Finance Friday: Signs You’re Saving TOO Much for Retirement
Episode Details
Are you saving TOO much for retirement (or early retirement)? Could you retire years sooner than you think? Will retirement expenses be even less than what you spend now, allowing you to reach FIRE faster with a smaller nest egg? Today, we’re getting into that exact question as Finance Friday guest Ethan asks how he can ensure he’s on the right track for early retirement by age fifty-five. And if you’re like Ethan, you could retire RIGHT NOW…but should you?
Ethan is spending a LOT of money every month. He’s got two kids in private school, extracurricular sports fees, pricey car payments, and a mortgage. The good news? He’s raking in cash at his high-paying tech job! His current expenses cost him nearly $20,000 per month, but this number could be cut in half (if not more) once his kids leave the house. This means that his FIRE number might be a fraction of what he thinks it has to be to retire early.
Speaking of early retirement, is it wise to leave such a high-paying career to sit on the beach all day? Ethan has the skills and the energy to make a sizable income, so what should he do instead of full-time work once he reaches early retirement? Should he transition to part-time consulting, focus more on rental property investing, or buy a business?
In This Episode We Cover
Why your FIRE number may be WAY off from what you need to retire early
The retirement expenses that disappear once your kids are out of the house
Making money in retirement and whether buying a hands-off business is your best bet
Planning for future weddings and how much you should set aside for your kid’s big day
Limiting your taxes by qualifying for real estate professional status (REPS)
Whether or not you’re keeping too much cash on hand (is the bank account interest worth it?)
And So Much More!
Links from the Show
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Email Mindy: Mindy@biggerpockets.com
Email Scott: Scott@biggerpockets.com
BiggerPockets Money Facebook Group
Get on the Path to Early Retirement with “Set for Life”
Dude ACTUALLY Withdraws From His 401(k) and Retires at 47 w/Eric Cooper
(00:00) Intro
(04:27) Money Snapsho
(12:44) Current Net Worth
(15:11) Work Less, Travel More?
(21:10) Early Retirement Expenses
(27:02) Buy Rentals for Retirement Income
(33:59) Paying Too Much in Taxes
(38:22) Downsizing Houses and Next Steps
(44:40) Saving for Future Weddings
(48:52) How Much Do You NEED to Retire?
Check out more resources from this show on BiggerPockets.com and https://www.biggerpockets.com/blog/money-577
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See moreIn this episode of the BiggerPockets Money Podcast, hosts Mindy Jensen and Scott Trench welcome a guest named Ethan, who is a 48-year-old tech entrepreneur with aspirations of retiring early at 55. The episode delves into Ethan's financial journey, focusing on his portfolio, which includes several rental properties and retirement accounts. Throughout the conversation, the hosts guide Ethan through analysis and strategies to determine whether he is on track for early retirement. They discuss practical aspects of managing expenses, including how certain costs will diminish as his children leave home, and how his current income level could sustain his desired retirement lifestyle. The hosts highlight key financial principles, such as differentiating between necessary expenses and those that will change as life progresses. They explore the benefits of a well-balanced portfolio, touching on the importance of both stock and real estate investments, while also considering options for establishing a property management business for passive income in the future. Scott and Mindy emphasize the importance of maximizing the asset base for retirement and provide reassurance that Ethan is well-positioned to meet his goals if he maintains his current trajectory and makes smart financial decisions. One of the revelations of the discussion is the concept of 'pre-tirement,' which reflects Ethan's desire to work less while still maintaining a level of income. This approach allows for flexibility and enjoyment of life even before full retirement. The episode offers listeners actionable insights and relatability, showcasing not only the technical aspects of financial planning but also the emotional journey of preparing for retirement. Ethan leaves the conversation feeling reassured and motivated about his financial future, thanks to the clarity and information shared by the hosts.