In this Episode of the Secure Your Retirement Podcast, Radon and Murs discuss what it really takes to retire before 65 and the key strategies you need to make early retirement not only possible but sustainable. Many people assume that leaving work before Medicare at 65 is too expensive or too risky, especially when it comes to health insurance before Medicare, tax planning, and long-term income strategies. But with the right process, tools, and guidance, you can build a retirement plan that helps you retire early and retire comfortably.

Listen in to learn about the essential areas you must think through: ACA health plans, Medicare at 65, the 59 and a half rule, the 401k rule of 55, Roth conversions, Social Security timing, and more. Radon and Nick Hymanson, CFP®, break down the critical details around investment strategy, retirement withdrawal strategy, sequence of returns risk, and bucket strategy investing. This conversation highlights not just the numbers, but also the emotional side of retirement—building confidence and clarity to truly secure your retirement.

In this episode, find out:

·     Why health insurance before Medicare is the #1 concern for early retirees, and how ACA health plans and subsidies fit into your strategy.

·     How to navigate tax rules like the 59 and a half rule, the 401k rule of 55, and smart Roth conversions.

·     The importance of a retirement withdrawal strategy that considers taxes, cash flow, and long-term goals.

·     How to protect yourself from sequence of returns risk with bucket strategy investing.

·     Why budgeting for retirement and addressing the emotional side of leaving work is just as important as the numbers.

Tweetable Quotes:

Radon Stancil: “Retirement planning is like turning knobs—when you adjust one, it impacts the others. The key is making sure they all move in the right direction.”

Murs Tariq: “The confidence to retire doesn’t come from guessing—it comes from having a written plan that helps you make decisions with clarity.”

Resources:

 If you are in or nearing retirement and you want to gain clarity on what questions you should be asking, learn what the biggest retirement myths are, and identify what you can do to achieve peace of mind for your retirement, get started today by requesting our complimentary video course, Four Steps to Secure Your Retirement!

To access the course, simply visit POMWealth.net/podcast.

Here’s the full transcript:

Welcome everyone to the Secure Your Retirement podcast. Glad to have you back, glad

to have you listening. Today we’ve got a great episode. It’s a question that we get

all the time in our financial planning strategy meetings and that question is, “Hey,

I’m thinking about retiring before the age of 65. What do I need to know?” And,

you know, I think we see this from time to time of the idea of when to retire.

People want to retire earlier and earlier. And a lot of people have done a good

job of saving and I think it is very feasible, but there’s a handful of things

that we need to be thinking through to make get the most efficient retirement

possible. And so, for that reason today, alongside me, I’ve got Nick Hymanson.

He’s another CFP on our team and a wealth advisor, and he’s in the trenches during

a lot of these client meetings and seeing a lot of different stories and situations.

And so, I thought it would be nice to bring him into kind of talk through what

it takes and what you need to think about if you’re considering retiring before the

age of 65. So, Nick, thanks for making some time for us today here on the podcast.

Yes, good to be here. All right, so let’s kick things off, Nick, which I think is

the biggest one that often gets overlooked is healthcare. So, take us through the

conversation you’re having with people as you’re thinking about retiring before 65,

which is a key year, and I’ll let you explain that. But what do they need to

think about? Yeah, so from a healthcare standpoint, one of the big things that

people look for is, hey, I want to make sure, they say,

hey, I want to make sure that I can make it 265 so that I can get on Medicare.

Medicare, obviously, it has its premiums. It has part B premiums,

part D premiums. And then there are sometimes additional premiums added onto that

based on income, but That is a milestone that many people look for when it comes

to retirement. They say I want to retire at 65 So that I can get on Medicare But

I will say for for some of our clients in the conversations that we have People

would like to retire earlier and a lot of times they have the means to retire

earlier but they want to do it efficiently from a health care standpoint and from a

lot of things that are around in media and things that you read other videos,

there’s a lot to healthcare before 65. There’s a lot of different options related

to, you know, you might have an option for COBRA, you might have an option for

private healthcare through the private marketplace, but there’s also options for ACA

plans, affordable healthcare option plans, so with subsidies as well. So, there are

many different types of health care plans that come into play when looking to retire

before 65, but that is a hurdle for a lot of people when looking to retire early.

So, we’ve had many conversations, not only this year, but many years in the past of

how do we take the topic of health care and retiring early and how do we do that

efficiently? So, to just explain a little bit about our process.

