5 Ways To Retire Early

This episode brought to you by Abound Wealth. Take the relationship to the next level and become a client: https://moneyguy.com/become-a-client/ Want to retire early but worried your retirement money is locked up until age 59 and a half? Brian and Bo break down 5 early retirement strategies that can help you access your investments sooner, including taxable brokerage accounts, the Rule of 55, 72(t) distributions, Roth conversion ladders, and Coast FIRE. Learn how early retirement withdrawals work, the tax implications to consider, and why the best financial independence strategy may involve combining multiple account types. Whether you want to retire at 50, reach FIRE, optimize your 401(k), or simply own your time sooner, understanding these retirement planning strategies can help you build a more flexible financial future. Jump start your journey with our FREE financial resources⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠Reach your goals faster with our products⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠Take the relationship to the next level: become a client⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠Subscribe on YouTube for early access and go beyond the podcast⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠Connect with us on social media for more content⁠⁠⁠⁠⁠⁠⁠ Bring confidence to your wealth building with simplified strategies from The Money Guy. Learn how to apply financial tactics that go beyond common sense and help you reach your money goals faster. Make your assets do the heavy lifting so you can quit worrying and start living a more fulfilled life. Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Speaker 00

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• 1:00Brian Preston?

  A lot of people want to retire early, but how do you actually access the money when it's tied up in retirement accounts?

• 1:06Speaker 03

  And Brian, I am so excited because today we're covering five ways to retire early, including some that you may not even know about.

• 1:13Brian Preston?

  I'm Brian, he's Bo and this is the Money Guy Show where two financial advisors share strategies to help you grow your wealth and get access to it when you actually need it.

• 1:29Speaker 03

  Yeah, Brian, a lot of people want to retire early or at least they want the option to. They want to get to financial independence so that they then have the ability to own their time, to do what they want, when they want and the way they want to do it.

• 1:43Brian Preston?

  But let's face it, this system is designed for you to get access to your money after you're 59 and a half. So what do you do if you actually want access to that hard saved money much, much sooner?

• 1:54Speaker 03

  And if you listen to us for any amount of time, you know, we talk about the financial order of operations all the time. Brian, you know the thing for me, we have a nine step process to help you figure out what to do with your next dollar. And a lot of people say, okay, well, if I want to retire early, if that's what I want to do, then I probably need to break the financial order of operations or whatever that happened. Brian, is that true?

• 2:13Brian Preston?

  No, I do not think you have to break the financial order of operations, but it is going to require you to kind of use all the tools that are in the tool belt of the financial order of operations. And with that, we're going to kind of give you all the different things you can do. Cause first of all, if you're going to be going through the financial order of operations, we still want you saving in these retirement accounts that have a 59 and a half or 55 access point.

• 2:40Speaker 03

  Yeah. So why are retirement accounts a big point? For exactly that reason, there's a good chance that you're going to need these dollars even after age 59 and a half. We think so much about early retirement and what that looks like in our 40s and 50s, but there's a big chunk of our assets that we're going to need to optimize in our 70s, 80s, even 90s. So why not take advantage of the accounts that are designed exactly to do that?

• 3:02Brian Preston?

  And we're going to show you today that there's actually easy ways to access these accounts earlier than yes, you taking the easy shortcut of just opening up a taxable brokerage account.

• 3:13Speaker 03

  So we're going to walk through five different ways that you can access your money that you may not know about. And the very first one is the one that you actually just said. This is utilizing a regular after tax brokerage account.

• 3:26Brian Preston?

  Now, look, we like after tax accounts because these are still tax favored because we'll, we'll talk about what the dividends can be lower tax rates, capital gains can be lower tax rates, but they don't get the tax deferred or tax free growth that you see with a lot of the retirement accounts. So it better make sense you, make sure you understand tax rates when we're talking about investing in this structure.

