Retiring Early in 5 Years? Do THIS First

Summary

Podcast Summary: BiggerPockets Money Podcast

Episode: Retiring Early in 5 Years? Do THIS First
Date: April 10, 2026
Hosts: Mindy Jensen & Scott Trench

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Episode Overview

This episode tackles the five crucial steps everyone should prioritize in the five years before early retirement, especially for those on a serious FIRE (Financial Independence, Retire Early) path. Rather than focusing on abstract dreaming, Mindy and Scott break down actionable strategies for experienced savers preparing to pull the trigger on early retirement, including goal setting, portfolio management, health care planning, bridging to retirement accounts, and understanding your true spending.

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Key Discussion Points and Insights

1. Retiring TO Something—Not Just FROM Work (03:19 - 11:45)

• Why Purpose Matters:
  Scott and Mindy emphasize the necessity of finding fulfillment beyond quitting your job. Retirement should be about moving toward meaningful pursuits, not just escaping employment.
• Personal Examples:
  • Scott: Enjoys building spreadsheets and has specific intellectual projects post-retirement; not interested in formal financial planning for clients.
  • Mindy: Focuses on health and fitness, going to the gym five times a week now. Looks forward to traveling and outdoor activities (bike rides, hiking, international walks).
  • Notable Quote
    “This concept of having something to retire to... overwhelmingly you see a disproportionately, extremely healthy group of people [in FIRE]…”
    — Scott Trench (05:01)
• Action Item:
  Start a bucket list or a “Lifetime Goals” doc—even if work is fulfilling. Outline what you want to do with your time post-retirement.
• Resource:
  Scott’s Goal Setting Worksheet (biggerpocketsmoney.com/resources) is recommended to clarify your vision and plan actionable steps.

2. Stress-Testing and Designing a Resilient Portfolio (14:42 - 27:50)

• Beyond the 4% Rule:
  • The “4% rule” is a starting point, not gospel. Early retirement often means longer drawdown periods and higher health care risk. Personal circumstances (like being a renter vs. homeowner) massively impact safe withdrawal rates.
• Notable Analysis:
  “If those [ACA] subsidies go away for that person and their health care costs… inflate… that’s a curve you need to plan on funding right now.”
  — Scott Trench (15:43)
• Experts & Further Study:
  • Paul Merriman: Factor investing and smoothing returns.
  • Karsten Jeske (Big Earn): Rigorous safe withdrawal analysis; conservative approach.
  • Frank Vasquez: Argues for defraying risk with uncorrelated assets.
  • Bill Bengen: Origin of the 4% rule.
• Notable Quote:
  “If you make way too much money and your 30s, 40s, and 50s go by needlessly not doing the things that you love, that’s a shame.”
  — Scott Trench (22:40)
• Action Items:
  • Study robust portfolio theory and withdrawal strategies.
  • Practice with a small “sandbox” portfolio—try actual withdrawals and see how your strategy holds up (see Mindy’s experiment at 26:47).

3. Modeling Health Care Costs (28:19 - 33:37)

• Biggest Wild Card:
  Health care can be a budget killer, especially if ACA subsidies don't last for FIRE retirees.
• Notable Quotes:
  • “Plan on the $1,300 [a month for health care premiums] line, make that part of your budget… subsidies were not intended for millionaire early retirees.”
    — Mindy Jensen (28:19)
  • “That’s the risk I’m trying to talk about here…take those numbers and feed them into your favorite AI.”
    — Scott Trench (32:17)
• Action Items:
  • Use kff.org to model costs at various ages and income levels.
  • Assume premiums will increase, especially as you age—don’t over-rely on subsidies.
  • Focus on staying healthy to minimize long-term risks.

4. Bridge Strategy: Accessing Retirement Funds Before 59½ (33:37 - 38:09)

• Withdrawal Challenges:
  You may face penalties accessing retirement accounts before 59½. Strategies like 72(t) SEPP withdrawals or Roth conversion ladders are common but complex.
• Recommended Reading:
  Tax Planning to and Through Early Retirement by Cody Garrett and Sean Mullaney.
• Certified Help:
  When nearing early retirement, consider engaging a fee-only or flat-fee Certified Financial Planner (CFP) specialized in FIRE. Mindy and Scott recommend Domain Money (biggerpocketsmoney.com/cfp).
• Quote:
  “This is a legitimately complex planning challenge…plan on the next two or three years on receiving [subsidies] and optimizing income around there.”
  — Scott Trench (37:39)

5. Nailing Down Your True Spending (38:09 - 41:57)

• Reality Check:
  Most people underestimate their real annual spending. “Wishful” numbers, irregular expenses, and lifestyle inflation can derail plans.
• Best Practices:
  • Track spending rigorously for 3–5 years leading up to retirement.
  • Use tools like Monarch or detailed spreadsheets.
• Notable Quote:
  “I think you should be tracking your spending for the last five years leading up to your retirement so you can see, Oh, I thought I was spending 60. I’m actually spending 61… but if I thought I was spending 40, I’m actually spending 61, that’s a problem.”
  — Mindy Jensen (38:09)
• Action Item:
  Get consistent, granular data on your expenses and adjust your FI number accordingly.