There are a lot of healthcare and budgeting and things like that for healthcare that

go into the financial planning process of retiring early. One very important person

that we have as part of our team, his name is Sean, he helps many of our clients,

not only with Medicare enrollment, but looking at all of the options when it comes

to the different options of ACA plans and also private insurance. So, he is a big

resource to all of our clients when it comes to figuring out the best option for

them, what makes the most sense, and staying within the budget. So, I just had a

conversation with him this morning about subsidies on ACA plans and the fact that if

Congress doesn’t pass some sort of bill before the end of the year, those subsidies

may go away starting next year. So that’s a big topic and something that we are

all aware of when it comes to financial planning retiring early and having those

conversations with clients Yes, I think that’s too huge. It’s not lost on us What

a big resource Shawn is and if you’ve been listening to the podcast Sean is

We’ve had him on several times talking about Medicare and pre-Medicare. He’s a

wealth of knowledge So if you’re thinking about retiring early and you don’t know

what you’re going to do for health insurance You we’ve got a great resource for you. I

want to touch a little bit on tax and tax strategies, especially with the early

withdrawal, I mean, sorry, sorry, the early retirement or earlier than normal

retirement. And the first thing is you got to be aware of early withdrawal

penalties. So, depending on when you retire, a lot of our assets for a lot of

people are socked away in these qualified accounts or retirement-based accounts like

a 401k or an IRA. And a lot of times these accounts, we are limited to our access

to them as limited until age 59 and a half. You can take from them before 59 and

a half, but you’re going to incur a 10% early withdrawal penalty outside of a

handful of exceptions that may apply to you. So, you’ve got to be very aware of

that if you’re planning on retiring before the age of 59 and a half. Once you have

that age 59 and a half, then you’re good to touch that money without any penalty.

Taxes still apply though, so you want to be very aware of that. If you are

thinking about retiring before 59 .5 and you do have a 401 (k), a lot of those 401

(k) s have a rule where they allow withdrawals without penalty at the age of 55.

Something else to consider as part of your investment strategy as you think about

that. You may not want to take all of that money out of the 401 (k) to Make sure

you keep access if you do retire early. Roth conversions is a topic in tax strategy

that’s talked about all the time right now. If your advisor is not talking to you

about it, they should be. We have a process all around Roth conversion planning with

our tax team. The bottom line here is that a lot of times when we do retire, we

typically, are going to have lower income than we were when we were earning, and the

opportunities for Roth conversions become more and more available. However, there’s a

good amount of planning that needs to be done as far as understanding how much to

convert, when to convert, and how the bigger question is how we are going to pay

the tax to make this conversion possible. And then also, if we’re retired early,

we also have to have the cash flow to live while we try to convert these assets

at the same time. So, a handful of things go hand in hand there. Coming up with

the withdrawal plan with retiring early is also really important. It all depends on

goals and everything like that. But if we’re going to try to do Roth conversions,

well, we may want to have a withdrawal plan that is a little bit more tax

efficient so that we’re living off of less taxable money so that we can maximize

those Roth conversions along the way. And then another thing which ties back into

what Nick was just talking about, those subsidies on the ACA, on the healthcare

side, those could be wiped away because we weren’t paying attention to the income

that we’re generating through our investments. So, I tell this story all the time of

how retirement planning is a bunch of knobs and a lot of times you turn one knob

and it’s going to turn several others and so we want to be aware of that so we’re

not making any major mistakes that we look back on. So, I think tax strategies we

could go on and on and on about. Another one that comes to mind is if there is a

goal of retiring at say 50 or 55, you want to make sure you have good tax

diversification. So not investment diversification but tax diversification. You want to

have money that’s in a brokerage account so that you’re not worried about early

access penalties and you want to have that IRA money and hopefully have some Roth

money as well. The more diversification we have, the easier it is to set up that

withdrawal plan, especially prior to the age of 59 and a half. So that’s kind of

tax things in a nutshell there. Nick, let’s talk about investment strategy. How do

we think about investment strategy if we are retiring a little bit earlier? Yeah, so

Ultimately, we look at it from a long -term perspective. So, if you are, let’s say,

60 years old right now and you’re looking towards retirement, or you are already

retired, that means that we could be planning for income for 30 plus years. That

also means that if you’re spending, let’s say, throwing out a random number, $8 ,000

a month today based on a 3 % inflation in 20 years,

let’s say you’re 80 years old, instead of 8 ,000 a month, your expenses, everything’s

staying the same. On a 3 % inflation for 20 years, your expenses are now 16 ,000 a

month. So how do we plan for that? How do the investments come into play to make

sure? Not only that you’re going to not run out of money in the future, but also

efficiently cover the expenses from a withdrawal standpoint, and also to ensure that

you know you’re going to be okay when it comes to making those, you know, expense

payments in 20 years. So that’s everything from a financial planning standpoint that

we look for and review with our clients every single year. So, from the standpoint

of preparing to cover those expenses, investments have a lot to do with that. But