• 3:52Speaker 03

  Yeah. So a lot of people will say, okay, I'm just going to do the taxable brokerage account. I'm not going to do the 401k or I'm not going to do the other types of accounts. Well, the reason you may be missing out on that is because historically this is true now and it's been true for the last 30 years, ordinary income rates are higher than capital gains rates. So if I can save some money today and I can save at the ordinary income level, that's likely going to be more advantageous to me than just saving in an after tax account and being able to take of long-term capital gains. Yes, long-term capital gains are favorable and they are a tax advantage, but it's not more advantage than it's not more advantageous than actually saving money at the ordinary income tax.

• 4:34Brian Preston?

  So let's talk about the benefits of using a taxable brokerage account because this is the easy button. If you think about it is, hey, let's go out and load up this after tax account, you know, but look, we don't want you cutting the corner off. And that was the whole point we were making, but we can start with the pros of this is accessible for everyone. If you think about the fact that there's not any early withdrawal penalties, there's no contribution limits. This is one that really does make it easy.

• 5:00Speaker 03

  Yeah. It has a ton of flexibility and the fact that you don't have to be working or not working in order to do it. You don't have to be a W2 or a 1099 employee. There aren't contribution limits. There aren't age requirements. And we've already alluded to this, when you invest in an after tax brokerage account, the gains on that, when you go to sell the securities are taxed at long-term capital gains rates. They're not taxed at ordinary income rates, like the money that you pull out of your 401ks and IRAs.

• 5:27Brian Preston?

  And this is what we were talking about earlier on the cons side of this is that yes, there are tax favorites parts of it, but it's just not as good. I mean, how do you actually compete with tax-free growth or tax deferred for the next 20 to 30 years? So that's what the part we want to cover is yes, this might be a good bridge account and more to come on that. But we do want to make sure you understand that there are actually four other ways that you can get access to some of these more tax favorite accounts and that's stuff we want you to lean into and pay attention for.

• 5:56Speaker 03

  All right. So strategy number two, again, we've talked about this a little bit, but this is the rule of 55 and we won't spend a ton of time on this one because this one is actually pretty straightforward. What it suggests is that if you are employed with the company that sponsors your 401k or your employer sponsored retirement plan, in the year that you turn 55, you can begin accessing those dollars penalty free before 59 and a half, but you have to make sure that you do not retire, do not leave work until the year that you turn 55.

• 6:26Brian Preston?

  Yeah. This is one that I, it's rule of 55, not retire at 53, leave it in that account for two years and then pull it out. No, you have to literally, literally be working at this company in the year that you turn 55 for this rule to actually work for you.

• 6:41Speaker 03

  So how do you need to structure your accounts if you want to do this? Well, obviously you're going to be building inside of a pre-tax 401k, inside a traditional 401k where you get a current year tax benefit. If you decide to contribute to a Roth 401k, it can work, but you need to recognize that any dollars you go to pull out of your Roth 401k before 59 and a half, if any of them are earnings, they will be subject to taxes and penalties. So you can only pull out your basis in the Roth 401k. So the best setup, if you're going to take advantage of the rule of 55 is doing so inside of a pre-tax 401k.

• 7:16Brian Preston?

  So let's go through on rule of 55, what are the pros and what are the cons? For the pros, this is pretty simple. I mean, it's a pretty binary decision of, hey, am I in the year that I turn 55 and did I have separation of service? If the answer is yes, hey, voila, you've unlocked, we have full access to immediate and full potential without having to pay an early withdrawal penalty.

• 7:38Speaker 03

  And it's tax advantaged if your tax bracket's going to decrease in retirement. If I put money into my pre-tax 401k when I was in the 30% tax bracket, but then I retire at 55 and I'm going to be in the 22% tax bracket, obviously that was a more advantageous tax arbitrage than I was able to take advantage of.

• 7:57Brian Preston?

  Now, if we're talking about the cons of this, it is dependent upon the plan designed. You have to, because when your company put, set up their 401k, they did have to make the election to choose to allow the rule of 55 to be something that they wanted their participants to be, have available to them.

