The Downside of Working "Just One More Year"
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This is another episode of ready for retirement and your host, James. Can all and I am hear to teach you to get the moster life .

with your money now aren't be episode some, James.

how are you?

I'm doing good. I'm thinking about us as the initiators. I don't if it's caught on yet from the last episode, but maybe maybe i'll stick maybe someone else come along well.

find out on the youtube comments. Let us know that if you have no idea we're talking about listen, last upset, we just started this new podcast don't have a name for IT r has the early retire podcast I have the ready for retirement podd cast this episode ism be pushed to both of those also live on the James cannot youtube channel, if so, which we call this. So if you're totally confused what we're talking about, listen, last week episodes, do we have gone on this week?

Today we've got a fun one. So I hear often. I know you do as well.

James, hey, should I just work one more year? Oh, maybe one more bonus, two more years, three million box, then i'm finally gone to retire and we'll call that goal post planning. We're going to explain what that means in a second.

But these comments, everything we discuss on this show, whether you're watching on youtube or are listings on the podcast apps, these are coming from you. So you can see here, this comment was left from woods Parker, seven, nine, zero, two. And he said, our teachers may have a strong desire, retire early because of the stressful environment they work at.

Now, only teachers, there is a real state games. Only teachers are stressed in their job. No, everyone stressed. So this could be applying to you of your teacher, engineer.

What have you? Even if IT means sacrificing some of the finer things in life, let's call a first class ticket over coach. I would predict one more year of work may not be worth the trade to fly first class if IT means an early classroom exit. So my question is very simple to you. James, have you ever flown first class?

I have one time in my life, I know is great.

Did IT feel weird?

I did feel a little weird. And IT was a compromise, well, was a compromise. IT was cash. I hope I throw my wife of the bus. I don't think I am. I barry asked if we were we were flying to to mexico to go to cobo, and we're staying practically for free because some friends had a nice, but that like a place that that was open and was said, yes, he just didn't feel super comfortable. Some stuff that had happened in mexico was like, friend.

He just like, I don't feel comfortable doing that as well, will fly from Sandy ago directly to the airport there and will do the first classes or stay for free, as opposed to, like what a lot of people you will do is drive down to the border, walk across and then fly from tijuana to cup up because it's super cheap and iterate easier on that stuff. Sk, that that was the instance that was fun. IT was cool.

The the meal, the flight IT was, uh, a good experience. But I say no, didn't feel weird though. The only time we've we've done IT.

I have an interesting thought on that because you're got right there right when I asked you, you were like, no infrared IT was cool and if you had grown up only flying first class, you'd have been like, I imagine like, or what is life without first class and then I think of other people, just like the person may be leaving in this comment right now, would who's going look sure, first class is nice, but i'd rather retire two years earlier.

If that means I don't get to fly first class, I don't care. That's more important to me. Do you find many people that you either speak to or read comments about struggle with this? Should I work one more year or two more years? How do I think about trade off with spending? Or is IT just now? It's easy.

Yeah, there's two. There's two main principles are things that I wants to pull out of this. The first is handing about a good example.

Bit may be in college like, okay, you have an exam you need to study for and you really don't like this class, you not want to study, what do you deal? You clean your entire room hasn't been clean. The entire cemetery during the or you have a project at home, really need to do IT.

But like what do you do? You do anything else besides that? Like it's this procrastination ation. Like what can I find to deal to avoid doing the hard thing? That's the same thing that's happening a lot times here.

Someone knows they can retire, but the hard thing is, who do I actually want to to be when I retire? What am I gonna deal? How am I gna find meaning and purpose? That's a really hard question that requires some really deep thought and introspection.

So instead, we clean our room. We do all the dishes we do us. And now with it's not actually clean the room.

It's we say we're going to wait for another bonus. We're gna run another financial projection. We're going to do another tax optimization thing.

And it's just that same thing of these are forms of there are things that are little bit easier to do to avoid the big scary project, which in these cases, not for every for a lot of people who am I actually going to be when I retired and don't have this giant of forty to fifty hour commitment called work every week to fill up my time and distract me from the bigger questions of life. So that's part of IT. The other part of IT is there are traders in first class for some people to go back.

