On Track for Retirement at 55?
Update: 2025-01-31
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We're currently in our 40s, but I am trying to figure out if my wife and I are on track to be able to retire at 55?
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Welcome to the Jill on Money Show.
00:02:22
It's Friday, January 31st, and we are here trying to help you make better or at least more considered financial decisions.
00:02:33
This is the time of year where we do get a ton of input from you guys about changes you think you want to make.
00:02:40
It's still the beginning of the year.
00:02:42
It's tax season.
00:02:43
All those things are happening.
00:02:45
We know that sometimes during this period of time you have very specific questions.
00:02:50
Whether it's a question about taxes or maybe it's a question about you've figured out that you have plenty of money and you need to know how you're going to manage it better, whether you need a financial planner or not,
00:03:02
anything like that.
00:03:03
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00:03:04
Go to our website JillOnMoney.com.
00:03:06
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00:03:09
Of course, if you'd like to join us on the air live, check the box.
00:03:13
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00:03:15
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00:03:17
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00:03:21
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00:03:24
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00:03:27
All right, so let's go talk to listener Ben.
00:03:31
He is on the line from Idaho.
00:03:32
All right, Ben.
00:03:33
What's going on?
00:03:34
How can we help you out?
00:03:36
Thanks Jill.
00:03:36
I appreciate you having me on.
00:03:38
Sure.
00:03:39
I'm 44 years old and I kind of want to be one of those financial independence, possibly retire early.
00:03:47
I've been looking at my numbers and just trying to figure out if I'm on the right track to potentially be able to go part-time at potentially 50 and maybe even retire by 55 so I can hopefully enjoy my early retirement years.
00:04:03
Why do you hate your job?
00:04:05
I like my job, but it's very physically demanding and I worry that my body may give out and I don't want that to happen.
00:04:13
I don't want that to happen for you, either.
00:04:15
I mean, it's always like when I have like white collar job folks, I'm like, "deh hate it," but it's different with a physically demanding job or teacher who's like on their feet all day and also sort of that emotional extra heart of it,
00:04:30
which is really tough.
00:04:31
Let's see what we can do for you.
00:04:34
So you're 44, you're working full-time.
00:04:36
Are you married?
00:04:37
I am.
00:04:38
And does your spouse work?
00:04:40
Well, she doesn't work outside the home.
00:04:42
She has a tougher job.
00:04:43
She's raising the kids, but how old is she?
00:04:46
She is 43.
00:04:47
Okay.
00:04:48
How many kids do you have?
00:04:50
Two boys.
00:04:50
How old?
00:04:51
One is 15 and one is almost 11.
00:04:54
How much do you earn right now?
00:04:56
It varies.
00:04:57
It's roughly 150, 180,000 per year depending on the amount of call or things like that I have to take.
00:05:05
Okay.
00:05:05
And will you be entitled to any pension bin?
00:05:09
I wish I could say yes, but unfortunately no.
00:05:12
That's all right.
00:05:13
Listen, we suffer.
00:05:15
Have you set aside some money in a retirement plan already?
00:05:20
Yeah, I've got a fair amount saved in different ventures.
00:05:25
Okay.
00:05:26
When I look, I mean, I can go into depth if you want.
00:05:30
Yes, I like to do depth.
00:05:33
First of all, let me just do one quick question.
00:05:35
Have you saved money specifically for the kids for college?
00:05:39
Let's keep that separate.
00:05:40
Yeah, so I have saved money for each of my boys and I have that separated out and I have it not only in college funds, but I have a side business, so I actually pay them and they have some Roth IRA money,
00:05:51
hopefully giving them a step up from what I had when I was young.
00:05:55
All right.
00:05:55
How much is in college funds and how much is in Roth for them?
00:05:58
So college funds for my oldest is 58,000.
00:06:04
And then in Roth and UMTA account, he's got about another 38,000.
00:06:11
So he's got 97,000 total for in college and and different accounts.
00:06:16
Do you think he will be going to private or public school?
00:06:20
Public school.
00:06:21
Okay.
00:06:21
And the 11 year old, how much is the total there?
00:06:24
So he's got 42,000 in his college fund and then total, he's got about 70,000 with his UMTA and his Roth.