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Key Action Steps

• Retire To Something:
  List your post-retirement goals. Download and update the Goal Setting Worksheet at biggerpocketsmoney.com/resources.
• Master Portfolio Management:
  Dive deep into withdrawal strategy nuances; run trial withdrawals. Reference leading experts.
• Model Health Care Costs:
  Use kff.org’s calculator and assume no subsidies as your conservative scenario.
• Strategize Withdrawals:
  Map out bridging tactics from retirement to age 59½. Consider CFP advice for this phase.
• Get Real With Spending:
  Track all expenses closely for several years—tools help, but meticulous accounting is non-negotiable.

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Notable Quotes & Memorable Moments

• “The last five years before early retirement are the most important. You’ve built the portfolio, but this is where mistakes can cost you years.” — Mindy Jensen (02:39)
• “That’s our five years out roadmap there.” — Scott Trench (41:57)
• “If you don’t know what you’re going to do after you retire, go back to the beginning—why did you want to stop this in the first place?” — Mindy Jensen (10:53)
• “Optimal can be the enemy of options in the last few years leading up to early retirement.” — Scott Trench (26:18)
• “Retireability—what is your retireability?” — Mindy Jensen (23:38)

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Important Timestamps

• Retiring to Something / Purpose — 03:19–11:45
• Goal Setting Tools & Worksheet — 11:19–13:41
• Portfolio Theory Deep Dive — 14:42–27:50
• Healthcare Cost Risks — 28:19–33:37
• Bridge Withdrawal Strategies — 33:37–38:09
• Tracking Your Real Spending — 38:09–41:57
• Recap / Five-Year Roadmap — 41:57–43:29

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Final Thoughts & Resources

Mindy and Scott urge intermediate and advanced FIRE seekers to devote as much effort to planning HOW retirement will look as they spent saving for it. Purpose, portfolio, healthcare, bridging assets, and honest accounting are your levers to a confident, flexible, and meaningful early retirement.

More Resources:

• Goal Setting Template: biggerpocketsmoney.com/resources
• Find a CFP: biggerpocketsmoney.com/cfp
• Health Care Cost Modeling: kff.org

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Contact the hosts:
Email Mindy at [e-mail] or Scott at [e-mail] with your own pre-retirement lessons or topics you want covered.

Transcript

[Scott Trench]

Mindy and I are so grateful for the following sponsors who make BiggerPockets money possible.

[Mindy Jensen]

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[Mindy Jensen]

The last five years before early retirement are the most important. You've built the portfolio, but this is where mistakes can cost you years. Today we're covering the top five biggest things we think you need to keep in mind in your lead up retirement. Hello, hello, hello and welcome to the BiggerPockets Money Podcast. My name is Mindy Jensen and with me as always is my semi retired co host, Scott Trench.

[Scott Trench]

That's right, in the five years leading up to your retirement, you start a podcast on personal finance and early retirement and that is how you supplement your lifestyle here. So that's the topic for today's show

[Sponsor/Advertisement Voice]

is what do you do to prepare?

[Scott Trench]

Prepare for early retirement. And while I'm making fun of me and you Mindy, as podcast hosts here, that is like our intellectual passion I think is, is this topic. And so I think that's what, what is yours finding that I think is

[Sponsor/Advertisement Voice]

a one of the first tips that

[Scott Trench]

you should be thinking about here. Like what do you want to do with your mind and your mental energy that gets you going here?

[Sponsor/Advertisement Voice]

Right.

[Scott Trench]

I like building spreadsheets that get through the right answer for financial portfolios. And I do not like, I do not like the idea of taking a client that I have to show up on time for and actually, you know, providing some kind of, you know, 15 hour financial plan statement for, for example. So like that, that's, that's mine. But anyways, what, what's yours on this

[Mindy Jensen]

path, I am very much looking forward to, well, not looking forward to. I am there now. I am very much enjoying getting my health in order. I had worked at BiggerPockets for the last 10 years and had gone to the gym very sporadically, like once a week, once every other week. And lo and behold, that's not the regular cadence. You need to keep your body in tip top shape. So I steadily gained weight and now I have been making it a point to get to the gym five days a week. I am lifting heavy. Scott, you wouldn't think it but you know, you would look at me and be like, yes, that's great. And I look at me and I think, yes, that's great. I lift weights three days a week. I do a hybrid workout two days a week, a hybrid cardio, weights and that is something that is making me healthier and making me feel better in general. And that is my. One of my favorite things to do, of course, outside of this podcast. But we started this eight years ago, Scott, not five.

[Scott Trench]

This concept of having something to retire to. And I think fitness absolutely belongs in there, right? You look at the fire community and you, and you talk to folks and overwhelmingly you see not, not everybody, but you see a huge, A disproportionately, extremely healthy group of people because that is the. You know, these are very optimized people who have really put a lot of time and energy into thinking through how to build their finances. And that skillset translates directly into building a great body and optimizing for fitness. And that's also one of the best things you can do to safeguard your early retirement. Because if your body and mind are super smart, you can pivot and adapt

[Sponsor/Advertisement Voice]

later in life and your health care

[Scott Trench]

costs are probably going to be lower. Right. And that's going to be a major cost savings. I don't know when and where that risk will strike. For, for now, many of the fire community can receive healthcare subsidies, but that is a major threat to especially very early retirement, this healthcare concept.

