3 Classic Early Retirement Mistakes To Avoid

These are the classic mistakes that people make over and over again , that I'm constantly hearing about , and so I want to make one video where I just talk about the three classics . What are the main things that you need to think about ? There's a lot out there and it becomes overwhelming very quickly .

What are the things that you need to think about so you never make these mistakes ? So when markets go down , you go , yep , I don't care , I've got a plan for that . Or if you go , you know what , I don't know what tax strategy I should implement . How do I even think through that ? What am I going to do in retirement ?

All those types of things I want to make sure that you have total clarity on . So today I'm going to give you those answers right off the bat .

I know a lot of you are very busy people and you want to listen to the podcast to get that answer , and then , if you want the logic behind every single thing I talk about , you can make sure to stay tuned for the whole episode where you are going to get that as well .

So I want both of you to be happy if you can put yourself in one of those boxes there . I know some of you will shoot me a note saying , aria , very busy , appreciate the podcast , want to make sure that I get your information , but time is of the essence . So if you can consolidate some of these episodes , be really helpful .

Then another person send me a note saying , hey , any chance you can go in more detail . So try to balance for both of you the podcast . I don't want to make them too long . Where you go here , we go again Another guy making a TV show by as a podcast , and that's why I don't do advertisements and other stuff like that .

I had the one advertisement for just three weeks of a holistic physical therapy only because I felt it was really applicable where , if a lot of you have tons of assets but don't actually feel like you're able to do what you want in retirement because your body's not in a position to do so well , that's a problem .

So I'm only trying to bring you guys what I feel is the most helpful content so you can go live your best life . Now let's hop right in . So what are the three classic early retirement mistakes ? So number one is feeling like you should be running . What on earth does that mean ?

What that means is a lot of you have been working very , very hard for many , many years . You retire and you still feel like you should be running . Oh , I'm not being productive enough . Oh , I'm not doing this . Oh , I'm not . You're allowed to put yourself first , and sometimes doing that means not doing other stuff . What does that mean ?

The client came to me and said Ari , I don't know what to do with my time anymore . I know I should be playing golf , but I feel guilty playing golf . I feel like I should be doing more . Other people go oh my gosh , are you telling me there's people that are having these problems ?

I'm loving my retirement , I've got my community , I know exactly what I wanna do , like I just this is . I can't believe people have this problem . It's very real . So you might be listening going hey , I've got no issues Financially . You tell me when I'm in a good spot to retire early , I'm making it happen .

Other people go yeah , I think I'm in a good spot , but I'm actually very concerned because I think I might know what I wanna do , but I retire and I'm worried about being bored . And I saw my neighbors be bored and I saw their coworkers and I'm debating an early retirement . So there's the financial aspect of can I make it happen ?

I think once you have that answer , that's when you can start to actually think about hey , what am I gonna do ? The truth is a lot of you are not going to retire because you're going . Oh my gosh , what am I gonna do when I do retire ?

And I have clients that tell me you can't perfectly plan out your retirement until you are retired and what they're trying to say is , as long as you're still working and very , very busy , you don't really have the time to go pursue these other things that you might really love . You don't know if you'll love them until you do them .

So this client financially knew they were in a good spot to retire early but did not know what they wanted to do in retirement .

They retired anyways and they did a lot of planning and it does take a lot of work to understand what they wanted from a purpose , a fulfillment perspective , and they were like , hey , it turns out , I really love gardening and I haven't had the time to do it .

And so then , all of a sudden , they joined a gardening community and they loved it a whole lot more . Then all of a sudden they went you know what , what , if I traveled and started teaching people about gardening , then they started thinking , you know what , should I make videos and help my local community ?

Oh , and then it turns out they loved to charity nearby , so they started doing charitable giving that talked to their tax plan , so they started to really kind of put themselves into true retirement mode . But they couldn't have done all that stuff while still working , and sometimes people feel like they should have their retirement mapped out .

So tip number one is feeling like you should be running when in reality I want you to walk and jog , and if you want to go for a sprint , you get to go for a sprint . But think about going for a sprint almost like , hey , let's assume you really love what you do . Okay , go do part-time work that you think you'd really enjoy .

