What The Wealth Retirement Podcast

Case Study: $1.4M, Early 50's – A Small Tweak Results in More Cash, Less Stress (117)

• Jonathan Bednar II, CFP • Episode 117

Share episode

In this episode I share a real-life example of how a couple with $1.4 million was feeling crushed by cash flow but found relief with a 5% contribution change and a focused debt reduction. Small, smart tweaks restored breathing room, protected retirement, and funded key home repairs without new loans.

• How saving more can add stress when cash flow is tight
• A small 5% 401(k) reduction created real breathing room
• Setting up a debt snowball for quick wins
• Rolling freed cash into essential projects
• Preserving long-term retirement while easing today’s pressure
• The right time to restore higher contributions

🗓️ Meet with me: https://paradigmwealthpartners.com/begin-your-journey/#calendly
↔️ Connect with me on LinkedIn: https://www.linkedin.com/in/jbednarii/
🌐 Paradigm Wealth Partners (website) – Financial planning for career professionals who want to retire and stay retired: https://paradigmwealthpartners.com/
🌐 What the Wealth (website) – Adding clarity to difficult financial topics: https://whatthewealth.com/
▶️ YouTube: Paradigm Wealth Partners

If you or someone you care about could use the help of a financial advisor and sees the value in establishing a financial plan, please reach out to me.

Thanks for Listening!

Jonathan

SPEAKER_00:

