How to Retire at 55. 3 Crucial Steps to Optimize Early Retirement

[@RootFP]

Find the tax cheat sheet here: rootfinancialpartners.com/important-numbers

[@Retiredmco]

I retired at 55 in july 2019. Best decision ever made.

[@VLOGITJAY]

@retiredmco I'm working on retiring at 55 as well. If not,sooner would be even better. Congratulations and enjoy retirement,sir.

[@zubrickadvisors6742]

Congratulations.

[@gauravipal5691]

I retired at 56 in June 2021

[@gauravipal5691]

@@VLOGITJAYall the best

[@journeytothevoid2899]

What was your financial independence # (you don’t have to be exact, a range would be great). I’m in nyc/nj area

[@Flo-jm6ox]

James, keep doing this. You are on to something. Don't let haters distract you. Educating folks and enlightening them in this realm is the most rewarding job. I am certainly one who learned a lot, and I appreciate your efforts. I couldn't be more grateful to you. God bless you !!

[@c7042]

I had to retire at 58. I'm partially paralyzed and can't work. Some savings. Now 16 years later, my NW is over $500k, mostly due to gains in my savings and investing in the last 16 years. I had to really suck it up, but now I believe I'll be ok. The only advice I have is to not give up, no matter how bleak your situation seems. Sacrifice is required though. I still live like I'm poor-$1000/month.. Breaking old habits you know. I could spend $2500/month now and wouldn't run out of $$$, but I want my kids/grandkids to gain something from my efforts too.

[@METVWETV]

EXACTLY! Thank you

[@toomanymodz]

I retired on my 54th birthday with 1.6M. Single with no kids helps keep expenses very low. After one year of being retired, the portfolio gained over 120k after all expenses. So far so good.

[@M22Research]

Solid planning scenario explanation with just the right amount of detail. Wish we could find an advisor with similar expertise who did not have an AUM fee model. I fully understand all these concepts and am already using an excellent Monte Carlo planning tool. Looking for a second check of my decisions as well as a periodic relationship to more fully activate should I die before my less financially sophisticated spouse… or if my intellectual acuity deteriorates. From other YT commenters, I know our scenario is not unusual- there appears to be an opportunity for planners. Looking for a hybrid/middle ground that flat fee planners don’t fully fill.

[@DoublethinkNomad]

The fees of assets seems to just raise the amount needed to retire. On the other side, it’s a service for folks who choose not to learn.

[@richdewitt760]

James, Another great walk thru--you are the best retirement/personal finance presenter I found on KZbin and have the heart of a Teacher. Thank you! Rich

[@adamfrost9048]

Since you asked, the long format with all the detail is great for me since the details touch on some of my own concerns. Great video, thanks!

[@bvoyelr]

I'm a little surprised that a retirement that begins with 5 million and ends with around 12.5 million only has a 60% chance of success. That suggests there are quite a few foreseeable scenarios in which their desired retirement fails, which, again, is surprising. I'd be interested to see some of the monte carlo scenarios in which this particular retirement fails and what kind of adjustments they'd have to make to account for those failure modes.

[@DrSchor]

adjustments: earn more, spend less

[@over07ful]

Heritage Wealth Planning Josh Scanlon addresses this. cash is king. We want to look poor on paper in early retirement. Have cash. It gives you options. Live off cash. Perform roth conversions at 50 k a year. This is your reported income taxes at the lower tax brackets. You will now qualify for up to 1500 a month in Obama care for two filing jointly. People, you're being paid not to work!!!!!

[@jenniferbissonnette2258]

Yes, 4% of $4.5 mil is $180,000 per year and that is a conservative portfolio with no social security and retiring in 1966 which was the worst year to retire due to sequence of returns. Try using New Retirement and forget these scare tactics!

[@timothymitchell7250]

Probably attributed to the length of time. A scenario with a lower return will have a bigger impact vs. A shorter term. I am assuming the MC analysis is not being iterated each year independently.

[@METVWETV]

Try "FI Calculator." You can go through each and every Historical year. Also, with that amount of wealth, More can be allocated to Stable accounts for the inevitable down years. Maxing out ones portfolio to suck every last dime from it is a recipe for disaster! Ie: For 100% Success, you either have to take less or adjust your dispersments when the Portfolio takes a substantial downturn.