• 8:16Speaker 03

  And the other limitation is this has to be with your current 401k, the actual retirement plan that you are currently participating in. If you have an old 401k or an old 401k that you rolled into an IRA, where those assets are now would not qualify. But there is a little bit of a hack. There is something you can do if you know that you're going to retire and you do have other pre-tax assets or old 401ks or old employer sponsored plans, you can actually roll them into your current plan, thereby allowing you to access those dollars after you turn 55. But if you do not do that account consolidation, you do not roll them in, those other assets would not be available.

• 8:53Brian Preston?

  And this last con, this is Captain Obvious stated this is that you can't retire until you're 55. Remember this is rule of 55. If your goal is to retire at 50, this probably isn't for you.

• 9:05Speaker 03

  All right. So we're talking about ways to retire early and I don't know if we did this on purpose, but we're kind of going from least complicated to more complicated because obviously taxable brokerage account, not all that complicated.

• 9:16Brian Preston?

  Easy button.

• 9:17Speaker 03

  Rule of 55, again, not all that complicated. You just have to turn a certain age before you access. Now this third one, this is one that I do think is a little more complicated. And if you, if you read any sort of financial independence, retire early literature, do any research, you've likely come across 72T distributions.

• 9:34Brian Preston?

  And if, you know, if you don't love numbers, let us give you an acronym, SEPS. And what that stands for is substantial equal periodic payments. This is actually a setup. I'll let Bo read the actual definition, but it's going to allow you to have access to these retirement plans earlier than that 59 and a half without penalties. You know what? You don't have to read it because I actually just gave it off of memory, pretty much the exact same definition.

• 9:56Speaker 03

  Cause I can read the thing that you just said, if you want me to.

• 10:00Brian Preston?

  Get it so close to the actual definition. I don't do that very often.

• 10:02Speaker 03

  So how do you do this? How do you actually take advantage of substantially equal periodic payments or 72T distributions? Well, one, you need to choose what account you're going to do the 72T from. Is this from a 401K that you've been participating in? Is it from an IRA that you rolled a 401K into? Is it just from a pre-tax IRA? You choose a specific account that you want to subject to this type of distribution. Then you want to choose the type of payment. And there are generally three different calculations you can do. You can do the RMD, Required Minimum Distribution Method, where every year, the amount of your payment is recalculated based on the size of the portfolio and your life expectancy. You can do the amortization method, which is a fixed amount where it equally amortizes

• 10:47Speaker 03

  the amount that you'll receive over a fixed period of time. Or you can do the annuitization method, which uses an annuity factor to calculate your payment based on your mortality rate, a chosen interest rate, and how much money you're starting with. Each of these three different calculations will come up with three different answers for how much the periodic payment is going to be. So you want to make sure, if you're doing this for early retirement, that you choose the right calculation method so that you can actually meet your retirement living expenses. Then, once you set this in motion, you have to make sure that the payments continue for at least five years, or until you turn age 59 and a half, whichever is longer. So if you were to start 72T at 57, you have to

• 11:32Speaker 03

  go past 59 and a half. If you were to start them at 45, you would have to execute them for 15 years. So you want to make sure your math is right before you jump in.

• 11:42Brian Preston?

  So with that, as you can see, by just by the sheer fact that you have to choose what your distribution method is, is a complication.

• 11:50Speaker 03

  Absolutely.

• 11:51Brian Preston?

  And then the fact that you have to now make sure you honor this five-year or 59 and a half, whichever is longer, you can quickly see how this gets complicated. And then, let me tell you how this actually works in practicality, and then we're going to go through the pros and cons. A lot of times, you're trying to get to a specific amount of money that you need in retirement, and you have this one big account. And if you calculate the payment off of that, you're like, whoa, that's way too much money. I don't want all that money. So you have to then split the account out. You have to go back into the much smaller account balance that you actually now want to make eligible to the 72T. You can quickly see how this thing spirals into a complexity that you probably had not originally thought of, but still, it is a viable option if you are leaving the workforce early.

