Podcast Summary: "How Much Money Do You Need to Retire in 2026?" (Episode 538)

Released on July 15, 2025

Hosts:
Joe Anderson, CFP®
Alan "Big Al" Clopine, CPA
Presented by Pure Financial Advisors

Introduction:

In episode 538 of the "Your Money, Your Wealth" podcast, Joe Anderson and Big Al Clopine delve into the critical question of determining the necessary funds for retirement by 2026. Despite Big Al's temporary unavailability due to an extended vacation in Europe, the hosts present an encore episode featuring listener questions from a previous October 2024 broadcast. This episode maintains the show's characteristic blend of humor and insightful financial advice, focusing on retirement planning, investment strategies, and tax optimization.

Section 1: Listener Case Studies

1. George and Wheezy from Illinois (Land of Lincoln)

   Timestamp: [01:02] - [07:18]

   Case Overview: George and Wheezy are contemplating early retirement in mid-2026. They have substantial savings and various retirement accounts but are uncertain about their readiness and the sustainability of their financial plans.

   Financial Breakdown:

   • Assets:

     • IRA: George has $1,200,000; Wheezy has $1,010,000 (both non-Roth)
     • 401(k): George has $1,100,000 (only $50,000 Roth)
     • Taxable Brokerage Account: $880,000 ($240,000 in a government money market fund)
     • Personal Residence: Valued at $1,000,000 with a $300,000 mortgage at 6%
     • Health Savings Account: $65,000
     • Cash Value Life Insurance: $140,000

   • Income Streams:

     • Non-Qualified Deferred Compensation Plan: $2,200,000 expected balance by January 2027, projected to pay $220,000 annually.
     • Social Security: George expects $3,600/month at age 70; Wheezy expects $2,000/month and $25,000 at age 70.

   Hosts' Analysis:

   • Joe Anderson:
     "They want to spend $180,000 annually. With $4.3 million in assets, that's a 4.2% distribution rate, which is on the higher side but manageable given their deferred compensation plan covering $220,000 yearly."
     [03:54]

   • Big Al Clopine:
     "With the deferred comp plan, there’s no immediate need to dip into savings, allowing their assets to grow. The key consideration is the tax diversification and potential future tax rates."
     [05:29]

   Conclusion: George and Wheezy appear financially prepared to retire by 2026, provided they manage their tax strategies effectively and validate their spending. The hosts suggest ensuring their annual expenses are accurately projected and consider the implications of their deferred compensation plan on their tax liabilities.

2. Jen from Ohio

   Timestamp: [13:02] - [17:46]

   Case Overview: Jen is facing a company office closure and is contemplating whether to move, take a career break, or retire altogether at age 55. She inquires about her early retirement options with her spouse staying at home and no immediate Social Security benefits.

   Financial Breakdown:

   • Assets:

     • Brokerage Account: $2,100,000
     • Rollover IRA: $1,700,000
     • 401(k): $1,300,000 ($280,000 Roth)
     • Roth Conversion IRA: $1,100,000
     • HSA: $80,000
     • Cash and Short-Term T-Bills: $45,000
     • 529 Plans for Two Kids: $750,000

   • Expenses:

     • Desired Annual Spending: $40,000 (pre-tax)
     • Planned Gifts to Children: $30,000 annually per child for IRA funding

   Hosts' Analysis:

   • Joe Anderson:
     "With $6.2 million in liquid assets and a desired spending of $200,000 annually, you're operating at a 3.2% distribution rate, which is feasible. However, considering the cash flow from real estate investments is crucial."
     [14:23]

   • Big Al Clopine:
     "A 4% burn rate is aggressive for individuals in their early 50s. It’s essential to assess the cash flow from real estate investments to determine any additional income needs."
     [21:03]

   Conclusion: Jen is in a strong financial position to consider early retirement. The hosts recommend a thorough review of her actual spending versus projected expenses and the stability of her real estate income. They also advise evaluating the sustainability of her distribution rates and potential adjustments to ensure long-term financial security.

3. Seth from Montana

   Timestamp: [18:20] - [24:34]

   Case Overview: Seth and his wife, both aged 52, have recently ceased most of their work activities. They seek validation on their retirement path and inquire about Roth conversions within their solo 401(k) accounts.

