Safe Withdrawal Rate Debate: How Much Can You REALLY Spend in Early Retirement? - 582

Summary

Your Money, Your Wealth, Episode 582

Safe Withdrawal Rate Debate: How Much Can You REALLY Spend in Early Retirement?
Date: May 19, 2026

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Episode Overview

In this lively and humor-driven episode, Joe Anderson, CFP®, and Big Al Clopine, CPA, tackle a hotly debated topic among their audience: what’s a truly “safe” withdrawal rate for early retirees? Listeners Ron & Harry and Rand & Elaine challenge the hosts’ historically conservative advice on withdrawal rates, prompting an in-depth discussion bolstered by real-life scenarios. The hosts also address concerns raised by an Apple podcast reviewer about fees, spending flexibility, and the realities of early retirement.
The episode is filled with candid commentary, wit, and practical guidance for those considering early or nontraditional retirement paths.

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Key Discussion Points & Insights

1. Ron & Harry: Early Retirement, Portugal, and a 2-3% Withdrawal Rate

[01:14–15:13]

• Who are Ron & Harry?
  Couples, aged 38 and 35, high-risk specialty performers (speculated to be stuntmen), currently working in the US.
  Financials:

  • $230,000 in 401(k) (70% traditional, 30% Roth)
  • $320,000 in brokerage, paid-off European property ($7K/yr income), side gig ($9K/yr income)
  • $200,000 cash (high-yield savings)
  • $300,000 annual W2 income
  • $85,000 annual spending
  • Plan: Step down in April 2027, stay in US 3–4 years, move to Portugal and live on $38,000/year (free healthcare), semi-retired at 43, part-time earnings capped at $16,000/year.

• Key Questions:

  • Can they safely withdraw 2–3% from their brokerage (not touching the 401(k))?
  • Should they rent or sell their Florida home when moving abroad?

• Hosts' Take:

  • Big Al:
    • “At that age, Joe, I think I’m alright with a 2.5% distribution rate. That’s maybe kind of the upper limit...” ([06:18])
    • They’d need ~$760K in non-qualified (taxable) assets (currently have ~$500K, could hit target with a few more years’ saving).
    • Success depends on keeping expenses low, using taxable accounts until eligible for penalty-free retirement withdrawals.
    • Possible to sell Florida home to boost liquidity and avoid the hassle/costs/management of an overseas rental.
  • Joe:
    • “I think they’re sitting in good shape — $38,000 is really the number. I think that’s the biggest crutch.” ([10:08])
    • Outlines fixed income: rental ($7K), side gig ($10K), potential home rental ($11K) = $27–28K/year, so only about $10-11K/year needed from investments.
    • Stresses the importance of realistic spending expectations and examining true rental profit after costs.

• Memorable Exchange:

  • Joe: “I’m more concerned about what’s the lifestyle — you go to Portugal, and you just chill on the beach?”
  • Al: “They said they’re going to be coaching potentially, so that’s fulfilling.” ([11:46])

2. Retirement Mindsets and the FIRE Movement

[12:19-15:13]

• Changing Perspectives:
  Al warms to the idea that younger generations (especially millennials) value enjoying life earlier and are open to returning to work later if needed.
  • Al: “I think our millennial generation has a different set of values in terms of enjoying life while you’re younger and then going back to work later if you have to... I’m starting to change my mind a little bit, Joe, on retiring early.” ([12:19])

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3. Rand & Elaine: Calling Out "Absurdly Conservative" SWR Advice

[16:17–33:26]

• Background:
  Couple, 36, from Idaho (“Wheel of Time” pseudonyms); million-dollar portfolio, family medicine doc & nurse, $420K income, $150K (non-childcare) expenses.
  Plan: Expect ~$4–7 million in 9–14 years; want to travel young, maybe work later.

• Main Gripe:

  • Upset with repeated advice that “2% isn’t low enough” for a safe withdrawal rate in early retirement; ask for a more dynamic thought experiment:
  • At what point during a 3-year sabbatical, if markets perform poorly, should highly employable professionals cut it short and head back to work?

• Hosts’ Wisdom:

  • Joe:

    • Focus on “sleep factor”: How much loss in portfolio value are you willing to tolerate before returning to work?
    • Flexibility is key, and specifics depend on actual market performance and lifestyle spending.
    • “If that [nest egg] goes to $2 million, will I still be able to sleep at night? If the answer is no, then I’m going back to work.” ([26:10])
    • Giving yourself a clear, emotional ‘floor’ (e.g., “If we fall to $4 million, we’ll go back to work.”)
    • Suggest budgeting specific spending during the sabbatical, then reevaluate.

  • Big Al:

    • Advisors should run stress scenarios:
      “Let’s just say I want to take a 3-year sabbatical...What if the market goes down 10% a year? Where am I at?” ([27:02])
    • For true sabbatical (not a full retirement), a 6%+ withdrawal rate may be reasonable — so long as a return to work is likely.
    • For true early retirement, 2.5–3% is safer — especially if you might “never work again.”

• Memorable Quotes:

  • Al: “As long as it’s a temporary retirement…it’s a sabbatical. And maybe it’s a 1-to-5-year sabbatical. You would think about distribution rates quite a bit differently.” ([31:31])
  • Joe: “But it’s the spending that’s going to drive all of this.” ([29:21])

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4. Listener Review: Withdrawal Rates, Flexibility & AUM Fees

[34:12–40:44]

• Mike To Me 17 on Apple Podcasts:

  • Challenges the show’s past statements about <2% withdrawal rates.
  • Wonders if the hosts are being extra conservative to account for their 1% AUM (Assets Under Management) fee.
  • Argues that spending flexibility raises safe withdrawal rates.