This question is amazing. Call for the people. They couldn't care less. So I think how do you look at retirement, not through the I should be doing these things.

I did a podcast of a few weeks ago with the client til SHE was shared just very transparently tly. I retired when the chAllenges. My family wants her, he wants to travel.

I don't want to travel like that's not interesting to me. I like being where we are, but sometimes it's this all i'm supposed to do IT. I'm supposed to retire and travel. I'm supposed to retire and do your retirement, not just your retirement really of your life should be what you want IT to be.

But that takes a lot of introspection, a lot of reflection um so I see those are two themes that both are coming out of that question on the goal post planning of constant pushing things back because IT easier to do that. And to face the big question of what I wanted do in the other side of, okay, what do the trade us involved here and how do I create my ideal tigers, not my neighbors? Ideal tagged perfectly.

said the neighbor's ideal retirement. That's just plain old head trash. It's like when you seen article online that says you need a million retire or two million or five million, you don't they're all wrong.

And some people say, are you just say that or James, you're just say that when you feel good, like no or not, you need to replace your income in retirement. That's what you need to do. So I want you all for a second if you don't mind.

And yes, we ask you to do this. Ask yourself and be honest, have you ever said i'm going to wait three more months, six more months, one more year, my spouse is gonna until that one boss finally quits, then i'm going to retire. If that's you, please be honest. Let us know in the comments or you can tell A R James, you guys, you're totally not say never deal with this at all and we won't make another episode like this ever again but all good to see if there is lots of comments or not I know I want to see you go through James, an example of, okay, how does someone think through, what if there is a pension and you could be a teacher with a pension, a government employee with a pension, how does that factory the security to a portfolio? You could walk to an example.

Let's do that all. So let's do IT you wanna hit IT or do you want to start the example.

all start with the example, and then come do with some thought so example. Let's pretend john and jane there fifty five years old and they're just public school teachers. They're been doing that for thirty years.

They're like, look, we love IT, but we do on to retire. We just don't know exactly and we think we have enough money. But who knows they want to spend one hundred twenty thousand a year in retirement.

Now some of you hear us say that 那个 you guys don't go deepen a is that after taxes that before taxes that a justice inflation？ Um what about X, Y, Z? We're just gonna sume always in these examples.

It's after taxes. So this couple points, ten thousand months after taxes, adjust that for inflation. There a million dollars in retirement accounts.

And I hear some of you going, is that in the four one k that a four three b, is that a rough I rays or broker jacta? It's all in bitcoin. No, it's not all in bitt coin.

It's across different account. So or make some assumptions going into this and that they own their home with no other debt. And let's just assume this couple because we talked a lot of couples that are always going well, fy, financially optimize. Maybe I could actually just pay on the minimum to my mortgage, invest the rest.

I'll come on on top, and then James and I will ask that person, hey, are you going to sleep Better by having that mortgage gone? Are you gonna sleep Better by getting a nine point three, two, nine, six, seven, two percent? And then like, oh, thank god you told me I could paid off.

I just wait to hear that. So part of this is financial part. This is emotional.

But we want to walk through an example. If you're in this boat of early fifties, it's called mid fifties. Want to retire. Ve got a million box. I want to spend ten thousand month and retirement.

Can I make that happen? And how do I think through IT? In the last thing before I come to you, James, on this is the mistake.

Ic, because I see a lot of early retirement cases is people do the following. They go here. I am retiring my mid fifties.

I don't have so security yet. I maybe don't have a pension yet. Maybe there's no inheritance, no rental come. I don't want to spend too much money because I think I might run out.

And then what happens? Is there seventy five, eighty, eighty five going? Well, I know I didn't have other income sources back then, but I still had planned to retire.

So now great, i've got fifty million box, but. I wish I retired earlier. I wish I spent more when I had my health and energy, but I can exactly quantify that. Any thoughts?

