom me.
But you can go build your ownplan.
That's a good starting spot.
That's something I recommendwhen people are on their way
towards an early retirement.
Maybe they're five plus yearsout and they've got a good
(13:51):
amount of money in a 401k andthey want to optimize.
I'm the weird advisor that sayseveryone doesn't need an advisor
.
It actually depends on whatstage of life you're in and what
experience you're looking for,then we of course, have what we
do at Root.
Our core business model is wehelp clients so they don't have
a new job having to manage allof this throughout retirement.
If that's something that's ofinterest to you, go to our
(14:11):
website, rootfinancialcom.
Click, get started in the topright and we look forward to
talking to you.
See you guys next time.
Thank you all, as always, forlistening to the Early
Retirement Podcast.
I love getting to host theseshows and make different content
for you guys every single week.
I've not missed a single weekin years and that is because I
love getting to do this.
Now, please be smart about this.
(14:33):
Before you actually execute anystrategy that you see me talk
about or hear me talk about,should I say Please talk to your
financial advisor, your taxpreparer, your estate attorney.
Please be smart about this.
None of this should beconstrued as financial advice.
This is for fun, educational,informational purposes only.
Once again, just quickdisclaimer here.
(14:54):
Guys, please be smart aboutthis.
Appreciate you listening, asalways, and you can, of course,
submit a question on my website,earlyretirementpodcastcom.
If you, of course, want me toaddress a specific case study or
topic.
I will not promise I can get toit, but I respond to every
single person and if I find itwill be helpful for a lot of
people, I will absolutely makean episode on it, at the very
(15:16):
least give you some insight.
That's it, thanks, guys.
You may think you need $2 million to retire.
You might think you need $3million.
You might actually not know howmuch you need to retire, but
the reality is none of thatactually applies to you.
Now, I know that's not superhelpful, so what I'm going to do
on this episode is tell youthat, if you have about $1.5
million, or if you're on trackfor $1.5 million, what that
could mean for you if you wereto stop working tomorrow.
(00:22):
Now, most of the time when Ispeak to someone and they're
interested in retiring early,it's not necessarily, hey, I'm
trying to do that tomorrow, butit's mainly I would love to know
if I'm working because I wantto or because I have to, because
if I really had enough money, Iprobably wouldn't keep working
at the rate that I'm workingbecause it's really impacting my
health, time with family orfriends or relationships.
(00:44):
So I just want to know when isit possible?
Now, the idea that you need amillion or 5 million or 10
million none of that applies toyou.
You need to make sure you haveenough money to live the life
you want to live.
Why is that important?
I had a client who and I oftenwill share stories when I record
these different podcasts orYouTube videos because I find
(01:07):
this is the most fun way tolearn.
I watch YouTube videos myselfand this is how I like to engage
content, so I make YouTubevideos and I watch a lot of
YouTube videos, so I hope thisresonates with you.
But this person reached out andsaid hey, I really don't think
I can retire early.
I only have about $1.2 million.
My neighbor actually has.
I know more than that becausewe're very transparent with
(01:29):
finances and I asked them totell me how much.
And they said it's just morethan that.
That's all you need to know.
And I said why are you hesitantto retire?
And they said well, becausethey have more than me and they
don't seem like they're anywhereclose to retiring.
And I said that is completehead trash.
You don't know if they want tospend 50,000 a month.
You don't know if there's threekids that they're supporting.
You don't know if there's asecond home they want to buy.
(01:51):
They might have completelydifferent goals.
And the fact that you'reconsidering not retiring even
though you're actually in apretty good spot to make it
happen pretty soon, that's justtotal head trash.
And once they heard that, theywent oh my gosh, like I just
kind of needed to just hear itonce.
It's like one of those momentswhere it just clicks.
So what I'm going to do is walkyou through.
If you have one and a halfmillion dollars, here's how much
(02:12):
you could spend realistically,knowing that you would not run
out of money, assuming you dothe right things, of course,
which I'll walk you throughtoday.
If you're not familiar, my nameis Ari Taublieb.
I am a certified financialplanner.
I am the host of this podcast,the Early Retirement Podcast,
and I'm the chief growth officerhere at Root.
Now, these videos are posted onYouTube as well as on the
(02:34):
podcast app, so, depending onwhere you're engaging this
content, I encourage peopleengaging with this content.