• Joe & Al’s Response:

  • Joe:
    • 1% advisor fee should be offset by value delivered; if it isn’t, don’t pay.
    • Safe withdrawal rates on the show are “back of the envelope,” just for rough sizing, not a full financial plan.
    • True spending and market experience will require ongoing adjustment.
  • Al:
    • Flexibility in spending greatly improves your chances, but earlier/more extended retirement requires lower starting rates.
    • Cites studies (Morningstar, Vanguard) showing good advisors add more value than they cost.
    • If retiring fully at 45, a 2.5–3% rate is reasonable if investments are well-allocated and spending can flex.

• Memorable Quotes:

  • Joe: “A distribution plan is completely different than an accumulation plan…you have to be fluid in the overall strategy.” ([39:36])
  • Al: “If you’re the type of person or couple that can be flexible on your spending, you have a much greater chance of this working.” ([36:06])

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Timestamps for Important Segments

• [01:14–15:13] Ron & Harry scenario: Early retirement math, Portugal plans, SWR specifics
• [16:17–33:26] Rand & Elaine: The “absurdly conservative” SWR debate and sabbatical risk management
• [34:12–40:44] Apple Podcasts review: Withdrawal rates, AUM fee criticism, and how to flex spending
• [12:19, 31:31] Joe and Al discuss changing generational attitudes towards work/retirement
• [26:10, 27:02] Sleep factor and scenario planning for withdrawal decisions

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Notable Quotes & Memorable Moments

• Al:
  “At that age, I think I’m alright with a 2.5% distribution rate. That’s maybe kind of the upper limit…” ([06:22])
• Joe:
  “If that goes to $2 million, will I still be able to sleep at night? …If the answer is no, then I’m going back to work.” ([26:10])
• Al:
  “If you have that sabbatical for three or four years and you go, ‘you know what, I really don’t want to work again,’ that would be a problem with that much distribution out of your portfolio.” ([31:31])
• Joe:
  “A lot of times, most people don’t know how much money they should have…What we’re trying to do is to help, like, identify, well, how big of a nest egg should you be shooting for to maintain the same lifestyle…” ([37:34])
• Al:
  “If you’re the type of person or couple that can be flexible on your spending, you have a much greater chance of this working.” ([36:06])

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Summary Table: SWR Discussion by Scenario

| Scenario | Safe Withdrawal Rate Range | Key Conditions & Comments | |-------------------------------|---------------------------|---------------------------------| | Early, full retirement (40-45)| 2–2.5% (maybe 3%) | Must last potentially 50+ years; assumes no additional work, must be well-diversified, consider flexibility | | Temporary sabbatical (3–5 yr) | Up to 6% | Okay if plan is to return to work and portfolio is sufficiently large and/or spending tightly controlled | | Flexible spending | Can allow higher SWR | Ability/willingness to cut spending during downturns increases sustainability |

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Takeaway Advice

• Safe withdrawal rates are not “one size fits all” — they’re a guideline for identifying “Are you on track?”
• Flexibility in spending, an open mind about future work, and realistic tracking of your expenses are critical for early retirees.
• Don’t let portfolio drawdown rates push you into “lifestyle creep.”
• A sabbatical is distinct from full retirement; plan accordingly.
• Track your “sleep factor”: Don’t jeopardize your peace of mind for a financial theory.

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This episode offers a robust, realistic, and at times entertaining look at the nuances of financial independence, safe withdrawal rates, and living your best (early) retirement life. For further resources, find the tax, withdrawal, and blueprint tools linked in the episode description.

Transcript

[A]

Today on youn Money, you, wealth podcast number 582, Joe and Big Al address something a not insignificant portion of this audience has been complaining about for years. Their so called absurdly conservative safe withdrawal rates for early retirement. Rand and Elaine from Ohio are here to gripe about it directly with a thought experiment. A million bucks at age 36 and a three year sabbatical in France. When, if ever would Joe and Vig Al say they should cut it short and go back to work if the markets turned ugly? Mike, to me, 17 piles with his own SWR take about AUM fees in his Apple podcasts review. But first, a real world example. Ron and Harry from Florida are elite performers with a high risk specialty job. Can they safely pull off moving to Portugal and living on $38,000 a year in their early 40s? If you're one of the people yelling at your podcast app every time Joe or al mentions a 2% withdrawal rate, today's your day and we welcome you to leave more of your thoughts on the topic in Apple Podcasts, YouTube, on Reddit, in inboxes like everyone else has. I'm executive producer Andi Last. And here are the hosts of youf Money, you, wealth, Joe Anderson, CFP and Big Al Clopine, CPA.

[B]

Hey Joe. Big Al. Andy. I'm Ron, 38 and my husband is Harry, 35. We are both European, both working in the US since 2020. I found your podcast two years ago and I listened to it every Tuesday on my way to work. I am sure we are not your typical listeners. We are elite performers with a high risk specialty job. Elite performers, Al, that's kind of like you and I.

[C]

Elite.

[B]

We're very elite in our performance.

[C]

Well, I'll put it this way. We try. So what do you think? Do you think they're stuntman, maybe?

[B]

High risk specialty job. If you're an elite performer. High risk specialty job.

[A]

Keep reading. There's more here. They might give us some clues.

[B]

Knievel.

[C]

Yeah.

[B]

Because we depend entirely on our bodies to do this job in its very high risk career. We are stepping down soon. Okay, what are they? 38, 35, retired. All right. They must get paid well. They must be famous.

[C]

They must be.

[A]

And they're listening to us. Wow.

[B]

We arrived in the US in 2020, but for obvious reasons, we didn't work until late 2021. So we've been working

[A]

intensively. There you go.