Yeah I A lot of thoughts. There's a lot of different ways we can go with as the first is, you know this person with a million box of fifty five wanted to retire and have one hundred and twenty thousand dollars after taxes from their accounts but just say that one hundred and fifty thousand three round numbers um if you were only living on your investment that's a fifteen percent without w right there is almost no way in the world you're gna be able withdraw fifteen percent of your portfolio.

Have that forty plus years as just not good luck. Have that happened? Not going to almost certain ly um humans their teachers teachers have pensions.

Typically our teachers are not known for being super highly paid. Love teachers are very underpaid. I will say the pensions the love teachers have are pretty significant. You know, if you have a pension that, let's say, sixty thousand dollars per year, one way of looking at that is almost how much would you have to have in a borough, one key in investments to recreate that level.

Then come you have, if you use just a simply put of the four percent rule le OK, we can take four percent from some investment and think that's going to last for some party time. A sixty thousand dollars your pension is the same as having one point five million dollars in a four one k or four or three b so in some ways these pensions um helps at least somewhat offset, I won't say fully offset, but somewhat offset low pay for many teachers. I don't know what ages person gets pension.

Let's say at fifty five, if you're a teacher, typically you have some years of service to hit that pension requirement. All this stuff, the reality that is long in the way of saying this individual, most individuals, you don't need to pull the entirety of your expenses from your portfolio. That million dollars by itself, almost certainly couldn't cover everything.

Do you have a pension coming in the covers? Part of that, does social security then kick in at a latter age to fund another part that now you are teacher, if you do have attention, you might be subject to something called the windfall elimination provision, also the government pension on offset for some spousal benefits and social security. So can get in the weeds of what that means.

Just be aware of bit. But my initial thoughts are know this person could not retire just on the portfolio that they have, but that's why it's so important to look at the big picture. Retirement is about cash.

Allow retirement about understand what are all your income sources. Your portfolio have been one, but then also potentially pension, then also potentially social security. And the other thing i'll say to this on the casual side is that income, the others expenses, one hundred and twenty thousands are starting expenses.

Some people look at that and that's IT. Other people may be look little bit more detail now. I know this couple doesn't a mortgage hypothetical, but what if I did have a three thousand million per month mortgage and was be paid off in three years? When you look in to say OK, you have one hundred and twenty thousand expenses the first three years, but that's onna drop down seven thousand per month, at least when the principal interest portion of your mortgage is paid off. And so that's when the chAllenges of retirement planning is on the financial side, at least incoming expenses aren't IT is consistent.

And then what you have to be able to do is have a real clear sense of the financial side so you can come back to the trade outside of what this person's talking about, of, do I work one more year to get more pension, to get more savings, to get more income? Or do I retire today and are doing the things that I want to do? And that's where you have to marry the financial side of things with a, what do you want in your life to look like side of things and find that that thing that meets.

can I pretend to be your client? Of course. okay. So James, I feel like you are not hearing me. I have a million dollars time.

I know in in a box, draw this and withdraw that. I want to retire, but i'm probably not gonna do nothing. I mean, look, i've had my been with my spouse, haven't only seen him for thirty years because i've been working.

But apparently I still have a spouse. IT says that on the document somewhere. So because of that, i'm probably do some part time. And I mean, I know exactly how much and what if I hate IT, then like I don't want to have to do IT, but does that change my retirement shadows?

Are you tell me about this part homework? What what would what would you find satisfaction doing that still might bring in coming?

Well, there's a few different things i've been teaching for thirty years. I'm thinking about maybe doing a little bit less teaching with some of the kids that lets just say cause a little bit more havoc. Okay, it's on a nice way put in that.

But I think I want to do a little bit maybe some smaller classroom things. I'm just gona guess IT brings in thirty thousand boxes. And if I like doing IT, maybe I do IT for ten years.

Ten years. Okay, what about your spouse? You see your spouse to the same thing.

Oh yeah, i'm married. Sorry, forgot you. I'm still married, so my spouse I I have one of those yeah my spouse, I think they're prying, not going to anna be with me as well.

