How to Plan Your Retirement (By Age!)

0:00on this episode of the personal finance podcast. How to plan out retirement by age. Oh, what's up everybody and welcome to the personal finance podcast. I'm your host Andrew founder of mastermoney.co. And today on the personal finance podcast, we're going to be talking through how to find your retirement number. By age, if you guys have any questions, make sure you join the mastermoney newsletter by going to mastermoney.co slash newsletter and don't forget to follow us on Apple podcast, Spotify, YouTube or whatever podcast player you love listening to this podcast on it. If you want to help out the show, consider leaving a five star rating and review on Apple podcast, Spotify or your favorite podcast player. Now, today we're going to be talking through how to plan out your retirement number by age. And this is one of those things that every single person I truthfully believe needs to track their retirement number every single year.

1:01This is not something that you can wait every five years or every 10 years and track your retirement number. I think this is something you need to do on a yearly basis. And at the top of this show, what I'm going to do is I'm going to show you exactly how to track your retirement number step by step, then we're going to dive into how to plan out your retirement number by age and some of the things that you need to focus on, some of the things you need to be thinking about by age. So the first thing we're going to do is step one is we are going to start with what we are spending today. This is one of the most important metrics that you need to do is figuring out where you stand right now. And I want you to pull out your bank statements and I want you to add up how much you're spending on a yearly basis. Now you can figure this out in a number of different ways. One, you can take the average of the last couple of months, figure out what that average is, multiply it by 12 and you can figure out how much you spend that way. Two, is if you use an app like Monarch Money, you can go in there and look at your yearly spending over the course of the last year. This is one of the beautiful things about using Monarch Money is that you can go back and figure out these numbers very, very quickly. In fact, Monarch Money now has an AI assistant where you can chat with it and ask it a few

2:03questions. And it is still in beta mode, but it is something in a feature that you can use. Three, is you can also pull out your bank statements and you can take out all the personal information that's on your bank statements, throw them into some sort of AI tool and say, hey, how much do I spend every single month? But you want to make sure you are careful about privacy when it comes to this because you do not want it to have too much information. So these are three things that you could do up front, but I just highly recommend that you go through figure out how much you spend every single month. That is number one. Now, we are looking at what we are spending right now and you may be saying to yourself, well, why would I care about what I spend right now? I'm trying to figure out how much I'm going to be spending in retirement. This is a very hard number to figure out exactly what it is. So instead, I want you to go out and figure out what you're spending now. We're going to use this as a baseline and I'm going to show you how to think about this going forward. Now step two, is I want you to think about the expenses that are going to be gone over the course of the next couple of years? So maybe your plan is to pay off your mortgage before you retire. Well, are you on track to do this or are you going to own your home for 30 years by the

3:04time you hit retirement age and you know that mortgage is going to be paid off? Well, that is a great indicator that you may not need, you know, the amount that you're paying towards your mortgage or are your kids going to be out of the house and those expenses are going to be gone, then you may not need to think about those or maybe you have a car payment and you're not planning on having a car payment or you're going to have additional debt payments right now that you do not plan on having the future. Maybe you're paying for your kids school or extracurricular activities. Those types of things can get removed from your overall budget when you're thinking about your retirement number because the likelihood of you having those extra expenses is not going to be there. And so we want to take out all the expenses that we do not anticipate being part of our budget and retirement. Now if you're saying to yourself, now I want some extra cushion. You can absolutely leave those in if you are okay with the risk of having to work longer. But if you are someone who really wants to retire as fast as you possibly can, I would remove some of those if you know they're not going to be there by the time you hit your retirement age. Now if you are totally unsure and you're like, I don't know what expenses are going to be there, I don't know which ones are not going to be there, then you want to make sure

4:07that you just leave them in and you can use the number of how much you're spending right now. Now the next thing we want to do is we want to factor back in health care. Now health care is one of the biggest variables when it comes to retirement. In fact, health care spending rises dramatically once you reach retirement age and folks after the age of 70 spend a lot more on health care studies show than folks before the age of 70. And so we want to make sure that we are factoring in health care costs. In fact, the average couple is going to spend over $300,000 in retirement when it comes to health care. So how do we plan for this and how do we think about this? So we can look at the average inflation rate of health care over the course of the last decade and we are seeing a rapid rise in the cost of health care and back inflation for health care is very different than inflation for other areas and we are seeing a 6% increase in health care costs in comparison to some of these other areas. So you want to add health care back in and this is where your HSA comes in in a lot of scenarios as well. Your HSA could be the forced savings retirement account if you're not using it for your

5:08yearly expenses that could help you with this problem where a lot of people are like, well, what if I overfund my HSA in my opinion, that is an okay problem to have is to overfund your HSA because health care costs are continuing to rise. And I think a lot of people in the future are going to be living a lot longer with AI taking over a lot of different health care opportunities. They are stating now that there is going to be robots that are going to be able to perform surgery on you. And if that's the case, I would anticipate there's going to be a lot more cures for diseases going forward. And so we need to plan that we're going to live a little longer than currently people are right now, especially if you're in your 20s or 30s, that is something I definitely want you to plan for. So making sure you have enough on hand for health care, I think is a very important metric and a very important number that we need to note. And so adding health care back in can be very, very powerful. Now if you're saying to yourself, well, I don't know how much I'm going to have saved for health care. Just factor in some of the averages here and you can come up with a number that makes sense for you. Maybe it's having $300,000 as a household or as a family saved up in addition for some

