Jim Dahle and Joe identify four life moments that make retirement easier: paying off your mortgage, kids finishing college, hitting Social Security eligibility, and qualifying for Medicare. Each milestone removes a major expense or adds income, shifting what retirement actually costs.
We're going to talk about something special today.
We're going to talk about four times in your financial life when retirement might.
Be a little bit easier. And the reason why isn't necessarily because you're making more or you have more.
Income or anything like that.
It is that your expenses go down at these four periods of time in life. And the first one, hopefully the first one, although it could be the last one because there's no real age on this one, is paying off your mortgage and just getting rid of this big rock in your budget can reduce your expenses so much that all of a sudden retirement becomes possible on whatever you have as a nest egg.
To that point, whether you pay off.
Your mortgage at 45 or 50 or 55 or whatever, that is a time when people start going, this might actually be possible. So I encourage people to find a.
Way to pay off their mortgage, you.
Know, in some period of time shorter than 30 years after buying the home.
That might involve getting a 15 year mortgage.
It might just involve making extra payments toward the mortgage, whatever.
But that's the time when people go.
Hmm, this might actually happen. Another big transition point is when your kids get done with college, right? A lot of us are cash flowing their college or we're saving up for college. Well, once they're out and they're kind of out of the house and on.
Their own, you know, you've taken them.
Off the family payroll, if you will, all of a sudden it frees up.
A lot of income for you and you don't need as much income from your portfolio in order to be financially independent. Now that's often a time in, you know, depending on when you had the kids, that might be sometime in your early 50s is probably the most common time period. Although for some of us that can be pushed back into late 50s or even early 60s.
Another big transition point happens between age 62 and 70, right?
And you guys know what this is, right? This is Social Security.
All of a sudden, at 62, you.
Become eligible for this additional income.
And that additional income may push you into financial independence. Now, the right answer for most people is to delay that until 70. But even so, even if it comes at 70, you know, it's substantially bigger.
Than it would have been at 62. That in a lot of ways can make up for, you know, a smaller nest egg. And all of a sudden now you do have enough that you don't have to work anymore.
The other big data is at age 65, right?
At age 65, you become eligible for Medicare.
Now Medicare isn't free.
You generally have to buy Medicare B or Medicare D. But compared to what.
A lot of us have been paying for health insurance or paying via our employers for health insurance, it's usually a pretty substantial discount.
And that reduced expenses can often make you financially independent and able to retire.
Now, one point that you might think.
In life when you might be more likely to be able to retire is.
After a big run up in the.
Stock market and all of a sudden your investments are now worth more than they have been.
But you have to be a little.
Bit careful about that.
You know, it's really the same thing whether you have a lot of assets with lower future expected returns or whether you have fewer assets with higher future expected returns.
And so when the stock market goes up, you're trading one of those for.
The other and the stock market goes down vice versa.
So I wouldn't necessarily say that in the, in the midst of the world's.
Biggest bull market is a transition when.
You ought to consider retirement. Really, that decision probably, probably ought to be more predicated on other things than just where we are in the market cycle.
Obviously, if we're in the depths of a nasty bear and you happen to.
Have enough to retire, you're probably going to be just fine. But I think people think about it a whole lot more after a big run up in stocks, and that might be a mistake.
The hosts of the White Coat Investor are not licensed accountants, attorneys, or financial advisors. This podcast is for your entertainment and information only. It should not be considered professional or personalized financial advice. You should consult the appropriate professional for specific advice relating to your situation.
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