[@markb8515]

Thanks James for another informative video! The way that you express the logic you use in optimizing the retirement planning is very helpful.

[@jeffreycooke949]

Thanks for the deep dive video James. Love your channel

[@Engineers_Shred_Too]

I really appreciate this real life scenario with walk through and parameter sensitivity testing on many of the variables at play. Well done!

[@joefilbrun]

Great video, thanks. It would have been interesting to see the Monte Carlo analysis after filling up the 10 and 12% brackets with Roth conversions. It seemed a little anti-climactic that a couple retiring at 55 with $4M in assets can't get to a 95%+ chance of success. If they can't do it, who could? But your example never got them higher than 76%.

[@METVWETV]

You just need to either take less or be prepared to limit dispersments in down years

[@Hossafy]

They’re only 55. If they wait another 2-3 years I’d bet they’d be at 95+

[@striperkid]

My wife retired in June at age 55. I'm retiring next month at age 56. No more work for the both of us. Between no debt, pensions, investments, and SS at age 62, there's plenty of $$$ for us to splurge.

[@markciocco2509]

Love this video topic scenario. EXACT questions I am asking myself.

[@buckwildz]

Another high quality video. Thanks for covering a wide range of retirement ages and levels of wealth!

[@FincaBelleVue]

Love this video. We are also DINKS and we are planning something very similar. The only difference is we plan to leave our high tax state and travel out of the USA to save on taxes, cost of living, and health insurance. Thank you!

[@Mugwart1]

I licensed the software from Root and have figured out all of the details shared in this video from the other excellent videos that James has posted. That offered, if I hadn't already seen the other content, this would have been an outstanding "starter" video to understand all of these details. Great video along with all of your other content! :)

[@davidfolts5893]

James Conole is the smartest in the room and frequently the entire building.😀

[@OfferoC]

Amazing content here. Thank you for the in depth analysis.

[@jenniferbissonnette2258]

I enjoy your videos. That said, I take serious issue with both SS estimates and health insurance. My husband and I are applying for insurance through the open market and it is no where near these estimates. Especially if they can reduce their MAGI, which they can since they have so much in a brokerage account. Forgo some of the roth conversions before 65. Who is going to inherit their money anyway!

[@roundabout1419]

Loved the detailed deep dive. We are planning to do Roth conversions between ages 60-65. Still trying to wrap my head around the topic completely, but this was very helpful - thank you!

[@DallinBunnell]

If you used any kind of annuity, you probably would have reached a 90+% chance of success. Either a FIA with a buffer income strategy (taking 10 years of income at a time) or a guaranteed income annuity for essential expenses would basically eliminate their sequence of returns risk. They would probably have a lower portfolio value, but a lot more predictable income. It would potentially require more tax planning, but I think it would have helped this plan.

[@cwilson6880]

Thanks James, great video 👍🏻 very easy to follow and very informative. My wife and I are hoping to be in partial retirement in 6 years and fully in 10. I find a golden nugget of information in almost every video that you and Ari publish🙏 Many naysayers in the comments may forget that each situation is different and you two are providing this ‘schooling’ at zero cost 😊Please keep up the excellent work!

[@BardWannabe]

Sorry for my previous deleted comment, James. It was intended for the previous video in my queue. You are doing valuable work.

[@J-2024-v8i]

Great video as always James!. I’m curious as to why this couple at 55 did not consider getting healthcare through ACA with subsidies. I know that could potentially hinder their ability for Roth conversions at the 10% bracket or above. However, with a taxable account at that size and invested, we can assume that they are already getting enough dividends to fill up the standard deduction, so there is not much space left for Roth conversions if they also need to pull money with LTCGs to cover their expenses. It would be helpful to see this example where they use ACA and therefore need to control their MAGI for subsidies. Would in that case they still be able to convert to Roth up to the 10% bracket?. Thanks again for all your great content!

[@mikellock]

These are really helpful James. Most of the dollar figures you demonstrate are much higher than my reality, but I am always learning something helpful.