6:08of those health care expenses. But again, remember, you're going to have Medicare and you're going to have some other options available to you once you reach retirement age. Now, the other thing you need to do is step four. Step four is to inflate the number that you have going forward. So I want you to adjust your contributions moving forward by the inflation rate. But then in addition, we also want to know what the cost of living is going to be over the course of the next 20 to 30 years. There are inflation calculators out there that are great to help you with this, that you can go through and figure out exactly how much your dollar is going to be worth and how much your dollar can stretch over this time frame. Now, let me tell you all right now. This is why we invest our dollars for retirement and we don't keep it in cash. We invest our dollars because going forward, we want to make sure that we have enough cash on hand in order to outpace inflation. This is why we put these portfolios in place. This is why we invest our money for our financial future because typically our investments are going to outpace inflation. But we want to know what our buying power is and so you can look 20 to 30 years ahead and see what your buying power is going to be based on the amount that you're spending right now.

7:09And inflation calculators can help with that as you go through this. Next, step five is I want you to add up all your different income sources. So you could have income sources coming in from a number of different ways. It all depends on your personal financial situation. This is why I don't like when people say, oh, you need five ex of your salaries saved by the time you're 30 or 40 or 50. I don't like those generic things because everybody has different income sources coming in. Everybody's has different financial situations coming in and so I don't think there's a blanket statement for anyone. It's going to depend on the math and it's going to depend on what you need. Now, I want you to remember this right now. Retirement is not an age. Retirement is a number. And once you hit the specific number, you will be able to retire. And so that's why we are going through this exercise to figure out what your number is. So then going forward, you have your North Star. You know what you're going to be doing going forward. This is where you need to be when it comes to building wealth. All right. So we need a look. And for us, you can go to ssa.gov. You can sign up for an account there and you could try to figure out exactly where your social security will be by the time you reach retirement age.

8:11Now, if you're getting closer to retirement age, this is going to be a much more accurate number than maybe someone who's in their 20s or 30s trying to figure out what this number is, you can do an underestimate. I like to underestimate everything when it comes to retirement. That way, as I get closer to retirement age, I know I'm either on track or way ahead and I can actually retire sooner, which is a beautiful thing to look at. Next is that want you to, so you're going to factor in these different income sources. So first, social security, what do you think you're going to have on hand in social security? Another thing would be any pension income that you have available to you. I want it to be your net pension income, not your gross pension income, but after taxes, how much you think you have available to you. We want to have some of these net numbers because this is the real money we're dealing with. This is the money that's actually hitting your checking account. And we want to make sure that we have that on hand. Then adding in any rental income, if you have rental properties or you have anything else that you think is going to be cash flowing, then we want to add in that rental income after operating expenses. So your net operating expenses are going to be something that you want to factor in.

9:12And then you want to look at the cash flow after all of your operating expenses. So your cash flow is not what you're renting the property for. No, you need to run the numbers and understand exactly what your cash flow is going to be. For most people out there, maybe it's a couple hundred bucks per property. Maybe you have a couple properties and you're going to make in a few thousand bucks or maybe you have a lot of rental properties and it's going to cover your entire lifestyle expenses. Well, that's a great number to have. We need to factor that in and then add any other passive income sources that you think that you have. Maybe you have a passive income source out there where you're investing in a business and that business is going to be paying you over time or maybe you think you're going to have another passive income source where you invest in notes or something else. Add all of those different things in so that you know exactly how much you're going to need. The reason why we're doing this is we're going to find the gap so we know how much we have to have invested in our portfolio. And so you can think about all of your income sources and add those up. Now you may not have a pension. You may not have real estate income or income from property. You may not have passive income and so maybe the only thing you have is social security. That's okay because we're going to figure out exactly what that number is.

10:12But I want you to start to add those items up and then I want you to think about that total number because next we're going to subtract our total income from some of our inflation adjusted spending. So we figured out, hey, here's how much money we need in order to going forward, spend in retirement. Here's how much income we are going to have coming in. What's the difference here? What is the gap between those two things? The gap is how much we're going to need to have invested. And so long time listeners have heard me talk about the 25x rule on this show. This is something I think most people need to make sure they are factoring in and figuring out is exactly where they stand when it comes to that number. Because let's say, for example, that you want to spend $100,000 per year in retirement. And let's say, for example, 40,000 of that is going to be covered just by the income coming in. Maybe it's your social security. Maybe you have a rental property or two. And so 40,000 per year is going to be covered based on the income you already are going to have available to you. Well now we just need to come up with the extra 60,000 and invest those dollars in our portfolio.

11:16And so this is where the gap is going to be. And this is exactly how we figure out how much we are going to need to have invested. And so you can reverse engineer this a couple of different ways. Number one is you can think about, and I'm actually going to do this in a little more advanced way than 25x rule. So you can do the simple math of the 25x rule if you want to. We're going to actually think through this in a way where you can decide how much you think you're going to withdraw on your portfolio. If you don't know what to start with that, look at the 4% rule. You can look deeper into that. And that is going to be a great place to start, meaning if you have $2 million invested, you could draw down 4%, which is $80,000 per year. That is going to be the safe withdrawal rate that a lot of people start with. And then you can adjust based on that. If you're retiring early, you may want to only withdraw 3%. If you are retiring in your 60s, maybe you want to withdraw 5%. But this calculation I'm about to give you is going to help you figure out exactly what that number is. So once you have your income sources, you subtract that from how much you need, and all of a sudden you have a number. So again, let's do this with the simple math of $40,000 per year as your income sources. And you still need another $60,000 per year because you want to spend $100,000 per year