[Mindy Jensen]

Yes. Another thing I wanna do, Scott, is travel. I have a child at home still. She's a sophomore in high school, so that's not really a big option for us right now. But in a couple of years she will go away to college and then Carl and I will start traveling a little bit more. I'm very excited about that too. But you know, for right now, I'm just. I'm working on my house, getting that all fixed up, working on my body, working on the other house, getting that finished build, and then we're done with the flipping. And that's, that's a very, very exciting thing to retire to. No more flipping.

[Scott Trench]

You're need a new Tuesday once you're done working on your houses.

[Mindy Jensen]

Yeah, you know what? Tuesday is going to be the bike ride day.

[Scott Trench]

All right.

[Mindy Jensen]

And Wednesday and Thursday and Friday.

[Scott Trench]

Mindy has a particularly excellent handle on biking, by the way, which is the. The Ragbrai. Right, the ride across the great state of Idaho or Iowa.

[Mindy Jensen]

Iowa. Yes. That is. That is such a fun. And you know what, Scott? In two years, when Daphne's out of high school, I' to put out a call to all of our listeners and let them know I'm going to ride Ragbrai again. And anybody wants to join me can join me. Love it, Scott. I don't know if you Remember this? But the fall of 2028. Yeah, fall of 2028, Daphne will be out of high school. Carl and I are going to walk the Camino in Portugal or France, I can't remember which one we're going to do. And I said, hey, does anybody want to join me? Come on. And you know, email me. Mindy BiggerPockets money.com I had somebody email me. So already I am collect to go with me on my travels.

[Scott Trench]

Awesome. And for my part, I don't want to travel, you know, I don't want to get on an airplane with our 3 year old and 1 year old and go to other place that's not a relaxing vacation. Right. Maybe that was the idea, you know. You know, seven or eight years ago. I do a lot of travel, but I think those days are coming in a few years for the Trench household here. In the meantime, I'm like, I live in this awesome state of Colorado and I've barely explored any of it. I've been here 12 years and that's starting to change this year. And it's awesome. I've been able to get out and actually ski even though this season was terrible. I'll get on my mountain bike a bunch. Should be a good season for that since we're going to have no snow in the mountains and have plenty of chances to do that. And I got in a bunch of hikes toward the end of last year and I'm planning on doing a bunch of those this year. So it's like this, it's playground is right there and I just, I never have taken advantage of it the way I probably should have and that's been phenomenal.

[Mindy Jensen]

Scott, do you have a bucket list?

[Scott Trench]

No, I don't really have a bucket. I have like a set of goals that I want to achieve in my lifetime. That's kind of what I work against. But this year's bucket list equivalent is basically a trip with my best buds from high school, which just completed four trips with Virginia, a couple of one night getaways with the little ones to try to get that, that habit built. See how if we can get to a place where that's actually sustainable and manageable so we can begin taking longer trips and then 10 hikes, 10 bikes and 10 ski days across the course of the year. So that's kind of more of my bucket list. And then I have a bunch of things I'm excited to work about here, work on here at Biggerpockets. Money.

[Mindy Jensen]

Yeah, but that's work I'm Talking about like things you want to do. Carl and I were driving back home from California, which is a very long drive, and we had a lot of time to have conversations about things we wanted to do. And we started a bucket list because, you know, we're always so busy, we don't have time to sit down and talk about this. Well, we had, I don't know, 16 hours or something and we created a rather sizable bucket list of like, I would love to swim with whale sharks in an like eco friendly way. I haven't looked into it at all. If you know about it, please, you know, email me. Mindy BiggerPocketsMoney.com but just even having the bucket list made me even more excited to go travel and do these things and like start checking things off the list. So anybody who is thinking I'm about five or six years from retirement and I don't know what I'm going to do afterwards, sit down and think about all the things that you've always wanted to do and write those down and start doing them.

[Scott Trench]

I don't have a bucket list. Maybe I should think about doing that. But I have, I have a different version of that. And there are work related things, not necessarily money making things, but projects that I want to complete that are more, I would say my, my bucket list on there. So that's kind of how I, how I think about.

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I like my routine.

[Scott Trench]

I got my set up here with it. And then maybe in a few years when the girls are a little older and more travel is more realistic, maybe that bucket list will evolve to incorporate many of the things you just said. But yeah, I think that that's the important thing is like, why are we doing this Right? And I think that a challenge that a lot of people in the fire community have is after 20 years of doing the same thing or this very similar type of work in there, it's very hard. Like now my brain has been wired to do that and that's my skill set and that's what I'm comfortable with. And the fire goal, I think can get lost in that grind towards it. And I think that's a major challenge that we know comes up over and over and over in and that needs to be addressed. And there has to be a specific plan of action because otherwise the goal gets lost. We begin deferring. We don't actually realize the fruits of this major sacrifice of labor that has been a major sacrifice for us for a very long time.

[Mindy Jensen]

Yeah, yeah. If you don't know what you're going to do after you retire? Go back to the beginning. Why did you want to stop this in the first place? Usually it's I hate my boss or I hate my job or both or. Or I don't have enough time to. Great, there's where your bucket list starts.

[Scott Trench]

Mindy, what is something practical you can do to actually address this? How do I retire to is how do I make it not so fuzzy?