[B]

Sorry. Intensively. For almost five years before that. We were touring the world doing what we do best. Okay, interesting. Here's the numbers. We got a 401.4% match, $230,000 combined, 70% traditional, 30% Roth got a brokerage account of 320,000. We got a rental property in Europe that's paid off, getting $7,000 a year from that. Got a little side gig. $9,000 a year for that. Then there's some W2 income. $300,000 a year. Combined primary home value is $375,000. $150,000 mortgage remaining. We got $200,000 in cash in a high yield savings account. Yes, I know it's high, but our job is risky. We are also considering buying another rental. We got annual spending of $85,000 a year.

[A]

Yeah, I'm leaning towards stuntmen. I think they're evil Knievels.

[B]

All right, so here's the situation. We are stepping down in April 2027. After that, if we become coaches, we expect to earn 30 to 35 bucks an hour. Our plan is to stay in the US for another three to four years, complete the 40 credits required for Social Security, then we will move to Portugal. Have you been to Portugal, Big Al?

[C]

I have. About a year and a half ago. It was wonderful. Especially Porto. Love Porto.

[B]

Got it. Where we've calculated that we need about $38,000 a year to live comfortably on today's money. And healthcare will be free for us there. We would work part time in Portugal, Semi retired at 43, but combined earnings would not exceed $16,000 a year. I'll keep my European rental in my side gig. Here's the spitball questions. How do you live on $38,000 a year?

[A]

Apparently, Portugal's got a low cost of living.

[C]

It's. It is lower. I'm not sure it's that low, but maybe they figured out a way.

[B]

All right, should we rent the Florida home when we leave? We'd net around $900 a month after the mortgage. Or just sell it. 2. Can we safely withdraw 2 to 3% of our brokerage account and our age without touching the 401? We know our Social Security payments will be modest, but every little bit helps, right? More details. Harry drives a 2022 Hyundai Tucson. Is that a Tucson or Tucson?

[C]

Tucson. Tucson.

[B]

I know Tucson. But I thought there was a Tucson. Isn't there, like, a truck called a Tucson?

[A]

I think you made that up, Joe.

[C]

I think so, too. That's your version of Tucson.

[B]

Yes, I know how to spell Tucson. I know how to. But I thought a Hyundai had us something different.

[C]

All right, we'll Go with that Hyundai Tucson.

[A]

Why not from now on?

[B]

Why am I Texan? He drives a 2019 Ford Edge. Both paid off. We are healthy, boring green juice drinkers, though we can be persuaded to buy a cider or cabernet on special occasions. We have a two year old cookie poodle. No kids ever. I absolutely love your podcast and you have generally been a big part of our financial success since we've arrived in this country. You have no idea. P.S. i saw a photo of Joe and he's exactly what I imagined. His voice matches the face. So. Voice for radio.

[C]

He didn't say that.

[B]

Thank you for everything, Ron and Harry in Florida.

[C]

Okay.

[B]

All right. We're going to get these boys retired at 40 years old, semi retired at 43. Big Al.

[C]

Yeah, yeah. So I've done a little math for you, Joe.

[B]

Okay. $40,000 a year. They're going to have the side gig of 10,000 and then the rentals. 10,000. So 20,000 roughly is coming in.

[C]

Yeah. Another 20, they're saying salary maybe 16. Rental seven. So 23 in three years, that's like 42,000. Right. So their shortfall is about 19,000. And at that age, Joe, I think I'm all right with a 2 1/2% distribution rate. That's maybe kind of the upper limit, but anyway, they would need about 760,000 in their non qual and that's a little tricky because if you take out that hsa, which you can't really use for living expenses without penalty, they have about 320,000. But if they sell the Florida home, maybe they have another 200,000. So I'm just saying they got a little over 500,000 to start with, that they have to grow it at 764 in three years and that that means they'd have to save over 40 grand a year. 44 is what I get at a 6% rate of return. Or if they can eke it out for four years, they need to save about 32,000 a year to get to that non qual account. That will give them a 2.5% distribution without touching their 401k. So that's what I think. I think it's doable. I'm not sure how much they're saving now, but maybe they.

[B]

Well, they're making 300. They spend 85.

[C]

Yeah.

[B]

So that gives about $100,000 of savings.

[C]

Yeah. So if that's the case. Right, yeah. So anyway, yeah, no, I think it's doable and I think, you know, the, the other Question. Should we rent or sell the Florida house? Me, personally, I think you could go either way. Me personally, I'd probably sell if I was going to go back and live in Europe. Not to have the hassle of a foreign rental. But that, you know, that, that might be me.

[B]

And I got a different.

[C]

What do you get?

[B]

I have $28,000 of fixed income when they retire.

[C]

Where are you getting that?

[B]

I'm getting $10,000 or call it $11,000 if they rent out the Florida home.

[C]

Right.

[B]

I'm getting another $10,000 a year in the side gig and the freelance. So that's $20,000. And then he's got a rental property in Europe that is generating another $7,000 a year. So that's $27,000 roughly, of fixed income at retirement with those three sources.

[C]

Right.

[B]

So he needs $10,000 from the portfolio, given age 43, if he doesn't work.

[C]

Right. Here's my caution with that, is if they're making 900,000 after paying the mortgage, you and I know there's more expenses than just the mortgage. There's vacancies, there's maintenance, there's. There's insurance. We don't know if there's a homeowner's fee. So I'm a little bit concerned about the $900, how real that is. But that, that is another way to look at it. So we don't know enough to be able to say to, to sell or turn it to a rental. But what I'm suggesting is if you're going to live in Portugal, do you really want a US Florida rental? I wouldn't myself, but maybe some people are okay with that.

