In this episode of the Secure Your Retirement Podcast, Radon Stancil and Murs Tariq continue their discussion from Episode 292 on How to Retire at 62. In this follow-up, they welcome their team member, Taylor Wolverton, to dive into the numbers of a real-world retirement financial plan. Together, they walk through detailed retirement scenarios for someone looking to retire at 62, highlighting critical strategies to ensure a secure and sustainable retirement. From income and expenses to Social Security at 62 and withdrawals, they leave no stone unturned.

Listen in to learn about how to build a financial plan that works for you, even when unexpected scenarios arise. You’ll also gain insight into why retirement planning at 62 requires more than simple calculations and how ongoing adjustments can help you retire comfortably and with peace of mind.

In this episode, find out:

·      How much you need to retire at 62 and why a conservative approach matters

·      A step-by-step breakdown of Social Security income strategies for early retirees

·      How inflation impacts retirement expenses and why planning for it is crucial

·      Key insights into 401k withdrawal strategies and cash flow sustainability

·      Why a flexible and evolving retirement financial plan is essential

Tweetable Quotes:

·      “Retirement planning isn’t about a one-time decision; it’s about creating a flexible, evolving plan that adapts to life changes.” - Radon Stancil

·      “The key to retiring at 62 is understanding your numbers and having a solid plan to sustain your lifestyle long-term.” - Murs Tariq

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.

Welcome everyone to Secure Retirement Podcast and today we're excited. We've got Taylor Wolverton with us. She is been on a few episodes when we get into some of the things around taxes and financial planning. And so she's here today to walk us through a financial plan. But let me kind of set this up as to what we're going to talk about two episodes ago, which was episode 2 92. We had this statement or title and it was How to Retire at age 62 in 2026. And if you go back, if you did not listen to that, if you listen to that one, me and I walked through somebody sitting in the office and saying, I want to retire in 2026, January, 2026, and I'm going to be 62, what do I need to have? And we went through all the different things that we would need to gather from the person in order to be able to make some decisions.

And then what we told you was is that we were going to come back with another episode and we're going to walk you through all the numbers. So here's our setup. Our setup is this. We got all the numbers and we've named our person and everything. Her name is Cindy Martinson. And Cindy has sent us all of her data and we now have gave that to Taylor. Taylor has now put it into the financial plan. And in this setting, what I want you to imagine is now you're getting to listen as to how this meeting with Cindy is going to go. And so to give you, remember now she's 61, she's a professional, so she has a good income, she's been a good saver when it comes to 401k and we're trying to figure out what's this going to look like of her retiring in one year from really now. So the way that meeting would really go is if you were sitting in that meeting, if it were with me or if it with Murs, we at this point would turn it over to Taylor and say, Taylor, could you start walking us through the financial plan? So that's exactly what we're going to do right now and we're going to turn it over to you Taylor and let you share all the details.

Sounds good to me. All right, so first we're going to start with looking at Cindy's current income. So first thing I'll mention here, we're looking at my screen right now for Cindy's salary, we have her currently earning $200,000 a year and that is gross before any taxes are taken out. Before any 401k contributions or anything like that. We have a note here also for Cindy's social security. This is going to start when Cindy does retire right now we have that at age 62 in 2026, so we're planning for that as well. And right now we have that Cindy's expenses each month are $6,000 for her assets. We have that her cash savings in the bank is around $50,000 balance right now. And then we also have her 401k balance at about a million dollars as well as a brokerage account with a balance of 200,000. So with that information for the inputs, we will move over here to the long-term analysis.

So what we're looking at here on the screen on this is that we basically now have all this data coming in and at this point what we would do is walk through the cash flows. So what we're really trying to identify here is when she's going to retire. And so what you'll see on the screen here, 2025, she's working. So she has that 200,000 that's going to be coming in. So that all works nicely, but let's go down and look at 2026. So can you open up income flows there for us, Taylor? So what you're going to see here is that she has a partial year, I'm sorry, what month do we have her retiring?

We have her retiring in June of 2026.