[Mindy Jensen]

Well, Scott, you have created a beautiful document called the Goal Setting Worksheet. It's a nine page document. You've given your example of how to fill it out and given a lot of space for people to really think about what their goals and actually are. And you can find that@biggerpockets money.com resources Scott, you're clicking it open right now. It is downloadable as a Google Slide.

[Scott Trench]

Google Slide or as a, I think it's a doc, a docx. So you can just download this thing and modify it. It's just free. There's no email required or anything like that. But we find a lot of the times people come to us with what should I do with my money? And well, it's like, well, where do you want to get to? Right? If you want to have $10 million, there's a very different approach you're going to take than if you want $2.5 million and to enjoy Tuesday on a mountaintop. The challenge here is you must be clear on what you want heading into early retirement. And so this is a free template that helps analyze that. And I recommend that the output is a draft, a first draft. You plan to modify this every 90 days for a year or three. Because figuring out what you want is hard. And then, you know, you can see what I want. As an example. This is how I do it literally with my wife. It's the exact same output from like six months ago that my wife and I do this, that we update this on every six months. And there's just a process for arriving at that. And I think that's really important because that will either move the goal posts appropriately or stop them moving once you're clear on what you want. And this moved all over the place for us for the first few years of our marriage and now it's kind of settled and we make very few changes to it each. Each time we revisit it, although we almost always make a change, but that helps us be very clear on what we want. And I think it's a really powerful tool. It's very woo woo, but it's also it takes the, this abstract kind of end game and puts it into something very tangible that you can now actually engineer for.

[Mindy Jensen]

So I think it's hilarious that you designed something that's very woo woo. I would not call this very woo woo. I would call this something to help you get very clear on what you want your goals to be. Carl and I downloaded this and we're still working on it because it's a lot, but it is so clarifying when you finally get to the end of this. Set actionable goals and there's examples. Build a system and cadence for accountability and there's examples.

[Scott Trench]

This is nothing like crazy original. I didn't come up with any of this. I just took the various pieces from various goal setting gurus over the years and compiled my own version of it. And it's just available as a document, right? There's not, there's no secret sauce to this stuff. It's just you have to have it some way. And hopefully this isn't a reasonably accessible one to do it. But I think that's the first thing you should do if you think about five years out from early retirement is figure that out and write it down in great detail so that you actually move towards that and allow yourself to make it low stakes. It's a draft each time. It's going to stop moving after a while and you're going to know that you really know what you want at that point. But I think, I think it's super powerful. And I think fitness, family, relationships, finance or business and some kind of mental challenge all belong in there. The wheel of life, right? That these other. I don't have that in there. But that's like, that's like all these goal setting things have, right? There's like six dimensions or eight dimensions of life. You know, list them and say what I want in those categories.

[Mindy Jensen]

Okay, Scott, what is the second point that our listeners should be thinking about in the five years leading up to retirement?

[Scott Trench]

I think it's the portfolio right now. Now we have to actually get comfortable with portfolio theory and what the best research is, what's unknowable, and what the risks are that are inherent to that. So what do you think about this, Mindy?

[Mindy Jensen]

Yeah. Can your portfolio actually handle your retirement? You know, average returns really don't matter. Your returns matter. So if the entire stock market on average returns 8 to 10% and you're seeing 4%, something needs to change. And if you're seeing 14% or 24%, call me up and tell me what you're doing. But also maybe that's a little too risky. Can your portfolio handle retirement? You're going to need to stress test your portfolio. You are going to need to consider your withdrawal rate. Your, you know, do you have a cash buffer? How are you getting from retirement to age 59 and a half? Are you just hoping that your portfolio goes up? Like, are you truly five years away from retirement?

[Scott Trench]

Yeah. And I think that the more we learn about this, right. So the 4% rule is a wonderful gift that Bill Bangan and others have provided to the fire community and refined Michael Kitces, for example. Right. And it's also the starting point, right. As you know, the first I think there's like levels of understanding portfolio theory where you start out in the fire journey, like, oh, I get to 4%, I'm done. Now I have an actual tangible goal. Then as you learn more, you're like, oh wait, the 4% rule doesn't work in 4% of 30 year withdrawal scenarios. And it only lasts. It's only for 30 year withdrawals and early retirees are going to have longer retirements there. That's like this, this next level. Then it's like, well, once you incorporate any flexibility and you realize that the 4% rule doesn't include Social Security or flexible spending or any type of part time work, inheritance, any advantage whatsoever, that kind of negates this small risk profile of your portfolio dropping. As you continue to model this out in more and more detail, you realize, well, there actually are edge cases where the 4% rule is pretty dangerous for certain ports of the population and parts of the population that are kind of saved by various components in their portfolio. So let me give an example. A lean fire household with a million bucks spending 40 grand a year. If they fire on the 4% rule as renters and all their expenses are inflation adjusted, then healthcare becomes a huge risk. That basically negates the safety of this 4% withdrawal plan because they're basically relying on Affordable Care act subsidies that are intended to fund very low income households. And we've talked about this at length in the Bear Pockets Money podcast in prior episodes. That's a real killer. If those subsidies go away for that person and their health care costs are going to inflate at a much faster pace than inflation. Not because health care costs, the underlying costs are going up because insurers are allowed to charge you much more up to three times more as you age. Like a 60, 65 year old, they can charge a 65 year old three times more than a healthy 20 year old. And that's a curve that you need to plan on being able to fund right now. If you have a house that has a mortgage on it and that there's 20 years left in the mortgage, you're retiring at 35, that completely offsets that risk because that principal interest payment is going to stay static with inflation and then it will roll off right when those health care costs potentially peak. So that's an accidentally correct 4% rule. Right? And the most rigorous work done on withdrawal rates from that 4% rule is Karsten Jeske over at early retirement now can't talk.com can't speak highly enough about his work in there. And there's reasons to be more conservative about the 4% rule that are very well addressed on his blog. And there are counter arguments from people like our friend Frank Vasquez who have come on and been very strongly opinionated about, hey, you can actually defray those risks with different factor portfolios. So this is complicated stuff. If you're not following what I'm saying here, then in the five years leading up to your early retirement, you should probably become very well versed in these things and have a very strong intellectual foundation for what your situation is going to call for in an early retirement and whether you have enough. And it's this is not a be optimistic or a be pessimistic. This is a be right in your situation that's really important. And I get a little annoyed by people who say it's all going to work out and by people who are overly doom and gloom because it's a real, real prize to retire early. And it's also a real risk when you want more.

