Can I retire in my 40s is a question I receive a lot.
In this video I’m going to share a scenario from a guy who emailed me his stuff and wondered if I thought he was able to hang up his boots at 48.
From a birds eye view one might think he’s good to go. After all, no debt, a net worth of over $1 million and not huge income needs.
BUT…you’ll see in this video, there are issues, mainly TAXES! You can’t just look at retirement income without considering the taxes you have to pay.
So, if you need $4k a month from your portfolio, which is entirely an IRA, you may want to account for $4500 or so monthly distributions to account for state and federal taxes.
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Retiring at 48: Is it Possible?
Many people dream of retiring early and enjoying the fruits of their labor while they are still young and healthy. The idea of retiring at 48 may seem like a pipe dream to some, but with careful planning and financial discipline, it is actually achievable for some individuals.
The first step in determining whether or not you can retire at 48 is to take stock of your financial situation. This includes assessing your current savings, investments, and any retirement accounts you may have. It also involves looking at your expenses and determining how much money you will need to live on for the rest of your life.
One of the most important factors to consider when planning for an early retirement is your lifestyle. Are you willing to live a more frugal lifestyle in order to make early retirement a reality? Are you willing to downsize your home, cut back on luxury expenses, and live within a budget? These are all important questions to consider when contemplating an early retirement.
Another important consideration is healthcare. If you are retiring before the age of 65, when Medicare kicks in, you will need to find alternative health insurance coverage. This can be a significant expense, so it is important to factor this into your retirement planning.
Investment strategy is also crucial when planning for an early retirement. It’s important to ensure that your investments are diversified and will provide a steady income stream for the rest of your life. Working with a financial advisor can help you develop an investment strategy that will support you in retirement.
For those considering early retirement, it may also be necessary to explore options for generating additional income, such as part-time work or starting a small business. This can help supplement your retirement income and ensure that you have enough money to live comfortably.
Ultimately, whether or not you can retire at 48 depends on a variety of factors, including your financial situation, lifestyle choices, and investment strategy. It is important to carefully consider all of these factors and work with a financial advisor to determine if early retirement is a feasible option for you.
In conclusion, retiring at 48 is certainly a possibility for some individuals, but it requires careful planning, financial discipline, and a willingness to make sacrifices in order to live on a reduced income. With the right approach, it is possible to achieve early retirement and enjoy the benefits of a life of leisure at a relatively young age.
thanks
It I was on those same shoes, I would probably do a cash out Re-Fi on the rental every so often to keep cash flowing above the monthly rents… or maybe consider selling it and invest it on income producing ETF's like SCHD or DRGO but then the rents stop tho.
Great vid. thanks!
I wish you could've showed all his 401(k) in Roth tax free
Could I retire at age 46? Municipal pension would be $3000 a month also taking a lump sum amount of $146,000 and 100% survivor benefit for my wife. We also have a 457 deferred comp account with $55,000 and an old 401k (wife when she used to work outside the home) with $55,000. House would be paid off, value at $450,000. I am currently 43years old.
Why is this guy not maximizing his 401k?
Thanks for the video.
I'm 54, and I plan on retiring at 60. I will have around $200k in my 401k. I won't apply for social security until 67.
I believe I will need $12k-$15, since I'm moving to Thailand.
What do you think?
Should we all try to die with as much money saved as possible? 60% of people won't live much past 72 anyway and those who do could very possibly have an extremely poor quality of life. Then doctors and nursing homes will suck you dry. Now if you have no money left you get free medical care. From what I've seen the care is the same, unless you are worth millions.
LLC absolutely. But it still won't 100% shield your personal assets from law suit happy tenants. My advise as someone who has rented a payed off single family home for 9 years: If you are a small time property investorlandlord with say 1-3 property's that each carry mortgages and plan to include the net income from these rentals in your calculations to fund your early retirement, DON'T. People just don't look at the negatives of a rental especially when contemplating early retirement. No way would I ever rely on rental income to fund my early retirement. I had to evict my last tenant which took 3 months while no rental income was coming in because the laws in most state protect the tenants, not the landlord. You ask, didn't I screen my tenant? Every time. Many times that eviction process can go longer. Add $2k plus in attorneys fees you will likely never see back. Note, my property is paid for but I could imagine the stress if I had to pay a mortgage out of my own pocket…in early retirement? No way. Don't forget the annual property taxes, repairs and insurance. I repaired the damages last month and put it on the market. It went contingent in a week which hopefully after nit picking inspection reports, will close by the end of this month. After all is settled, I will net around $150k. $150k in the Vanguard High dividend yield i'd say I could pull 5% with relative ease. That's $7,500 without the rental worries of ahole tenants which after general land lording expenses, is worth slightly less income. If' you have several properties, maybe because lets say you have 3 in eviction, one still looking for a tenant and 5 with steady tenant occupied income, then maybe yes. But remember, land lording in early retirement isn't stress free. If your ideal early retirement is to watch the grass grow, don't do rentals.
That rental is more liability than asset in my opinion. Unless they can get double the current rent I would sell it and invest the proceeds into a better property or quality dividend paying stocks if cash flow is the goal.
If they need $4000 a month 4% rule says they need about $1.25 million in income producing assets.
Interesting example. So bottom line is need to accummulate more assets and keeping expenses low. And this couple is already way above the norm for asset accummulation. Other altetnative is continue to earn income which is anyones biggest asset. Thanks for post.
I would be scared to retire with so little $ for two. You need to plan for stormy days.
Thanks for walking through. Some constructive feedback from a non expert viewpoint:
Did the “aggressive” strategy switch the cash to stocks AND shift the rentals to stocks?
Should an expense = 1% of the home (and rental) be built in annually as new roof/paint/updates cost?
Is a >25% chance of failure too high, especially given 7% equity returns w current high PEs?
Is chance of failure understated because no nursing home (or LTC insurance) costs?
If there’s no strong “bequest” motivation, I wish there were a palatable way to “sell” the upside in the good scenarios to cover the bad scenarios!
Can you model the rental as being sold at age 70? And or reverse mortgage on the home? (Not sure if you can do a reverse mortgage on the rental)
Good stuff thanks. Like your “not yet” conclusion.
How about Roth conversion ladder to avoid 10% penalty? Need some already existing Roth contributions OR some cash/investments not in 401k/IRA though.
Got a question not related. If one is going to get a $20k a year pension with no COLA or inflation adjustment how much do you need in a supplemental account to subsidize the pension to stay at pace with inflation at a 3% inflation rate per year?
Seems like the net return on the rental is too low to justify holding the rental property. Could he sell it now to add to his investments and get better results.
Josh, is this software available to individuals?
Thanks Josh
What if you withdraw from your 401K but it's less than your standard deduction and you have no other income? Then there is no tax correct? Only the 10% penalty if you are not 59 1/2.