12:17in retirement. And so you have this $60,000 per year. Where are we going to get this from? We need to get our dollars invested and we need to start growing our wealth over time. But we need to decide how much we need to have invested before we are financially free. And so you can take your annual gap number and you can take that number and you can divide it by your withdrawal rate. So if you're going to withdraw 3%, or 4%, or 5%, you can do the math to figure out exactly how much you need in your portfolio. So it's going to be your annual gap number divided by your withdrawal rate. And that is going to equal your retirement number. So here's the quick math on this. And I'm going to pull out my old trusty calculator on my phone here. So let's use our $60,000 per year. Let's use that number as the amount that we need. All right, so we're going to put $60,000 into a calculator here. And we are going to divide that by the annual withdrawal rate. So let's say, for example, that you want to withdraw 3%, well, I'm going to put .03 in there and I'm going to hit equals. And that's going to tell me right there that if I want $60,000 and I'm going to only

13:21withdraw 3% every year, I need $2 million in that portfolio. Let's do this again. Let's say $60,000 per year, but this time we're going to do the 4% rule. Well, if you do the quick math on the 4% rule or the 25x rule, you know that that is going to be where you're going to need 1.5 million dollars. But let's do math here. We're going to divide that by 0.04. And we have 1.5 million dollars inside that account. This is the simple math that you can do is divide it by the amount that you are withdrawing. All right, let's say we want to do 5% and we're going to withdraw 5%. Maybe we're retiring a little later or we're going to get aggressive with our portfolio and we are okay with that. Well, let's say $60,000 divided by .05, that is going to equal 1.2 million dollars as how much we need invested in our portfolio. And so this is a great way to figure out a very accurate number of what your retirement number is going to be based on your withdrawal rate. Now we are going to have an episode coming up talking through the different ways to think

14:22about withdrawal rates, the sequence of returns risk. In addition, we're going to talk about guard rails and how it could be very important to have guard rails in place based on what the market is going to do. And this can give you a flexible retirement where in some years you're going to be spending a lot more than in other years. And so we have that episode coming up for you. So get ready for that. But these are the steps you need to take to find your retirement number and get a really accurate retirement number. These are the steps we teach inside MasterMoney Academy and we dive even deeper than this in that. So I really, really want each and every single one of you to make sure that you understand and know how this works before we dive into how to prioritize things based on your age. And so this is how you find your retirement number. So now let's dive into how to plan out your retirement number by age. So if that's something you're into, let's get into it. Workplace chaos. You know the feeling. Deadlines are stacking up. Emails are flying. And then someone on your team gives notice. That's when you think this is a job for sponsor jobs. When you need the right hire fast, indeed sponsor jobs helps your posts stand out and reach

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17:29Head to wayfair.com April 25th through the 27th of shop wayday, that's w-a-y-f-a-i-r.com. Wayfair, every style, every home. All right, so let's start with our 20s first. And in your 20s, I want you still track any retirement number on a yearly basis. Now guess what? The reason why we do this is because the goal post is going to move and the reason why I started to do this was because in my 20s, so many different things changed in my financial life that I had to start doing this to actually get an accurate picture. Where every single year, usually I did it towards the end of the year and if I missed it, I would do it towards the beginning of the year, I would set up a time to start to track my retirement number. I would do the exact steps that we did at the top of this show. And if you're in your 20s, you're going to realize very quickly that over the course of the next couple of years, your life's going to change dramatically. Maybe you get married, maybe you have your first kids, maybe you get a lot of different wage increases because you are working hard at your day job. All of this stuff is going to be shifting and into your 30s is going to shift even faster.

18:32And so you want to make sure that you're tracking this on a yearly basis because if you don't and you think it's just magically going to happen, you're going to save enough cash on hand, then you're going to feel like you're too far behind or way too far ahead and you weren't spending enough on things that you actually love. So instead, we want to make sure that we are tracking this on a yearly basis because that goal post is going to move. My goal post continues to move even at the age of 37 right now. And so I really, really want to make sure that each and every single one of you is on track and on target to make this work well. So number one, is I want you to get that free money first. Obviously, you're going to get that 401k match. This is going to help you dramatically, especially if you start in your 20s. This is going to help your retirement account be much larger than most other people. In fact, we have done studies in the past where we have shown that people who get their 401k match have high six figure differences in their portfolio from people who don't. In fact, if it's a long enough time horizon, if you're going to work for 45 years, it'll be a seven figure difference by getting that employer match, then from not getting that employer match.

19:32So if you want to make sure things like health care is covered in your portfolio, you want to make sure that you have that extra money to go out and travel. Getting that 401k match is going to boost your retirement by hundreds of thousands, if not millions of dollars, depending on what your time horizon is, as to when you are going to retire. So every single person in their 20s, you got to make sure that you are getting your employer match and make sure you're taking advantage of that 100% rate of return. Step two is get that Roth IRA going as early as you possibly can. When you're in your 20s, this is a great time to open a Roth IRA because future you is probably going to be making more money. And so you don't usually need a tax break right now when you're in a lower tax bracket, instead you're going to need a later on down the line. So the Roth IRA means that money goes in, that's already been taxed. It grows tax free and you can pull the money out tax free at any given time. So you're deferring, having to take on a tax bill later on and instead you're paying taxes right now and getting that tax free growth and getting to pull that money out. Well, the tax free growth when you're young is the majority of your money. And so I really want you to realize this because it is very, very powerful. You can get $7,500 per year into a Roth IRA right now.

