I find most of this channel relevant and I 'like' the videos, but after watching I often forget to push the Like button before I move on to the next tab. I want to recommend your regular views LIKE the video when they first start to watch - they can always change their selection later if they find reason to do so. Dare I say S.W.M. may want to pin and heart this comment?
Clarification: The Rule of 55 specifies that you need to separate from work in the year you turn 55 or later. There was a slight miscommunication in this presentation. We apologize.
One correction to the presentation- the rule of 55 allows penalty-free withdrawals from a 401(k) and 403(b) if you leave a job during or after the CALENDAR YEAR you turn age 55. In other words, you don’t need to wait until your 55th birthday to take advantage of this rule.
I'm 55, have worked as a critical care nurse for 30 years so far. My invested assets are worth 2.8M currently. I can access most of my invested funds as they are in a combined trad / Roth 401k, HSA, taxable brokerage, inherited stretch trad IRA, and a Roth IRA. My original plan was to work to 65, but the situation is 60 might be more sensible. My work has a small pension I can take at 60, along with health insurance which will bridge me to 65. That way I work until age 60 when my two sons are done with college. But I don't have to wait on SS which I can take at age 70. I think even as I continue to work I will reduce my hours and concentrate on quality of life with more time off at age 58 to 60.
Seriously, you have done so well. I encourage you to look at the ACA for healthcare, consider living off your brokerage which will keep income low and make you eligible for healthcare subsidies. Retire as soon as you reasonably afford to. Don’t push your health like I did. Health is wealth.
Great content as always. As an early retiree, another thing to juggle would be parents with kids in college. Would love to see you explain how FAFSA works and keeping income down to look poor on paper. People need to realize (which I found out later) that withdrawals from Roths are tax free income and don't count against ACA, but do count against FAFSA as untaxed income. You could use your detailed graphs to show the sweet spot for family income with kids in college. The FAFSA has more limitations because of counting back in Roth income, but still believe there is opportunity as an early retiree to explain this as this effects many people with families in early retirement. Thank you!
I think from an optimization standpoint, if someone is retiring at 50 but has most of their money except 5 years worth locked up in taxable retirements, they should do a roth conversion for the first 5 years. Afterward, it would seem that doing a 72t from age 55 to 60 would be the logical next step rather than spending down the roth. If you're trying to limit your AGI to get a low monthly healthcare premium from age 50-64 on the ACA, it does get complicated.
A big thing is Where u get the money to pay the taxes on the tax differed withdrawals? Instead of coming out of your pay check u will need to pay additional taxes out of your retirement money, it will hurt alot more!
Great, great video .... 2nd one I've sat through in the series by Safeguard Wealth Management. I wish I had come across these videos while I was still working. You've really given me a new perspective on the pros AND cons of the tax-deferred accounts with the associated "RMD time bomb". Many thanks!
72t is a minimum of 5 yr or age 59.5 which ever is longer. so if i took it at 57, i have 5 yrs of the plan or face penalties back to the first payment.
Some slightly early retirees may find themselves on Medicaid. I've recently heard about Medicaid Estate Recovery. This would be an interesting topic either alone or shoehorned in with other healthcare topics.
There really isn't early or late per se. There are just certain government benefits or incentives which come along at certain ages that we need to plan around. We're pretty fortunate to even have the opportunity to retire. It's a fairly modern concept.
If one withdraws small amounts between age 55 and 59.5 even when paying a 10% penalty offset by the standard deduction and low income tax rates the effective tax rate is still manageable. Funds access is still manageable.
Combination of MoneyGuidePro and our own programs. Unfortunately, there isn't a great off-the-shelf package available that doesn't have 'holes' in the planning process. We've had to patch those wholes with programs built by our team. Hope this helps
I understood the rule of 55 to apply as long as the separation from your employer happens in the calendar year you turn 55, not "must have turned 55 before retiring"
@@SafeguardWealthManagement So, another workaround strategy I looked into (and found) was to locate a financial planner who would hire a retiree in the year they turn 55 just long enough for them to roll their IRA into the 401k, then retire. I'm surprised this isn't more widely advertised as a workaround for early retirees. It works similarly if you can find a short-term job with an employer that supports reverse rollovers and rule of 55 retirements. It would be much better if 401k plans were required to carry provisions like these as standard features, so there would be no wondering when screening potential employers.
Why do so many financial advisers ignore the 72 T strategy to get pre- tax retirement money pre-59.5 without having to pay penalties? Do you have any 72T strategies with pros and cons?
@@path4061 Let me see if I understand what you’re saying. So you’re not able to make a single automated annual withdrawal 5 times without making a mistake? And for that reason you’d throw the strategy out the window?
So if I am over 59.5 and convert IRAs to Roths, I don't need to wait 5 years to access the funds? I was told the exact opposite by a tax lawyer I paid to answer that very question.