• 12:36Speaker 03

  And so if you're thinking about this, is this something that makes sense for me? What are the pros and what are the cons? Well, obviously, one of the pros is while you're building up, while you're saving, the accumulation process is pretty straightforward. You follow the financial order of operations. You fund your pre-tax 401K account. And then, when you get to retirement, when it's time for you to start taking these dollars out, that's when the complexity enters into the equation.

• 12:59Brian Preston?

  You also have the tax advantage. If your tax rates go down because you're essentially not having as much earned income, they can be tax advantage because your tax brackets will decrease in retirement.

• 13:09Speaker 03

  Now, as you can imagine, those are the pros, but there are some cons. And probably the first con is very obvious. There is a lot of risk in the complexity. The calculations on how much you should take can be difficult. And if you mess it up, the penalties can be pretty severe. If you either stop the payments prematurely, or you do not take a substantially equal amount that you're supposed to take, they can actually charge you a 10% penalty retroactively for all of the years that you were executing this strategy. So you want to make sure that you get this right on the front, and you actually execute it correctly.

• 13:42Brian Preston?

  Yeah. And then realize, these don't have a lot of flexibility in them. Once you kind of set it and forget it, you don't get to change things. Like, the distribution method doesn't change. If you think about the fact that there's a lot of market volatility, and now that payment you calculated doesn't work out to what you actually need to live off of, eh, you have to start the process again with more of the previous account balance that you maybe had rolled an account off of. Or what happens if all of a sudden you have a, you set up this 72T, and then you have a windfall of money come your way? Whether it's an inheritance, or you start doing side hustle, or you do other things? Well, sorry, you started this process. You have to finish the drill. Because remember,

• 14:23Brian Preston?

  it's the longer of either five years or reaching 59 and a half. There's no take backs on that.

• 14:29Speaker 03

  Yeah. I think what's really interesting, as it relates to 72T distributions, is they're super interesting from like, an academic and theoretical standpoint. When it comes to practice, we really just don't see it all that often. And even for the people that are going to do 72T distributions, what they're likely going to do is they're going to open up that separate account. They're going to put a smaller sum of money in there, and it's only going to cover a portion of their needs. They basically create their own short-term fixed annuity to create that income stream. So for as much press and as much interest as 72T distributions get, I feel like in practice, I just don't see them really all that often across FIRE participants.

• 15:08Brian Preston?

  Yeah. So that's 72. Still a viable tool, though, because I do want to make sure we don't poo-poo it too much. Because I do, we have clients that are using this strategy and using it effectively. We just want to make sure you go into it with your eyes fully open. Well, when I started podcasting, all the way back in 2006, a lot of other financial advisors thought I was crazy for giving away so much free advice.

• 15:27Speaker 03

  And here we are, 20 years later, still loading people up with free calculators, and resources, and financial education. And the reason is, we really do believe in the abundance cycle.

• 15:38Brian Preston?

  Yeah. We know a lot of you will use this information to help you build your wealth. And that makes it all worth it. But for some of you, that knowledge works a little too well. Your net worth grows, your financial life gets complicated, and one day, you realize you need to take the relationship to the next level.

• 15:55Speaker 03

  And when that day comes, we would love for you to come back to where it all started, The Money Guy Show and Abound Wealth.

• 16:02Brian Preston?

  That's right. We're fee-only, and we're fiduciary advisors, meaning we put your interests first. And our goal is for you to rest easy, knowing every box is checked in your army of dollar bills, that they're working efficiently.

• 16:13Speaker 03

  So if you're at that point, go check us out at aboundwealth.com, or click the link below. We'd love to connect and see if we are a good fit for you.

• 16:22Brian Preston?

  You know what? And that's what we always talk about, the abundance cycle. We help you build wealth for free. And if you ever need a professional to take you to the next level, we're right here, and we'll leave the porch light on for you.

• 16:33Speaker 03

  So if 72T is one that gets a lot of press, this fourth strategy also gets a lot of press. And this is executing a Roth conversion ladder in order to be able to access your dollars early.

• 16:44Brian Preston?