20:35Now, step three is your overall goal should be to save 20% of your income, meaning 20% of your income needs to go towards emergency fund or investing and it needs to go towards those wealth building activities. Why? Because if you'd save less than 20% of your income, you're going to be working for a very long period of time. And that is going to be something where we don't want you working over 30 years. So saving 20% of your income allows you to reduce the time that you're going to be working and is going to help you dramatically in the long run. So a lot of people out there hear people say, I'll just save 10% of your income. Well, if you save 10% of your income, you're going to be working for around 40 years of your lifetime by saving that 10% of your income. So instead, we want you to reduce the amount of time that you're saving and your savings rate by four is one of the most important things that you can do. We have an episode coming up just talking through savings rate and how powerful it is, but it is one of the most important things that you can focus on, especially early and often. And then increasing that savings rate over time can be very, very important. Now, if you can only save 10% of your income right now and you're just trying to get

21:36by your living paycheck to paycheck, you don't make a lot of money yet, then we want you to do the 1% increase every single month or every couple of months so that you can slowly turn up that dial and increase the amount that you're saving and investing. Just do it by small amounts over time, increase it by 50 bucks, 100 bucks, 150 bucks every couple of months, and try to increase your income slowly over that time frame as well. That is going to help you get this base because if you start right now, you got to start as early as you possibly can and if you start as early as you possibly can, it'll change your life forever. Remember, every single dollar you spend today is going to be worth $10.06 and 30 years if you got a 10% rate of return. And so making sure that some of those dollars that you make right now goes to our investments is going to help you so much in the long run. And then step four is I want you to focus on milestones. There are milestones. This is what motivated me in my 20s. When I was living paycheck to paycheck, I said, I just want to get to my first $100,000. I just want to get to my first $10,000. I just want to get to those two numbers as fast as I possibly can.

22:36So there are some milestones that'll change your life in your 20s. Your first $10,000 saved and invested is very, very powerful and I want you to get there as fast as you possibly can if you're just getting started. Then I want you to try to get to your first $100,000 once you get to your first 10 and use some of the milestones along the way. Maybe it's $50,000 in between to keep you motivated because your savings rate is going to propel all of this when it comes to your first 100 grand. That is something you need to know is that your savings rate is going to do all the work compound. It first takes over later on down the line, but your savings rate is going to do all the work and you got to build up that base and you got to build up that foundation. So get to your first 10, get to your first 50 and get to your first 100 in your 20s so that you don't have to worry about this later on in your 30s. If you do those things and you get to your first 100 grand in your 20s, you were going to be so much better off than everybody else just sat on their hands or spent it all and going out or spent it on a brand new car or a really nice apartment downtown or whatever else they blow money on. You will be in a much better situation than anybody else that does that. So in your 20s, I want you to get the systems in place.

23:37I want you to get the automations in place and the behavior you build now be worth its weight and gold in the future. Remember that and say that to yourself every single time you want to blow money on a big purchase. The behavior that you build right now will save you so much going forward. Now I want you to also have the balance and the ability to be able to do what you want with your money. So we'll talk more about that as time goes on, but these are the foundations that you need in order to plan out your retirement, tracking your retirement number every single year, getting that habit going so you know exactly where you think you're going to land is going to be important. Then in your 20s, you have the time to tweak this. Then you can say, I want to retire at 55. Now I actually want to retire at 50. If you get really good at this, you can retire in your 40s easily and I've seen people do it in their 30s even because you have enough time and you have enough thought to do this. You're aware with all when it comes to your retirement number is going to change your life forever. Now let's get to the 30s. Your 30s is where the paths cross where people are in their 20s who said, I'm going to start later, finally hit their 30s and it comes a lot faster than they ever thought

24:40it would. And all of a sudden they realize, oh shoot, I am behind. This is what the regret that I do not want anybody listening to this podcast to have. And if you do feel this regret right now and the way that you found this podcast was because you wanted to get your money right, well boy, oh boy did you come to the right spot because your boy is gotcha, we're going to help you out through this process. The good news is your income is probably rising and the good news is most likely you are advancing in your career and the other good news is hopefully you have some sort of delta or gap in place in order to invest some of your money. If you don't, that's a okay. We're going to figure out a way to get you there. But for most of you out there, you want to make sure you find that delta. Now what are most people doing their 30s when they're bad with money? This is what I call the dangerous decade, in fact, it is the most dangerous decade of your life because if you fall into those money traps, you fall into the trap of buying the fancy brand new car or you fall into the trap of getting a house that is way more than you can afford or you fall into the trap of just spending way too much money on designer or luxury items and you get used to that lifestyle when you really and truthfully can't

25:44afford it. Now if you can afford it, I love it for you. I love that for you if you can afford this stuff. But if you can't, guess what? You are going to get yourself in a whirlwind of problems and especially if you are starting late and you did not start investing and you also do some of those things. You really are going to have to drastically change. It's a lot harder to go backwards when it comes to money than it is to make sure you just don't get yourself into hot water in the first place. And so we're going to go through some of the things that you need to do in order to make sure you're maximizing the dangerous decade, the messy middle, the decade where everything starts to happen, where overall you're making more money, but also your obligations are increasing, especially if you're getting married or you're having kids, your expenses are rising. Let me tell you right now, as someone who is now in their late 30s, I understand how fast your expenses can rise in your 30s, especially when your family is growing. And a lot of you out there who listen to this podcast, your family is growing. It's a big motivator as to why you want to build generational wealth because you want to do it for your family. And so let's dive into some of the stuff you need to do. Hey, maxing out that Roth every year, that should be a no brainer for every single one