[B]

So they got $500,000 in taxable money.

[C]

Yeah. But 190 is HSA, so you can.

[B]

High Yield Savings Account. HYSA H Y S A. Yeah, HYSA High Yield Savings Account.

[C]

I, I dropped the Y. Okay. 520. So, yeah, it looks better than what I said then.

[B]

Yeah, they can generate, I don't know, probably $20,000 from the taxable account. And then plus everything else. I mean, I think they're sitting in good shape at 38,000 is really the number. I think that's the biggest crutch.

[C]

Yeah. Can they do.

[B]

I've never been to Portugal, so I don't know how cheap you can live. And I guess if you drink green juice and work out all day. Right. But they probably got to eat if they're elite specialty performers.

[C]

Yeah, probably.

[B]

You probably got to get a lot of protein and they got to.

[C]

They have to have a good gym membership, so they got some spending here. Okay, well, that. So you are right, Joe. That makes this a little bit better than what I said.

[B]

I think they're sitting really. But $40,000. How much did you spend when you spent a week in Portugal? Well, $40,000 that week.

[A]

Vacation's a lot different than living there.

[C]

Yeah, we stayed. Let's see. We went to Lisbon. We went to the island of Madeira. We went to Porto. Yeah. We definitely. We spent not 40 grand, but it was. It was a decent number.

[A]

And these guys say that they are European, so chances are they've actually been to Portugal and they've done all the sightseeing and all that before, and they

[C]

know how to do it. Yeah.

[B]

So no health care. So if 38,000 is the number, I think. But these guys are performers. They travel the world in front of audiences, probably. Right. And it's like, you're going to retire at 40 years old. Would you go bored? What are you going to do? I think I'm more concerned about what's the lifestyle. You go to Portugal and you just chill on the beach.

[A]

Well, they said that they're going to be coaching potentially, so they're going to be.

[B]

That's fulfilling.

[C]

Yeah. Yeah. And may. And maybe they could continue that in Portugal. I. I don't know. We don't really quite know what they do and whether that's transferable, but maybe. I think I'm starting to change my mind a little bit, Joe, on retiring early. I think that our millennial generation has a different set of values that we do in terms of enjoying life while you're younger and then going back to work later if you have to.

[B]

You're jumping on board in the fire movement, huh?

[C]

I'm jumping on board because I, I. Well, so I wasn't fire. I'm fi. But I didn't retire early. And now that I'm fi. I kind of like the freedom. And if in the current millennium.

[B]

Well, you tried to do it at 50, didn't you?

[C]

Yeah, but I didn't.

[B]

Well, or you weren't fi. You just wanted to ri. Re.

[C]

I thought it was ready, but the Great Recession took care of a lot of my real estate equity, so that changed that equation. But, yeah, no, I feel like, why not? If you're healthy, late 30s, 40s, whatever, and you want to take some time off, why not? And then knowing that maybe you'll have to go back to work someday, I think when we talk about distribution rates, we're Talking about you retire and that's it, you never work again. Right. So I don't know, 40s, late 30s. Yeah. Ron would be early 40s. Yeah.

[A]

Yeah. And they're saying semi retired at 43, so that, you know, that's where they would move into that coaching position. And.

[C]

Yeah. Plus the other thing, Joe, they say no kids ever.

[A]

So maybe they'll become European real estate moguls after the coaching career.

[C]

Maybe. Yeah. Who knows?

[B]

What would you do? Would you sell the house or would you rent it?

[C]

I'd sell it because I don't, I don't want a foreign rental. It just.

[B]

Would you sell the Florida home?

[C]

I'd sell the Florida home. Because if you did, if you didn't sell it, you turn into a rental. I like.

[A]

If you kept it and wanted to rent it out and you needed to hire a property manager to take care of that stuff for you, how much would that end up costing somebody?

[C]

Well, typically about 10% of the rent, so. So you get that. They don't mention maintenance, they don't mention vacancies, they don't mention insurance. So there's more costs than just the mortgage.

[A]

Yep.

[B]

Yeah. They could sell it with the 121exclusion, pay no tax, probably.

[C]

Yeah.

[B]

So that's good.

[C]

Yeah.

[B]

Safely withdraw 2% to 3% on the brokerage account without touching the 401. Yeah, I think you're good there.

[C]

Yeah.

[B]

Actually, even though it's modest, everything counts. Yeah. You'll receive the benefit because you put in the quarter. So I think they're sitting good.

[C]

Yeah. If we go with your correction for my analysis, which I agree with. So they got $520,000. If they sell the property, maybe they got another couple hundred thousand. That's about 720. Remember I said they need about 760. So with probably what they're saving. Yeah, I think they're sitting good. I think probably they can spend more than the 38,000 than they're thinking. But you bring up probably the most important question is what's the spending really? Right. Because that seems like not very much money.

[B]

Yeah. All right. Well, yeah, thanks for the question and

[A]

good luck, Ron and Harry. You two are ahead of the curve just for knowing your numbers as well as you do. Speaking of knowing your numbers, this week on YMYW tv, Joe and Big Al turned the tables on their audience with an 18 question retirement pop quiz. Stuff like, what percentage of Americans have zeros saved for retirement? How much do you actually need to generate $40,000 a year in retirement income? When should you start taking Social Security and how much will it actually replace? It's the kind of episode that makes you realize pretty quickly whether you're on track or whether you've been assuming you're more ready than you actually are. It's fast, it's a little competitive, and you might want to keep score. To see how your retirement plan scores, use our free self guided financial Blueprint tool. You plug in your assets and projected spending and it'll calculate your probability of retirement success along with some actionable steps to help you get there. Watch YMYW TV and calculate your free financial blueprint at the links in the episode description.