not only So, you know, a big part of the investment strategy is income planning and

ensuring that there is a safe level of withdrawals that are available to you when

you do retire early. One of the big risks of retiring early is, you know,

let’s say you retire at 60 and there are a few bad years in the market, which

could very well happen at any point when someone retires. So, if there is a

significant downturn in the market where we see, you know, a lower and lower market

over, it could be a year, it could be multiple years or even a few months, any

sort of period where we are withdrawing from an account, where an account’s going

down, could be, especially if it’s a long -term situation,

could be a detriment to someone’s financial plan if they are withdrawing on the way

down. One of the big reasons for that is that when the market eventually does come

back up, it takes a much, much longer time period for the account to recover since

we’ve been drawing on it along the way on the way down. So, one of the reasons or

one of the ways we reduce that risk is through our safety bucket.

So So along with the growth bucket, we want to be exposed to the stock market. We

want to have stock market growth with some of the money. We also believe for some of

our clients and for the situation in particular, it is a lot of times very

important to have a safety bucket where you can get reliable, safe withdrawals

without the worry of that money going down and being exposed to stock market loss,

especially when you retire early and you’re looking for those withdrawals to cover

your expenses. So going on with the withdrawals, withdrawal strategy is going to be

very, really important, especially for someone that’s retiring earlier. And I mentioned

earlier about tax diversification. And so, I’ll come back to that in the sense of

you want to hopefully have some assets in non-qualified or brokerage account type

money. You want to have money in qualified accounts, which are your IRAs and your

Roth accounts. Those are taxed in two different ways, but what it does is create

tax flexibility so that we can create a withdrawal strategy or an income plan that’s

catered to you. Now, old -school thinking or old -school rule of thumb is the

withdrawal all hierarchies, you take your taxable accounts first because they are tax

advantaged in the sense of capital gains tax, and then you’d start dipping into your

tax deferred accounts like IRAs and Roth accounts, I mean IRAs and 401 (k) accounts,

and then the last you would save is for is your Roth, your tax -free money. That

being the last because the longer we give it to grow tax -free, the better. And it

also makes for a nice legacy if we are leaving some money behind. I say that’s a

rule of thumb. I think it really comes down to a bit of your goals -based planning

as well. So, if Roth conversions are at the forefront of your mind, well,

then maybe we do something a little bit different. Or if you don’t care about Roth

conversions, but we do want to smooth out your taxation over time, maybe we do

start drawing on the pre -tax money like the IRAs and the 401 (k) is a little bit

earlier so that we’re not hit with a huge requirement of distribution comes 73 or

75, which is that force withdrawal on those assets, whether you like it or not. So

having really someone that you trust to kind of help you think through what’s going

to be the best sequencing and the best withdrawal plan for you is going to be very

important. The other one is always a conversation of social security timing. When is

the right time to take that? Because that while it’s not going to cover all of

your retirement needs; it is a chunk of what you’re going to provide for your

retirement. You know, for most, it’ll cover say 30 to 50 % of what’s going to be

needed in retirement. And so, you want to get that decision right. So, say you retire

at 55, you know, 62 is the earliest you can turn on social security and the latest

or the time where it stops growing is at age 70, and so deciding the right time

could be, again, a handful of things that make it make sense. We have some clients

that will wait till 70 because they want to maximize the benefit for their spouse

in case they pass away. We have some clients that will take it right at 62 because

it fits their plan really well and they need cash flow, and we would rather take

cash flow from Social Security rather than trying to, and rather than putting a lot

of withdrawal pressure on our own assets. So, I’ll leave it at this with Social

Security. Oftentimes the question is asked of how much, how do I get the most out

of Social Security? And I think that’s a valid question. I think a more important

question is, how does Social Security complement my financial plan the best? And so

looking at it more on an individualized type of basis. Nick just hit on sequence of

returns risk. that’s really important too. So, kind of ties back into the investment

strategy of making sure we have different types of investment structures so that as

we are withdrawing, we’re never worried about, you know, drawing from a bucket that

is down 20%. And so that does take some thinking and some thought as far as how

we structure the investments. This is a big one. I think that I want you to talk

about Nick, which is all around, you know, budgeting and everything like that because

you and I were talking before we started this podcast around how people view

budgeting while they’re working and then how it changes when they retire. So, take us

through that. Yeah. So, you know, most of the time when people are retiring and

they’re working and they’re close to retirement or they’re getting ready for

retirement, they have either, you know, they’ve saved for many, many years and

they’re,

Maybe they’re saving outside of their 401ks, but they may not have a budget.