26:47of you. If you're not doing so, make sure you do that. Also get your 401k match, obviously, and start to increase the contributions to your 401k every single year. Every time you get a raise, those contributions should be increasing. In fact, you should be putting at least 50% of your raise towards wealth putting activities if not more and increasing the amount that you're putting towards some of these things. So if your employer offers a 401k, that is absolutely fantastic. The other thing is if you're planning on retiring early, opening up a taxable brokerage account is what you want to be doing because this is the bridge account and the easiest account to retire early with. In fact, I would argue that the taxable brokerage account is a fantastic place to put a large portion of your income if you are going to retire early. So once your Roth IRA is covered, your employer matches covered and you decide, actually, I'm going to retire early. Then maybe you want to put the taxable brokerage account even in front of the 401k. There's nothing wrong with that because you're going to be paying long term capital gains tax on that. And for a lot of folks out there, if you reach retirement age, you're not going to have

27:47a high income in retirement, this is going to be where you're not really going to be paying much tax at all, if any, depending on your financial situation. Also when you're in your 30s, I want you to start thinking about real estate if that is something you're interested in. It is not for everybody, but if you do want to start thinking about real estate, now is the time to maybe get your first property, start to feel as though you are making some progress here. And a lot of folks out there are just trying to get to be homeowners. If you want to be a homeowner, just make sure you buy, right? Run total cost of ownership before you do that. A lot of people are making a lot of big mistakes in their 30s that they should not be making. And if they had the right education in place, they would not be making. We have an episode coming up on creative ways to buy a home. We're going to talk about creative financing and creative ways to buy a home that maybe most people would not talk about. And we're going to have an expert coming on on creative financing when it comes to buying your own personal residence. So if you're interested in that, make sure you're subscribed to this podcast because that is coming up soon. Now the big thing that I want you to do. This is the big, big thing for folks in their 30s is to fight lifestyle inflation.

28:51It is going to come at you like a thief in the night. And you're not going to notice that all of a sudden, you're spending a little more on groceries and you're spending a little more on subscriptions and you're spending a little more on kids activities and you're spending a little more on dining out and you're spending a little more on convenience and you bought the nicer house and you bought the nicer car. And all of a sudden, you're buying the nicer tools for your garage or you're buying the nicer handbags for your closet and all of a sudden, everything just starts increasing. And by the time you know it, you have doubled the amount that you're spending in the decade. I don't want that to happen to you. And so you got to stay on top of where your money is going. If you feel as though your spending is getting out of hand, I recommend the five minute drill. The five minute drill means that you take out your budgeting software and I really think that most people should have some sort of budgeting software. We use Monarch Money here. There's a bunch of great ones out there. Monarch Money is absolutely fantastic. We have a code down below. If you want 50% off, you can use code PFP. But with Monarch Money, this is a tool that's going to help you make sure that you're just on track and on top of your money. And the way the five minute drill works is that you log into your app and every day for

29:54five minutes, you just categorize your expenses. I like to do this at a trigger time, meaning my first five minutes at lunch, I like to categorize my expenses for the previous day and whatever happened that morning if I spent money that morning. That's going to help me stay on top of this. Use flashing. Guess what? This only takes like 90 seconds. It doesn't take more than five minutes and for most people, once you have this organized and set up, you really barely take any time at all. You can miss a day or two and still it's going to be less than five minutes because most people don't have 50 transactions a day. You have two, three, four, five, six depending on how many people are in your household and that's all you have each day. It's not going to take you long and a lot of times with a lot of the budgeting apps. They integrate AI and so it all is naturally working for you where you can link them all up. I want you to fight lifestyle inflation. This is the thief in the night that is going to come steal your wealth if you're not careful. Some lifestyle inflation is good. You should be improving your life. You should be spending more on the nicer house when you have a bigger family. You should get the bigger car, the safer car for your friends, for your kids as you start

30:57to grow your family. But if you do this without intention, you're going to get yourself in trouble and retirement is going to get further and further away from you. During this decade, this is where it's very, very important to track your retirement number. This is also when it becomes murky or muddy on exactly what your expenses are going to be because it feels like your expenses are getting thrown at you left and right and you got a lot of kids stuff here. You got a lot of marriage stuff here that is getting commingled into something that may not be what you spend in the future. That's okay because what we want to do is at least figure out conservatively what we think will spend in retirement and we want to track it every single year. Now let's jump into the 40s. Your 40s are your financial prime and this is when most people are making the most amount of money in their career and your 40s can carry you into your 50s. But this is the decade where it is used or loses. This is the time where we really need to accelerate how much we are investing and we need to figure out exactly where we want to be in retirement. Some of you, if you planned accordingly in your 20s or your 30s, you could be retiring

31:59in this decade. Some of you may feel as though I am just getting started in my 40s and I need to get started now. But this is the time frame where you could transform your entire financial life by just getting started in your 40s and let me tell you, for those of you who do not or under utilize this decade, this is where you're going to feel the pain if you do not get started now. And for those of you who are willing to get started now or have been investing from your 20s and your 30s, this is going to be the decade where you see an acceleration and you start to thrive. Why? Because you are making more money. Now, some of the hurdles that you are going to have to think about here is you may have a lot of expenses that are rising, a. Your kids are most likely getting older or you're starting a family later on in life. 2. Is you have aging parents most likely and if you are supporting those aging parents, then that could be something that you have to worry about because long term health care is going to be a very important thing and these are some of the scenarios that people deal with. They're going to stretch in both different directions. 3.