[B]

Okay, let's move on. We got Rand and Elaine. Wheel of Time. To Hell's Wheel of Time.

[A]

It's a book series. Are you familiar with it at all?

[B]

As you can tell,

[A]

Rand Al Thor and Elaine Trackan from Wheel of Time series by Robert Jordan. There was 14 books from 1990 to 2013, and Amazon Prime Video adaptation launched in 2021.

[C]

All right, Andy, how much of that did you know without looking up?

[A]

Absolutely none of it, which is why

[C]

Joe and I don't know it either.

[B]

Aaron watches it. You like. You like the Wheel of Time. What is it? You spin the wheel and you go to whatever time that the.

[A]

Wow, that is a great concept for a show. Just ask Joe and he'll spitball what your show concept should be.

[B]

It's a little time travel.

[C]

Yeah, Maybe back to the future, maybe.

[B]

Got it. All right, so dragons and sorcerers and that sounds right. Right up my alley.

[C]

Okay. All right, well, that's our assignment for this week, Joe. We got to watch an episode.

[B]

Yeah, I need a new show. So here we go. All right. They're from Idaho, 36 years old, who are mainly writing to gripe about Joe's incredibly absurd take on early retirement safe withdrawal rates. Well, you know what? I'm not going to watch Wheel of Time anymore. Most importantly, we drink. I don't have anything that's incredibly absurd. Take on withdrawal rates first and foremost. So I'm going to correct you here, Rand and Elaine, I think you kind

[C]

of went off on it on one of the episodes.

[B]

I don't think you.

[C]

I do.

[B]

Continue reading to see what. See what they're talking about.

[C]

Okay.

[B]

All right. Most importantly, we drink French 75. What are French 75s?

[A]

Gin, lemon, simple syrup and champagne.

[B]

Little French 75s. Okay, that sounds a little hoity toity.

[A]

We had a show where there was a rash of them that. That was their drink. And we're starting to see a whole bunch more of them. As a matter of fact, there's another one coming up later.

[C]

Okay.

[B]

All right. Little French 75s in our distress. You've never heard about this before 2025, but happy to hear so many have come out of the woodwork recently. It is also not sweet. Did we talk about a French 75 before?

[A]

I just got done saying that, Joe. You just have to listen with your ears.

[B]

I'm on a seven minute delay here. All right. I'm in the studio in San Diego. You're in Australia, in Big Al's in Hawaii.

[C]

Yes.

[A]

We had a number of people write in all like within one or two shows that were all drinking French 75s. And it's become popular on the show since then. So. Yes, we have discussed it before.

[C]

Well, I. I will say I asked Annie if she'd ever heard of a French 75 and she said she said yes, but only in the last six months when she was out with some girlfriends and one of them ordered a French 75.

[A]

It must be getting pushed out, you know, in the marketing or something like that. By the way, for listeners and viewers, that was Al's wife, Annie, not producer Andy. Just to clarify.

[C]

Yeah, good point. Andy, also known as Ann. Yep.

[A]

Yes.

[B]

Okay.

[C]

Do we have a question?

[B]

Yeah, it's a wonderful gin drink. Aviations are also quite lovely. All right. We drive a CRV and a Corolla. We have two lovely daughters. 7 and 3. Financial deets. Million dollars investable assets 40% Roth 25% brokerage 35% traditional $150,000 non child care current expense $420,000 of income. Family medicine doc and nurse. Oh, that's cool. In episode 529, you discussed how 2% isn't low enough for your liking and it's upsetting my soul. I need to have a heart to heart. I'm extremely manly and not at all lame. Financial spreadsheet that projects my current $1 million in assets will grow to 4 to $7 million in 9 to 14 years, allowing for a good start to financial independence. Retirement at the time for our expenses. Obviously, a million things can change at any time in my spreadsheet, so it's certain to be wrong. The goal of my wife and I is to be able to get to a point where we feel comfortable taking a leap and traveling for a few years while we're still young and we're willing to go back to work and might even want to later on. My question is more of a Thought experiment. Let's pretend you are 45 and have a really easy job to go back to. We are really employable and fun and have 4 to 5 million with expenses hitting about a 4% withdrawal rate. You don't ask Joe or Big Al what they think of your plans and go off to France for three years. At what point would your return and go back to work if the markets were doing poorly? Assuming a well diversified portfolio, is it hitting a specific withdrawal rate? A percentage failure on the Monte Carlo, A portfolio loss amount? I think this discussion would be really helpful for our younger folks who want to take advantage of our youth in the savings to do something really cool early on. Obviously, it may not be a forever traditional retirement, but that's okay. I'll be 45. Thanks for entertaining me while I do the dishes. Not in France. All right, this was a little clustered. I don't know if it was my reading or if it was the doctor's writing. I'm thinking a little bit of both here. So he wants to get out, right? So he said they're family medicine doctor and nurse.

[C]

Right.

[B]

So he wants to get out. He's got a million dollars currently in investable assets. They want to spend $150,000. They make $420,000 in income today. And the goal of his wife and I is able to get to a point where we feel comfortable taking a leap and traveling for a few years while they're still young. All right, so they want to do a little sabbatical, Al.

[C]

I think so. And maybe as much as three years. Because he mentioned France. Three years.

[B]

Okay.

[C]

Yeah. And they already have a million dollars at 36. So presumably in another nine or ten years they would have 2 million or 3, maybe. Who knows? Right. They're making a lot of money and they're saving a lot. So anyway, I don't know what they'll have, but. Yeah, what do you think?