  Yeah. Now, this one's interesting, because we all know when you start saving and investing, especially if you have an employer retirement plan, it's not uncommon that you look back one day because it's so tax favored, and you go, man, I have a huge tax-deferred retirement account, but I'm planning on leaving the workforce at 53 years of age. What am I going to do to get access? And then, there is an option, where, and I think, I love that the FIRE community, or the retire early, or move on to the next endeavor community, has said, hey, there is a loophole in the fact that if you do a Roth conversion, and you do the, turn some of that 401K, or that rollover IRA, and convert it into a Roth, if you keep it out there for five years, you can actually get access to that money, even if it's before

• 17:27Brian Preston?

  59 and a half, because that's now basis. That's intriguing.

• 17:30Speaker 03

  That's right. A lot of people don't recognize, one of the little-known things about Roths is even though they're supposed to be used for retirement and 59 and a half, any money that you put in, any money that you contribute is considered basis that you can access pre-59 and a half with no tax and no penalty. Well, when you're doing Roth conversions, exactly what Brian said, now you're just adding to the basis. So what are the logistics? How does it actually work? Well, step one, you contribute into your 401K. And this year, you can contribute up to $24,500 into the pre-tax traditional side of your 401K.

• 18:05Speaker 00

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• 18:33Speaker 01

  Flowing ad budget on metrics that look great till the CFO sees them. That's bull spend and marketers are calling it out in dashboard confessions.

• 18:43Speaker 04

  I remember telling my boss, it'll be good for the brand when leads were slow. Yeah, it, it wasn't.

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• 19:03Speaker 03

  Then as you get closer to retirement, you choose to convert a portion of that 401k to Roth. You're going to pay taxes on the converted amount and then that becomes part of your Roth basis. But you have to let it sit in there for five years. You can't convert today and then draw money next year. You have to let it season. If you let it season, then you can draw it penalty free and tax free. And you repeat steps two and three annually for as many years as you need to create distributions for.

• 19:31Brian Preston?

  So let's take an example here, a visual example of somebody who's taken years and decades to save and invest. And have built up a traditional 401k. And then they determine, hey, five years from now, I think that the amount of money I need to kind of bridge my early retirement is $30,000 a year. So what they'll do is, is in five years from the day that they actually think that they want to retire. Like say in this example, 2024, when they're 50 years of age, they're going to convert $30,000 into a Roth. Now they're going to wait the five years. So in 2029, they will now have access to that $30,000 because they waited the right holding period.

• 20:11Brian Preston?

  Now they have access to what's in the government's eyes, the basis in this Roth conversion. And then they'll repeat that process for when they're 51, 52, 53, 54. And you'll see that this is actually going to be the bridge account that's going to fund $30,000 a year is available to them all the way until they're age 60, which ding ding ding, now you're north of the 59 and a half and have access to all of your retirement assets.

• 20:36Speaker 03

  So just initially, this seems interesting and we love the idea of turning, what is that? One, two, three, four, five, six, $180,000 into Roth dollars. But here's the issue, every year that you were converting from age 50 to 55, you had to pay tax on that conversion. So $30,000 got an added to your ordinary income tax. And then you began drawing off that Roth basis in years 55 through 60. What I'm going to argue is that if you had money to pay the taxes on the conversion, you probably could have built an after tax account instead of doing the Roth conversion. I can't help myself. I gotta throw it out there.

• 21:15Brian Preston?

  You're doing this way out of order. Let's at least give them, let's give them the pros and then I'll let you unleash a little bit more when we get to the cons. The pro is exactly what we were laying out there. You know, the cool thing about in 2010, they changed the rules on Roth conversions. You know, this thing used to have a limit. If your income was like over a hundred thousand dollars, you couldn't do this. But in 2010, they made it where there's no income limits on Roth conversions whatsoever. So that, that means whatever you need, you can convert as, we'll put in the little caveat or asterisk that you better have the money to pay the taxes. And this also can be very tax advantage. If your tax brackets reduce in retirement. Now, look, Beau will say that pro that I just read out to you is probably a con is because for most people,

• 21:59Brian Preston?

  when you're in the last few years of working, you're actually in your highest earning years. So it's, it's kind of, even though I said this, this is a benefit, it's really only a benefit if your taxes go down later in retirement. It's actually a negative and that's why I'll probably open it up to Beau. What's the cons, Beau?