And so you know it's been a long time, but look, maybe we read each other like I spent a long time since we ve had a first state. Let's assume we're gone that first day and you go, yeah, you're right. Let's get part time jobs.

Well, I to be honest, they don't want to try. My spouse doesn't want to travel as much as I want to travel. So I might bring in thirty thousand dollars year, but they might work more than me because I still want to travel. I've been working with these kids, you know, cause you have IT. And so because of that, and just so all of, you know, listen to this, my fiance say, is a teacher okay, so I have a song spot for the teachers out there um so you can give me sticks still if you'd like to but my spouse pride gone to bring in forty thousand and pride bring in thirty maybe next ten years or well.

let's do this are you know we ve been working together for a long time now and I do notice that you're attitude by the of the school year, you're pretty be down. You're pretty discouraged. Just been a long year.

You're ready for summer time and to take those trips. I also notice when August comes around this time for school to start up again, you got a bit more pet than your step, your little less discuss about things. You're excited because you do love kids.

You do love teaching. Here's one thing. I notice I was a review in your your benefit statement. You've got about twelve a weeks of P T O that you've saved up to this point. You know when you're working, you're given IT. You're all why don't we consider something like this? How whatever the next twelve months i'm gna task you with using all of that burn all that up.

Okay, that gives you sometimes see, do you really want to transition out of this? Or do you just need a little bit of a call, a sabbatical? So it's not making major decisions here, but what if you use all twelve weeks of your p to and if you not fully love IT, if you're not fully reenergize after taking the trip you won't take, then let's consider going to part time work. How does that sound you .

to all you're stressed for me? I think I should maybe speak to my parents during that time because I vents talk to them about money in a long time. But I think that's a good idea because here you're right some people, James, i'm known I am only five foot for apparently but you're right sometimes guess i'm going back to school.

Some people think of five for at six at that tank. Is spring my step? And so I think it's a good idea.

I think I start with the P. T. O. Now, let's fast. For three months ago, James, turns out I miss my spouse and I haven't got to see them.

I was about to go just in my brain plan, in my financial strategy for thirty thousand near the next ten years. I don't want to do that. No way.

I'm spending time with my spouse. Now there is still gona do something. Bring in ten, twenty thousand year. But this experiment that you just told me about this just shift in my retirement.

Well, that's great and that is so. So if you keep working, if this really energizes, you obviously store the income, you can keep a good pension benefits, you can keep going portfolio. You have no problem the retirement.

Then on the flip side, if IT doesn't even working part time, ray, let's assume that between you and your spouse are bringing in fifty to sixty thousand dollars per year, that's half of what you need to cover, which means that the the difference maybe of a pension of fifty thousand per your combined, the kicks in from your school, you are almost at a hundred percent of where you previously were between your pension and between part timeworn. Now your portfolio needs to support much less to still cover all of your needs. So really what we want to work towards is how do we start with at the money side? What's most importantly sounds like this is your relationship with your style.

It's travel. It's the building to live now and not be so stressed out with what you're doing. Then how do we see what are the options to make that happen?

Perfect world is you love what you do for work and you're able to do all those things. So that's why you going to take ot wa weeks A P T O. And you're going to see if that's possible. If not, we're going to shift in the plan b, which is still a great plan, which is do something part time because if you fully retire today, fifty five, you might love that for the first two months, three months, four months, no one you are. You might get bored and you might be wondering what's so let's start to shift this gradually, knowing that you can find entry support at both today as well as at sixty five, seventy five and eighty five beyond because of the strategy and will continue evaluate along the way.

I feel like that's a good plan. I have a few financial things gone off because my neighbor, who keeps. 就是 always come and see they come over， James.

And like I got to tell you about this new allocation strategy and like what is that they're like, you should be sixty, forty. I know some people said that's cookie cutter, but no, no, no, I saw another article. This is just so brilliant.

The tell me should have sixty forty now I don't know if that's right. There's a part of me that feels it's not right because I have a pension and I might do part time and come. But you know, I don't know sixty forty.