00:06:33
All right.
00:06:33
Now that's for them.
00:06:35
Now let's talk about you guys.
00:06:36
Does your wife have any retirement holdings right now?
00:06:40
Does she have an IRA or a Roth IRA?
00:06:42
Yeah.
00:06:43
So I've kind of combined both of our IRA and Roth IRA stuff together.
00:06:47
Great.
00:06:48
So let's give me those numbers.
00:06:50
So our traditional 403B IRA set IRAs is 1.11 million.
00:06:57
Okay.
00:06:57
Great.
00:06:58
Congratulations.
00:06:59
That's awesome.
00:07:01
Traditional 1.1 million.
00:07:02
Got it.
00:07:03
And then we have Roth combining 171,000.
00:07:07
And then we have 457s that my wife had from a prior job with 27,000.
00:07:14
And then we have 368,000 in brokerage.
00:07:17
Wow.
00:07:17
That's great.
00:07:18
That's a lot of money you guys have saved.
00:07:21
Do you guys own your own home?
00:07:23
We do.
00:07:23
We owe 56,000 left on that.
00:07:27
So it will be paid off here in the next couple of years, which I'm looking forward to.
00:07:31
And you're not going to move.
00:07:32
You're happy where you are.
00:07:33
The plan is to stay.
00:07:34
Okay.
00:07:34
How much is the house worth?
00:07:36
Just shy of 600,000.
00:07:38
Any other real estate?
00:07:40
No other real estate.
00:07:41
The only other that we have is we do have an HSA that has 55,000 in it.
00:07:46
When you retire, would you be entitled to health insurance?
00:07:50
Or is that something you're going to have to actually pay for in the future?
00:07:54
I will have to pay for it.
00:07:56
So the the saw you said you sort of have a side hustle business.
00:08:00
How much do you earn when you said 150 to 180?
00:08:04
How much is the side hustle part of that?
00:08:06
It varies from year to year.
00:08:09
This past year, I was like 18,000.
00:08:12
So it's usually somewhere in that seven to 20,000 dollar range.
00:08:17
Okay.
00:08:17
And is that what you're thinking you would continue?
00:08:21
So if you said to me, okay, I'm good at 50 to go part time.
00:08:25
Is that the amount of money you would make or you think you'd get an actual part time job?
00:08:30
No, I would continue doing what I'm doing, but I would just cut back my hours and put me back to about 100,000 for my overall compensation.
00:08:40
Oh, okay.
00:08:41
I got it.
00:08:41
And then you'd keep doing the side hustle maybe or not.
00:08:45
As long as I can continue it to go, that would be the hope.
00:08:48
So when you look at your spending, and I know you're saving a bunch of money, but the actual spending, what do you think you need to spend right now to live your life?
00:08:58
Probably right around 6,000 a month is where I'm at.
00:09:02
I'm hoping that will drop a little bit once the boys are no longer doing their competitive sports.
00:09:08
Essentially, if for the next six years, right, you're 44, you keep socking away money in your retirement account.
00:09:17
And are you putting money right now into a traditional or a Roth?
00:09:20
What are you doing currently?
00:09:21
So I just changed it this year, my CPA said I could change it.
00:09:25
So I'm now doing 8% of my salary into a traditional 403B, 8% into a Roth 403B to try to start bumping up my Roth stuff.
00:09:35
And then my hope is when I retire early to be able to convert some of the traditional stuff to a Roth.
00:09:42
Okay.
00:09:42
When you look at sort of the, you know, when you say the spending it could go down, let's just keep it at 6, okay.
00:09:49
Let's for the heck of it, right?
00:09:51
And then let's also presume that when you turn 50 and you go part-time for 100,000 that you're essentially probably not going to be putting money into a retirement account because you'll have that 100,000.
00:10:03
You put up whatever you do have a match.
00:10:05
Do you have a title?
00:10:06
Are you entitled to a match?
00:10:07
Yeah, I do.
00:10:08
What percent must you put in to get your match?
00:10:11
6%.
00:10:11
So let's say that maybe at age 50, you go down to 6%, just so that you can, you don't have to touch your assets, right?
00:10:19
You just, you just live on what you earn from age 50 to 55.
00:10:24
And then just putting 6% away.