[B]

I don't understand the point here. When he's like, okay, well, let's say you have a really easy job to go back to. Okay, so they're super employable.

[C]

Yeah.

[B]

Medical doctor, nurse.

[C]

Yeah, yeah.

[B]

Really fun, really good guys.

[A]

That is fun and easy. I don't know.

[B]

What's that?

[A]

I said how that is a fun and easy job being a family doctor. I don't know, but. Or nurse. Both of which. I mean, I've been seeing my fair share of doctors and nurses lately. They don't have an easy job.

[C]

I think he said they're, it's, they're really Employable and fun.

[A]

Yes.

[C]

I'm not sure. I'm not sure. It said easy.

[B]

Easy job to go back to.

[C]

Yeah, easy to go back to.

[A]

Not an easy job. It's easy to get back to.

[C]

Yeah, yeah, yeah, yeah.

[A]

They're in demand.

[C]

Okay, so let's say. Okay, this is kind of like the other one. So millennials wanting to enjoy some of the money they've accumulated before they retire. I think that's. I think, Joe, I've got two millennial sons. I feel like that's going to be kind of a trend here. What do you think if you do that? Let's say you got 2 or 3 million, when do you go back to work? Or when should he go back to work?

[B]

Well, I don't know. If you can't make $5 million last 20 years.

[C]

No, no, no, no. You got to think about this differently. This is a three year, and then you go back to work.

[B]

Well, I don't know. I would. Well, no, I mean, when would you go back to work? Would it be three years, five years, or within the three years? I mean, I think you want to take a close look at what the portfolio is doing and what the withdrawal rate is. If he wants to pull 4% out, that's totally fine at 45, but then you just have to take a look. If you have a market downturn for three, four, five years in a row, and that four million is now two and a half or three, depending on how much that you're taking out of the portfolio, to me, I think you have a sleep factor. This is just my personal opinion. Get the financials out of the way, because I think at $5 million of liquid assets, you can do a lot of different things and you've saved a ton. And I would think you're financially independent at that point because you can always adjust your savings. Right?

[C]

Right.

[B]

Instead of spending $350,000, you spend 150, 200 grand. You're still living pretty comfortably, Right? I think I would have a number in my mind of where I would want that number to get to. And so maybe if his number is $5 million, then I would want to kind of put a range between that. What's my sleep factor? If that goes to $2 million, will I still be able to sleep at night? If the answer is no, then I'm going back to work, right?

[C]

Yeah.

[B]

If it never gets to that point, I would continue to stay retired. I think he's right. He's very employable. He can always go back to work. Part time, at halftime, a couple hours a week. He could be like Doc Holliday, you know, or Hollywood. Remember that movie? I do remember the old doctor.

[C]

Yeah.

[B]

I don't think he worked full time because Michael J. Fox came in.

[C]

He did.

[B]

So he could be that guy. Right.

[C]

There you go.

[A]

So he says, at what point would you return and go back to work if the markets were doing poorly? So I kind of take that to mean how long are the markets doing poorly before I say, okay, it's time to cut bait and get back to work?

[B]

You never know when the markets are going to do poorly though. Right. So you're. Every time the market kind of makes a little bit of a dip, then it's like, all right, well, here I'm getting my resume out. Yeah, I don't know if that's the right answer either.

[C]

Yeah. Me personally, how I would approach this is I would have kind of a somewhat set plan that I could modify. Like, let's just say I want to take a three year sabbatical. Okay. Then I'd run some numbers with my financial planner. It's like, all right, what if I take. What if the market goes down 10% a year? And where am I at? And I'm always so, you know, so you have a sleep factor. What if the market stays even? What if the market goes up 8% a year? So you kind of look at different scenarios and where are you comfortable? And I think you go back to your answer, Joe, when you, when it's affecting your sleep because you're worried about running out of money, I think that's a pretty good clue that you got to go back to work.

[A]

Something else to take into account that I can speak to from personal experience is the cost of moving countries, because that is, is substantial.

[C]

Yeah, that's a good point. Probably. I'm guessing if it's a three year thing, they probably just rent a home there that maybe even was furnished. So I don't know. But yeah, I think, gosh, if you really were going to only take a three year sabbatical, I think 6% distribution rate or more. Right. Because you're planning to come back right now if you ask it differently and say, I'm thinking of taking three years off, but I may want to fully retire, then my answer is different. Then I'm going to go back at 45, 2 and a half or 3% distribution rate, which would be a more standard rate if it's kind of a long term retirement.

[B]

Yeah. Or you could just say I'm going To spend a million and a half in three years. Yeah. $500,000 a year for the next three years. And then that's what my budget is. So I know that I still have this other pool of money that is growing over that time period. And then when I go back to work, that's my nest egg for the next 20 years of my working career. There's a ton of different ways that you could slice this.

[C]

Yeah. And I think you probably gave one of the best answers, Joe. The sleep factor, when you get to the point where it feels like your money's slipping away.

[B]

But I think you got. There's a lot of, of, what is it called? Something creep, you know, lifestyle Creep.

[C]

Lifestyle, yeah.

[B]

Yeah. A little fried today. If you can't tell my brain gotta

[A]

find that word lifestyle.

[B]

Yes, well, so once you accumulate dollars, it's like, all right, it seems like, all right, now I got a million, now I got 3 million, now I got 5 million. And it's like, okay, well, now my number's 10 million. No one ever really gets satisfied. They always, it seems like, hey, can I get a little bit more? A little bit more? And then we. People spend more when they make more. So if he could stay disciplined and say, hey, we're only spending $150,000 a year, you know, and then. Or you want to spend a little bit more than that, you can kind of break up your dollars into different time frames. But it's the spending that's going to drive all of this.

