00:00:00
Do you want to quit your job or retire
00:00:01
in 5 years or less? Or maybe you don't
00:00:04
necessarily want to retire fully, but
00:00:06
you do want to have the option to just
00:00:08
be able to do whatever the heck you want
00:00:10
to do. So, if any of that sounds
00:00:12
appealing, listen up. I've had private
00:00:14
financial coaching sessions with over
00:00:16
500 different clients, and most of them
00:00:19
are retirees or people that are about 5
00:00:21
years or so from retiring. So, I have a
00:00:24
lot of firstirhand knowledge with people
00:00:26
that are actually in this same
00:00:28
situation. So let's get after it. My
00:00:30
name is Nolan Goa. My students call me
00:00:32
Professor G. And I made this channel to
00:00:34
make investing simplified. So the first
00:00:37
thing that you need to understand is you
00:00:39
have to know how much money you are even
00:00:42
going to need. Not necessarily the big
00:00:44
number. You just need to at least
00:00:46
understand how much do you think you're
00:00:48
going to need per month or per year in
00:00:51
retirement. Once you figure that out,
00:00:53
you can generally just use the 4% rule.
00:00:56
So that would be your annual expected
00:00:58
expenses times 25 and that's going to be
00:01:02
your retirement target. So if you want
00:01:04
to live on $60,000 per year, you're
00:01:06
going to need about $1.5 million
00:01:09
invested. If you need $100,000 per year
00:01:12
for your lifestyle, you're going to need
00:01:14
$2.5 million invested. Now, in order to
00:01:17
figure out that monthly amount that
00:01:19
you're going to need from investments,
00:01:21
you need to do a couple of things. The
00:01:23
first one is figure out what's your
00:01:24
location going to be or at least what's
00:01:26
the cost of living going to be. A lot of
00:01:28
very smart retirees move from a high
00:01:31
cost of living place to a low cost of
00:01:33
living place or they downsize. Maybe
00:01:34
their house was a little too big and the
00:01:36
payment on it was a little too big. So
00:01:38
you sell that and go into something that
00:01:40
now you don't have a payment. You also
00:01:42
need to consider health insurance what
00:01:44
that is going to look like. You also
00:01:45
need to understand is there any other
00:01:47
type of income that's going to be coming
00:01:49
in something like passive income from a
00:01:51
rental property or maybe dividends or a
00:01:54
business of some sort. Also keeping in
00:01:56
mind how much do you expect to get from
00:01:58
social security and when do you plan to
00:02:00
take it? So now going back to what we
00:02:02
started with, if you say you're going to
00:02:04
need $100,000 a year, I know that it
00:02:07
seems like a lot to say, well then that
00:02:08
means I need $2.5 million invested. But
00:02:12
hold on a second because if you're going
00:02:14
to get something like $30,000 a year in
00:02:16
social security and you get $20,000 a
00:02:19
year from a pension or from rental
00:02:22
property income or something, that's
00:02:24
$50,000 a year of income that's coming
00:02:26
in already. So you don't need $100,000
00:02:29
from your investments. You're only going
00:02:30
to need 50,000 per year from your
00:02:32
investment. So that brings it down a
00:02:34
bunch for how much that you're actually
00:02:36
going to need invested. But now that we
00:02:38
understand how much you're going to need
00:02:40
invested, we need to just get straight
00:02:42
to it. As far as what to invest in, you
00:02:45
need to invest strategically. You need
00:02:48
higher than average returns, but without
00:02:50
reckless risk. So, a core portfolio
00:02:52
structure for this would be something
00:02:54
like 70 to 80% in broad market ETFs like
00:02:58
VTI or QQQM or SCHD or VU. And we talk
00:03:03
about exactly which ones in different
00:03:05
videos. Then with 10 to 20% of the
00:03:07
portfolio maybe going a little more
00:03:09
aggressive with some individual growth
00:03:11
stocks or thematic sectors like AI or
00:03:14
semiconductors or data centers then with
00:03:17
a further amount 5 to 10% or so would be
00:03:19
alternatives like crypto REITs private
00:03:22
equity. The main thing to see in that
00:03:24
portfolio is the vast majority of it is
00:03:26
still broad solid like blue chip style
00:03:29
ETFs and then smaller portions of it get
00:03:32
riskier because if we're looking for
00:03:34
higher than normal gains, you're going
00:03:36
to have to risk it just a little bit.