Alright, so she's got a part of the year, so that's why she has a salary. So she's got 83,000 that she earns because she worked until June and then she's going to start taking social security for the rest of the year. So she gets 13,000 for the rest of the year. And what you'll see is you get a clear picture of what her social security is projected to be as in 2027, that's when she gets all of her social security for the year. So she's going to get $27,097 a year for social security that's going to be coming in. So that helps you to see the flow there of income. Now what you'll notice is if you're looking here that $27,097, we do not inflate with a cost of living adjustment with our plans for the most part to make them conservative. We go down the assumption, what if you do not? What if the social security, you never get a coastal living. Now we could argue all day long whether or not that's reality and we don't know. All I'm trying to do is make this plan conservative. If social security goes up, great, it's all gravy in the plan. But for this part of the plan we're going to say it does not. Let's go back. Now,

Another comment I would like to make on social security is if you're listening to this and you're saying, oh, she's starting social security at 62, I have heard you need to wait till full retirement age or I have heard you need to wait till 70. Well that's analysis that we absolutely take into consideration for Cindy in this scenario. It makes sense for her to take it at 62 for someone else. It can make perfect sense to wait and take from other assets. It all just depends on plans and what goals are and strategies and where money's coming from. So I wanted to clarify that, that it's not, hey, if you retire early, you take social security early. It's if you retire early, let's build a plan around what you need for your plan to be functional and successful.

Okay, excellent. Good point. So let's open up expenses and what you'll see here is that what we're saying is that Cindy wanted $6,000 a month, but what you'll notice is that in year one, and let's go down to 62, in 2026, since she's going to need $74,160 the next year she needs 76,385. Why is it going up? Well, because there's inflation and we're building in an inflation factor here of around 3% that's going to go up. So when you go all the way down to say age 71, you'll see us growing to 96,000. All that is is just inflation. So we are building into the plan that says we're going to need more money every year to keep up with our cost of living because of that inflation. So let's go back and look at our summary and now in our summary what we're also seeing, there's a tax column. We're not going to go through all the details there, just want you to know that we are figuring tax in this particular scenario and then we're going to now say, okay, we've got all this running and all this is now feeding into the overall plan. What we're trying to figure out, are we going to be okay? Are we going to run out of money? So let's go now, look at our balances. You want to take this over Murs?

Yeah, sure. And remember, she's 61 right now goal of retiring next year. We know that she's done a good job of saving. You see on the very first slide, her beginning balance is that million in the 401k plus some cash plus the brokerage account, the taxable account by the end of the year. Then we're looking at 2025 By the end of the year, we assume that that money is going to make some money if it's properly invested. So we assume a rate of return by the end of the year it's grown to about 1,300,000. This type of formulation is going to happen every single year, but in the next year and at 62 she retired. So she walks it to retirement with about 1,300,000 to work with. And now this column of net cash flows is rather important. This column of net cash flows is well, are we positive or negative on how are we withdrawing on our bucket of money that we have to work with, but also our money is still making money at it's earning but we're drawing on it.

You'll see the first year because it's a partial year in 2026 and net cash flows around 6,000. But then we get into the reality of what her retirement's going to look like going forward. And you'll see if you go down one line, 51,000, 53,000, 54,000, this is what the portfolio has to generate for her to live comfortably with her expenses, taxes, she's got some money coming in from social security, but clearly that's not covering everything. So the big question that everyone has is based off of how I withdraw and based off of what I have coming in the door, does my portfolio sustain my withdrawal rate? So we like to answer that by looking at the column on the very far right and saying, Hey, in general, are we going up? Are we going down? Are we maintaining? In her case, you'll see her withdrawals, her net cash flows continue to go up, but her balance is because of how her withdrawals are relative to her assets, it looks pretty good.

So as Taylor starts to scroll down a little bit, we like to take a gauge of an age. We'll go to age 90 and at age 90 we do see a turnaround. At age 90, we'll see that her assets starting retirement at about 1,300,000. At age 90 we're around 933,000. So we've gone backwards a little bit. That's completely fine. It really comes down to a comfort as far as how much risk we want to take on the portfolio from a withdrawal perspective. So in general, this plan looks really good. Now if something popped up here on this page at age 73 for her, and so let's go back up there, you may be thinking, or sorry, 75 for her, she's of that age where 75 is where this applies. You may be thinking, well what about required minimum distributions? I've heard about this. I have friends that are complaining about this, that the government's going to force me to take withdrawals.