33:00If your kids are older, maybe you're also paying for their college or you're paying a lot more than you were when they were younger kids. This could be something that is weighing on you or if you do have younger kids, we have daycare costs, those types of things and your costs could just be dramatically rising. So, your income is rising but your costs could also be rising at a rapid rate and we want to make sure that we get control of all of this stuff. Because your income is at as high as we want to try to max out every retirement account we can across the board. If you have an HSA available to you and you have a high deductible health plan, a great thing to max out. If you have a Roth IRA, a great thing to match out. Your 401k, a fantastic or phenomenal thing to max out. All of these are going to matter so much over the course of the next couple of years and as you start to approach your 40s, your mid 40s and late 40s, this is where you really want to get as many dollars invested as you possibly can. So the brokerage account is going to come in and it's going to help you bridge through the gap and get some planning going. Now, along this decade, we also want to diversify our tax buckets. So maybe we want some pre-tax, we want some post-tax and we want some taxable in these

34:01three different buckets. This is going to allow you to have flexibility and retirement and this is going to allow you to have flexibility in your financial plan, which is what we want. Money is best enjoyed when you have flexibility and it is your life is best enjoyed when you have flexibility and so making sure we have so many of these buckets can be really, really important. So the third thing I want you to note is do not under any circumstance sacrifice retirement so that you can save for your kids college. You need to take care of your retirement first, then you can take care of your kids college. I know it's counterintuitive as a parent, but there are no loans for someone who is in retirement and there are loans for college. So do not put your kids college savings, do not put your kids retirement savings, I've seen people do this before your own retirement savings, if you are not on track to saving for retirement, you should not be putting a dollar in a 529 plan. Let me say that again for the people in the back, if you are not saving for your retirement, you should not be putting a single dollar into a college savings bucket.

35:04It's the oxygen mass method, you take care of your own retirement first, then you can help out others when it comes to saving for retirement. So make sure you're doing that and do not sacrifice for college fund, okay? Too many people do this, I've seen people come into master money academy, and we've helped them through this, but I've seen people do this time and time again. Our students are the best, and we've kind of put them on the right track, which is great, but do not, and I repeat, do not do this. Also, review your asset allocation, because now as you approach 40s, you may want to shift what your asset allocation looks like. There's two phases to your asset allocation, there's the accumulation phase, and there's the preservation phase. Some of you who understand how the market works, may still be willing to stay in the accumulation phase, and you are willing to keep a high percentage in stocks, and you don't really want much bonds yet, because you want this portfolio to keep growing for the next 10, 15, 20 years. But for those of you out there who want to be a little more conservative, you can start to review your asset allocation on a yearly basis and say to yourself, okay, maybe do I want to add some more bond exposure, especially as we get to my late 40s, maybe I want to

36:08retire at 55, and so I want to add some more bond exposure very slowly back into the portfolio. This is up to you on how you handle that, but you want to just review your asset allocation and review your risk tolerance on a yearly basis to see exactly where you are. See, the goal of the 40s is to make sure you are aggressively deploying as much capital as possible towards future you, because future you is coming really quickly, and you're going to really thank yourself by making sure that you take care of this in your 40s instead of waiting to bond. So I highly encourage each and every single one of you to make sure you maximize this decade. This is the decade where really you have a lot of time left for money to compound. And so we want to ensure that we are continuously investing our dollars as time goes on, because even if you're 40 and you're like, I'm getting started right now, you still can, you know, you retire at 65 and you have 25 years for your money to compound. That is a long, long time. So honestly, you may feel as though you're behind, but you can get these dollars working for you and you can still get the ball rolling. Now let's jump into the 50s.

37:08At the start of every year, I find myself asking the same question, am I actually making progress or am I just tracking what has already happened? It's one thing to look at last month's spending. It's another to build a plan that moves you forward, whether it's paying off debt, stacking up an emergency fund, or saving for something big. Set yourself up for financial success this year. Monarch is the all-in-one personal finance tool designed to make your life easier. It brings your entire financial life, budgeting, accounts, and investments, net worth, and future planning together in one dashboard on your phone or laptop. You feel aware and in control your finances this year and get 50% off your Monarch subscription with code PFP. And what I love about Monarch is their new AI features where it's going to track your spending automatically, but it also has a new AI assistant that you can chat with and you can ask questions. How much did I spend on groceries last month or how much did I spend on my kids' activities last month? So set yourself up for financial success in 2026 with Monarch. The all-in-one tool that makes proactive money management simple all year long.

38:10Use code PFP at Monarch.com for half off your first year. That's 50% off your first year at Monarch.com with code PFP. The first day of spring always does something to me. I start to clean out closets, I start to clear out the garage, and getting things organized again. And every year, it makes me think about the bigger stuff, too. Not just spring cleaning my house, but cleaning up my long term to-do list. And one of those things is protecting the life that we built. And that responsibility can feel heavy. Making sure your family would be okay financially if something happened to you isn't exactly a fun task, but it's an important one. And that's where policy genius comes in. See, policy genius isn't an insurance company. They're an online marketplace that helps you compare life insurance quotes from some of America's top insurers, side by side for free. And their license team works for you, not the insurance companies. They help you find the right coverage, amounts, prices, and terms. Answer your questions, handle the paperwork, and advocate for you along the way. It's about clarity and peace of mind.