• 22:18Speaker 03

  Yeah, most likely you're going to have a high tax bill. If you're trying to do these conversions while you're still earning income, you're going to be converting. You're going to be paying tax on that. Even if you're someone who says, oh, no, no, that's not the strategy. The strategy is I'm going to retire at 50 and then I'm going to be in a low income tax bracket. I'm going to do Roth conversions. You're likely still going to have to come up with money to pay those taxes that could have served as a bridge. So I think it's again, a fantastic exercise, but in practice it also, it often falls short. And you have to remember there is this five year delay. If you want to be able to take advantage of this, if you want to do this, you have to be planning at least 60 months in advance to be able to get access to that basis.

• 22:59Brian Preston?

  And then I'll just state the obvious. If you ask me who my favorite child of my favorite tax saving children are, it's going to always be Roth accounts. I mean, I will literally tell you, you know, it's, it's so interesting is if you think about the order that you save retirement assets, there's a reason even in the financial order of operations, we tell you to fund in step five, the Roth account. But you know what happens typically? If you, if you think about the order of when you fund your retirement savings, you typically go Roth, which is tax free. Then you go to 401k, which is kind of taxed deferred because that's where the, the employer match is. And then the last account typically around step seven of the financial order of operations is your after tax brokerage account.

• 23:41Brian Preston?

  And then what I find interesting, and maybe it's because I just come from a public accounting background. So we did it in that order. We went Roth, taxed deferred, after tax was the way we funded these accounts. When you hit retirement from an inventory of where you pull those assets out, you typically then go taxable, taxed deferred, because you want to, you want to start doing Roth conversions and other things before you have to do the required minimum distributions. And the last, never fails, the last account most people don't want to take assets out of is the Roth. Because it is your precious, it grows tax free and it even grows tax free from a legacy standpoint. So if you think about you're going to leave the kids some money, you start looking at all of your assets and you go, which one would I want my son, my daughter to inherit it?

• 24:26Brian Preston?

  Well, the Roth is the coolest because it at least has a 10 year, you know, extension of the tax free growth. It's pretty sexy from even a legacy standpoint. So I, I don't mean to give it so much lip service, but a big con is, is that you're giving up your prized favorite tax investment child.

• 24:48Speaker 03

  So, so obviously, uh, well, normally when we've done these shows in the past, this is kind of where it stopped. Hey, four things or four ways to retire early that you may not have thought of. But there actually is a fifth one and this is sort of a different type of retirement. But again, this one's got, uh, this one has had a lot of press and a lot of tension over the past couple of years. And this is for folks who want to do some version or some variation of coast fire.

• 25:14Brian Preston?

  I just had this, I had a call yesterday where the client's been with me for, for quite a while. And she's just at her wit's end. She doesn't like the area she lives in the country anymore. She doesn't really love her job anymore, but she's done a fantastic job of building up assets in the background. And I, and I was, and what I told her, I could tell she was getting overwhelmed in the situation. And I asked her, I said, have you ever heard of coast fire? Now she had not, but I was like, let me tell you how this is going to work. You have done such a good job of building up assets, but I can tell you are straight up miserable with where your life is going right now. We're going to use all that goodwill of building up all those assets. What if I told you, we could start doing an exercise where we start looking at different parts of the country you could live?

• 25:59Brian Preston?

  What if we start looking at, you don't have to make the same income you've been making. You can switch careers to a lower paying job that just covers your living expenses. Cause we'll just quit saving and investing for the future. You've already done that hard work. We're going to coast to the finish line because what you've done will get you there. You should have seen the relief. I mean, I, I turned a frown upside down and I was so happy. So that's why I know a lot of people call us the fire extinguishers because they say we, when we talk about fire content, we always have this, this, this edge to us. The edge is only conservatism. We just want to make sure that when you go through that threshold of retirement, that there's no regrets. Because usually it's hard to get the water back up the hill. But I, I do use this as a tool for my clients.