[C]

Yeah, well, and the investments. So if you're all in cash, you're not going to do as well as if you have some in the market. But in the market, the market could tank. Right. So you got to factor that in. But maybe that's a good, good way to do it, Joe, is figure out the spending for a three year period. And if the market stays the same, goes up or goes down, are you, are you okay with where that ends up? And, you know, so that you can sleep at night and then if the market does, great, gosh, maybe I'll do four years.

[B]

Yeah, right. You get $5 million. As soon as that hits $4 million or below, we're going back to work.

[C]

Yeah. Whatever your comfort level is in terms of what you could spend. Yeah.

[A]

And make plans for what you're going to do about healthcare if you happen to get sick during those three years or something happens in that respect.

[B]

Yeah, He's a doctor.

[C]

Yeah. They'll work on each other.

[B]

He's going to treat himself. But here's what I don't. You don't ask Joe and Big Al what they think of your plans and go off to fr 3 years? Why don't you ask us? Didn't he just ask us?

[A]

No, he's, he's using this as a thought experiment. What if somebody just does this without consulting with you first?

[C]

Well, okay, the way I read that is we have, we have often sort of discouraged people at retiring at 45 because you're going to be bored. But I just told you, I'm think I'm rethinking this. I'm thinking, I'm thinking the millennials have a different perspective.

[A]

The listeners have gotten to you, Al.

[C]

Well, because I have two millennial kids, I'm starting to get on board with this. As long as it's a temporary retirement. It's not really a retirement. It's a sabbatical. Maybe. Maybe that's a better way to say it. And maybe it's a one year to five year sabbatical. And then I think, I think you would probably think about distribution rates quite a bit differently. But I will say one thing, Joe, is if you have that sabbatical for three or four years and you go, you know what, I really don't want to work again, that would be a problem with that much distribution out of your portfolio to have anything close to continuing.

[B]

Okay, yeah, I don't know if I agree with you. I'm not, I'm not sure if I'm 100% on board with this. Hey, you know what? While we're young, let's go have fun.

[C]

I think it makes a difference whether you have kids or not. I think if you have kids, this is more difficult, not a possible.

[A]

How likely it is that you are going to be able to just hop back into a job if you need to re. Enter the job market. Yeah, as a doctor, definitely. As a podcast producer, maybe not.

[B]

Right? I mean, it doesn't have to do with the economics too. So he's a doctor with a million dollars at 30 something. So sure, yeah, do whatever you want. Who cares? You're going to go back to work and be a doctor again. But how about if I have like 50 grand in my name and it's like, you know what? I want a sabbatical. I'm a millennial. I was like, yeah, I'm on board because I got two millennials myself.

[C]

No, no, not even close. So, so I'm going, I'm going.

[B]

Go for it, man. I'm never going back to work. And I'm sleeping on your couch.

[C]

No, I'm going with this. This fact scenario which is a million today. In 10 years it's probably three or more. Right? And then. And employable as a doctor. I'm okay with that. Yeah, you have 50 grand and you're not very employable. You got to find a better job, dude. This is not time for a sabbatical. So. So it depends.

[B]

Got it. All right, fair enough.

[A]

A lot of what Rand and Elaine and Ron and Harry and so many of you are wrestling with in terms of safe withdrawal rates comes down to the same question. How do you turn a pile of money into a paycheck and how do you make it last? Nearly 70% of your retirement savings could get eaten up by taxes if you don't have have a robust withdrawal strategy in place. Our free withdrawal strategy guide walks you through how different approaches stack up like fixed dollar, the 4% rule, and proportional withdrawals. It gets into the tax smart stuff too. Roth conversions, tax loss harvesting and the right order to pull from your accounts so you're keeping more of what you've saved. Grab it for free in the link in the episode description and when you do, you'll see a drop down that asks how you heard about us.

[B]

Choose Podcast let's go to Mike to me 17 this was from an Apple

[A]

Podcasts review and it was on topic so I thought I'd throw it in here. Takes a different angle on this withdrawal thing.

[C]

Okay.

[B]

Love the model of reviewing real people's finances and they do keep it fun. Hard to agree with less than 2% safe withdrawal rates in early retirement, especially after listening to many other financial podcasts. I think they have a tough time understanding many people in the real world can be flexible in their spending and may be reducing their proposed safe withdrawal rate in order to account for the 1% fee in their AUM model. Oh damn. When did we ever say less than 2%?

[C]

Well, apparently it was episode 529 and

[A]

I think it was because somebody had intended an extra long retirement and that was the problem.

[B]

Who said it? It had a bit big Al.

[C]

No, no, it was definitely you.

[B]

I would say less than 2%.

[A]

It's going to be dependent on the assumptions in that particular person's situation.

[C]

Yeah, I would agree with that and I think like so this is a sort of a different than what we just discussed was a sabbatical. Now this is an early retirement. So that's different. Right. So I would say if you want to retire at 45, I'm probably good with two and a half, maybe even 3%. But it depends upon how your investments are. If you're too conservative, then you're not going to have enough growth to cover this. But I also think if you're the type of person or couple that can be flexible on your spending, you have a much greater chance of this working. Right. So I don't, I don't remember what we said in episode 529, but no, I sort of agree with Mike. I mean, it doesn't. By the way, these are just back of the envelope discussion points on whether you have enough to retire. This is not a retirement plan where you get to 2% or 2 and a half percent. Okay, I can retire. There's a thousand variables that could make this work or not work.

[B]

Right.

[A]

Now, let's talk about this thing about taking into account your AUM fee and whether or not that is playing some part in whether you're saying these people are safe to withdraw that rate or not.

