Are you in your 50s, financially prepared, and eager to retire early—but unsure if you truly can? Join Rachael Van Pelt on Next Act Ninjas as she dives deep into the critical questions you must ask before taking the early retirement plunge. This episode explores the hidden factors influencing your retirement timing, from health and stress management to realistic financial independence numbers and strategic lifestyle adjustments. Discover whether downsizing, going part-time, or tapping into home equity could bridge your financial gaps, and how shifting your mindset from wealth accumulation to wealth spending can set you up for a fulfilling Next Act. Learn how to balance financial practicality with emotional readiness, ensuring your retirement years are vibrant, purposeful, and financially secure.
Are you in your 50s, financially prepared, and eager to retire early—but unsure if you truly can? Join Rachael Van Pelt on Next Act Ninjas as she dives deep into the critical questions you must ask before taking the early retirement plunge. This episode explores the hidden factors influencing your retirement timing, from health and stress management to realistic financial independence numbers and strategic lifestyle adjustments. Discover whether downsizing, going part-time, or tapping into home equity could bridge your financial gaps, and how shifting your mindset from wealth accumulation to wealth spending can set you up for a fulfilling Next Act. Learn how to balance financial practicality with emotional readiness, ensuring your retirement years are vibrant, purposeful, and financially secure.
Chapters
00:00 The Quest for Early Retirement
00:50 Why Retire Early?
04:01 Have You Reached Your Financial Independence (FI) Number?
05:28 What Do You Need to Do to Catch Up to FI?
08:10 What's Your Runway to Early Retirement?
08:51 One Man's Hybrid Approach to Early Retirement
10:52 Bridging the Gap to Age 59.5y
13:00 Mindset Shift for Retirement Lifestyle
15:03 Craft Your Early Retirement Plan
Hey, hey, welcome back to Next Act Ninjas, the go-to podcast for mastering your health and wealth longevity. I'm your host, Rachael Van Pelt. Today, we're going to address the question, can I retire yet? Because it's a topic that hits home for many of us. Specifically, we're going to address those of you who are in your 50s who have done everything right. You've diligently saved for retirement, you've built equity in your home, and are itching to retire maybe a decade earlier than the conventional age of 65 or 70. So this isn't a podcast for the 30- or 40-something-year-old FIRE crowd. This is for those of you who just want to retire at, 55 or 60 so that you can enjoy your freedom while you're still vibrant and energetic.
But let's start with the most important question. Why do you want to retire early? I mean, really dig deep. Is it urgent because health issues are knocking at the door? Is it escape from a soul-sucking job? Or just that itch for freedom to pursue your passions, to travel, or maybe even write that novel?
As a scientist who has studied health longevity for decades, I am a huge proponent of moving and shaking as long as possible. However, I question the narrative that we should all work as long as possible. I know the conventional view says that we should delay retirement for financial security, but Skeptical Me asks, well, what's the point if we're too worn out to enjoy it when we finally do retire? Research shows that chronic stress from hated jobs can accelerate biomarkers of aging, like telomere shortening. The question is, should we retire early or maybe even switch to something else that we love that will buy us more years of joy?
Government policies keep pushing retirement age later and later, from age 62, then to 65, then to 70, and they cite increasing lifespan. But we all know that expecting Americans to work to age 70 has nothing to do with better lifespan. It's about propping up social security. And besides, average lifespan may be increasing, but healthspan hasn't kept pace. Which means true vitality still plateaus around age 60 to 65 without intervention.
Clearly we want to extend healthspan regardless of when we retire. by strength training, eating anti-inflammatory foods, improving sleep, managing stress. When we give attention to those four pillars of health, we can definitely extend the number of fun years that we have left. But that said, we don't want to take for granted that we're going to stay healthy forever, do we?
So I want to get back to your "why". Why do you want to retire sooner than later? Is it your health? A challenging job situation? Or maybe it's simply the allure of freedom, the chance to pursue your passion. Getting crystal clear about what your motivation really is is going to tell you what strategy is going to be best for you.
If you've grown to dread Mondays, you're burned out, and retirement just can't come soon enough, escapism may be what's driving you. In that case, you're going to want to start asking questions like, "How much of this is about retirement and how much is actually just work stress". Ask yourself, "Would I be happy working longer if I found a more fulfilling work environment or just drop to part time? Those are the kind of questions that are really going to help you get clear on next steps.