[Mindy Jensen]

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[Mindy Jensen]

Everybody's specific situation is different and the 4% rule is rule of thumb. It's not a hard and fast rule. I think that there's a lot of opportunity for interpretation. I'm sad for people who are so doom and gloom about it. They're like, well, it's got to be 3%, it's got to be 2.5%, it's got to be 1% withdrawal rate. So they're saving way more money than they need to and kind of wasting a part of their life that they don't need to waste this time at work if they truly don't want to. They've, they've thought about number one and they've got a place to go and things to do and people to see, and they're just waiting to get there. Stress test your portfolio, look at what your plan actually needs. I think that's great, Scott.

[Scott Trench]

If you make way too much money and then your, your 30s and 40s and 50s go by needlessly not doing the things that you love, that's a shame. Right?

[Sponsor/Advertisement Voice]

But it's also a shame if you're

[Scott Trench]

at your peak earning years and you retire a little too early and then you come back into the workforce 10 years later at a much lower rate with much worse opportunities. Right. I think there's, there's a realism that has been lost in some parts of the fire community over the years that has not, has not addressed those risks rigorously enough. And we've been bailed out by wonderful market performance for five, 10 years now. That's made my, my prognosticating about being realistic about this completely unnecessary for almost everyone who's retired in the last 10 years. But I digress, but that's everybody that's

[Mindy Jensen]

retired in the last 10 years. We're talking about people that are going to retire in the next five years. Right now we've got some pretty iffy situations going on in the world at large, and those are going to affect our retireability.

[Scott Trench]

Just be aware, that's the new word the fire community needed.

[Mindy Jensen]

Retireability. What is your retireability? All right, Scott, what are some action items that our listeners can take to make sure that they are testing their portfolio so that they can be comfortable and sure that it, it will handle early retirement?

[Scott Trench]

First thing you should do is start researching portfolio theory. And I think there's conflicting information out there from really smart people, maybe even people I'd go so far as to call genius level in this area. So one of them that we really love is Paul Merriman, and you can go to paulmerman.com for example, and he's got a really wonderful set of research on factor investing that could be really powerful for somebody who wants to keep growing but doesn't want it to all be in the s and P500 or one index fund, wants to have exposure to, you know, small cap, large cap, growth value, those kinds of things. He's done some wonderful research on how that can change, you know, the smooth the ride of what is still fundamentally a growth portfolio. Next up is Big Earn. He's the one that I think is most rigorous and perhaps conservative in the space in terms of analyzing safe withdrawal rates and how the 4% rule applies to early retirees. So that's kind of like the PhD, I would argue in sequence of returns, risk and safe withdrawal rates. Bill Bangin did the original research on this. You can read his work. And then Frank Vasquez has come in and I think Chat would challenge some of the work by Paul and Karsten Jeske at early Retirement now by putting in factor investing and risk parity style portfolio that has large amounts of uncorrelated assets. There are trade offs in each of those portfolios and familiarizing yourself with those trade offs I think is a really good intellectual exercise. It'll make you much more comfortable with early retirement. The second tip I'd have for people that are thinking about their portfolio actually handing retirements is building towards balance in their asset location. So there's what kind of portfolio do I want? Do I want s and P500? I want international, but there's where do I want that portfolio? How much do I have in my traditional pre tax retirement accounts? How much do I have in my Roth retirement accounts or the equivalents, whatever if you're Canadian or you know, have some sort of government or military accounts. But how much is my pre tax and how much is my, my post tax, my Roth accounts? How much is my taxable brokerage and how much do I have in an HSA or equivalent? And what we want when we go to become early retirees is we want that to be reasonably in balance. Right? Nobody's ever perfect with this. But the more balance you have, the better off you're going to be because you're going to be able to pay less taxes. Now if you're contributing appropriately to a pre tax account in a high income tax bracket and withdrawing later at a lower one. But you also want to have portions in the Roth and the taxable account to provide flexibility in there. And so I always bias toward balance when I'm looking at these things because I think that that helps make better decision making and provides reasonable tax efficiency along the way. So optimal can be the enemy of options in the last few years leading up to early retirement. Right. Like so if everything's in the pre tax that could be optimal, but it also may limit your options and maybe put you in a tougher position later. So balance is the key. There is the bias I would encourage folks to have. And then the last tip I think is I'll leave you with Mindy, that because you're practicing what you're preaching with

