A Real-Life Early Retirement Plan Under Pressure (130)

A retirement plan can look flawless on paper and still feel wrong the moment real life changes. We start with Tom and Janet, a couple with a paid-off home, no debt, and a strong nest egg, who originally planned to work a few more years and claim Social Security at 67. The numbers checked out. The stress tests looked great. Then Janet hit burnout and gave herself two days to confirm whether walking away from work was actually possible.

What reshaped everything was time. After Tom’s father was diagnosed with a terminal illness and passed sooner than expected, Tom stopped thinking of retirement as a date and started thinking of it as a limited window of health, energy, and freedom. We walk through how that mindset shift changes the goal of retirement planning, from chasing the biggest possible portfolio to building a sustainable retirement income plan that supports a life you love.

In this episode I break down the key retirement planning levers in plain language: How their net worth and investable assets fund retirement, what a Monte Carlo probability of success really tells you, how retiring at 61 compares with waiting until 67, and how Social Security timing at 62 versus full retirement age affects the plan. We also discuss the practical realities people forget to model, like spending more in the early active years and covering healthcare costs before Medicare.

If you’re exploring early retirement, worried about running out of money, or stuck chasing “perfect” certainty, this conversation will help you think more clearly about tradeoffs and choices. 

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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

Transcript

A Plan That Looked Perfect

SPEAKER_00 0:04

About a year ago, Tom and Janet came into my office to build their retirement plan. At the time, everything was pretty straightforward. Janet wanted to work three more years, Tom would work seven more years, both claimed Social Security at age 67. They had about 1.6, 1.55, 1.6 million saved in retirement at that time. Their home was paid off, they had no debt, and they wanted to spend roughly $72,000 a year in retirement. So we built the plan, we stress tested it, we ran multiple scenarios, and everything looked good for Tom and Janet. Problem solved. Or so we thought.

Burnout Forces A New Deadline

SPEAKER_00 0:56

She wasn't sick, she wasn't injured, she was just simply tired, tired of her employer demanding more and more from her and not showing up to support her the same way she was showing up day in and day out to support. In fact, they were asking her to get additional credentials and learn new systems and softwares, which is fine. She didn't want to continue to pour into them when they weren't going to continue to pour into her. So we met on a Wednesday, and she told me, you know, Jonathan, I want to meet and review this plan because Friday is my last day. We had two days to review this to confirm or figure out if this was even feasible. But what happened next really uh kind of shook the room and made us all uh realize that uh ultimately our time is finite.

Grief Turns Time Into The Asset

SPEAKER_00 2:00

Tom, her husband, Janet's husband, shared that uh his father had been recently diagnosed with a terminal illness, and they thought they had more time with him, but things uh changed quickly, and and Tom's father had passed away in his early 80s. And so for the first time, Tom had started questioning whether working an additional seven years was really what he wanted. Um he he actually said to me, you know, when when when my father passed uh at 81 and me at 60, I was just concerned, you know, how much time do I really have? And if I you know work seven more years, I'm I'm losing seven more years of my retirement that I could be doing the things that he loved. So he was starting to really internalize, you know, time being his biggest asset, and does it make sense to continue working if the numbers can work out today? He had already actually built his dream garage on the back side of his property. He wanted to tinker on cars, he's a self-proclaimed gearhead, and so he wanted to be under the hood and and and tinkering and and you know have the ability to do the things and the hobbies that he loves, and then also spend time traveling and doing the things that Janet loves and then doing those together. So you know, just suddenly found himself wondering what if I'm spending some of my best years preparing for retirement instead of actually living it. Now, the retirement plan we built a year ago didn't uh quite feel so perfect anymore. In fact, we're we're we're I actually had kind of done a 180, like we're we're over it. We we want to retire if the plan says we can retire. So, what I want to do today is kind of pull up the original plan uh that and so you can see it, um, and then show you and walk through what we've done to kind of show, you know, can retirement be successful today at 67 and 60, and uh how can we continue to provide them the clarity and confidence they need in uh in their you know financial planning, their retirement plan, their income plan. Uh what I'll say is we've changed their names. Their names are not actually Tom and Janet. We do that for uh clarity and protection, and we've changed a little bit of the scenarios again to protect them. So uh, you know, you could consider this a hypothetical uh case study, but this has come from real conversations with people where we are kind of displaying to them how can we take your nest egg today, provide that retirement paycheck, and let you retire early so that you can live and create the life you love. We'll answer these questions, we'll walk through, and what we want to do is make sure we point these out so that you're you can be thinking about how do you optimize your money and your life so that you can create the life and retirement that you love.