Should I say I encourage peopleto check out my YouTube channel
because that's where I'll oftengive visuals that can help with
some really tactical thingsthat I'll discuss, whether that
be a Roth conversion or taxharvesting or a withdrawal
strategy.
(02:55):
Today's episode this is totallycool.
If you're listening on thepodcast app, great.
If you're watching on YouTube,even better.
I just have a favor If you'rewatching, please comment below
how much money do you want toretire with Now?
Don't say $10 million.
Okay, be realistic here.
Some people like, hey, mygoal's 2 million, my goal's 3
million, my goal's 5 million.
Some people say, my goal's800,000, and I'm retiring next
(03:18):
year.
If you guys don't mindcommenting, it helps.
Don't mind commenting, it helpsother people who watch this
video to realize and go hey, I'mnot alone.
I have $800,000.
And here's 10 other people thatare also going to retire.
I thought I was nuts and that Iwas going to have to work 10
more years.
What am I thinking?
Here's a bunch of other peoplethat seem really smart as well
and they're going to retire.
Maybe I could retire earlier.
(03:39):
It's one thing to hear it fromme, it's another thing to hear
it from others.
So I encourage you to commentbelow and even if you're not
planning to retire soon, pleaselet me know.
It's fun to hear what kind ofcontent resonates with you.
So let's hop in.
So, is one and a half millionenough to retire?
The answer is yes.
If the answer is always yes.
If it depends, it depends howmuch you want to spend.
(04:01):
If you said, ari, I would loveto spend $100,000 every single
month, I'd go.
Then no, because you'll run outof money in less than two years
.
But if you go, no, you knowwhat I really would love to
spend.
Let's call it $50,000 a year.
I'd go, then it's possible.
Maybe your home is paid off,maybe you're not a big spender,
maybe if you had $4,000 a monthevery month after taxes adjusted
(04:22):
for inflation, that you couldreally live the life you want to
live.
Now many of you I know, becauseyou're my client who will say
hey, I, 4,000 a month, like whatwould that even look like?
Well, let me give you anexample 4,000 a month.
I'm actually going to go alittle bit more aggressive,
because one and a half milliondollars.
If you were to use the 4% ruleand many of you know, know, I
don't like the 4% rule, I preferthe guardrails approach.
(04:45):
The 4% rule is based off a30-year retirement and the
guardrails approach is based offa 40-year retirement, which is
oftentimes much more applicable.
But 4% of $1.5 million is$60,000 a year.
Now that's not including SocialSecurity or inheritance or
rental income or healthcarecosts.
So there's a lot missing.
But to keep it simple, let'sassume I said here's $60,000 a
(05:08):
year.
I'm gonna use John and Jane asan example John, Jane, 60,000 a
year or 5,000 a month.
Here's what that would looklike.
Let's pretend, for example, youhave a mortgage still and it's
$1,500 a month, and you need tobe able to pay for healthcare on
a monthly basis.
That's another $500 a month,which, by the way, most of the
time healthcare can be.
(05:28):
I have one client that pays $11a month because they're
optimizing their healthcareplanning, which you can
absolutely do if you're smartabout it, and I have other
clients that spend $1,000 amonth on healthcare.
So I'm just giving out somebasics of what would a $60,000 a
year retirement really looklike.
It would be $1,500 for mortgage, $500 for healthcare, another
$500 for groceries, $400 fortransportation that's car gas.
(05:52):
$250 for utilities andentertainment, $400 for dining
and entertainment, $300 fortravel I know that's not a ton
for travel, that's 300 a month,so 3,600 a year, another 500 for
buffer.
Once again, you don't need tosave more money because you're
retired, so you don't have toworry about 401k contributions,
but 500 bucks a month and thenanother 150 for giving, so 1800
(06:15):
bucks a year.
Now, would that be tight in NewYork or San Francisco or LA?
Yeah, that would be tight.
But some people are like, hey,I'm a simple guy, and if that
means I don't need to keepworking.
Well, that's worth it to me.
So geography matters, lifestylechoices matter, healthcare
matters.
These are big things.
So the three questions to askyourself is how much would you
(06:37):
love to spend?