Correct. If over 59.5, you have an exception to the 5-year conversion rule. I'm sorry you were told otherwise. NOTE: The five-year contribution rule still may apply if you have not started held a Roth IRA for at least 5 years
Thanks for making a video for early retires, as always some of the best content on RUclips. Please keep doing these videos. Also Personal Capital have a decent Monte Carlo simulator if you go and edit the assumptions.
Not sure about Monte Carlo. My gut tells me it gives a false sense of security and isn’t of much use . The markets aren’t random (Monte Carlo) and it’s using historical data which probably isn’t useful going forwards. Could Monte Carlo have come close to modeling the past 3.5 years ex ante??
I agree, If Monte Carlo just randomly selects annual returns, then that's going to generate bad data. I have friends who use Monte Carlo. One has 100% bonds and the other one has 80% bonds & 20% stocks. I calculated the opportunity costs for the one who has 80% bonds, for 2012 thru 2021, and it was $1,900,000. She was NOT happy, but hasn't yet changed her asset allocation. These two friends are under the impression that they should strive for a 100% success possibility, with Monte Carlo. I understand their wanting to achieve a 100% success goal, but the randomness of Monte Carlo is causing people to make bad decisions, and lose out on returns.
I'm 54 and my wife and I are VERY worried about our future, gas and food prices rising daily. We have had our savings dwindle with the cost of living into the stratosphere, and we are finding it impossible to replace them. We can get by, but can't seem to get ahead. My condolences to anyone retiring in this crisis, 30 years nonstop just for a crooked system to take all you worked for.
I find most of this channel relevant and I 'like' the videos, but after watching I often forget to push the Like button before I move on to the next tab. I want to recommend your regular views LIKE the video when they first start to watch - they can always change their selection later if they find reason to do so.
Dare I say S.W.M. may want to pin and heart this comment?
Clarification: The Rule of 55 specifies that you need to separate from work in the year you turn 55 or later. There was a slight miscommunication in this presentation. We apologize.
Thank you! Enjoy your videos. What about a solo k or similar for self employed? Can you access those accounts at age 55?
One correction to the presentation- the rule of 55 allows penalty-free withdrawals from a 401(k) and 403(b) if you leave a job during or after the CALENDAR YEAR you turn age 55. In other words, you don’t need to wait until your 55th birthday to take advantage of this rule.
I'm 55, have worked as a critical care nurse for 30 years so far. My invested assets are worth 2.8M currently. I can access most of my invested funds as they are in a combined trad / Roth 401k, HSA, taxable brokerage, inherited stretch trad IRA, and a Roth IRA. My original plan was to work to 65, but the situation is 60 might be more sensible. My work has a small pension I can take at 60, along with health insurance which will bridge me to 65. That way I work until age 60 when my two sons are done with college. But I don't have to wait on SS which I can take at age 70. I think even as I continue to work I will reduce my hours and concentrate on quality of life with more time off at age 58 to 60.
Seriously, you have done so well. I encourage you to look at the ACA for healthcare, consider living off your brokerage which will keep income low and make you eligible for healthcare subsidies. Retire as soon as you reasonably afford to. Don’t push your health like I did. Health is wealth.
With that kind of a savings I would have retired a long time ago, you will never get back the time that you lost, you can always make more money later
Jesus...wish they paid teachers this well...
Great work. One of the most important videos Safeguard had put together. Thanks Eric !
Great content as always. As an early retiree, another thing to juggle would be parents with kids in college. Would love to see you explain how FAFSA works and keeping income down to look poor on paper. People need to realize (which I found out later) that withdrawals from Roths are tax free income and don't count against ACA, but do count against FAFSA as untaxed income. You could use your detailed graphs to show the sweet spot for family income with kids in college. The FAFSA has more limitations because of counting back in Roth income, but still believe there is opportunity as an early retiree to explain this as this effects many people with families in early retirement. Thank you!
Great info, everyone planning early retirement should watch this multiple times
I think from an optimization standpoint, if someone is retiring at 50 but has most of their money except 5 years worth locked up in taxable retirements, they should do a roth conversion for the first 5 years. Afterward, it would seem that doing a 72t from age 55 to 60 would be the logical next step rather than spending down the roth.
If you're trying to limit your AGI to get a low monthly healthcare premium from age 50-64 on the ACA, it does get complicated.
Thanks, outstanding job!
Thanks David!
Great video, as always. Thanks!
Another great video! Thanks Eric!
Thanks Terry!
I'm retiring at 55.
Only a few more years to go.
Overall great presentation with great content. Truly appreciate it.
Thank you! Glad it was helpful!
A big thing is Where u get the money to pay the taxes on the tax differed withdrawals? Instead of coming out of your pay check u will need to pay additional taxes out of your retirement money, it will hurt alot more!
I'm an expat who can't avoid taxable accounts due to US tax rules. I'm stuck with taxable accounts.
Great, great video .... 2nd one I've sat through in the series by Safeguard Wealth Management. I wish I had come across these videos while I was still working. You've really given me a new perspective on the pros AND cons of the tax-deferred accounts with the associated "RMD time bomb". Many thanks!