Are you guys thinking about this? And absolutely the software does factor in that at age 75 you enter into required minimum distribution, which means you are forced to start withdrawing on your pre-tax or your IRA 401k type assets. All I want you to see here is that it is in the plan, that plan distribution column that popped up and now for a long time it was zeros when she turned 75. Now we've got formulaically dollars coming out of specific types of accounts to cover that requirement by the IRS. All of that's working together and the plan looks pretty good.

So one thing I think, I don't know if we said this or not, but just as sometimes people want to know, well, what kind of rate of return are we using on the portfolio? Again, we like to make our plans conservative. So our plan right now is only figuring in that we make around a 6% net rate of return. I say net, which is after fees. So we're saying, Hey, that we've got inflation built in, we've got a conservative rate of return, we have no cost of living on social security. So this is a conservative plan. That's the way we want to do it. But now remember, go back and look at age 90. At age 90 her assets were growing and then they pulled back and they came down to this idea of now they're 933,000. So she could look at this and go, man, I don't like seeing that account go down that way.

And that bothers me. What could I do? So what we're going to do now is if we were sitting in this meeting, we would basically go right through this scenario. So imagine now the person says, I just want to leave this stressful corporate job that I'm in, but what if I go work? Well, we can very quickly go over and Taylor's going to go back and she's going to go in here and we're going to run another scenario. So in this scenario, what we're going to say is, is that Cindy says, you know what? I'm still going to leave this corporate job that's stressing me out in 2026, but I'm going to work part-time until I'm 65. And so in this thing, we had a question and answer back and forth with her. She feels like she can actually generate $50,000 working. Maybe she's going to do some consulting, it doesn't matter.

She said she feels like she can make $50,000 a year. Now what we're going to do since she's going to make 50,000 is now we're going to delay social security and we're going to say that she doesn't take social security until she fully retires at age 65. So that's going to give her a little bit more. So all we need to do now is go look at this particular plan. We're going to say, well what did it do? And so if you go back to cash flows, which is and is what's how we would take her back through this, what we're going to see here is when we go look at income is that her social security actually is now coming in later. She's got that $50,000 a year coming in until she's 65. She then retires at 65 and now social security, if you remember before it was around 27,000.

Now it's $33,548. So now just those two factors of changing, what does now her balance look like at age 90? That's the way we do this. We're always referencing that as a benchmark. So go back and we're going to go look at age 90 and remember it was 933,000. So making that little change, now it's 1,465,000 right? Still fell a little bit off of its top, but I started retirement with 1,200,000. Now I've got 1,400,000. Now she goes, man, this makes me feel a lot better. I'm going to see what I can do about working part-time when I, when I fully retire in June of 2026. Now I want you to know that if this were a real case and we were sending her home, Taylor's now going to send her a link. She's going to have this as a live retirement focused financial plan.

She's going to have her own live dashboard. She can actually run her own scenarios, be able to go back and forth and say, well, what if I did this? What if I did that? She's able to run all those scenarios because another scenario could be is what if she decides what if I just want to work one more year and I don't retire in June of 26, I make it to June of 27. Well, with this particular program that we have, she can do that very easily so that she can walk herself through all these scenarios. This is a planning tool that is absolutely essential if you're thinking about retirement. Anything we miss at all here? Me, anything?

No, I think I would say that these plans that we build, they are not set in stone. Life changes. We realize that job changes, goals change, and so we want the ability to adapt. So part of our process is having annual financial planning strategy meetings that catch us up to date as far as what the client is thinking. I was thinking about retiring come January of 2026, job changed. I moved within the company and now I'm happy again and I could see myself working at that place till 65 or I found that part-time job and I did it for six months, realized that this is not going to work out for me. Can I retire now? So the plan we believe is always evolving and that there should be flexibility in it and that's our job is to help someone adapt based off the change. So it's an ongoing process and needs annual maintenance.

Alright, well thank you very much Taylor for hopping on here with us and welcome folks. You're welcome.