Late Start, Early Retirement: How to Invest for Retirement NOW!
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- Опубликовано: 5 июл 2024
- Episode #538
Are you a late starter who wants to reach retirement (or early retirement)? Then we’ve got just what you need! We’re back with Bill Yount and Jackie Cummings Koski from the "Catching Up to FI" podcast as we share how to invest for retirement as a “late starter.” Did you know there are some serious advantages to investing later in life? Some of these advantages are so secret that even our hosts didn’t know about them! But today, we’re sharing them with you so you can achieve financial freedom on your terms!
From top to bottom, we’re sharing everything you need to retire sooner-from the best retirement accounts to debating 401(k)s vs. Roth IRAs vs. HSAs and more! Worried about healthcare if you retire before you turn sixty-five? DO NOT put your retirement plans on pause because of this! With some smart healthcare saving and investing, you won’t have to worry about visits to the doctor’s office!
But before you start investing, we need to get your spending in check. Bill shares how he went from paycheck to paycheck to exploding his savings rate by “downsizing” his spending, which makes reaching financial independence even easier! If you’re ready to retire, stick with us and follow these steps to a tee if you want to be financially free!
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Show Notes at:
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BiggerPockets Money 344 - Rethink Social Security: Myths, Benefits, and Clearing Up Misconceptions w/Jeremy Keil:
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BiggerPockets 422 - The Late Starter’s Guide to Financial Independence (Even in Your 50s!) w/Bill Yount:
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BiggerPockets Money 527 - Retired at 49 on an Average Salary after Getting a “Late Start” to FIRE w/Jackie Cummings Koski:
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00:00 Intro
01:19 Create a Simple Plan
04:58 How Much Do I Need to Retire?
09:18 What About Social Security?
16:27 Reducing Your Expenses
19:59 Healthcare and HSAs
33:28 Best “Catch Up” Investments
38:31 Roth vs. HSA vs. 401(k)
47:34 Investing Beyond Retirement Accounts
49:38 It’s NEVER Too Late!
Thank God for that young man, basically he was the one asking questions concerning the topic and speaking for us late starters. Thank you.
It was fun
I turn 55 this year and my HSA is my favorite investment account. I did switch my HSA equities into more dividend monthly paying covered call ETF funds and since then my HSA has been screaming forward at over $2,000 a month over month tax free growth. My biggest regret though is the the first few years I had my HSA I didn't realize what a powerful tool I had at my disposal and I didn't contribute to it or do anything with it, but the last few years it's been getting maxed out to the penny.
Jackie is the HSA queen. We are both at Fidelity
That 25x expenses is the same as the 4% rule, which was calculated for a 30 year retirement, not necessarily a LIFETIME. So if you FIRE at 30, 40 or even 50, the calculations dont work the same way.
That's a great point. I think one of the most undervalued asset for someone retiring in their 30s, 40s and 50s is human capital. At those ages you're much more likely to be doing something productive (projects, passions ect) that may bring in some income. Also the 4% rule does not include Social Security. I did not include SS in my FIRE# at all (overly pessimistic, I guess). Now that I know realistically it will still be around in some form, I see it as a powerful backstop in my older years- a fixed monthly amount, adjusted for inflation, for the rest of my life.
I am 45 and this episode was so informative! Thank you.
Great to hear!
Fantastic episode!!! I learned so much and got a ton of insights and ahas. That’s coming from a guy who has been studying personal finance for years. Thanks so much y’all!
Thanks!
I love how forward and direct Jackie speaks. Sometimes, I need a strong voice to tell it like it is and verbally shake me into doing something lol
She is a great cohost on the show
LOL ❤ The financial world is way more complicated that it needs to be sometimes so I have a habit of spouting out things that simplify a lot of it so people can actually understand 😃
This was one of the best episodes for a late starter like me!!
Thank you!
Excellent two parter, and the best point made by example is the joy and motivation you still have with constant learning to better optimize your journey. Like you say, mistakes will be made along the way, and those are the things that spur you to learn and be better....
I have made every mistake in the book! We are still on track after waking up at 50
Love this episode! On journey at 49!
Thank you
49:35 My mom did disability leave from her job at age 56 but I warned her, if you want to use the Age of 55 Rule, it has to come out of the 401k. Employees at Wells Fargo were trying to get her to roll it over into an IRA (the traditional advice), however, it prevents you from taking advantage of the 55 Rule since it'll no longer be your employer's plan. Luckily she listened to me and I would just encourage folks to read up on it more before making those big decisions and rollovers.
Really ready great information
I keep O,PFE,DGRO and SCHD in my HSA. Great point you made cash flow your health and keep those receipts so you can take that money tax free.
Great episode ... Very practical advice
Thanks
I'm halfway in and I already know that I'm going to have to listen again and again! As a millennial who desires to reach FIRE early, I am happy to say that I have all of these accounts (especially the HSA investing hack). But now I have to figure out how I can max them all out. Such good convo as someone who studies and talks about personal finance. Thank you all!
wow! such kind words
Plan all you can, but medical expenses and the likelihood of needing long-term care can crush all your plans, particularly if you FI early and live on a 4% plan that was set when you were in your 40s and 50s.
Health Care is a challenge for sure. Long term care insurance is out of reach for many. Some think about using home equity as a resource to tap into for it in a worst cast scenario.