39:11Protect the life you've built. With policy genius, you can see if you can find 20-year life insurance policies starting at just $276 a year for $1 million of coverage. Head to policygenius.com to compare life insurance quotes from top companies and see how much you can save. That's policygenius.com. Having something new is uncomfortable. I remember when I first started building this podcast in business, there were so many what ifs. What if no one listens? What if this doesn't work? And what if I'm wasting my time? But pushing through was one of the best decisions I have ever made, and having the right tools makes a huge difference. That's where Shopify comes in. Shopify is the commerce platform behind millions of businesses and handles 10% of all e-commerce in the US. Whether you're just getting started or scaling something big, it gives you everything you need all in one place. You can build a clean, professional store with ready-to-use templates. Use AI tools to write product descriptions and improve your listings and run email or social campaigns to actually get your product in front of people. And the part I love is it simplifies everything, inventory payments, analytics, marketing,

40:15it's all in one place. So you're not trying to duct tape a bunch of tools all together. Plus, if you ever get stuck, they've got 24-7 support to help you through it. It's time to turn those what ifs into caching with Shopify today. Find out for your $1 per month trial today at shopify.com slash pfp, go to shopify.com slash pfp. That's shopify.com slash pfp. For a long time, I thought investing was something you did later. Like once you had everything figured out, more money, more knowledge, and more time. But the shift for me was realizing you don't need to have it all figured out. You just need to start. And that's why I like acorns. Acorns is the financial wellness app that makes it simple to give your money a chance to grow. You can sign up in minutes and start automatically investing your spare money. Even if all you've got is spare change. What really stands out to me is the potential screen. It shows you what your money could become over time. And that's powerful because it keeps you focused on the long term instead of getting caught up in the day to day.

41:16It's also all in one place. You can invest, save, and stay on track with your goals without juggling a bunch of different apps. Sign up now and acorns will boost your new account with a $5 bonus investment. Join the over 14 million all-time customers that have already saved and invested over $27 billion with acorns. Head to acorns.com slash pfp or download the acorns app to get started. Pay non-clined endorsement. Compensation provides incentive to positively promote acorns. Tier 2 compensation provided. Potential subject to various factors such as customer accounts, age, and investment settings. Does not include acorns fees. Results do not predict or represent the performance of any acorns portfolio. That results will vary. Investing involves risk. Acorns advisors LLC. An SEC registered investment advisor. View important disclosures at acorns.com slash pfp. So your 50s is the decade where we really want to have our retirement plan dialed in. And we want to start making sure that we know exactly what we're going to do next when it comes to building wealth. And your 50s is the timeframe where a lot of you, if you are getting started again, not too late, but you got to get the ball rolling right now.

42:17We have a lot of listeners who started in their 50s who over the course of the last six years of listening to this podcast have made amazing strides. We had someone listen to this podcast who retired in eight years just by listening to the show. So this is never too late for anybody out there listening, but you got to make sure that you make drastic changes going forward. So I am really excited to dive into folks in the 50s because they can use a couple of different things that will really, really help them going forward. Number one is catch up contributions. So utilizing catch up contributions is one of those things that can really just help you going forward. So if you have a Roth IRA, for example, you get an extra thousand bucks into your Roth IRA if you're over the age of 50. And if you're someone who is contributing to your 401k, you need an extra $8,000 into your 401k, meaning you can put $32,500 into your 401k. And so really the extra $1,100 into your Roth and the extra $8,000 into your IRA is really, really important to note for the catch up contribution.

43:18Secondly, is we want to have a plan in place when it comes to social security and the closer you get to retirement age, especially when you're five years out, you want to have that plan solidified and you want to make sure that you are attacking that plan. Maybe you're deciding to retire in your 50s. If you are, you can use the rule of 55, you can use a set of payments. There's all kinds of things. We have an entire episode. If you are retiring in your 50s on how to get access to your retirement accounts, we talk about all the different ways to do that. So make sure you check that out. We'll leave it down in the show notes that you can check it out. But if you have not heard that episode, make sure that you are thinking through your plan because when you're five years out from retirement, this is where it's game time. You got to know what your retirement number is. You got to know what you're doing and this is why it's so important to track every single year because once you get to your 50s, it makes it so much easier. And so once we start to do this, we want to have a social security strategy. Most people go into retirement thinking, I don't know, when I'm going to claim social security, I don't know what to do. My parents are in their 60s and I talk to them. I talk to a lot of their friends and a lot of them had no idea. And they were actually going to take social security.

44:18And so we'll do an entire episode on this, but I want you to think through this. If you need money early in your retirement and you're going to retire in your early 60s, well, that will be a time to take social security. If you don't need it, then you could delay year over year and decide, okay, I am going to get the guaranteed 8% rate of return that happens every year. I don't take social security and I am going to take a bigger benefit later on in the line. Maybe you want to take it at 66 or 67. Well, that is going to give you a guaranteed rate of return. But there are two sides to the coin that I want us to dive deeper on in that episode, where maybe you're like, hey, life is short. I want to get my money now or you're like, there's no other guarantee return like this. I'm going to take that guarantee return because I can live off my portfolio or I enjoy working part time. A lot of different options that you will have early in your 60s and your 60s is a very interesting time to think about social security and how you're going to handle that. Also, in your 50s, you need to think seriously about healthcare and how you're handling this. You do not have a plan for healthcare. You need to get one because this is going to be a huge portion of how much you are spending in retirement and I want to make sure that each and every single one of you has a plan