The Numbers Behind Their Retirement

SPEAKER_00 5:25

And by the way, if we're meeting for the first time, I'm Jonathan Bedner, certified financial planner, co-owner of Paradigm Health Partners in Knoxville, Tennessee. And we help individuals and families build retirement plans designed around their life. And we believe time is your biggest asset. And so we're not trying to just grow the biggest portfolio, we're trying to create a life that you love, full of experiences and hobbies and uh traveling, doing things with your friends and family. So, with all that said, let's dive into Tom and Janet's original retirement plan and let's see what changed. All right, so now we're gonna dive into uh the planning part of Tom and Janet Joan, uh, excuse me, Tom and Janet Davis. We're gonna kind of just walk through kind of the base facts of what they originally were planning for, and then I'm gonna walk through and show you the we're ready to retire today scenario. So I'm gonna run through these facts real quick. Net worth today is about $1.7 million, investable assets of $1.2 million. So there's roughly $480,000, $500,000 in equity in the house here, and that leaves them $1.2 million in retirement accounts. So that's what we're trying to look at for funding their retirement. So uh Tom is 60, Janet is uh 65. We are looking at uh retiring uh you know, really uh today, walking away from retirement, uh Janet to retire uh effective immediately. Tom uh the original plan was for him to work 67, and uh what we're going to do is actually kind of show you uh he is going to finish out the remainder of 2026 and maybe some of the first quarter. So he's 60 today, he'll be 61 in October, and so we're gonna show him essentially working for you know kind of nine more months. But what does it look like to retire at 61 versus continuing to work till 67? Um, net worth, uh, there's some Afflex stock, they have a joint account worth about 440. There's some Pepsi stock. Janet has her current 401k, there's an IRA, Tom has his current 401k, and then Tom has his IRA that leaves uh their primary house, their only home, their only rental, uh not rental, their only um real estate asset is their home at $482,000. Current income today, Janet makes about $87,000. Tom makes about $168, uh if Tom goes till $67, his Social Security will be $46,000. Janet Social Security uh at $67,000 would be $29,000. Current expenses are $72,000. They're in Tennessee. Tennessee has no state income tax, they would still be due federal income tax uh if that applies to them. So they have a really simple uh life uh expenses, there's not a lot of expenses, they have no debt, that's they're in really good shape from that standpoint. They are contributing to their current plans. Um, what I want to do is just kind of I want to show you those facts, and then what I want to do is kind of show you where they were projecting when we started this plan a year ago, so that you can see how would that map out for them uh if they chose to you know retire and leave their current plan in place under their current trajectory.

Early Retirement Scenarios And Odds

SPEAKER_00 9:10

You can see that from a linear standpoint, we're projecting them to live to uh to 95. And so here we have uh Janet's retirement, which is next year in 2027, and we have Tom's retirement scheduled for 2032 when he is 67. So you can see assets steadily grow. Um their uh Monte Carlo score, which is you know kind of probability of success, shows really, really high. They have a 99% probability of success. So all of these things look good if they continue on their current plan of retiring at 67, turning on Social Security at 67. But if I remind you, their plans have changed. You know, Janet is ready to go, she's ready to hang it up. Um in fact, again, when we met on that Wednesday, she said Friday's my last day. She's over it, she can't handle it. And then with Tom's health scare or Tom's dad's health scare, and then Tom just realizing that you know he doesn't want to give up seven more years of his life, he too, in fact, is burnout and he's ready to go. So we have looked at how can we hang this up today? How can we go ahead and uh cash out of work and move into retirement? So we planned out kind of early retire, uh retire hooray is what I'm calling this scenario. And what we're gonna do is just kind of walk through uh a couple of situations so you can see this. So the first thing that we did was instead of both of them retiring at 67, uh what we did was we changed this for Tom to go ahead and finish out this year and retire when he's 61. And then we've got uh Janet also retiring at 67. So they're both essentially going to retire uh this year. Um and you can see that that has an impact in their overall plan. In fact, they've lost $2 million in net assets over the life of their plan by going ahead and retiring now instead of working another couple of years. Right out of the gate, what we want to see is how does this impact us? Because we were at a 99% probability of success. If they retire now and do nothing else, they're still at a 98% probability of success. So they could retire today, hang it up, put in their termination or their uh retirement notices to their employees and walk away, and their plan still looks really good. The next thing we talked about was go ahead and starting Tom's Social Security at 62 instead of waiting until 67. Uh Janet will go ahead and take hers at 67. And as you can see, their plan still looks really good. It's it's marginable, marginal impact on the overall success of their plan by going ahead and retiring now. They'll use their portfolio to go ahead and provide income for the year that Tom is going to retire from 61 to 62 and then turn Social Security on at 62. But overall, they're in a really good position to do so, and their probability of success remains