[Mindy Jensen]

this practice with a small portfolio that you actually spend. So a few months ago, actually, it was like last July. Now, Frank Vasquez came on the show and helped me set up a risk parity portfolio with $10,000. And as I log in right now into my account to check on my risk Frankenomics portfolio, I see that my original $10,000 that I have been withdrawing the equivalent of 5% per year out of, I withdraw $42 a month. And I now have. I've taken that 10,000 and turned it into $11,032. It just keeps going up, and I keep withdrawing from it. There's something to be said for this portfolio. However, this has only been in play since July, so not even a full year yet. I am having a lot of fun with this portfolio. I don't check it every day. I used to check it, like multiple times a day when I first did it. It did dip down into the nines at one point, but then it popped back up and now it keeps going.

[Scott Trench]

Yep. And I think this is just great advice of just taking 10,000 bucks if you're trying to retire early. 10,000 bucks should not be a major sacrifice. And putting that into one or maybe two versions of the retirement portfolio that you're considering and then actually withdrawing and spending that on dinner, on drinks, on breakfast, whatever it is. That was a great tip from Frank that I think has been really helpful. I've done that with a similar version of the the portfolio there as well, although I have much more illiquid assets like real estate in my portfolio.

[Mindy Jensen]

Scott, you touched on this, but we're gonna go a little bit further. Healthcare is the biggest wild card in your early retirement because you are leaving your job that is providing you with health care. Now you've got to go out and get it yourself. It's the biggest wild card, but it's also not the biggest wild card. I mean, people have inflated this to be such a huge thing. Health care is going to be a fixed cost in your budget moving forward when you no longer have employment. And it is either going to be the entire amount of the plan that you get on the aca. And I don't care what politician is saying what they're going to do. The ACA is not going to go away. And if it does, you can email me and tell me. I told you so. But the ACA is going to be around. It is just not tenable to remove it. So your ACA price is X. Let's say it's $1300 but with subsidies you can get that down to 500. Great. That is your choice to take subsidies or not if you qualify for them. Subsidies were not intended for millionaire early retirees to get cheaper health insurance. So plan on the thirteen hundred dollar line, make that part of your budget. You think you need $3,000 a month or $4,000 a month. Now you need 5,300.

[Scott Trench]

I think that yes, it's probably wise to plan on the ACA continuing and not the subsidies for those plans continuing for the fire population. Maybe they do. Maybe you spend the next 20, 30 years in early retirement having taxpayer funded federal poverty, you know, low income tax credits offsetting your health care costs. That's fine, take them if they're available. But I think it's a bad plan and it's a very specific political bet that you're making that the American taxpayer is going to fund your early retirement as a possibly able bodied millionaire and defray your health care costs. I think that's not going to happen and I think that's a bad plan, plan A. But I think again it's not bad to take them. In addition to Minnie's great point about planning on paying the full amount, remember that amount, that premium is going to go up every year, right? I'm going to pay what like $20,000 in premiums for my family of four if I did not receive any subsidies for health insurance on an ACA Bronze plan in 2026. If I just change those numbers and I'm 60 years old with two adult children, those premium costs go up to like 35 or 40,000 thousand dollars per year. That's not inflation, that's the insurers being allowed to charge you more as you age and you've got to bake that into your plan. So that's a real threat to a lean fire portfolio in the million dollar range. And it's noise in the chubby fire portfolio in the three to half to five million dollar range. Right? And so know where that that is. If you're in lean fire, you're going to want to plan and set aside some additional cash to defray that risk. Maybe delay your fire timeline by a little bit. If you're chubby fire, it's probably noise and there's gonna be enough wiggle room in your budget and your flexible spending. You don't have to worry about it. And that's where this is all gets. So context specific.

[Sponsor/Advertisement Voice]

The best thing you can do though

[Scott Trench]

is as you're approaching fire and after you fire is maintain excellent fitness, right? Hit, you know, go running, get that VO2, max up, lift weights. That's gonna defray or reduce a lot of the risk associated with healthcare costs. And that can only mean good things.

[Mindy Jensen]

And Scott, that's not available to everybody. You know, if you've got a chronic health condition, this might not be an option for you. But while I said that the ACA is never going to go away, I can absolutely see a net worth cliff as well for the subsidies so that people who don't need the subsidies aren't getting them. And that does include the FI community. We don't need these subsidies. We can afford health care without them. They were meant to for people who couldn't afford health care without them. That's where they came in. So plan for the highest health care premiums to be a line item in your budget and if that doesn't come to fruition, you just have a little extra money.