[@keibro5212]

Thank you. This is very helpful for Gen X

[@irmafranke1012]

Hi, yes. This was very helpful. I like hearing your thought process and logic. I have several years until retirement but I think about it all the time. I have a pension at my job and I'm so grateful but also want to be prepared. I'm in Los Angeles and keep thinking I'll have to move eventually.

[@gauravipal5691]

One thing you are not taking into account. Given the brokerage account balances, they are going to get interest and dividends which are taxable as ordinary income. They are not going to be in as low an income situation as you project them to be. Also you are not taking into account the income from long term capital gains which will also be taxable. So the Roth conversion strategy maynot be as beneficial as you make it out to be. The other thing is that in low tax years they would be eligible for Affordable Care Act subsidy. You are budgeting too much for their healthcare.

[@edwardyccheng]

Hi James, where is the link to the tax cheat sheet pdf file you mentioned at 27:00? Thanks.

[@RootFP]

Find it here! rootfinancialpartners.com/important-numbers

[@eddieklemm661]

Thanks for the awesome video and explanations, the long format with all the detail is great for me since most of the details touch on some of my own concerns. do you ever offer a discount on your course like a black Friday sale?

[@KristinJacobs-rj6kh]

My husband and I are evaluating in 2 years when we will be 57. We enjoyed this video and it gave us a number of things to think about. Thanks for doing these case study videos.

[@andrewdiamond2697]

This came out 4 days ago. I turned 55 4 years ago. This is problematic for me. BTW, 6:10 $15k per year for travel isn't much. While working, taking 5 weeks of vacation annually, we easily spend $25k a year. Heck, we spent $19k on ski trips alone winter 2022-2023. 6:30 fixed it with "Extra Travel".

[@turdferguson12]

I have 37 months to go. With the rule of 55, I plan to retire right after my 55th birthday. I’m maxing out my 401k in preparation.

[@davidburrus9813]

I find these scenarios very educational.

[@SueTNguyen]

Retired at 55 in Oct 2024. We are healthy and plan to live past 95. Will not be following how our parents age for sure!

[@cgferrer6550]

I love these videos! Thank you for sharing.

[@vinceyeh4675]

super helpful!!! great work!

[@gizmobowen]

Thank you very much James. These kinds of in-depth examples are very helpful to understand what the different variables are and how they interact. I'm trying to model my own early retirement using some different software, but I can use your examples to see how they affect my specific plan. I appreciate your time in making these videos.

[@daveomeara1]

@RootFP No mention of the "Rule of 55" to gain early access to retirement accounts such as 401(k)?

[@stephenholcomb9278]

My mind is blown. I consider myself very educated for a layman and I had no idea this Rule of 55 existed!🤯

[@BryanFinnegan]

Great tax strategy and Roth conversion discussion. Since we're getting close to the TCJA sunsetting, love to see more of these or an in-depth analysis of several current asset scenarios and the sunsetting impact of future portfolio value.

[@kimberlypickering5725]

I really appreciate these in-depth explanations. Thanks!

[@PorscheSpeedster-kz6nc]

Nice video James. Only issue I have with this is that from 55-66, the income assumes or shows not ordinary dividend/interest (and possibly capital gain) income. At their level, I would think it is $25k-$100k. Any comment?

[@davidcook7847]

he said they were in tech stocks which typically don't pay much of a dividend.

[@chinbr]

my question exactly. how do they not have any DIV or INT to claim at the end of the year that would eat into their Std Deduction and 10% bracket? are they tax loss harvesting to keep income at 0?

[@mkmac9539]

Thank James. This is very helpful.

[@Byssbod]

19:04 this example makes no sense to me. Why in the world would a fresh retiree take so little from their nest egg while in the youngest, most healthy years of their retirement? Shouldn't we assume they're taking much more from their brokerage or something while they wait for SS to kick in?

[@orangecrush4362]

I'd love to have these problems. Could we do some scenarios with like 600-800k 😂

[@superzook5375]

Wholeheartedly agree. I don’t think rich people like the ones in this example need to worry about going hungry in retirement.

[@METVWETV]

It's just Division. Divide your Portfolio value by the Portfolio they're illustrating

[@dandydan999]

With that level of assets early retirement would be very challenging. Expenses would have to be minimalist type living.