Stop Chasing Perfection With Money

SPEAKER_00 12:45

strong. From there, what we want to do is realize that time is your biggest asset. We cannot let me switch this to average market. A lot of times that's just easier to kind of uh see. Markets don't go straight up in a straight line. They ebb and they flow. Uh sometimes we have good markets, sometimes we have bad markets. So what what this is showing is kind of uh varying returns every year. From there, we're planning on $72,000 a year in living expenses. This plan is very successful at as it is today. If retiring early, starting Social Security essentially immediately, uh, or at 62, 67, they have a 97% probability of success. What we try to get people to understand as they are building out their lives and envisioning what that retirement looks like, we are not just trying to hit a number for the sake of hitting a number. You need to think about your retirement plan. In this case, Tom and Janet be thinking about their retirement plan so that they can plan for their life and their uh their retirement years, their golden years with sufficient money. But what a lot of times people look at these Monte Carlo plans and they want perfection. They want 97, 98, 99, 100% success because that feels good. Reality is, is if we are planning for this high of a number, then odds are we're gonna leave money on the table when they're both dead. And in this situation, at 95, there's $6.8 million. That's three or four times the amount of money they have today. Um, I guess pushing more than that, pushing five times the amount of money they have today in investable assets. And so if the goal is not to leave a huge lump sum to your kids, uh, and in this situation it's not, if there's money left over for their kids, fine. But the goal is not to leave a big pile of cash. They want to be able to help family along the way. They want to enjoy their life that they've created to this point. And so we don't need to be striving for a high probability of success. What we need to be doing is figuring out how we can go ahead and retire earlier, how can we start doing some more of the things we want to do? Travel, you know, buy a new uh Jeep to tinker on and to work on, uh, learn a new hobby. Uh we will have to pick up some healthcare expenses from uh 62 to 65 until Tom can get on, or 61 to 65, until Tom can get on Medicare.

Spending More And Covering Healthcare

SPEAKER_00 15:29

So what I did was I adjusted the living expenses here to go from $72,000 a year up to uh $90,000 a year in retirement. And so what we want to make sure we're fix uh factoring in is spending more of that money so we don't leave as much at the end of the plan, but also uh account for maybe some of the additional healthcare expenses we're gonna have for Tom's health insurance premiums that he's gonna have to cover, and then maybe any out-of-pocket expenses he may also have on top of that. So when we increase their spending from 72 to 90, they still have an 83% probability of success. And so, what I want to try to show you, and when I showed this to Tom and Janet, there was a big sense of relief. Janet was very concerned about how are we gonna make it? Now, am I gonna be okay? Uh is there enough money to last us our lifetimes? And obviously, there's gonna be some big uh impact decisions that get made, and your spending is gonna play a major role in this. I mean, if we're spending $150,000 a year, it's probably not gonna look as good. But you can have, you know, give yourself the permission to take a step back, you're in a much better uh situation than you think.

Permission To Retire While Healthy

SPEAKER_00 16:57

And the last video I did, I talked about the perfect age to retire uh might be 59 and a half, and that way you're not giving up some of those healthy years in retirement. And that's exactly what Tom and Janet have decided to do. Instead of chasing the next, you know, the next comma, the next big number in their net worth bucket, in their investable asset bucket, we're thinking about what's most important. And that is living a life today while they have their energy, their mobility, their health. And so that's exactly what we've been able to show them. And as an example, things that you should be thinking about when you're planning for your retirement. Can't take any of this money with you. You should be thinking about living a life that you love, creating the life that you love so that you can sustain your retirement and enjoy it. Be confident in your retirement. Have a wonderful day. Thanks for joining me on another episode of What the

Subscribe Share And Final Disclaimers

SPEAKER_00 18:03

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 investments. Wealth isn't about just the chip chain. It's about our choices, chances, and changing our financial futures. 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. Securities are 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 for LPL Financial.