My my dad has sixty forty portfolio. He's pretty smart. So is that what I should do? I mean, I know i'm get a little financial here, but what should my allocation be? Just talking about that?

A couple things. One is nothing wrong with the sixty forty if that's the outcome of a good strategic planning process to determine how you should be invested. If that just a starting point, it's probably may be missing the mark. Nothing wrong with that, but it's typically something that OK you're retired. Therefore, this is your allocation and it's not the right mix for you.

If you were twenty fifty five or you need that money last for a very long time, is sixty forty portfolio might typically be thought of as this is going last year, may be twenty thirty years to a retirement twenty years from now, year seventy five. I hope you're still traveling. I hope you're still plain socket.

Hope you're still doing really fun things. We need our money to last a bit longer. So we do need to have enough that forty what that forty times or how much we need to have bonds or conservative assets. We do need to have enough in bonds, other conservative assets to be there for you win, the stock market drops twenty, thirty, forty percent. Not if so, we need to have a very specific intentional amount that will help you with stand that drop and still have stable income to live on.

But if you have too much there, inflation is going take two hundred and twenty thousand hours of live in expenses over the next thirty forty years in quadruple, if not more, what is going to cost? It's gonna you five hundred thousand dollars at age ninety and ball parking here to cost what today might cost one hundred and twenty thousand. So for two conservative, good luck keeping up with that.

Your money will stay fairly stable. You won't be subject to the ups and downs. But you get me really mad at me later on in life when I didn't allow you did I didn't advise you to be a bit more on the growth side to ensure a keeps up the inflation?

That's interesting. I think in a jam here, I think I would have been really mad you. But with this twelve weeks off a vacation and turns just a chill guy now so I pray won't be too mad but um lots of thoughts here, James so one just quick story and then I know we will wrap up here on the subsides.

So I my time for you are you already the adviser .

now are of the adviser. So this was, this was a few months ago. Someone came, they reached out and they go, you know, eighty three, and you'd help with my allocation.

They start talking about things like how m my advisers have. You have they four advisers, why you still they kind of just give ideas. They never give an action strategy. I said, okay, so we talked a little bit more in detail and I said, you should have a hundred percent equity and he said, here you nuts, i'm eighty three said, I know it's a horrible recommendation.

They're like, then why do you say that? I said, it's horrible for your neighbor that doesn't have a pension so security, inheritances and rental income, you would not be happy with me. Client, and i'm not consider name but client, if your four million went to zero, I know you would not be happy with me, but you would be okay because you would be able to meet your needs.

You won't be able to meet your legacy goals and lots of other things, but you might be able to still, if you're okay with the ups and downs, the stock market, have that allocation and be OK first, is your neighbor or a friend that told you that a terrible idea, they actually might not be OK if they don't have that pension and turn comes. So the whole idea of a cookie cutter, sixty, forty, seventy, thirty, doesn't really line well with me. But anything you want to add there.

what we see that all time on youtube and how many videos have you done where you do a hythe's of what does IT take to spend seven thousand month retirement? And you'll get so some comments of, oh my gosh, who who needs seven thousand per month? You should need no more than two to three thousand will go a lot of other comments who on her could possibly survive on seven thousand per month? We'll get some comments on you, but if you're not taking social security, sixty two, you're done and your you gonna have a horrible retirement league.

Others that say you wait till seventy all the way, walk. Get some comments right now from this, who on earth, whatever, hundred percent equity at age eighty three year, whatever there was versus yes. So it's it's hard to take a big step and say all these financial decisions should be very personal in nature and they should be very unique to you as an individual. One is not bad to have some basic groups of thun or some basic frameworks. I think there is a starting point, but this is something that you can you you can on, but it's not the right approach of just say no, here's your age, therefore, here's your ap allocation when you should take social security all these other details IT is so healthy, dependent upon the person and a number of different things.

Love IT that's all I got for this episode any other thoughts?

No um we are good, are still trying to come up with the name thoughts welcome comments welcome a thinks been for listening will see next time, see next time. Root financial is not provided any compensation for and is not influence the content of any testimonials and endorsement shown.

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