[@frawdulent]

Make more money, peasant.

[@bigtoeknee11]

Also someone may have a 75k pension which is equivalent of 1.5m IRA account. So with alot less saved you would have similar monthly incomes. With 500k 401 at 4% withdrawal rate = 20k plus pension of 75k that's close to 100k year.

[@MetHerInBaghdad]

Each video gets better and better. Great work!

[@Chilliconcarnage]

Very nice, I always enjoy these case studies. I'd like to see a "what if" health insurance is not available through employer, spouse or the ACA.

[@doran-f6w]

I came across your channel through this video-case studies are incredibly valuable, and I'm eager to see more in the future! Building wealth involves establishing routines, like consistently setting aside funds at regular intervals for smart investments.

[@dcflin]

Can you please share the tax cheatsheet link? Thanks

[@samcarbone3665]

In your example, the couple currently has over $1million in a taxable account. If I understand you correctly, you explain that they can "fill up" to the 10% tax threshold by converting a portion of their 401ks to a non-taxable account like a Roth IRA during their first several years of retirement. Isn't it more likely than not that the taxable account will generate $22k in interest and dividends income on its own in a tax year? Wouldn't this make the "fill up" impossible (for the 10% threshold)?

[@brentlorrilliere6057]

great observation....also, withdrawing money from the taxable account is going to cause a taxable event which doesn't appear to be modeled. sloppy.

[@jameslawrence2553]

He mentioned that their standard deduction should cover the qualified dividends and interest. That leaves the 0-10% Tax threshold available for the conversions.

[@herlifemusings23]

This is amazing! Great video

[@gaurd3]

pension, dip not nearly enough. good thought. i'm out at 50.

[@M22Research]

Seems like “core monthly expenses” MUST include healthcare and taxes. How can you survive without both?

[@israelpena4539]

Very helpful & informative although I would love to see an example as a single individual trying to retire early like this scenario versus a couple. Have you done a video with a scenario where an individual has a 401k and ESOP shares?

[@ericfrith6358]

Super helpful.

[@stevedemas5524]

Retired on my 55th birthday. It takes focus at age 45 to get this done in 10 years. I have 2 girls.

[@Cindy-ee5ou]

This is very helpful, especially the tax strategy. Alternatively, one can build a giant excel sheet, and determine next year’s budget end of each year based on less speculative numbers.

[@killerXover707]

Love the software. Much more simpler than MGP. Is this something I’d have to run through compliance in order to use at my firm?

[@mikeaieta236]

Please do an episode just on medical, ie why this couple would not buy a LTC policy , LTC /life hybrid v self insuring?

[@agreiwe]

Great video!

[@normswan5806]

The fear you have of social security viability is interesting despite that its track record is perfect. unlike dividends, bonds, stock market, or... anything else I can think of. Add to that, the revolt that would transpire if it was substantially reduced. There's a reason social security and Medicare are a " third rail."

[@toddblankenship8794]

It’s posted on the social security website that they will be unable to cover all of the promised payments by 2030-2034 unless there are changes made. Increased taxes, reduced entitlement spending, or money printing. Either way, he is right to mention it because if you do get your full amount, the dollars you are getting are going to be worth a lot less relative to your expenses because our politicians are too scared to raise taxes or cut entitlements. www.ssa.gov/policy/trust-funds-summary.html#:~:text=The%20Trustees%20will%20continue%20to,3.42%20percent%20reported%20last%20year.

[@voncilledemesa2075]

Definitely continue the real life examples.

[@NKUBill]

Great video James! I love the examples who retire early and need to utilize Roth conversions. It is amazing how much you can save in (future) taxes by taking a small tax hit today. My portfolio is 401k heavy and I started doing Roth conversions last year and will continue for the foreseeable future.

[@thomasclark5688]

Quite surprising that with $5M only 60% chance to make it. Even with 0 growth forever and no SS they could 100k/year for 50 years (yes super-simplified). I’d say the model being utilized has some way too conservative assumptions.

[@fostee1]

Yup. To increase AUM which means more fees!!

[@briananderson6535]

Love these examples, how about a scenario of couples where spouse is 5 or so years younger than the other?