Alternatively, if health concerns are what's nudging you towards early retirement, ask yourself, "What if improving my health would prolong my career? Would that change when I retire"? These aren't just rhetorical questions. They're essential if you want some strategic clarity. I think it's a good idea to be sure that you're not simply making a knee-jerk decision to retire if there are other factors like stress or health that are easily modifiable and could give you more runway should you need it.
Once you're clear on your "why", then it's time to look at your numbers. Do you know your financial independence numbers? Your FI number? That's the amount you need saved for retirement based on the standard 4% withdrawal rate. Typically, this figure is calculated as 25 times your annual living expenses. So if you currently spend $80K per year, your FI number is $2M, excluding your primary residence if you plan to live there during retirement.
Why do we exclude the house? That's because if you're not selling, it's not liquid for withdrawals, is it? Now there are ways that you can tap into that equity in retirement using HELOCs or reverse mortgages, but for the sake of today's discussion, we'll think of your primary residence as an emergency fund, not really a part of your FI number.
When you think about living expenses, don't forget to consider how that could change in retirement. I think many people assume the costs of living are going to decrease, but realistically, healthcare and leisure and travel and hobbies, all of those things can actually increase your expenditures. Have you factored those into your FI number? I think it's wise to anticipate and budget for lifestyle inflation.
If you haven't already, take a moment to do the math. Multiply your living expenses times 25. Are you there yet? Does your net worth, not including your primary residence, meet or exceed your FI number? If you're not quite there yet, what's the gap? What will it take to catch you up?
Say that you're sitting on $1.5M in retirement savings, but your financial independence number is $2M. Could you realistically bridge that $500K gap by working a few more years, continuing to grow that portfolio? Obviously, we aren't talking about wishful thinking here. I mean, does the math work out as long as you keep taking disciplined action.
The conventional approach to catch up to FI for most people is to work a few more years, maxing out contributions to 401ks and then letting that compound growth do the heavy lifting. An average 7% return, delaying withdrawals for 3 to 5 years, that could close that $500,000 gap. An alternative approach to catch up to FI would be to radically slash your living expenses. In this example scenario, that would mean reducing annual expenses from $80,000 per year to $60,000 per year. If you can live on $60K per year, your FI number shrinks from $2M to $1.5M. And now you've got an instant match, don't you? You can retire immediately.
But how would you do that? How would you bring down your cost of living so much? Is downsizing an option? I think this is often the go-to strategy for most people to close that financial gap. But you don't want to assume that downsizing is automatically going to solve your shortfall. Conventional wisdom says to sell the big house, buy smaller, pocket the equity, lower your cost.
For example, eliminating a $1,700 monthly mortgage, that would save you roughly $20,000 annually, but only if you can purchase that downsized home outright. That means having enough equity in your current home and moving to a place that you can afford to pay cash for the next home. For many people, that means making a significant geographic move or a major lifestyle adjustment. So ask yourself honestly, is that the retirement that you envision.
As a Realtor who specializes in transitions, I have seen it work time and time again. Clients downsizing from say a large suburban mansion to a retirement community townhome. That can often free up $15K to $25K per year. But uprooting your life isn't trivial. If you're attached to your current community and you're going to have trouble cultivating new social connections in a new community, that can lead to social isolation, loneliness, and accelerated cognitive decline. So you want to balance the social and emotional aspects of moving with the financial benefits of downsizing.
That said, once you've clarified your "why", you know your numbers, I want you to start thinking timeline. What's your runway? Do you desperately need to retire now or can you manage another three, five, or even 10 years? Each year you continue to work significantly impacts your retirement fund's longevity. So figure out if getting on top of your health or managing stress is going to buy you a few more years. Is going part time an option? Even just a few more years working part-time can considerably ease the financial strain on your nest egg. It buys you time to proactively prepare for retirement.
That's what one of my clients did. At the age of 53, Jake was exhausted from his high stress corporate job and he was already considering early retirement. He and his wife had done a great job of saving. They had about $1.8M in their retirement account. But they were shy of the $2M FI goal. Jake's initial thought was to retire immediately and drastically downsize their lifestyle. He'd even started shopping for properties in states with much lower cost of living, where they could downsize to. But the problem was they liked their home. They weren't ready to shrink their lifestyle. And, upon deeper reflection, Jake realized his knee-jerk decision was primarily driven by stress and burnout, not careful financial strategy. It was reactive, not proactive.
Once he shifted his perspective, Jake decided his first priority was just to get on top of his health and reduce stress so that he could keep earning a bit longer. So that's what he did. That's what we worked on initially. As his coach, I helped him get back in shape, start sleeping better, eating better, and of course, managing his stress. And once burnout was no longer a major driver of his desire to leave corporate America, he discovered the superpower of patience. That allowed him to extend his runway just enough.