How a 5% adjustment can transform your retirement. A real case study from this week. Most people think the solution is save more for retirement. But for some families, saving more is actually what's causing additional stress. And today I'm going to walk you through a real case study of a couple in the early 50s that have$1.4 million saved and they're still feeling overwhelmed every month. Let's break down what we changed and why it's going to completely transform their life. Welcome back to the What the Wealth Retirement podcast. I'm your host, Jonathan Bedner, certified financial planners, helping retirees and families gain clarity, confidence, and peace of mind around their money. And today I want to share this real case study from a couple I met with this week. Again, the early 50s with about$1.4 million saved, doing all the right things, but feeling incredibly stressed. And the reason is because cash flow, not because of lack of money, not because of lack of saving, but simply the pressure of trying to do too much at once. So their situation, their early 50s, um, they're saving 15% into their 401ks at work. They both have great jobs, good income, and they've amassed$1.4 million saved in retirement. So this is great. They're in a great position strategically for retirement. And on paper, those things look really strong. But the reality behind those numbers is a little bit more detail than I'm going to provide you. So they bought their dream house here on the lake in East Tennessee a few years ago. They've relocated from another state. You know, if you've ever remodeled a home, you know that one project turns into five, and pretty soon the whole house feels like it needs to be uh rebuilt. Uh that's a little bit how this situation has gone. They've already redone almost everything. There's three major projects that have to be completed. There's a$50,000 concrete job that needs to be done. They already have a quote on that for that$50,000. They need a new roof, and then they need new exterior siding. And these are not small cosmetic fixes, obviously. They're they're big, they're stressful, they cost a lot of money, but they need to be done. The house was in in rough shape, and these projects need to be done so that we can get them out of the reconstruction phase that they've been in the last three to four years and move them into a phase of enjoying the simple pleasures of life, enjoying their home on the lake, their pontoon rides, uh, the things that they bought the house for. So, what's adding to the pressure is they owe$13,000 on a pontoon. Their son is now driving, and so they purchased him a car for$15,000, and they uh also bought a new car a couple years ago. So they owe$40,000 on a Tahoe. So, together, between the the small debt and these big home projects, they have is kind of a perfect storm. They have high savings. I wouldn't say high debt, they have some some moderate debt, but it feels really mounting with the with the home projects together. And so they're in a cash flow crunch and they're exhausted. They're just emotionally and mentally exhausted with what do we do? So when we met this week in the office, we had uh a long conversation, and they kind of the thing that they said to me that stuck out was, we we feel like we're doing everything right, but it just feels stressful. And that's what happens with many families we work with. They're there it's not that they're irresponsible, it's not that they're really living above their means, it's not that they're overspending on you know too many pumpkin spice lattes or you know, trivial things. It's just life and things have piled up and you know these extra obligations, and and it's it's normal. We all have these circumstances. And so it's it's easy for emotionally to kind of get bogged down and just wonder, you know, what's happening. So what we decided to do is kind of pull back the curtains and and kind of reassess how we can come back and and create a plan, not the big are you on track to retire plan, but in the weeds, X's and O's, what can we do to kind of get out of this over the next little bit? And so the good news is they don't have to overhaul their life, they don't need to sell the house, they don't need to panic, they just need to free up some cash flow. So we made one strategic adjustment. Instead of contributing 15% to the 41K, let's reduce the 401k contributions down to 10. And here's why. Because you've already amassed$1.4 million saved, they're still gonna be contributing 10% of their salary, so they're still gonna be contributing a nice little nest egg. They don't plan to retire for 10 or 12 more years. So with their additional savings of 10% plus what they've already saved, they're still gonna have a really, really nice nest egg coming over the next couple of years. And this small tweak over the next 12 to 18 months are about reducing stress, not maximizing contribution. So this 5% shift creates meaningful breathing room for them today, and then you know, 24, 36 months, whatever it takes, we can readjust and go back to 15% if they want. Reality is we'll probably sit down at that time and then determine, okay, where do we go from here? But what we again, what we wanted to do was create this shift to give them a little bit of breathing room and some direction on how do we just kind of move forward and get out of this stuck. So from there, what we did was we talked about um the debt snowball. I'm a big Dave Ramsey debt snowball fan, and I think this is perfect. So what we've decided to do is once we reduce the 5% shift from 1k, we go from 15% down to 10%, we take that additional 5%, which is gonna work out to be um about an additional$500 paycheck. It's gonna be a nice little uh a nice little contribution into their cash flow. We're gonna apply that to the the payment. And what we're gonna do is we're gonna line these up from smallest debt to largest. Pontoon at$13,000, Sun's car at$15,000, Tahoe at$40,000. Those are the three debts we're trying to chip away. We're gonna add the extra$500 to the pontoon, along with the additional payment you're already paying for the pontoon, and we are going to not get that knocked out over the next six or eight months. In the meantime, we're still making the minimum payment on the Sun's car and the Tahoe. Once the pontoon is paid for, we're gonna take that money and apply the pontoon payment plus the$500 plus the son's car payment together to get the son's car paid for. So we're adding even more money towards that. Once the sun's car is paid for, we take all the money we've allocated to the pontoon, the pontoon payment, the extra$500, the son's car payment, throw that also at the Tahoe payment, and this quickly gets paid off, probably over the next 18 months or so, plus or minus. And and we do the debt snowball because we want these quick wins. The momentum builds, and that momentum matters, and so that creates the the drive to continue pushing on and getting these paid down. So with these three debts gone, we have cash flow back into our pocket, probably a thousand dollars or more by the time we count you know, the three of these debts together. That's huge. An additional thousand dollars that gives them more clarity, less pressure, you know, reduces the emotional burden. They're probably sleeping better. There's lots of benefits here. And then the magic part is once the debt is gone, we pivot that same payment stream forward and apply it to the home remodel. So now we start attacking the concrete job, the roof, the siding. There are places we could pull some money from, but we don't really want to try to pull any money if we don't have to. So what we're gonna do is just continue applying that cash flow to getting some of these projects done and without necessarily having to take on um new loans. So this is kind of a real-world strategy on how we're how we're making small tweaks to your plan. They don't have to derail the plan, they don't have to assume that you're not successful because you make these tweaks. This is part of how we provide advice and guidance to people who just feel stuck. They don't know where to go, they don't know who to turn to, they don't know what to do, they're just kind of stuck in their own head. And so, you know, I guess what I would say is they didn't move to the water, to the lake to enjoy those beautiful sunsets on the pontoon ride to be stressed. They moved there to create memories. And what we want to do is enable and help those memories come to fruition. And so once we clean up this debt, add the cash flow back in, they're gonna be in a really, really nice situation where they can do that without sacrificing their long-term retirement objectives. So if you are listening and you're saving and cash flow feels tight and you're not sure what to do, retirement, you know, what I want you to remember is retirement planning isn't just about the future, it's also about you know reducing stress today and enjoying the ride and and you know, smelling the fresh air and looking out the windows and and and just kind of enjoying the process, not so much the destination. The destination's important, but enjoy the ride. And sometimes these small adjustments like shifting how much you save and how you allocate your cash flow can make a huge difference. If you're not sure, you're stuck, you're overwhelmed. Let's talk. You can schedule that free consultation over at paradigmwealthpartners.com. If you're not a client, if you're already a client, you can go to the same place, paradigmwealthpartners.com, and schedule a time to meet with us. You can email our staff, have a time scheduled to meet with you to review your plan and how we can help kind of get you over those humps that come up seemingly out of nowhere. Thanks for listening. If you haven't already subscribed to the podcast, please do so. And until next time, take a deep breath. You're closer to clarity than you think. Be confident in your retirement, have a wonderful day. Thanks for joining me on another episode of What the Wealth. If you enjoyed the episode today, smash that subscribe button. It helps me more than you think. Also, if you found this episode insightful and a light bulb went off, share it. Your friend, Aunt Judy, the random guy in the office who's always talking about investment. Wealth isn't about just the chip chain. It's about our choices, chances, and changing our financial features. The information in this podcast is informational and general in nature and does not take into consideration the listener's personal circumstances. This podcast is not intended to be a substitute for specific in financial, legal, or tax advice. You should consult the approved qualified professional prior to making a final decision. Security is offered through LPL Financial, member FINRA SIPC. Paradigm Wealth Partners is the other business name for Independent Advisor Alliance. Investment Advice offered through Independent Advisor Alliance, a registered investment advisor, Independent Advisor Alliance, and Paradigm Wealth Partners are separate entities from LPL Financial.