[@gobuffs1993]

Never seen a video assuming social security and Medicare aren’t around (which is my base case).

[@frawdulent]

Don’t assume it will be here whenever you retire. I won’t retire until somewhere around 2050 and I sure as hell am waving it goodbye.

[@kubpol]

One thing that a lot of those videos keep getting wrong is the first of healthcare. A good silver ACA plan is around 100 dollars a month. In the original scenario the couple loves of cash/pay tax money while waiting for social security. That means they will qualify for 100% subsidy. But he still estimates about 1000 dollars a month for healthcare. That's extra 22000 a year compared to what they actually will be paying.

[@paula1360]

They may not quite get 100% subsidy because they will have some income at least from DIV/INT and capital gain if they have to sell stocks, plus whatever $ they convert to Roth IRA

[@dandydan999]

Also, the estimate includes potential health related costs like deductibles/copays and other out of pocket health related expenses. It's not just the premiums you need to anticipate

[@dandydan999]

Additionally, the extra health insurance costs by converting to Roth will be outweighed by the tax savings they will eventually benefit from in their RMD years.

[@hansangb]

I loved your course. I'd pay a premium for you to walk through the Right Capital software. Make it a part 2 that folks can opt-in.

[@miketaylor9027]

This is great! Thank you for sharing! I tried to find the medical cost calculator on Vanguard and can't seem to locate it. Would you please link to it?

[@j_mah]

How did the tax conversion affect the probability of success? Seems like it’s worth exploring that before making them work another year or two

[@adammonroe4037]

does the software run the montecarlo scenarios if you have access to it?

[@torchy187]

The projected health care costs for a 55 year old couple with Gold Standard seems rather high.

[@tonysilva3467]

Great video thanks for sharing. Quick question, you reference filling your tax bucket at 55 to offset longer term RMD income taxes but how do you pull from a IRA to a Roth before 59 1/2 without a penalty?

[@js37242]

Great video as usual, James. Is excel required on computer to run the retirement software if bought through your retirement academy?

[@MDog_FPV]

Beautiful software

[@jasonlugtu6186]

Another great video! Thanks James!

[@scottmuench6855]

It would be super helpful to show the impact of their RMD for how much money is coming in because of that in comparison to their projected expenses are they over because of it?

[@markwetzel3940]

James, I purchased your client version of your Right Capital software. It is great. Unfortunately the assumptions you have set for trying different things to improve chance of success such as the guardrail assumptions and asset allocation for moderate or aggressive portfolios are hidden. Can you expose them, enable the report generation which contains them, or document them on your university page? Thanks!

[@brc2567]

Noticed from my parents once they hit mid 70s, they started spending a lot less per mo.

[@b0ndrey]

I don’t understand that IRA over conversion concept. Seems the more one conveys to a Roth the better. How can it end up costing millions to convert? Either way the gains will be there but doing it sooner while it’s a lower amount should be less taxes than later when it’s a larger amount, plus the fact that taxes are currently as low as they are going to get and will likely be much higher in the future. I’m not sure what I’m missing here.

[@jefferydevens386]

James, would you consider running an analysis for retirement for a person/couple who does not have social security income but does have Medicare? Assume they have retirement income in a brokerage account of a few million dollars (you decide, 2-5 million) and want to retire at age 60. I'm wondering how you would structure retirement strategies WITHOUT social security or a pension. I work among a number of educators internationally (I also am an international educator) who are Americans but do not have access to traditional savings vehicles but do have access to a brokerage account they use as their main retirement "bucket." Many of these teachers will accrue the 40 quarter credits, but they will have very little social security income, if any. Curious to see how you would approach a situation like this.

[@cybrainx72]

Very good one!! One of the best I have seen. Healthcare costs does that Obamacare subsidys ? Over conversion how can it make such big diff is not clear.Remember Also tax rates could go up in future.

[@stephanieramos4688]

Is this analysis assuming they never run out of money? How does this planning change if they want to “die with zero”?