00:03:38
And I'm not necessarily saying that you
00:03:40
have to get any type of risky asset
00:03:42
whatsoever. But if you are looking for
00:03:44
something a little bit higher than the
00:03:46
normal average of 7 to 8% or so per
00:03:49
year, that's kind of the way that you
00:03:51
have to do it with that style of
00:03:52
portfolio. You're going to want to
00:03:53
automate and invest every month. Time in
00:03:56
the market matters more than timing it.
00:03:58
So, we figured out how much money just
00:04:00
in general you need invested and then
00:04:02
possibly a structure to what to invest
00:04:04
in. Now, we need to talk about something
00:04:06
even more important, which is how much
00:04:08
to add to your investing and how you can
00:04:11
add even more than you probably already
00:04:13
think. Once you hit the age of 50,
00:04:16
there's actually benefits for you as far
00:04:18
as you can add way more to certain
00:04:20
retirement accounts, which means that
00:04:21
you can get better tax deductions and
00:04:24
get that retirement account just growing
00:04:26
like crazy just by adding a little bit
00:04:28
more. And it's a benefit that you get
00:04:30
that younger people don't get. The 401k
00:04:33
contribution adds a catch-up
00:04:35
contribution starting at age 50. The
00:04:37
accounts contribution limit is 23,500 in
00:04:40
2025. People aged 50 and older can
00:04:43
contribute an extra 7500 as a catch-up
00:04:47
contribution. Due to the Secure 2.0 act,
00:04:50
those ages 60, 61, 62, and 63 get a
00:04:54
higher catch-up contribution of 11,250.
00:04:58
Savers can also contribute an extra
00:05:00
annually to an IRA. The current limits
00:05:03
are $7,000 in 2025, but it's $8,000 if
00:05:07
you're age 50 and older. This portfolio
00:05:10
padding can significantly improve your
00:05:12
retirement prospects. Saving 8,000
00:05:14
instead of 7,000 in an IRA from age 50
00:05:18
to 65 and earning just a 6% average
00:05:21
annual return can add nearly $24,000 to
00:05:25
your savings by retirement. Max out your
00:05:27
401k at work with an extra $7,500 a year
00:05:31
and you'll end up with about $177,000
00:05:35
more by retirement than you would have
00:05:37
if you hadn't made the catch of
00:05:39
contributions. So even more important
00:05:41
than focusing on what to invest in and
00:05:43
even adding in more money to that is to
00:05:45
very much at this point focus on your
00:05:48
biggest wealth driver. If you truly want
00:05:51
to retire in 5 years or less, you need
00:05:53
to do something drastic. And that all
00:05:55
comes down to you need to be bringing in
00:05:58
much more money. Maximize your income
00:06:00
now. You're on a tight timeline, so
00:06:02
focus on growing your income
00:06:04
aggressively. First thing you could do
00:06:06
is ask for raises or change jobs. 6 to
00:06:09
12 months of job hopping can increase
00:06:11
your salary fast. You could also build
00:06:14
side income streams. You could
00:06:15
freelance, consult, do some content
00:06:18
creation or real estate, even digital
00:06:20
products. You could even be looking into
00:06:23
high lever careers like tech, sales,
00:06:25
finance. They pay much faster and you
00:06:28
can get crazy commissions. If you love
00:06:30
what you do and you want to stay there
00:06:32
and you definitely don't want to add a
00:06:33
side hustle because that just seems like
00:06:35
too much work. That's fine. Find that
00:06:38
money in your budget then. That means
00:06:40
you're going to have to cut down on
00:06:42
something. It's usually not the funnest
00:06:44
answer in the world, which is why I
00:06:45
didn't start with this. But if you're
00:06:47
not going to do any of the other things
00:06:48
that I said before in order to add
00:06:50
income, then you need to do something to
00:06:52
decrease expenses so that at least we
00:06:54
have a little extra money that we can
00:06:56
invest with. If you have $500,000 in
00:06:59
your retirement account right now and
00:07:01
you're adding $500 per month at 10%
00:07:04
growth, in 5 years you'll be at
00:07:06
$841,885.
00:07:09
If you have 500,000 in your retirement
00:07:12
account right now and you're adding
00:07:13
$2500 instead per month at 10% growth,
00:07:17
in five years you'll be at a million. So
00:07:21
finding a little extra money every
00:07:22
single month is definitely worth it.