00:10:26
And then at 55, you now can start looking at taking some money out and supplementing whatever that, I don't know, maybe you do your side hustle or not,
00:10:38
but then you're supplementing what you need, right?
00:10:41
And so from, and you figure like 55 to 65, 67, you, you want to do Roth conversions.
00:10:51
I don't know if you should do Roth conversions.
00:10:52
Maybe you should just take the money out and live on it.
00:10:55
If you only need six grand a month, okay.
00:10:58
And you got a whole heck of a lot of money in your traditional already.
00:11:01
Like, you know, you have a million bucks, 1.11 million already, right?
00:11:05
That's going to grow for, let's, let's say that you really don't touch it for until you're 55 years old, right?
00:11:12
So you have 10, 11 years here where you're just going to have that money grow, that traditional money is going to grow.
00:11:17
Even if it doesn't grow by that much, even if we have a terrible 10 years in markets, it's going to grow and 2 million, right?
00:11:24
Yeah, 2 million bucks, you have that money.
00:11:28
And then I think that's the money.
00:11:31
Instead of converting you, we just pull that money out and live on it.
00:11:34
You know, and, and you'll be in a, I mean, it's today, I don't know what the tax brackets are going to be, but let's say was this was, we're going to pretend all the tax rates are exactly the same.
00:11:44
You'd still be in your 22% tax bracket.
00:11:47
You'd pull the money out of the traditional.
00:11:49
You'd live on it.
00:11:50
And you'd do that for, you know, a bunch of years, 12 years at age 67, your full retirement age.
00:11:58
Do you know what your social security benefit is?
00:12:00
I don't.
00:12:00
I should have looked at that, but I don't.
00:12:02
All right.
00:12:03
But I mean, if you, if we looked at your, I don't know, it's going to be a few thousand dollars.
00:12:08
So if you pull the money out of your traditional in those years, right?
00:12:12
Again, 55 to 67, you're just living on, you say, Hey, I give myself permission instead of converting the money, I'm just going to live on it.
00:12:20
I'm going to pay the tax anyway, live on it.
00:12:22
And what we're kind of doing is pull the money out of the traditional, pay the tax that's due so that as you move forward towards like your 70s, we're trying to get as much money out of those traditional accounts as we can,
00:12:35
because of course, there is going to be this thing called a required minimum distribution.
00:12:40
So, you know, one way to get around it is to convert the money.
00:12:43
There's just live on it.
00:12:45
And you'd be fine.
00:12:46
Can you, what kind of account can you pull it out early without the penalty?
00:12:49
Well, he'll be at 55.
00:12:51
Well, can we do the rule of 55?
00:12:53
He's got a traditional, but he's still there working part time and a reduced capacity.
00:12:58
Well, he's there and at age from 50 to 55.
00:13:01
And we're saying at 55, he starts pulling the money out.
00:13:04
Yeah, he's done done.
00:13:05
We're planning on that's the question, right?
00:13:07
Full retirement at 55.
00:13:09
If, if not, it doesn't matter.
00:13:11
If he keeps, so Ben, if you were to just say, like, Hey, you know what, this 100 grand a year is awesome.
00:13:15
I'm going to keep doing it.
00:13:16
And you can just live on it.
00:13:18
Then you might want to convert.
00:13:20
But I mean, if our game plan is at, from 50 to 55, we just live on your part time income, you fully retire at age 55, you then you leave your organization,
00:13:30
you're pulling money out of your traditional, your wife can clean up that 457 plan.
00:13:34
Also, you can just take the money out.
00:13:36
You, you pull the money out of your traditional account.
00:13:38
Let's say, again, in today's dollars, let's just say you're, you're going to pull out a 110,000 dollars, 100,000 dollars a year.
00:13:48
You pay the tax that's due on it and you live on it.
00:13:51
And you're going to do that from from age 55 to 67.
00:13:54
So you almost, you know, again, we don't know exactly what it's going to be worth.
00:13:59
But let's say it is too much.
00:14:00
You're going to like eat through half of your traditional account, which is fine.
00:14:04
That's what it's there for.
00:14:05
We're getting the money out.
00:14:07
You live on it.
00:14:07
You'll have your Roth.