If you're like I know me, I knowme, I'm going to want to spend
$100,000 a month, excuse me,$100,000 a year, and I want to
make sure I'm planning forhealthcare, and I might want to
travel more at the beginning ofmy retirement because I'm in
good health, and I'm probablygoing to want to help a kid with
a down payment and I'm going towant to do a home remodel, okay
.
Well, the reality is, then, youwant to make sure you're saving
(06:59):
more.
A rule of thumb is that 4% rule.
So if I were to take 0.04 anddivide that and I just want once
again, I'm just, it's notperfect, okay, but I want to
make sure that you get to spenda hundred thousand a month, a
hundred thousand a year, excuseme.
Well, I want to make sure thatyou don't, first of all, ever
run the risk of running out ofmoney.
(07:20):
I'm going to use the guardrailsapproach, though, because that's
the approach that I personallyresonate with.
So I'm going to use a reallysimple example.
Let's pretend you have $2million.
Now let's not get too into thedetails of is that in a Roth IRA
or a 401k or a brokerageaccount.
But that is important.
But that is important $2million.
(07:42):
If you follow the guardrailsapproach, you could take out
between five and five and a halfpercent of your portfolio and
be rest assured that money wouldlast for about 40 plus years.
So now, that's assuming you'redoing all the right things along
the way.
But $2 million If you took 5%out of that, that's a hundred
thousand dollars, not rocketscience and really basic math
here.
The reason I want to show youall this is when you're thinking
(08:02):
about planning, don'tovercomplicate it.
I have so many people that gooh my gosh, travel and
healthcare and my kids incollege.
There's no way I can retireearly.
You are cheating on yourself bysaying that.
So this is my tough love.
I will say often on my YouTubevideos I am the meanest
financial advisor.
I promise I'm not mean.
My dad used to say growing upI'm the meanest dad.
(08:25):
Because I would say can I hangout with my friends or stay out
late or do these things?
And he'd go nope, too bad.
I say why?
He'd say, because I'm themeanest.
So I'm telling you guys, I'mnot the meanest, but I don't.
I retire earlier.
I was in a fine spot.
Yeah, I had kids in college,but I had enough money through
my employment to pay for that.
I had enough money to pay forhealthcare.
(08:47):
It was a lot, but I had enoughto pay for it.
So if you have enough to do thethings you want to do, what I
find is a lot of people go.
I've never had no paycheckbefore, so that's scary.
And now you want me to spendmore money than when I was
working.
Yeah, that's scaring me todeath.
And then all of a sudden, you'rein your seventies, your health
isn't exactly where you thoughtit was going to be Not saying
(09:08):
that to you, but I see that alot and that's you cheating on
yourself.
So this is my tough love not tosay go retire, but to say, hey,
really run the planningprojections, really find out
when would work become optional?
Because the earlier you findout you can stop working, the
better you're going to feelabout life, about what you want
to do.
So this example of if you hadone and a half million dollars
(09:31):
and you used my guardrailsapproach, which I didn't invent
this.
This is done by someone namedJohn Guyton, who created this
guardrails approach, where hetalks about if you, for example,
are living in retirement,markets are doing well, maybe
you take out a little bit more.
But on the flip side, whenmarkets aren't doing as well,
maybe you scale back a littlebit.
So, rather than it's a certainamount every year, no matter
(09:52):
what, it's a percentage which Ipersonally resonate with If
you're going to take 5% of thatone and.5 million, that's
$75,000 a year.
Now here's what's really cool Ifyou retire early, all of your
money.
Let's pretend you retire at 55,you're living off your
portfolio.
That's how you're going to live.
But when Social Security getsturned on, you're going to have
(10:12):
additional income.
That's helping out.
So maybe you retire at 55 andyou've got $75,000 of living
expenses.
That all is coming from yourportfolio.
From a $1.5 million portfolio,you can see that's about 5%.
And you want to spend $75,000when you're 55 and when you're
65.
But when you're 65, you have$2,000 a month coming in from
(10:35):
Social Security.
Well, that's a big deal.
That's $24,000 fewer dollars.
So now you're that's only$51,000 that you need from your
portfolio.
Ideally, your portfolio wouldhave grown.
So now let's pretend you have$2 million instead of having
$1.5 million and once again, youdon't need $75,000.
(10:56):
You need $51,000 because SocialSecurity is helping you out.
So what we want to get a clearunderstanding here is okay, how
much could I spend then?