• 26:44Brian Preston?

  If there's any way I can tell you, hey, be rewarded for your hard discipline in the beginning, but live your best life instead of suffering through it for another seven to 10 years. We are going to do it. And I think coast fire checks a lot of those boxes.

• 26:57Speaker 03

  Yeah, coast fire is exactly that. It's the idea that while I'm in my highest income earning years, I'm going to save as much money as I can to hit a certain number that will allow me to then shift gears, downshift, move into a more enjoyable job, enjoyable career, until I ultimately get to where I'm truly financially independent. And so one of the huge benefits of coast fire is that it does improve your work, life balance earlier than full retirement, but you likely are sacrificing some work, life balance early on. You have to have a very high savings rate. You have to be able to do very hard work early in order to give yourself the margin to be able to do that downshift.

• 27:39Speaker 03

  But when you do it and when you do it well, it does allow you to enjoy spending now. If you can save up all the money that you need to save, and then you can just find a job that allows you to pay your bills and keep the lights on and maintain the lifestyle that you want to live. You get to actually spend now and begin enjoying the fruits of your labor earlier than if you're waiting till full retirement to be able to do that.

• 28:02Brian Preston?

  Well, also I like is that there's comfort in knowing that you've kind of done the heavy lifting already and you're getting a reward for that discipline is that you, you've, you've front and loaded. Now you're actually getting a dividend off of that hard work much, much earlier. But Beau, with all that, we just put some roses on this thing. What are the cons?

• 28:22Speaker 03

  Yeah, the big one is a lot of people don't do the math right, or they're too aggressive in their math. And they arrive at the conclusion that they take their foot off the gas too early. Okay. You know, I'm going to coast fire. I built up $100,000 and I'm 35 years old. I'm going to coast now. Well, if you've done the math poorly, there's a good chance that $100,000 at 35 might not turn into what you need it to turn into by the time that you turn 65. So you want to make sure you measure two, three, four, five times before you stop saving, before you leave that higher earning career, and you want to make sure that you have enough conservatism built in, that you're prepared for any unknown unknowns that might come your way.

• 28:58Brian Preston?

  The other, you know, thing to take into account is it's really how long is your time horizon? Because I do, one of the things we always make sure we bring forward for people to consider, if you're making this decision before you've closed out all the decisions on how big is your family going to be, how are you going to pay for, you know, or help, or have you even had that discussion on what does higher education look like for your children? Where are you going to retire to? Because if you're moving to a high cost of living area, what does that do to your plan? I always say, look at your time horizon. If there's too many variables it can change, it makes the planning for this much, much harder. See, that's why you have to make sure you measure twice, cut once, and that's where that conservatism comes through to make sure

• 29:42Brian Preston?

  your variables are right, so that you don't have a disappointment after you make these big, heavy decisions.

• 29:49Speaker 03

  So if you're going to retire early, and that's something that you want to do, which one of these fives is the most optimized path? Which one is the one that makes the most sense? Well, the answer is there's a lot of factors that will change the outcome, and the right solution for one person may not be the right solution for another person. So what are the things you ought to think at? What are the things you ought to look at? Well, you ought to think about your tax rates, both now and in the future. How much are you actually going to spend in retirement? Where's it going to put you from a tax bracket standpoint? What is your tax rate before retirement? What will it be after retirement? Where are you going to live? Are you going to live in a low tax jurisdiction or a high tax jurisdiction? What types of accounts do you have access to? Are you single now and

• 30:33Speaker 03

  you're going to be married? Are you married now and I hope perhaps you're going to be single? You want to make sure you understand those things because those are very much going to impact the mathematics of whether your plan is going to work or not.

• 30:46Brian Preston?