And all of a sudden you might find , wow , I really miss the fulfillment aspect of work . But you know what ? I've got it at this job and it's way less stressful . This is awesome . Other people go . I don't want to work ever again . I work so hard Just make sure I'm financially never going to run out . So very different for all of you .

But too many people kind of feel like you're kind of a gerbil on this wheel for years and years and years and it can condition you where you go . Hey , I kind of feel like that all the time . So when you get off that wheel you should feel like you should be running somehow . I want you to go . You know what ?

Maybe I'm not going to run , maybe I'm going to get off the wheel , look around a little bit and ask myself , what wheel do I want to be on ? And maybe it's not a wheel , maybe it's I want to travel the whole world , or maybe it's you know what . That sounds good , but for six weeks , not forever .

Or I want a new community , and so don't feel like you need to have it all mapped out . I had a few clients say I felt like I was supposed to and then I ended up just figuring it out because I had time to pursue it . Other people go . Hey , I kind of planned it perfectly and it turns out I didn't like any of that stuff .

So I feel like I wish I didn't do any of that planning . Other people say , oh my gosh , I have this one workbook that you guys talk about and we do . It's our post career purpose finder that we have all of our clients go through before they retire , just to make them think about this a little bit more , not to get every single answer in the same way .

When we show you planning , we say , hey , here's what the plan looks like , here's what planning looks like . I mean , life's going to change , tax law is going to change , here's how you plan for it . So , number one feeling like you should be running . That's a classic mistake in retirement . Retirement is not about doing nothing .

It's also about actually and I'm going to steal the words from a recent client who says I want a second generation of a childhood without adult supervision . I thought that was pretty cool Second generation of a childhood without adult supervision . So I really like that . Number two , the second classic mistake not knowing how much you can spend .

So if you go , you know what , I think I'm in a good spot . I've got 2 million bucks . I want to spend 100,000 a year . Maybe there's going to be rental income , pension , social security in the future . I think I'm in a pretty good spot . Pretty good doesn't cut it . And here's what I mean . There's something called the retirement smile .

A lot of you know it , but what happens for most of you is you retire early , you have your energy , you have your health , you are ready to go , and then all of a sudden , in your late 70s , early 80s , you just tend to start spending less . Excuse me , you tend to start spending less . It's not a bad thing .

I want to make sure that you can spend what you want to spend . But some people go oh my gosh , I think I want to spend 10,000 a month . My software says I'm going to be okay . Okay , the truth is that's what your software says .

At the same time , you are not software , and so what's going to happen is you're probably going to spend maybe even more than that , but only for the first five or 10 years when you're really doing heavy traveling or enjoying what you want to do . Then maybe it might come down in your late seventies and your early eighties In your portfolio .

It's going to compound even more during that time and then you're going to be in your eighties or nineties going hey , I don't want to die with 10 million bucks . Should I do more charitable giving ? What else should I do ? I've got medical expenses , so it looks like a smile for most people .

So that's why they call it the retirement smile , where you have these certain years that you tend to spend more when you have your energy and health . Then it comes down . Then at the end you go I've got medical expenses or charitable giving or whatever it is . Most people are marrying one number . Don't do that . Don't simply go .

Yeah , I think I'm going to be fine , because if you do that , what's going to happen is you're going to be in your eighties or nineties , probably going . Why didn't I spend more while I had my energy , while I had my health , when I wanted to do some of these things , when the money would have been worth more ?

So not knowing how much you can spend , that's a classic early retirement mistake . I want you to know the most you can spend without running the risk of running out of money . I've told this dumb joke before , but one client came to me and said all right , I'm going to be one of your best clients . I said why .

They said well , I've got $5 million and a really low withdrawal rate I mean I don't have to take a lot out of my portfolio in order to live I said you will be one of my worst clients . They said why I thought a low withdrawal rate was good . I said if you want a good withdrawal rate , go work 30 more years . Your plan will look amazing .