[@METVWETV]

Aiming for Zero is foolish. We don't know what the market will do and we don't know how long we have left

[@stephanieramos4688]

@@METVWETV It’s not literally zero. I’m asking about the concepts Bill Perkins explores in his book Die with Zero. His idea is that people can get the most from their money by using it strategically instead of delaying spending to retirement or building up a legacy. For example, the average age of recipients of inheritances is around 60. That money could have been more impactful when they were 25 or 30. Your health is often better in the years before retirement, so it might make sense to travel more before retirement, when your health and mobility is greater.

[@janethunt4037]

I would love for you to address how much to actually spend in retirement. What would be a good goal for age 95?

[@quemino]

So helpful ❤

[@mikeaieta236]

Also, please explain why you wouldn’t fund a Roth IRA or Roth 401k while working v just funding IRA , regular 401 and later doing conversions to Roth?

[@gbski43]

They are high income earners paying high taxes now.

[@DoublethinkNomad]

Imagine going from grossing $30k a month to spending $7.5k a month…

[@NoLegalPlunder]

So $7,500 was just the core expense per month and not the total expense per month? What's the total expense per month? $7,500 a month, with a 5 million dollar portfolio, is just 1.8% per year. $8,500 per month works out to 2% a year. This is way short of the 4% rule which has lasted 30 years given the worst moments in history. The 60% success rate is puzzling me. I guess their travel is the issue. $25,000 every 3 years. That's a lot of money to have some temporary fun with. To each their own I guess. I, personally, could find much more substantial joy for far less money. We're as rich as our wants are small.

[@israelpena4539]

My goal is to retire early, not as early as 55 but a few years after. When assessing my retirement portfolio to determine if I am on track, I have only assessed it as an individual even though I have a lifelong partner. My partner is getting ready to retire and they have positioned themselves to retire early, is my approach a conservative approach knowing that there is another household member or is there something I am overlooking that is giving me a false sense that I am able to retire early? Both of us have only performed retirement assessments as individuals…never as a household. Does that make sense?

[@DrSchor]

no

[@METVWETV]

Calculate it both ways. A Lifeling partner is NOT a spouse and you could find yourself threading water should said partner leave or pass. Consider Wills and Life Insurance if necessary.

[@chadhollenbeck]

If I can have an income of $10k per month through various sources ( pensions, va, rentals) plus 1.5m saved should I retire at 55?

[@dogegamer3288]

If you have both a traditional 401k and a Roth 401k with separate balances. Can you rule of 55 keep just the traditional 401k with the employer and withdrawal, and take the Roth 401k and roll it into an Roth IRA? I know you have to keep it at your employer, but if I'm not withdrawing from Roth 401k can I roll that out and just withdraw from the normal traditional 401k kept at my employer? Anyone know?

[@daralynx2]

Uh yep. Roth conversions in low income years. Tax rates also may rise after 2025 but they're working past that for some reason.

[@FIRE_DrNinjaTurtle]

Awesome video.

[@stephenholcomb9278]

This was one of the best videos I've seen from James. But I am confused about one thing. I probably missed it, and James probably took it into account, but I didn't hear about taking a 10% penalty from withdrawing from IRA/401K/403B/ROTH prior to age 59.5? Unless the example couple's joint account was all in cash? And if so seems like you would want to have that money aggressively invested. And I'm hoping for a Republican congress where our tax situation stays where it is and no sunset!

[@semosancus5506]

You can always remove your principal from a Roth with no penalty. Also many 401k plans allow for rule of 55 withdrawals. There are certain rules but generally you can access your 401k at 55.

[@darrellq6954]

I don’t get why their housing and health care is separate from their 7500 monthly expenses. Doesn’t make sense.

[@truplaya2010]

My assumption was home would be paid off so no mortgage. Not sure why exclude healthcare though

[@Clevertechly]

Different increase rates. Healthcare has jumped by an average of 5%, other by average of 3%. Also healthcare will change at 65 with Medicare.

[@hl10gg]

Does anyone know of a creator that does similar content but for Canada?

[@adventure_unlimited]

Its super easy to retire by 50 even 40 All you need to do is not have kids and partner with some one who has some earning potential. After than just move some place cheep and your sorted.

[@BruceCanaday-n9s]

Why two travel buckets? 25k every3 years? Just add 8k to the annual and call it good