And we're not talking a long time either. It was just a year of focusing on his health. And then he shifted to working part-time for another year. That strategy allowed him and his wife to grow their retirement portfolio by an additional $230K in just 2.5 years. That easily surpassed their original goal. Meanwhile, they continued to proactively plan for their retirement transition.
They're still considering a move, but now they're being proactive, not reactive, which is key, isn't it? We rarely make the best financial decisions when we're reacting. That's why we're walking through this thought exercise today.
So let's get back to that timeline and a few of the practical nuts and bolts that you want to consider if you're going to retire early. And by early, I mean before the age of 59.5y Why that age? It's because the IRS, penalizes people for early withdrawals from their 401k or their traditional IRA. If you're going to be younger than 59.5y, withdrawing money from those accounts is going to cost you an extra 10% penalty on top of your regular taxes.
So let's say you want to retire at age 55 and there's a 4.5 year gap. Ideally, you want to bridge that gap with some other after-tax investment or Roth account so you can avoid that 10% early withdrawal penalty. Now if you don't have a Roth or other after-tax brokerage account, you're going to need to determine whether you have another source of income to support you until you reach that age. For example, maybe you have cash flow from a rental property. If not, maybe you wait to retire until you reach 59.5y.
On the other hand, keep in mind that paying the penalty is not the end of the world. Sometimes it's worth it. For a $50K withdrawal, you're going to pay an extra $5K in taxes. That's a lot, but if it means freedom from a job that you can't stay in another year, it might be worth it to you.
If you own a rental property or perhaps you inherited your parents' home, make sure you factor that into your retirement strategy as well. Rental income is great. It can provide consistent income and reduce how much you need to withdraw from your retirement account. Alternatively, it might make sense to sell that property, harvest the equity, and reinvest the money back into a more liquid after-tax brokerage account, one that you can tap into prior to reaching age 59.5y.
Just keep in mind that you're going to pay capital gains taxes on the sale of any rental property, so plan accordingly with your CPA. And be sure to work with a Realtor to time the local real estate market. There are better times to sell than others and you're going to want to maximize your return and minimize your taxes to preserve your wealthspan.
Okay, so once you've clarified your "why", you've crunched the numbers, you've figured out how you're going to bridge any gaps, it's time to shift your mindset from wealth-building to wealth-spending. That switch, it's huge. Transitioning from accumulation mode to distribution mode is psychologically challenging. You've spent decades watching your balances grow. So the idea of intentionally drawing down your savings can be anxiety-provoking.
Conventionally, we're wired to save, save, save, and our fear of outliving or nest egg is real. So much so that 40% of retirees underspend in retirement. Recognizing and preparing for the shift is crucial, not just financially, but emotionally and psychologically. I think a good re-frame for your Next Act is to think of it as a time to invest in your lifestyle and new experiences.
It can feel frivolous to spend when you're no longer saving. However, studies show that investing in health and relationships yields much higher life satisfaction than hoarding cash. So start making that mindset shift now as you start planning that retirement transition.
And besides, investing in your health is one of the best ways to extend your wealthspan. Health issues in retirement can rapidly deplete your savings and turn dream retirement into financial stress. So think of any expenses related to fitness or nutrition or stress management as good financial planning.
And remember, a successful retirement plan is adaptable. Life is unpredictable. Shifts in the economy, your personal health, or family circumstances can all profoundly impact your retirement journey. So be sure you build contingencies into your plan, things like emergency funds and flexible spending. This is going to give you some financial resilience and peace of mind.
So back to the question, can you retire yet? Maybe, but do the homework. Clarify your "why", crunch your numbers, figure out your timeline, and get creative when it comes to bridging any gaps. Retiring in your 50s is entirely possible. I've helped clients do it by blending both health and wealth strategies. But remember, determining when to retire isn't just a financial decision, it's a deeply personal one. It's about how you want to spend your most precious resource, time. Time is limited, life is short, and there are no do-overs.
So as you contemplate your Next Act, consider not only what you're retiring from, but what you're retiring to. Make sure your vision for the future is clear, compelling, and fulfilling. The clearer your vision, the smoother that transition into retirement is going to be.
That's all I have for today. Thank you for joining me on another episode of Next Act Ninjas. As always, I am here to help you master your health and wealth longevity. So hop on my calendar for a free strategy session. You're going to find the link in the show notes. And until next time, live well, love more, age less, my friends.