One of the things that we see is sometimes when people are working and they’re

making a lot of money, they ensure that the money that they’re making, their income

is covering their expenses, and then they are saving for retirement, but from an

expense standpoint, they might not know exactly where every dollar is going or at

least have a good idea of how much they’re spending today and how much they plan

to spend in retirement. So that’s one of the first steps into figuring out when you

can retire and if it is feasible is to figure out exactly or very closely to what

your expenses are. It’s extremely important not only transitioning into retirement but

getting a good idea of the longevity of someone’s retirement plan and then planning

for that. So that’s one of the main points. And then, you know, we’ve talked about

a lot of topics here today, you know, everything from healthcare investments,

withdrawal strategy, one of the biggest hurdles though, while some of those are

hurdles for people in making the decision to retire and having conversations on that,

one of the biggest ones is the emotional aspect. So, and we spend a lot of time

with our clients, ensuring that they know the numbers behind everything when it comes

to retirement planning, all of the different aspects of it, but also ensuring that

they have the understanding and the peace of mind when it comes to making that

decision. That’s one of the most important things is not only knowing all the

numbers but having the confidence to make that final decision. So that is where we

spend a lot of our time as well with our clients having that conversation because

not only is it, you know, you saved for many decades and now you’re ready to

transition, but there’s emotional aspects to now you have to go from working and

having that take up so much of your life for many decades to now transitioning into

what do you want your retirement to be? What do you want the experiences to be of,

you know, you are retiring and having all of that time to spend with family, spend

traveling, spend doing things that you’ve always wanted to do, but maybe didn’t have

the time to do. So, um, there are so many things that go into making your,

uh, making your retirement, the, the dream that you wanted it to be, but also

having the confidence to make that decision, to transition into it. Yeah. And I

think the, the confidence comes from, you know, having going through the exercises of

what retirement success looks like, going through financial plan meetings and

everything like that. I know the clients that we work with that are not retired

right now, but are striving to reach that point, they feel way more comfortable

because they have a written plan in place. And I think that’s really important.

Other ones that we won’t spend as much time on, you know, things to think about is

the estate plan, making sure we have those documents in place, making sure that the

beneficiaries are updated. A lot of times when you do retire, you’re moving that 401

(k) plan into an IRA and so it’s into a brand-new type of account. You want to

make sure those beneficiaries get listed properly there. Something in the future that

often gets ignored when we retire is long -term care planning and thinking through

what we want our long -term care plan to be. Whether it’s we’re planning on selling

a paid -off house to fund our long -term care or we’re looking to policies,

and that space has changed quite a bit in the last couple of years. It’s way more

attractive than it used to be. We’ve all heard the horror stories of mom and dad

or their parents paying for paying premiums and never really using those types of

insurance policies. Today, they’re much more asset -based, and so it’s a whole

conversation within itself, but the options there have become rather attractive if

that’s a concern of yours that you’re trying to cover. Bottom line, I think

flexibility is going to be huge, especially for earlier retirement. You’ve got to be

nimble. You’ve got to be ready to adapt to all the changes that come your way.

I mean, Nick and I and the team here, we’ve seen thousands of financial plans at

this point, and not a single one of those that we built was set in stone.

Not a single one of those didn’t have adjustments that came, whether it was due to

inheritance of assets or loss of life or wanting to relocate or wanting to buy a

second home. So, the good stuff and the not so good stuff, the financial plan in

our opinion is always, always changing. And so, you got to have that flexibility type

of mindset. Also, different types of investments come around that you may want to

take part of and having the flexibility there as well is really important. So, Bottom

line, can you retire before 65? Absolutely you can. Is it a little bit more

difficult? I wouldn’t say it’s difficult. I think there’s just more things that you

need to think through and you have to have even more in -depth planning in place

because if you’re retiring at 55, well now you’ve gotta cover 45 years of retirement

life. If you’re retiring at 60, you want to plan on covering 40 years, right? And so

our money needs to work even better for us and we have to have a good base that’s

built up to kind of manage that longevity that we are seeing today and thinking

through all the knobs that I mentioned earlier that we need to be turning in the

right directions to make sure we do have retirement success. So, with that, I know

we just unloaded quite a bit on you. If you are considering retiring early or just

retiring at all and you don’t have a plan in place, you haven’t sat down and out

with someone or maybe you have a trusted advisor but you’re not getting this type

of guidance, we always encourage you to have a conversation with us. We’re always

open to that. Easiest way to do that is head to our website, POMwealth.net,

and there is a link there that you can schedule a call. You’ll talk with one of

our advisors. And from there, we’ll determine if there’s a good fit here or not.

And at the very least, you’ll have a good conversation out of it. But that’s all

we’ve got for you today. Thanks, Nick, for hopping on and thank you all for listening. We’ll talk to you again next Monday.