00:07:24
During this time though, I would
00:07:26
absolutely be looking at and researching
00:07:28
cash flowing assets just like I started
00:07:31
with at the beginning of this. Remember
00:07:32
when I said find what your number is
00:07:34
that you need to live off of per year in
00:07:37
retirement? If that number is something
00:07:39
like a $100,000 and you're getting a
00:07:42
little social security, the way that
00:07:44
you're going to be able to actually make
00:07:46
it so that you can bring down that
00:07:48
number of total investment needed in
00:07:50
order to hit that h 100,000 is to find
00:07:53
something that's bringing in some cash
00:07:54
flow to help with that. This could be
00:07:57
starting or investing in a business,
00:07:59
real estate, dividend stocks, ETFs. Now,
00:08:03
like I said before, figuring out exactly
00:08:05
what to invest in and where to invest
00:08:07
that can be very, very important. You
00:08:10
need to be strategic in all areas. So,
00:08:12
every little piece of this video is
00:08:14
important for you to understand, but
00:08:16
this one could save you tens if not
00:08:18
hundreds of thousands of dollars in
00:08:20
taxes long term. The big thing that I
00:08:23
see with my retirees is they have to
00:08:25
deal with taxes. If you're pulling out
00:08:27
of a 401k or a traditional IRA or just a
00:08:30
regular brokerage account, every time
00:08:32
that you sell and you withdraw the money
00:08:33
in order to live off of it, you have to
00:08:36
take into account the fact that there's
00:08:37
going to be taxes and it just depends on
00:08:39
where you're at in your tax bracket. The
00:08:42
issue that I'm seeing though is that our
00:08:44
national debt is crazy right now and it
00:08:46
just keeps getting higher and with
00:08:48
everything else going on geopolitically
00:08:50
and just in general, it just looks like
00:08:52
that's going to get worse and worse.
00:08:54
Eventually, what I can see happen is
00:08:56
that the tax brackets are going to go
00:08:58
up. So, right now, if you're in the 12%
00:09:01
tax bracket, I feel like that's going to
00:09:02
get up to a 15 or an 18%. Those of you
00:09:05
in 20% tax bracket might be in more the
00:09:08
30% and that's what they're going to
00:09:10
bring it to. And so, down the road, 10
00:09:12
years from now, if the tax bracket's
00:09:14
higher, that means that if you pull out
00:09:16
a certain amount of money, you're going
00:09:18
to be taxed heavier on that. The only
00:09:21
way to make sure that you're not going
00:09:22
to be taxed heavier if the tax brackets
00:09:25
go up is to have a good portion of your
00:09:28
money in a Roth IRA. Everything within
00:09:31
that Roth IRA as it grows is totally
00:09:34
tax-free. So if they do increase the tax
00:09:36
brackets down the road, you're going to
00:09:38
be totally safe because when you pull
00:09:40
that money out, you don't have to worry
00:09:42
about it. It's not taxed ever. So right
00:09:44
now, I would be maxing out a Roth IRA
00:09:47
even if you haven't started yet. I'll
00:09:48
explain that in a second. But very much
00:09:50
also looking at possibly doing Roth
00:09:53
conversions where you convert a portion
00:09:55
of your traditional IRA over to the Roth
00:09:57
or even some of your 401k over to the
00:09:59
Roth. Even if you don't want to add to
00:10:01
the Roth IRA right now because it
00:10:03
doesn't make sense. Maybe you're a high
00:10:04
income earner at this point and so doing
00:10:07
any type of conversions just isn't smart
00:10:09
because you're going to be tax too
00:10:10
heavy. Totally understand that. I just
00:10:12
think that it's smart to start thinking
00:10:13
about a strategy to how you would get
00:10:15
the money sitting in a 401k or
00:10:17
traditional IRA converted over to a Roth
00:10:20
IRA in your first couple years of
00:10:22
retirement because now your income is
00:10:24
little to nothing. So now you'll be
00:10:25
taxed at the lower rate and will
00:10:27
effectively save you thousands or even
00:10:29
tens of thousands of dollars doing this.
00:10:31
And like I said, even if you don't plan
00:10:33
to add to a Roth IRA today or start
00:10:36
being consistent with doing those
00:10:37
conversions today, I still think you
00:10:39
want to start strategizing about this
00:10:41
because there are certain rules with a
00:10:43
Roth. The first really big one that
00:10:44
people kind of get hit with is that when
00:10:46
you start the Roth IRA, if it grows to
00:10:49
something, you can't pull any of that
00:10:51
growth out for 5 years from when you
00:10:53
opened it and when you funded it. The
00:10:54
clock for that five years just starts
00:10:56
right when you open it. And so once you
00:10:58
fund or put a little bit of money in
00:11:00
there, say you put a $100, that starts
00:11:02
the clock. It doesn't restart every
00:11:05
single year. So, you know, you put
00:11:06
something in in 2025, you can't touch
00:11:08
that till 2030 or 2026, you can't touch
00:11:12
it till 2031. It doesn't work like that.