45:21in place. Medicare does not kick in until you're 65. And so because of this, we need to bridge the gap. If you are going to retire at 57, 58, 59, 60, any of those ages, we need to figure out what we're going to do about healthcare. Paying off your mortgage is also something I want you to do in your 50s if it makes sense because I don't really think that you should have much debt and retirement taking on unnecessary debt or having unnecessary debt and payments is just going to increase your stress and retirement and decrease your flexibility. And that's not a good combo for most people. That's not what they're looking for when it comes to retirement. And so instead, we want to make sure that we are taking care of our retirement and ensuring that all of this is getting done in the right order. And so paying off your car payments, making sure you have no car payments, that's a given, no credit card debt whatsoever, no personal loans. And then the mortgage is the one that is the up in the year option, but I really like when people have their mortgage paid off because it's just less of a liability. And then you're just paying the property taxes, you're paying the insurance, those types

46:22of things. Unfortunately, in this country, even when you have a house paid off, you still have payments to make to the government and to insurance companies because you need that home insurance in case there's a disaster, you want to make sure that gets taken care of. So that's a whole different, that's a whole different podcast episode. And it is definitely something that you want to make sure that you budget for is figuring out, hey, what are my taxes going to be? That is something when your home is paid off. People actually don't factor in, well, my property taxes are going to increase over time because the value of my home over the course of the next 30 years or 40 years is going to be going up. And so making sure you factor in and understand where your property taxes are going to be is also a very important metric to note. And now let's do a bonus of the 60s because your 60s is going to be a time where I want you to think through a couple of different options. One is sequence of returns risk. So this is the risk that if the market downturn happens every couple of years, you want to make sure that you're considering this and when you retire because if the market is down on the first year of your retire, this could completely wreck your portfolio if you're

47:25not aware of this and you start to withdraw too much money from your portfolio. And so this is why I like the guard rails approach because it reduces overall sequence of return risks and allows you to adjust the amount that you're withdrawing in your portfolio every single year. Number two is thinking about Roth conversions. When is a good time to make Roth conversions so that you can move money from your traditional IRA or your 401k over to the Roth IRA so you don't have RMDs anymore? Well, it should be in low income years or years where it makes a lot of sense. I would highly recommend talking to a CPA or an advisor when you are thinking about Roth conversions because it's a much more complicated calculation than just moving it over. And if you do the wrong thing, you could absolutely trigger a taxable event that is not in your best interest whatsoever. So making sure that you do this in the right order is going to be important. Social security timing. We just talked about this, but I want you to think through when you're in your 60s, you could start at 63, you could wait till 67 and kind of take it a little later and it's an 8% rate of return every year that you wait, but also life is short.

48:26So if you want to take it early, it could benefit you traditionally. And if you think you're not going to live a long time, maybe you have a preexisting condition or you think you're not going to be living well beyond your given years, then maybe taking it early makes sense. Or if you are someone who thinks you're going to live it for a very long time, then maybe taking it later makes sense, but it just depends on your specific situation. It also depends on how much your spouse makes. We're going to cover that in an entire episode coming up. Also Medicare starts at 65. And so we want to make sure that we are thinking about healthcare and then think about what the difference is within healthcare and how much we're going to be spending. Also, what about long-term care? Where are you going to live when you get older or you somebody has to come and take care of you? Is someone going to come to the house to take care of you? We're going to have enough money on hand or you're going to go live in a facility. If you are, how are you going to pay for that or cover that so that you are living in a situation that makes sense for you? And then RMDs are coming up in your 70s. So at age 73 is when you will have required minimum distributions, meaning the government and Uncle Sam wants his money, so he's going to make you withdraw a certain amount of money every single year from your 401k or your IRA, those pre-tax that you never pay tax

49:30on that money yet. You're going to have to pay tax at some point in time. And so RMDs could start at 73, which could impact every other phase of income that you have. And so traditionally, you want to make sure that you are planning out for those RMDs and talking to someone to help you through that process. That is the big thing that I really want you to do. And so if you plan this out properly in your 20s and your 30s and your 40s and your 50s, your 60s are going to be a breeze, they're going to be so easy and you're going to have the flexibility in place where you're not going to have to worry about this stuff. But we got to make sure that we are planning out our retirement with our goals and realizing that you can retire early. And that is really what I want you to know is that you can retire early. And if you have a plan in place, this is a lot easier than it seems. And so for everybody out there, do not wait for the perfect moment to plan this out. Back your retirement number on a yearly basis. We showed you at the top of the show exactly how to do this so that you can really get to the point in time where you are living your best life. That is our goal for each and every single one of you. Now, if you guys want to learn how to achieve financial freedom, how to have that plan

50:34in place. So you don't have to worry anymore. You are working step by step towards financial freedom and you're planning out the exact life that you want and you're using money as a tool to get what you want in life, then I want to invite you to join MasterMoney Academy. MasterMoney Academy is our community of people who is working towards building wealth together. We give you the exact framework of exactly what you need to do. We weekly coaching calls every single week and everybody is there to help each other out. And so inside MasterMoney Academy, it's going to reduce your money stress, anxiety, and anything else that you have worries about when it comes to your money. We give you the exact framework on how to do this. So for podcast listeners, we are giving you a free trial, a seven day free trial. You can see behind the curtain to see if it's for you would love to invite you to join MasterMoney Academy again. You have nothing to lose. It's a seven day free trial would love to invite you to join and see if MasterMoney Academy is for you. Thank you guys so much for being here. I truly appreciate each and every single one of you and we will see you on the next episode.