[Scott Trench]

I think the takeaway for health care is you need to model this out and understand that. Right? So I would go to kff.org and look at their health care cost calculator and I put in your information today, in five years, in 10 years, in 15 years. And I put your income at like a million bucks, something. Something so high that you won't confuse yourself by, by seeing what's subsidized in your premium costs. And I think that will be really powerful for you to see. Here's what I would pay if I didn't receive a subsidy today. Here's what I'd pay if I didn't receive a subsidy and I just changed my age to 45 or 55 or 60 or 65, right? And look at those numbers and watch them grow. That's not inflation in healthcare costs. That's the cost of your premiums today if you change your age. That's the risk I'm trying to talk about here. And then take those numbers and feed them into your favorite AI. I'll try to build a model for this at some point in the next few months. But for now, put it into an AI and ask it what's this curve look like for my healthcare costs based on these numbers? And how much more will I need to retire early than a traditional 4% rule? If I assume the rest of my spending will grow at 4% and then healthcare will outpace it at these levels, I think that's the responsible way to plan for fire and healthcare costs in 2026.

[Mindy Jensen]

Yep, that's K as in Kilo. F as in Frank. F as in frank.org Yep. Okay, Scott, next up, you need a bridge strategy. If you are going to retire early, you are not going to be able to get access to your retirement accounts until age 59 and a half without paying taxes and penalties. Of course you can always access your money. You are going to pay taxes and penalties. But I know the FI community and they don't want to pay anything and I don't either. Like I'm not throwing them under the bus and being like, oh, I'd love to pay taxes, I don't want to pay them either. So what are you going to do between the time you retire and and age 59 and a half? And one of the things that pops up all the time is the 72T and this is great. If you're my age, I'm 53 years old. 72T you have to take for at least five years or until your age 59 and a half, whichever's longer. So if you're a 50 year old early retiree, that's not nearly the commitment as if you're a 40 year old early retiree. So while you might be thinking to yourself, oh, I'll just do a 72T, that might not be the best option for you.

[Scott Trench]

This is where the fun begins. You can do this on your own. There's a great book called Tax Planning to and Through Early Retirement written by our friends Cody Garrett and Sean Mullaney. They've been on BiggerPockets money to talk about this book. It's fantastic and it talks about this stuff. The challenge with realizing income and early retirement is accumulation is so simple, right? You pick your account and then you invest in, I think a lot of people would argue invest in low cost, broad based index funds until you get pretty close to fire. Until you get to the five year mark here and begin thinking about these changes.

[Sponsor/Advertisement Voice]

Once you go to decumulate though, you

[Scott Trench]

now have like seven different things that you need to be considering here, right? First you're going to get yield from your cash that you're holding. You're going to get some kind of yield from the dividends. If you hold index funds, for example, in your after tax account, then you're going to have an income challenge. How much income do I want to realize and am I staying below the Affordable Care act subsidy cliff? Because you don't want to have your income going over 400% of the federal poverty line. So you disqualify yourself from health care subsidies at least in the next few years. That's the binding constraint for all of these withdrawal strategies. Right. You can pick and choose what you what you have in theory all you want, but you're not going to forego those while you're out there. So that becomes the first factor. Then it's how am I going to access the rest of my funds here if there, if everything's in a 401k, that's all ordinary income for every withdrawal. And like Mindy mentioned, there are real challenges for accessing those early. The 72T is a very real way to access them, but also requires pretty sophisticated and clear planning and income planning for the next five years. And you better not overshoot it or you're going to hurt yourself on the ACA side. And the other option is to do a Roth conversion which requires the conversion amounts to season for five years in the Roth accounts before they can be withdrawn penalty free. These are complicated convoluted strategies that require careful several year planning in advance. And I think that if you're at that phase, this is where I think it can make sense, a lot of sense to engage a certified financial planner. Right. We like hourly advisors advice only planners and we like flat fee planners. And we've partnered with Domain Money and David Jackson who actually is the financial planner for Mindy and I and we have a partnership with them. Those guys can be found if you want to learn more about [e-mail] CFP if you want to chat with David and interview him as one of the potential CFPs that you work with. But I think that this is a great case for engaging somebody to go through this, look at where your accounts are and maybe think about what I'm going to do over the next few years and how I'm going to work withdrawal in the first year of early retirement to make sure that you don't go over that ACA subsidy cliff. And you're also making a thoughtful decision about using up the 0% and 12% income tax brackets.

[Mindy Jensen]

Yeah. Carl and I started talking with David because we didn't need help with the investment side, but we definitely needed help with the strategy and the withdrawal plans.

[Scott Trench]

This is a legitimately complex planning challenge. We plan to provide free resources on this and it will still be overwhelming and there are be judgment calls no matter what. Right. What our tax bracket is going to be in the future. What's going to happen to ACA credits? Am I really going to plan 30 years on that? But I'm certainly going to plan on the next two or three years on receiving them and optimizing income around there. So it's a real. It's a real challenge. I think here that that is appropriately discussed in again in Cody and Sean's book. Great place to start. And the other place is maybe to think about hiring a CFP to help you with that.