This has always been a big concern of mine too. The way I have planned around some of it is to overfund my HSA, which can cover LTC insurance premiums, Medicare premiums, out of pocket costs for medical, dental, vision, and hearing- tax free. This account has grown to over $200k because I started it way back in the day (2008) and invested in it from the very beginning. Very powerful account.
Really enjoyed both episodes I am Jackie pretty much and I started I few years earlier than she did so pretty confident I’m on the right track.
❤❤❤
401k catchup above 50 is 7500 not 6000 as mentioned.
Thank you for pointing this out, $7,500 is the catch-up for 2023 and 2024.
I have Amazon and Berkshire. SCHG
For those who have a high income and you're trying to contribute to a Roth IRA using the back door Roth method. Be careful. Due to the IRS pro rata rule if you have a lot of money in your traditional IRA you may end up being double taxed on that money you're converting.
One way to get around this is to roll all the money in your traditional IRA into your company's 401k. Or get a lower paying job 😁
Correct, ideally no money in a traditional IRA for a backdoor Roth. We appreciate you!
@@CatchingUpToFI Thank you. I should qualify this by saying you will be taxed on the gains from your gains generated from your contributions. There's a way to make sure your actual contribution isn't taxed again but that involves planning for when your income is low possibly in retirement and tracking and reporting to the IRS. It's cumbersome as heck. The best solution if you really want to use the backdoor Roth is to roll all your traditional IRA funds into your 401k and do the conversion. Note if you have multiple traditional IRA accounts they all count towards the pro rata rule so best just roll all into a 401k. This takes pro rata out of the equation.
@@ariefraiser140 Agreed
Medicare part A has a $1556 deductible though
For boomers and senior citizens, the current market and economy are unnecessarily harder. I'm used to simply purchasing and holding assets, which doesn't seem applicable to the current volatile market, and inflation is catching up with my portfolio. My biggest concern is whether I'll survive after retirement.
Just buy and invest in Gold or other reliable stock , the government has failed us and we cant keep living like this.
Yes, gold is a great investment and a good bet against the devaluating dollar, been holding some for awhile now, I’m grateful my adviser’s moment by moment changes in the market are lightening quick, cos who know how much losses I would’ve had by now.
How can i reach this adviser?
Terri Annette Moore is the licensed advisor I use. Just search the name. You’d find necessary details to work with to set up an appointment.
Thank you for the lead. I searched her up, and I have sent her an email. I hope she gets back to me soon.
If i have a 401k and contribute, can i also open and contribute to an IRA and to a RothIRA? So i can have ALL 3 retirement accts ?? And maxout all 3 accts ??! Please advise? Im over age 50.
You can contribute to a Roth IRA for you and your spouse. If you have access to an HSA, do so as well. Put the rest in a taxable brokerage. There is something called the pro rata rule that will limit your contributions to the Roth if you use a tIRA
I ❤ this episode
We love our listeners!
👍🏾👍🏾👍🏾👍🏾👍🏾
In my employer 401k i contribute to only one target-date-fund. What did Jackie or Bill invest into within their 401k ?
I invest in VT, a total world etf, for my equity allocation and in Vanguard intermediate treasuries and ST treasuries for my bond allocation.
I'm retired now, but when I was working I primarily had a low cost stock market index fund and a little in bonds that fit my investment goals and risk tolerance. If you use a target date fund, just make sure you know the allocation of the assets inside of it (like stocks, bonds, international, ect). Usually there is a link you can click on next to the fund that will give you a "fund fact sheet" so that you can see the fund in formation at a glance.
Great Information thanks..I'm single and 53/m..bring home 60k yr😊
I have an extra $250 wkly and want to know can I have $100K when I retire early 6/2029.
By my math, you would get close to $100k in the next 6 years if you had a 10% return. But you can run the number though a compound growth calculator and see.
It's simple, it is not necessarily easy...follow the FOO. The Financial Order of Operations- The Money Guy
One you build that muscle, it becomes fun
I just turned 41 and awfully late to investing with barely any portfolio except my 401k, I have a decent amount of cash saved up and with inflation currently soaring AGAIN, I’m getting worried about retirement, my intention is to retire at 65 atleast, so how best do I maximize my savings of over $500k
Retirement is now more difficult than it was in the past. it's all about balancing your risk tolerance with your long-term goals. Maybe consider speaking to an advisor to help in diversifying your portfolio to spread out the risk.
Generally speaking, a good number of people discredit the effectiveness of financial advisor in planning for retirement, For over the past 10years, I’ve had a financial advisor consistently restructure and diversify my portfolio/expenses and I’ve made over $3m in gains… might not be a lot but retirement doesn’t seem so farfetched anymore.
Your advisor must be really good. How I can get in touch? My retirement portfolio's decline is a concern, and I could use some guidance.
Melissa Elise Robinson has always been on the top of my list..She is regarded as a genius in her area and well knowledgeable about financial markets. I highly recommend you look her up if you want excellent collaboration.
Thanks for sharing. I curiously searched for her full name and her website popped up after scrolling a bit. I looked through her credentials and did my due diligence before contacting her.
My Social Security check will simply pay for my premium drug supplement plan. That’s all I expect and that’s fine.
It will be there, but not accounting for it in your FI number is a good conservative plan
HSA is great..Please invest