The reality is most people Ifind are under spending when
they are in a fine spot toactually spend more.
They just don't reallyrecognize that.
So what we want to understandis okay, what would our
(11:17):
withdrawal rate essentially beif, let's pretend, once again,
your portfolio grew from one anda half million to $2 million
and now you only need to spendabout, let's call it, $51,000 a
month?
Well, what I can do is I cantake that $51,000, divide that
by my $2 million.
That's a 2.5% withdrawal rate.
(11:38):
That's extremely sustainableand, I would argue, too low.
Because what happens is if youunderspend, then all of a sudden
your assets grow and if youhave pre-tax money so 401ks,
iras those monies eventually aregoing to be taxed at your
highest marginal bracket.
Those are called requiredminimum distributions.
Those don't begin for most ofyou until you're 75, so you
(12:00):
don't have to worry about it fortoday.
But it's something that you'regoing to want to plan around.
So do you have a plan forhealthcare, for inflation, for
market downturns?
Do you have buffer?
One and a half million dollars?
Reasonably, to keep it simple,if you follow the 4% rule,
you're going to be able togenerate 60,000 a year.
I think.
If you're doing all the rightthings along the way, you could
probably generate closer to75,000 a year, and that's for 40
(12:23):
plus years.
So if you retired at 60 withone and a half million and
you're doing all the rightthings, this research would show
that you will not run out ofmoney until age 100 at the
earliest.
So that's, once again, assumingyou do all the right things.
I have other videos where I talkabout the actual withdrawal
strategy, meaning which accountdo you pull from, what's the
timing of it.
If you want to check that out,go to my videos.
(12:44):
The most popular videos areabout that withdrawal strategy,
because that's a common question.
But hopefully this was helpful,at least to make sure that
you're aware that you don't needtwo or three or five or $10
million.
But I also want to make sureyou know hey, it's about how
much you'd love to spend.
If you're someone that wants tospend $10,000 a month, awesome,
make sure that you have $2.5,$3 million so that you can do so
(13:07):
without worrying about, hey, ifmarkets don't do well or if
inflation goes up or ifhealthcare changes, I have to go
back to work.
I don't want you to have tothink that way.
So that's it for this podcastepisode.
Thank you, as always, forsupporting the channel.
If you want to download andactually run your own scenarios,
I have what's called the EarlyRetirement Academy.
You can find information onthis in the description of this
(13:29):
video.
That is where you can go buildyour own custom plan.
You can actually find out hey,what tax strategy should I use?
Which account should I pullfrom?
It's a few hundred bucks for areason.
You don't get one-on-oneguidance from me, but you can go
build your own plan.
That's a good starting spotfrom me.
But you can go build your ownplan.
That's a good starting spot.
That's something I recommendwhen people are on their way
towards an early retirement.
Maybe they're five plus yearsout and they've got a good
(13:51):
amount of money in a 401k andthey want to optimize.
I'm the weird advisor that sayseveryone doesn't need an advisor
.
It actually depends on whatstage of life you're in and what
experience you're looking for,then we of course, have what we
do at Root.
Our core business model is wehelp clients so they don't have
a new job having to manage allof this throughout retirement.
If that's something that's ofinterest to you, go to our
(14:11):
website, rootfinancialcom.
Click, get started in the topright and we look forward to
talking to you.
See you guys next time.
Thank you all, as always, forlistening to the Early
Retirement Podcast.
I love getting to host theseshows and make different content
for you guys every single week.
I've not missed a single weekin years and that is because I
love getting to do this.
Now, please be smart about this.
(14:33):
Before you actually execute anystrategy that you see me talk
about or hear me talk about,should I say Please talk to your
financial advisor, your taxpreparer, your estate attorney.
Please be smart about this.
None of this should beconstrued as financial advice.
This is for fun, educational,informational purposes only.
Once again, just quickdisclaimer here.
(14:54):
Guys, please be smart aboutthis.
Appreciate you listening, asalways, and you can, of course,
submit a question on my website,earlyretirementpodcastcom.
If you, of course, want me toaddress a specific case study or
topic.
I will not promise I can get toit, but I respond to every
single person and if I find itwill be helpful for a lot of
people, I will absolutely makean episode on it, at the very
(15:16):
least give you some insight.
That's it, thanks, guys.
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