[Mindy Jensen]

Next up is your spending in retirement. Your spending needs to actually be real, not theoretical. So Carl and I first started our financial independence journey with the idea that we would be spending about $40,000 a year. We don't spend only $40,000 a year anymore. And it took many years for me to realize that. I think in my mind I'm spending 40, but I'm actually spending 60. Well, if I only had a million dollars, then that would really mess up my retirement plan. I'm spending 1.5 of the 4% rule instead of 100% of the 4% rule. So a lot of people build their retirement plans around a number that they think is true or that they want to be true, but it's not actually reflecting how they live. They'll list out expenses in a spreadsheet, and then they forget about, like, this is my monthly expenses for three months in a row. That's clearly what it is. Well, was that the month that you paid your annual homeowner's insurance, your annual car insurance, your annual. All these annual payments that you're not really remembering because it's been six months since you paid them? There's like, all the irregular stuff. I think you should be tracking your spending for the last five years leading up to your retirement so you can see, oh, I thought I was spending 60. I'm actually spending 61. Okay, that's probably more like a rounding error, but I thought I was spending 40. I'm actually spending 61. That's a problem.

[Scott Trench]

Yeah, we pulled the bigger Pockets money audience, and half of you guys said you're sort of confident in your spending, but fire is so far away, that doesn't really matter at this point. Right. But for the other half of you, you know, you were basically split down the middle about whether you're very confident, 95% plus confidence in your annual spending target, or whether you, if you're being honest, you call it a moving target. And the 4% rule. All the safe withdrawal research that goes around retirement planning or early retirement planning is based on converting a portfolio into a reliable and sustainable income stream. And if you're not clear on what you need that income stream to be, you're at really big risk because that's not a risk that you can analyze away. In all this rigorous safe withdrawal rate research that people like Big Earn have done on this, you have to nail that number if you want to do this or have a big margin of safety if you don't have it nailed. And so these next five years are a great time to really dial in what your actual annual consumption is and what it ought to be. And you can practice that skill. You can get much, much, much more confident in your early retirement number.

[Mindy Jensen]

And Scott, the best way to do this is to either track by every penny or sign up for an account with monarch. Monarch.com is the best way to track your entire net worth, your entire financial situation. I have set up the dashboard a little bit differently than you set up your dashboard, but in my upper right corner is my monthly spending. And it's so easy to just jump into my account and look and say, oh, I'm on track for this month. We're on day 15 and I've spent about half of what I thought I was going to or I spent a little bit more because my mortgage comes out first. And you know, there's, there's things that are front loaded in the month, but once you get used to tracking it, it's just a glance. You can see like this month versus last month, you can see this year versus last year. It's really easy to get an idea of where your money's going. And you can either make changes in your spending or make changes in your VI number five years beforehand. Not be retired and say, oh, looks like I needed a lot more money. I'm going to have to change my whole spending habits. Yeah.

[Scott Trench]

So that's what we got. I think those are the big, the big five things to do here. Right? Have something to retire to and use the [e-mail] resources the goal setting workbook. If you're not clear on what that looks like, that's a moving target and allow it to iterate a few times so you're not making that guess. And highly likely to be wrong with your first guess right at the time when it's time to transition out. The second is make sure you actually have an intellectual basis for what your portfolio ought to look like. That's real work. Dozens or hundreds of hours. I believe for an early retiree to get comfortable with it and you should read the conflicting schools of thought from really serious smart people that have strong opinions on this sometimes conflicting the third is map out health care costs. KFF.org has got your your back there. The fourth is to make sure that you have your asset location dialed in and you have the beginnings of a plan for how you're going to withdraw that right. I would say that at this point this requires another serious round of self study and is probably a great time to engage some kind of CFP that is very valuable with that. And again, we have the partnership with domain [e-mail] CFP if you'd like to include David as part of your interview process. And then fifth, you need to dial in that spending number and the best way to do that is to maintain a rigorous budget and make sure you adhere to it and track it rigorously over the course of the next several years. We think Monarch is the best tool for that and we're very lucky to have partnered with them as well. That's our five Years out roadmap there.

[Mindy Jensen]

Yes, and if you are five years out and you think you should be looking at something different, please let us us know. Comment below or reach out to [e-mail] or [e-mail] and let us know what things you think you should be focusing on in the five years leading up to retirement. All right Scott, this is a lot of fun, but we're done. Should we get out of here?

[Scott Trench]

Let's do it. That was a great great.

[Mindy Jensen]

That wraps up this episode of the Bigger Pockets Money podcast. He is Scott Trench. I am Mindy Jensen saying See you soon Loon. When you want more, Start your business with Northwest Registered Agent and get access to thousands of free guides, tools and leg to help you launch and protect your business all in one place. Build your complete business identity with Northwest Today. Northwest Registered Agent has been helping small business owners and entrepreneurs launch and grow businesses for nearly 30 years. They are the largest registered agent and LLC service in the US with over 1500 corporate guides who are real people who know your local laws and can help you and your business every step of the way. Build your business identity fast with Northwest Registered Agent and get access to thousands of free resources, forms and step by step guides without even creating an account. Northwest makes life easy for business owners. They don't just help you form your business, they give you the free tools you need after you form it like operating agreements, meeting minutes and thousands of how to guides that explain the complicated ins and outs of running a business. And with Northwest, privacy is automatic. They never sell your data and all services are handled in house because privacy by default is their pledge to all customers. Don't wait. Protect your privacy, build your brand and get your complete business Identity in just 10 clicks and 10 minutes. Visit northwestregisteredagent.com money free and start building something amazing. Get more with Northwest registered [e-mail] money free here at BiggerPockets.

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