72t is a minimum of 5 yr or age 59.5 which ever is longer. so if i took it at 57, i have 5 yrs of the plan or face penalties back to the first payment.
I am 65 and retired at 56. I was able to use the rule of 55. I still have too much in my 401k
I'm retiring this year, a couple months before my 58th birthday.
Rule of 55 is in the year you turn 55, or after. Ok at 54 if you turn 55 that year.
Very good!
Cheers,
Jef
Some slightly early retirees may find themselves on Medicaid. I've recently heard about Medicaid Estate Recovery. This would be an interesting topic either alone or shoehorned in with other healthcare topics.
There really isn't early or late per se. There are just certain government benefits or incentives which come along at certain ages that we need to plan around. We're pretty fortunate to even have the opportunity to retire. It's a fairly modern concept.
If one withdraws small amounts between age 55 and 59.5 even when paying a 10% penalty offset by the standard deduction and low income tax rates the effective tax rate is still manageable. Funds access is still manageable.
What software package were you using to run the Monte Carlo analysis and showing on those corresponding charts/slides?
Combination of MoneyGuidePro and our own programs. Unfortunately, there isn't a great off-the-shelf package available that doesn't have 'holes' in the planning process. We've had to patch those wholes with programs built by our team. Hope this helps
@@SafeguardWealthManagement it does. Thank you for responding.
@@chris_harvey Personal Capital has a decent Monte Carlo analysis you can use for free.
I understood the rule of 55 to apply as long as the separation from your employer happens in the calendar year you turn 55, not "must have turned 55 before retiring"
You are correct here! I apologize for the slight confusion. We've pinned a comment for clarity. Thank you!
@@SafeguardWealthManagement So, another workaround strategy I looked into (and found) was to locate a financial planner who would hire a retiree in the year they turn 55 just long enough for them to roll their IRA into the 401k, then retire. I'm surprised this isn't more widely advertised as a workaround for early retirees. It works similarly if you can find a short-term job with an employer that supports reverse rollovers and rule of 55 retirements. It would be much better if 401k plans were required to carry provisions like these as standard features, so there would be no wondering when screening potential employers.
Why do so many financial advisers ignore the 72 T strategy to get pre- tax retirement money pre-59.5 without having to pay penalties? Do you have any 72T strategies with pros and cons?
@@path4061 Let me see if I understand what you’re saying. So you’re not able to make a single automated annual withdrawal 5 times without making a mistake? And for that reason you’d throw the strategy out the window?
ty
I really enjoy the videos. Great information. I just wish you took on clients that had less than $3 million.
Well said
So if I am over 59.5 and convert IRAs to Roths, I don't need to wait 5 years to access the funds? I was told the exact opposite by a tax lawyer I paid to answer that very question.
Correct. If over 59.5, you have an exception to the 5-year conversion rule. I'm sorry you were told otherwise.
NOTE: The five-year contribution rule still may apply if you have not started held a Roth IRA for at least 5 years
You can withdraw Roth 'contributions' at any time.
Thanks for making a video for early retires, as always some of the best content on RUclips. Please keep doing these videos. Also Personal Capital have a decent Monte Carlo simulator if you go and edit the assumptions.
Thanks Rob! We’ll keep posting if you keep watching ;)
Top notch overview.
Thank you very much James
Rule of 55 , I thought it was in the year you turn 55 not at or after 55 ?
Great as always.
Jef
You are correct. This was an error in our video. Thank you for pointing it out!
I want to retire at 60 if possible!!
Not sure about Monte Carlo. My gut tells me it gives a false sense of security and isn’t of much use . The markets aren’t random (Monte Carlo) and it’s using historical data which probably isn’t useful going forwards. Could Monte Carlo have come close to modeling the past 3.5 years ex ante??
I agree, If Monte Carlo just randomly selects annual returns, then that's going to generate bad data. I have friends who use Monte Carlo. One has 100% bonds and the other one has 80% bonds & 20% stocks. I calculated the opportunity costs for the one who has 80% bonds, for 2012 thru 2021, and it was $1,900,000. She was NOT happy, but hasn't yet changed her asset allocation. These two friends are under the impression that they should strive for a 100% success possibility, with Monte Carlo. I understand their wanting to achieve a 100% success goal, but the randomness of Monte Carlo is causing people to make bad decisions, and lose out on returns.
I'm 54 and my wife and I are VERY worried about our future, gas and food prices rising daily. We have had our savings dwindle with the cost of living into the stratosphere, and we are finding it impossible to replace them. We can get by, but can't seem to get ahead. My condolences to anyone retiring in this crisis, 30 years nonstop just for a crooked system to take all you worked for.
Am I to understand you decided to retire after working only 30 years? What were you thinking?
After watching your videos and several others, I have come to the conclusion that I am going to fund the govt. for a long time...LOL
Haha! We feel your pain!