  Yeah, I mean, this is one of those things where when I tell people, you have a simple financial life and you can create tremendous success with simple, small decisions. But at some point, complexity finds you. Success creates complexity. And guys, I'm here to tell you, when it comes to retirement planning, this is one of the more complex things that you deal with because as we've already covered, your tax structure matters, you know, how your accounts are, do you have all after-tax assets? Do you, you know, like a taxable brokerage? Do you have, did you load up only on Roth because you heard us say it was our favorite? And that's all you've got? That probably in the worst situation, by the way, if I'm being honest. Or maybe you have too much of the tax deferred where

• 31:27Brian Preston?

  you can't even pay for cars in cash because you're retirement rich and don't have other assets. All these things, we accept people for how they come to us, and then we try to help them live their best life. But the reality is, is personal finance is very personal, Bo. And that's what I always tell people is that this is the part where I always like to reach people and say, look, it's not one, two, three, or four, and you definitively just choose one of these strategies. What I like is, as a financial planner, we layer these strategies. Because I look at it and I say, hey, you know what? It looks like you have this 401k, you're retiring the year you turn 55, you know, that, the rule of 55

• 32:10Brian Preston?

  is going to be your friend, but it's not going to cover everything. But that's okay because we have this after-tax brokerage account. Or what if you have the 50-year-old and you say, you know what, let's do a portion of this with a 72T, but once again, we'll fill in the portion because we don't go too big on the 72T because you're making a promise to yourself for like a decade on this thing because we have to wait until we're 59. How about we load it up with some more taxable brokerage assets? All of these things can work in unison with each other, as long as you got a quarterback that will help you navigate this.

• 32:41Speaker 03

  Yeah, and that's exactly when we think it might make sense to take the relationship to the next level. For you, if you're retiring early, there's likely a truth that you've only retired early one time. You've only ever had to navigate one retirement, but we have been able to help thousands of people get to that point, navigate through that threshold. And we love giving away this free information. We love that we can load you guys up with it, but we want you to remember when you get to the point where your life gets so complex, or you just want to make sure that you're not not knowing what you don't know, we'll leave the porch light on for you.

• 33:18Brian Preston?

  I think it's interesting. I had a dear friend reach out to me, getting advice on because they knew, you know, Millionaire Mission had been successful, wanted to get my take on doing a book deal. And I was like, why are you trying to do this by yourself? I was like, you know, if you look at your, the business you've built, and just like if you're the individual looking at the retirement you've built, I was like, this is novel to you. You've never done this. Why would you try to do this all by yourself when you just don't know what you don't know? I was like, when I got stuck in this situation, I hired somebody to help me navigate this that had literally done this thousands of times. And, you know, and, and that's what I would ask of you guys. If I was willing to pay what I needed to pay to my agent to

• 34:02Brian Preston?

  help me navigate this, I think it's the same correlation can be made to your retirement. You don't know what you don't know, and that's the risky part. So why not bring somebody who you know is good with money? You've watched our content, you've seen the abundance cycle in action where we literally give it to you, overwhelm you with value, so you can become the best version of yourself. It's just when you reach that level of complexity, give us a shot. I'm your host, Brian, joined by Mr. Bo, Money Guy team, out.

• 34:30Speaker 05

  The Money Guy Show is hosted by Brian Preston and Bo Hanson. Brian and Bo are partners with Abound Wealth Management. Abound Wealth Management is a registered investment advisory firm regulated by the Securities and Exchange Commission in accordance and compliance with the securities, laws, and regulations. Abound Wealth Management does not render or offer to render personalized investment or tax advice through the Money Guy Show. The information provided is for informational purposes only, may not be suitable for all investors, and does not constitute financial, tax, investment, or legal advice. All investments involve a degree of risk, including the risk of loss.

• 35:06Speaker 06

  Hey, Bo's here. On your next track, listen for the decisions. Distortion on the bass, the vocal right up front. Every choice deliberate. With Bo's, you'll hear it all. Your music deserves Bo's.

• 35:21Speaker 07

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