00:14:08
The money will keep growing in your Roth.
00:14:10
You'll have your brokerage account, money keep growing, whatever you're putting away for college is fine.
00:14:16
You know, but I don't think this is a prop.
00:14:18
I think this is oddly doable, even though you're not like a bazillionaire, you don't spend a lot of money.
00:14:23
You have done an incredible job of accumulating assets.
00:14:26
This amount of money should allow you to retire early, presuming you don't mess up on the expense side.
00:14:35
If all the sudden you're not spending six grand a month and it's 10 grand a month, then, you know, in today's dollars, then it's not going to work.
00:14:42
But it works at six grand a month.
00:14:44
It really does.
00:14:45
I thought you couldn't get into your traditional like four three beats health 59 and a half.
00:14:49
Can you take it out of 55?
00:14:51
Yes.
00:14:52
You you have something called the rule of 55.
00:14:55
There's no tax penalty if you leave that job after you turn 55.
00:15:00
I guess the year you turn 55 or later.
00:15:03
To me, this is one of those things we don't like to talk about a lot.
00:15:07
Do you know why?
00:15:07
Because we don't want people to take their money out.
00:15:10
But you are doing your planning on it because you want to get that money out and you've saved a lot of money in there.
00:15:18
So this is the rule of 55.
00:15:20
And here's the actual.
00:15:21
If you turn 55 during the calendar year, you either lose or leave your job, you can begin taking distributions from your retirement account without paying the early withdrawal penalty.
00:15:32
The 401k or the 403B, you can do this.
00:15:35
Only your current only your current jobs account.
00:15:38
Not your own account.
00:15:40
Not your IRA, but your current jobs account.
00:15:42
That's right.
00:15:43
Okay.
00:15:43
Which the lion's share of the money is in that current jobs account.
00:15:46
Exactly right.
00:15:47
Exactly right.
00:15:48
It does not apply to individual retirement accounts.
00:15:51
You have to leave the money in your current 401k plan.
00:15:54
Penalty free distributions, baby.
00:15:56
Perfect.
00:15:58
All right.
00:15:59
Again, the reason why people are like, why don't I know about this?
00:16:01
Because people like me, we're old curmudgians and we don't like you to necessarily get all the money out that you can.
00:16:07
It's a little scary to people like me because we've heard people like drain their accounts and then all the sudden they're 70 and they're broke.
00:16:13
I don't think that's going to be you.
00:16:14
I feel like Ben from from Idaho really does have his blank together.
00:16:19
Am I right to assume that Ben?
00:16:21
You're not going to blow through all your money.
00:16:24
I sure hope not.
00:16:25
I worked too hard to save it.
00:16:26
I don't want to blow through it and and be poor at the end of my life.
00:16:29
That's right.
00:16:30
So what are you going to do in Idaho?
00:16:32
Just ski, ski your tush off.
00:16:34
What's going to happen for those years?
00:16:36
Well, the retirement years, the hope is to be able to do a little bit of travel, you know, spend some time with my family.
00:16:42
You know, my parents are still young.
00:16:43
So I want to be able to enjoy the time that I have with them.
00:16:46
And, you know, try to enjoy life and enjoy the great outdoors as much as I can while I'm healthy.
00:16:52
Also, Ben, do you have all of your estate documents done?
00:16:55
We got to protect your income for a while.
00:16:57
You have a life insurance.
00:16:59
What's going on with that?
00:17:01
I have life insurance and I have five more years on that and then off that re-up it.
00:17:05
I do have my estate documents, but they are on the older side.
00:17:08
So I actually, that's on my list this year as I need to have them updated because my kids are starting to get a little bit older and they were younger when I actually started those.
00:17:18
Okay.
00:17:18
Well, let's do that.
00:17:19
I don't necessarily think that you need a ton of life insurance.
00:17:23
If you could buy it through your employer and just, you know, again, you're really just trying to protect those years from 50 to 55, right?
00:17:29
So if something happened to you in those years, you'd want to be protected.
00:17:34
And so maybe if you could just bump that up a little bit, that would be helpful or maybe just look and see right now, if you went privately, what would a 10-year policy cost you just to add that little layer on top?
00:17:46
Exactly right.