[B]

The 1% fee that you pay any financial advisor should be a value add, not an expense. If it's an expense, you should never ever pay an advisor 1%. So you should have value, you should have more dollars, you should have more income, you should have a better experience by paying anything, anyone, a fee if it's a financial advisor, if it's a painter, if it's a carpenter, if it's a interior. You know what I mean? So I think if, if there's no value in what you're purchasing, then don't ever do it. So it's.

[C]

So, yeah, yeah. Joe Morningstar did a study a few years ago and can't remember, it was like 2 and a half to 3% of value is added by the average advisor for the average person. Now, that's not true across the board, but if it's a 1% fee and you're adding 2 1/2 percent, you're actually to the plus. Just like what you're saying.

[B]

Yeah, I think Vanguard ran a study too. So, yeah, again, I think the point of any type of safe withdrawal rate that we use on this show is to look at how much money should you have in liquid assets for you to consider retirement. It's not like, all right, take 4% out of your portfolio or 2%. You can have flexible withdrawal rates. You can some years spend a lot more. Some years you're probably going to have to spend a lot less. It's going to depend on what you're doing that year in your overall retirement. Some people go back to Work. Some people consult. It's kind of an ongoing process. It's not like, all right, it's set in stone. Once you retire, this is what you have to do. That's kind of absurd. But here's the issue, I think, is that a lot of times most people don't know how much money that they should have. I think people think about a number. It's like, all right, well, is 100,000 enough, or is it 500,000, or is it a million, or whatever the number is? What we're trying to do is to help, like, identify, well, how big of a nest egg should you be shooting for to maintain the same lifestyle that you're currently accustomed today? Because if you have $100,000, we, you know, we see clients that want to spend, you know, $30,000 out of that portfolio a year. It's like, well, you have 100,000. Well, yeah, that's a lot of money. Can't I spend 30, 30,000? Won't it last? Well, no, it won't. You know, so some people are really good at this, some people are not. So it's a back of the envelope spitball of what we're looking at. But a distribution plan is completely different than like an accumulation plan. So we're looking at, hey, are you on track? Not on track, Are you in the same zip code? So we use these safe withdrawal rates to identify, you know, what those liquid assets should look like. And then from there, then you have. Then the real work, in my opinion, comes in where you got to roll up your sleeves and figure out how are you going to create the income, how are you going to save money in tax, how are you going to manage your risk, how are you going to tax? Manage the account, how are you going to be tax diversified? And you have to do this simultaneously as you're going through retirement. And then when other income sources come in or not come in, or other expenses go up or other expenses go down, you just have to be fluid in the overall strategy that you have unless you want to go back to work. So we talked about these sabbaticals, and if you go back to work, then that's one thing. But a lot of times, most people don't want to go back to work because that's why they retired.

[C]

True. But what I'm suggesting is that's our generation now. I'm baby boomers. What are you, generation X or Y?

[A]

We're both Xers.

[C]

You're Xers.

[A]

65 to 80 is considered generation X.

[C]

I feel like the Millennials are more likely to want to take a sabbatical. That doesn't mean that we're necessarily retire forever. I just think we need to start thinking about this in certain cases. Not the. Not. Not the example you told me, Joe, the guy's got 50,000. I'm. I'm going to. I don't want to work anymore. That's a little tricky.

[B]

All right, Alan, when do you get back?

[C]

Saturday. So I'll be. I'll be in, I'll be in next week. Yeah.

[B]

Short trip.

[C]

Short trip.

[B]

Yeah. You got some, some people wanting to stay at your place or something or.

[C]

We do, but we, we spent the first part of our trip in Berkeley and I went to Tiburon, then we went to Sonoma county. So we've already done a bunch of stuff before here. So that's why we could. That's why we didn't record last week.

[B]

So now you're just relaxing and ready to come back?

[C]

I'm relaxing.

[A]

I was gonna say, I don't think he's ready to come back.

[C]

Not sure I'm quite ready to come back.

[A]

But he works just prime from his lanai.

[C]

And we just got some new furniture today, so it's actually rather exciting.

[B]

Oh, very cool.

[C]

New pouch, new Lazy Boy, new couch. We got. We've got a recliner and two side chairs. Very cool.

[B]

Wonderful. All right, well, that's it for us, Andy. Thank you very much, Al. Have a good rest of your time in Hawaii and we'll see you guys next time. Shows called you'd Money. You're welcome.

[A]

Next week on YMYW, Walter and Jesse from New Mexico want to unload $1.6 million in company stock without writing the IRS a job check. Richard from Staten island has one oil stock that's 80% of his portfolio, and his financial advisor wants him to sell it. And doctors Bones and Beverly are about to inherit a $1.35 million tax bomb with some concentrated stock, and they need a spitball before it detonates. Make sure you're following the show on your favorite podcast app so you don't miss a thing and join the conversation in the comments right now on YouTube. Your Money, you, wealth is presented by Pure Financial Advisors. Making the most of your money and your wealth in retirement requires a lot more than a spitball. Schedule a free no Pressure, no Obligation comprehensive financial assessment with the experienced professionals on Joe and Big Al's team at Pure. Click or tap the free financial assessment link in the episode description or call 888-994-6257 to book yours. Meet in person at any of our locations around the country, from California to Tennessee, or you can meet online right from home. No matter where you are, the Pure Team will work with you to create a detailed plan tailored to meet your needs and goals in retirement. Pure Financial Advisors is a registered Investment Advisor. This show does not intend to provide personalized investment advice through this podcast and does not represent that the securities or services discussed are suitable for any investor. As rules and regulations change, podcast content may become outdated. Investors Investors are advised not to rely on any information contained in the podcast in the process of making a full and informed investment decision.