   Financial Breakdown:

   • Assets:

     • Brokerage Account: $500,000
     • After-Tax LP Real Estate Investments: $2,040,000
     • Traditional Solo 401(k): $310,000 (Seth) and $740,000 (wife)
     • Roth Solo 401(k): $80,000 (wife)
     • HSA: $13,000
     • Cash and Short-Term T-Bills: $45,000
     • Home: Valued at $725,000 (no mortgage)

   • Income Streams:

     • Social Security: Seth expects $28,000 annually at age 67; his wife expects $35,000.
     • Desired Annual Spending: $150,000
     • Legacy: Plans to leave remaining assets to charity

   Hosts' Analysis:

   • Joe Anderson:
     "With a total of $3.6 million in assets and a desired annual spending of $150,000, you're looking at a 4.2% distribution rate. This is on the higher end, especially considering the varied liquidity of your assets."
     [21:00]

   • Big Al Clopine:
     "Understanding the cash flow from your real estate investments is crucial to determine any shortfall and adjust your distribution rates accordingly."
     [22:03]

   Conclusion: Seth and his wife are well-positioned for retirement but need to carefully assess their distribution strategies, particularly concerning their real estate investments' cash flow. The hosts emphasize the importance of tax-efficient Roth conversions and aligning their spending with their investment returns to ensure a sustainable retirement.

4. Leon from Chicago

   Timestamp: [25:31] - [33:56]

   Case Overview: Leon, a value-based investor from Chicago, seeks advice on integrating real estate into his investment portfolio without directly managing properties. He contemplates investing in REIT ETFs and desires guidance on portfolio allocation.

   Financial Breakdown:

   • Assets:
     • Portfolio Size: Approximately $1,000,000
     • Current Allocation: 70-30 stocks to bonds
     • Interest: Real estate involvement without direct management

   Hosts' Analysis:

   • Joe Anderson:
     "For someone looking to diversify into real estate without direct management, REIT ETFs are an excellent choice due to their liquidity and ease of access."
     [29:03]

   • Big Al Clopine:
     "Starting with a 5-10% allocation to real estate within your portfolio could provide diversification benefits while maintaining your preferred investment style."
     [32:41]

   Conclusion: Leon is advised to consider REIT ETFs as a strategic method to incorporate real estate into his investment portfolio without the complexities of property management. The hosts recommend beginning with a modest allocation to gauge comfort and effectiveness before potentially increasing exposure.

Key Insights and Takeaways:

1. Distribution Rates:

   • Maintaining a sustainable withdrawal rate is crucial. While the commonly recommended 4% rule serves as a guideline, higher or lower rates may be appropriate based on individual circumstances and asset liquidity.

2. Tax Diversification:

   • Balancing pre-tax and post-tax accounts can optimize tax liabilities in retirement. Roth conversions can be a strategic tool, especially for those in higher tax brackets or those anticipating higher future tax rates.

3. Asset Allocation:

   • Diversification across various asset classes, including real estate through REITs, can enhance portfolio resilience. However, it's vital to assess the liquidity and risk associated with each asset class.

4. Spending Assessment:

   • Accurate evaluation of current and projected expenses ensures that retirement plans are grounded in realistic financial needs. Contingency planning for unexpected costs is also essential.

5. Lifestyle Considerations:

   • Beyond finances, emotional and lifestyle readiness for retirement plays a significant role. Ensuring personal fulfillment and mental well-being is as important as financial security.

Notable Quotes:

• Joe Anderson:
  "With $6 million bucks and you're just miserable, you need to find purpose beyond the numbers."
  [11:53]

• Big Al Clopine:
  "A 4.2% distribution rate is manageable, but it's essential to consider the deferred compensation and potential tax implications."
  [05:34]

• Seth (Caller):
  "We would like to spend $150k annually and would like to die with 0. Anything remaining we will have left for charities."
  [19:00]

• Joe Anderson:
  "If you're 57, you're going to retire still in your 50s. That's super young for retirement. What are you going to do when you retire?"
  [07:04]

Conclusion:

Episode 538 of the "Your Money, Your Wealth" podcast offers comprehensive insights into early retirement planning, emphasizing the importance of sustainable withdrawal rates, tax-efficient strategies, and thoughtful asset allocation. Through real-life listener scenarios, Joe Anderson and Big Al Clopine provide actionable advice tailored to various financial situations, reinforcing the podcast's commitment to making finance both informative and entertaining.

Listeners are encouraged to engage further by accessing free financial resources, episode transcripts, and personalized consultations through Pure Financial Advisors to refine their retirement strategies.