00:17:48
I wouldn't wait five years until this one expires because it's going to cost you more money.
00:17:53
Right.
00:17:53
I would do it now for sure.
00:17:55
All right.
00:17:56
So like a half a million dollar policy right now, see what it costs just for the heck of it.
00:18:00
Half a million level term 10 years, 44, you don't smoke or drink or do anything bad like that, right?
00:18:05
I mean, you could drink, but you don't smoke, right?
00:18:08
No smoking.
00:18:08
Try to stay healthy.
00:18:10
All right.
00:18:10
Keep just keep saying, I feel like everyone in Boise must be healthy.
00:18:14
I don't know.
00:18:14
Maybe the whole state, I'm going to go for it.
00:18:17
I've never been to Idaho.
00:18:18
Should I come?
00:18:19
If you like the great outdoors, yes, you should.
00:18:22
It's a beautiful place.
00:18:23
The mountains are amazing.
00:18:24
Rivers and lakes are awesome too.
00:18:27
All right.
00:18:27
I'm going to put it on my list.
00:18:29
That could be a place I come.
00:18:30
This is great.
00:18:31
All right.
00:18:31
Ben, good luck to you.
00:18:33
Go get some insurance.
00:18:34
Don't lose your job and keep doing what you're doing.
00:18:37
Everyone else should you invoke the rule of 55?
00:18:40
You want to know more about it.
00:18:41
See if you can do this.
00:18:43
It's one of the reasons actually that it could argue for against rolling over a retirement account.
00:18:49
You know that?
00:18:50
It's just like we always talk, roll it over, have control.
00:18:52
Well, you lose the ability to do that.
00:18:54
You cannot invoke the rule of 55 for an IRA.
00:18:57
So maybe that's something we should be thinking about more often.
00:19:00
Give us a holler if you've got a question about that or anything else going on in your financial.
00:19:05
I've got a Jill on money dot com.
00:19:06
Click the contact us button.
00:19:08
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00:19:08
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00:19:21
And it is Friday.
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So let's do some business.
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Our music is composed by Joel Goodman.
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Mark Telaerson is our executive producer and king of all things web.
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We are distributed by Odyssey.
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We ask you to do something nice for someone else today.
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It's going to make that person feel good and it's going to make you feel good.
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Change your work, change your wealth, change your life.
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Thank you for listening.
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We'll talk to you next week.
00:19:43
Real estate.
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It's been a cornerstone of wealth building for generations.
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But it's also often a major headache for investors.
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3 a.m.
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maintenance calls tenant disputes property taxes.
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Enter the fund rise flagship real estate fund.
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A $1.1 billion real estate portfolio built for you.
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We're talking more than 4,000 single family homes in thriving Sunbelt communities.
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3.3 million square feet of in demand industrial facilities all professionally managed by an experienced team.
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With the flagship fund, you're tapping into real estate's most attractive qualities.
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Long-term appreciation potential, a hedge against inflation, diversification beyond the stock market.
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Check, check, check.
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All without complex paperwork, massive down payments or soul sucking landlord duties.
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Visit fundrise.com/jillonmoney to explore the portfolio.
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Check out historical returns and see just how easy it can be to add real estate to your investing strategy.
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Carefully consider the investment objectives, risks, charges and expenses of the fund rise flagship fund before investing.
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This and other information can be found in the fund's perspective at fundrise.com/flagship.
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This is a paid advertisement.
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Have you heard the Discretsland podcast?
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Do you know about Jerry Lee Lewis wanting to murder Elvis or the hip-hop star who cannibalized his roommate?
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What about the murders AC DC was blamed for?
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These stories and more are told in the award-winning Discretsland podcast hosted by me, Jake Brennan, every Tuesday, where I dive deep into the dark side of entertainment and the connection between music history and true crime.
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Longby's lead singer, Debbie Harry, was shocked when she saw the man's photo in the newspaper.
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She recognized him.
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How could she forget?
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He'd given her a ride years ago.
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A ride she'd barely escaped from with her life.
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And now, here he was, right there on the front page, accused of kidnapping and killing at least 30 women.
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And now, Debbie Harry finally knew his name.
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Ted Bundy.
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Follow and listen to disgrace land on the free Odyssey app or wherever you get your podcasts.
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