00:11:14
It's just a one-time 5-year clock. So,
00:11:17
whenever you start it, that's when it
00:11:19
starts. So, like I said, even if you're
00:11:21
not going to plan to add to that
00:11:23
consistently for the next couple of
00:11:24
years, just getting it started and open
00:11:27
makes it so that down the road you won't
00:11:29
have to deal with any of that issue. The
00:11:30
5-year rule is just one part of the
00:11:32
equation. For a Roth IRA withdrawal of
00:11:34
earnings to be completely tax and
00:11:36
penalty-free, it must be a qualified
00:11:38
distribution. To make a qualified
00:11:40
distribution, you must satisfy the
00:11:42
5-year rule and at least one of the
00:11:44
following conditions. You're at least 59
00:11:46
1/2 years old. You're using the funds to
00:11:49
buy or rebuild your first home up to a
00:11:51
lifetime limit of $10,000. You're
00:11:54
permanently disabled. The Roth IRA owner
00:11:56
has died. And the distribution is being
00:11:59
made to the Roth IRA owner's estate or
00:12:01
to you as the Roth IRA owner's
00:12:03
beneficiary. If you make too much money
00:12:05
right now and you don't qualify to add
00:12:07
to a Roth IRA, that's fine. There's a
00:12:10
couple of options that you have still.
00:12:12
Number one would be what I do, which is
00:12:14
just do a simple backdoor Roth IRA
00:12:16
conversion. It's definitely more simple
00:12:18
than it seems and there's a lot of
00:12:19
YouTube videos here on YouTube about
00:12:21
this, so check that out after this.
00:12:24
Also, if your employer offers a Roth
00:12:26
401k option, definitely consider doing
00:12:28
that. Yes, it's going to keep your taxes
00:12:31
just a little bit higher because when
00:12:33
you choose the Roth version versus the
00:12:35
traditional 401k version, you're giving
00:12:37
up that possibility of bringing down the
00:12:39
taxes just a little bit. But it might be
00:12:41
well worth it down the road. I like a
00:12:44
good strategy of doing half of it in the
00:12:46
traditional 401k and half of it in the
00:12:48
Roth. Usually you can choose the
00:12:50
percentage of where your allocation's
00:12:52
actually going. And that way you're kind
00:12:54
of just like canceling it out. But long
00:12:56
term that Roth, like I said, is going to
00:12:58
be so important for you, especially if
00:13:00
you're a high income earner right now
00:13:02
and you're not going to do the backdoor
00:13:03
Roth IRA version. The last thing to
00:13:05
start thinking about is as you get much
00:13:08
closer to actually being able to retire,
00:13:10
like one year, maybe a year and a half
00:13:12
out from retirement, it's time to start
00:13:14
cutting a lot of those risks. So at 12
00:13:16
to 18 months from retirement, begin
00:13:18
shifting from growth to capital
00:13:20
preservation, from volatility to income.
00:13:23
So instead of something like
00:13:25
semiconductors or AI or something of
00:13:27
that nature, move it over to possibly
00:13:29
bonds or short-term bonds or dividend
00:13:31
ETFs, cash flowing assets. And then at
00:13:34
that point, you definitely want to
00:13:35
revisit your health insurance, long-term
00:13:37
tax planning, and even legacy planning.
00:13:40
To retire in the very near future, you
00:13:42
need to definitely have all of your
00:13:43
ducks in a row and understand a lot of
00:13:45
these numbers that I talked about in
00:13:47
this video, but also understand how to
00:13:49
build a strategy. And so, if you ever
00:13:51
need help with something like that, you
00:13:53
know where to find me. My information is
00:13:55
in the description down below if you
00:13:56
want to send me an email for a
00:13:58
consultation. But in the meantime, watch
00:14:00
this video to check out the exact three
00:14:03
fund portfolio that I always recommend
00:14:05
and that I'm personally doing. And not
00:14:07
only that, I talk about exactly how much
00:14:09
percentage of what type of portfolio
00:14:12
based on your age. Or watch this video
00:14:14
to keep you going strong in your
00:14:15
investing journey. Remember to keep
00:14:17
investing simplified.