The goal in life is not to do that . The goal in life is to have the highest withdrawal rate without running the risk of running out of money . So I will tell my clients yes , I want your withdrawal rate to be eight or nine percent . They go all right , that's crazy . I thought there was like a four percent rule . So eight , nine percent sounds crazy .

I go oh , yeah , it is crazy . If it was forever , it's for this one year . Then you're going to be less than three and a half percent the next 20 plus years . Then , when some security gets kicked in , you're going to be in the 2% withdrawal rate . Please go spend the money this year . Now . I'm not Mr Nice Guy . I'm the meanest early retirement advisor .

I am the first to tell a client you are not in a position to do so . I want to make sure that you do not get mad at us in your 80s . We have tons of money . Why didn't we spend it more sustainably ? At the same time , I don't want you to be running the risk of running out of money . There's very fine line there , which is my point .

Number three the classic early retirement mistake is people invest too aggressively . Now what does aggressively mean ? Aggressively means they invest too heavily in a single position or in a single equity or in a single asset class , and now their retirement is being dictated by what the market does . No-transcript . They have 100% in equities . People go .

How on earth could you recommend that I go ? It would be a terrible recommendation if they were needing all of those funds to live . But this particular client has a pension and that pension covers the majority of their needs and Social Security covers the rest . So , yeah , they have $3 million in a portfolio that if it went to zero , they would still be okay .

They understand the risks of the market and they know if markets don't perform well , that's not changing their income . For some of you , you might have three , four , five million bucks .

That is just in legitimate portfolio funds , and there might not be other rental income or Social Security or whatever it is , and so you need to make sure that you have the income you need for the rest of your life .

And if a 50% downturn occurred and you didn't have a strategy in place to either take advantage of it from a tax playing perspective , or didn't have perspective , or whatever it is , well , now you're in a really tough spot . So if you have a heavy concentration in one position or you know what , you go . You know what .

I just worked at Microsoft for 40 years . I think they're never going away . I love them . We say , hey , great , we love them too . Here's how much we want you to own . Here's , if you sold what you have the tax consequences . Here's the balance and timing of when you might wanna execute X decision . So real planning is what I call BP bulletproofing .

What are all the things that are gonna bulletproof your retirement ?

And for some people it's going out and buying long-term care even if they don't need it , just because if they don't buy it when premiums shoot up , when that state requires it , just like in Washington , well then , all of a sudden , my clients being charged way more than they should , and if we would have just gotten earlier , we could have saved them thousands of

dollars every year . Other times it's us going to a client go , hey , we really need you to spend more this year and it's gonna . You have income , you have plenty . We're gonna take a healthcare subsidy and we're gonna take advantage of this before brackets change and implement Roth conversions .

This is a year that , instead of bringing in some more part-time income , I'd rather you actually become a successful spender . So understand exactly how much you'd wanna spend in retirement and dream for a moment and kind of , here's the guardrails I want you to stay within .

So the easiest way I tell my clients hey , what are the early retirement mistakes to avoid ? I do this silly bowling analogy because it tends to resonate with a lot of my clients . First I'll say , hey , are you a big bowler ? And no one's ever said yes to this . Let me be clear okay , but I gotta come up with some new ones .

But this is one that I've struggled to find a better one and to me , this is the only way to actually learn this stuff . So I told a client I go , hey , what you're wanna do in retirement ?

Right now you're going bowling and you could hit a gutter ball , getting very unlucky , or markets go down , you could get really lucky , hit a strikes over and over again , maybe even get a 300 , which is unlikely . Or you could use the cheat code and everyone goes what's the cheat code ? I go , the cheat code is going bowling with the bumpers up .

That's what you're doing with us . What you're doing is we're telling you or you could implement this as a listener what we call the guard rails approach , and we don't call it that , it's just called that . What we're doing is we're actually saying markets have done really well .

This is the year to go take some extra income from your portfolio and go take that trip that you've been waiting to take . At the same time , we're not Mr Nice Guy and we say , hey , here's the minimum that we're gonna kind of let you spend , meaning it's your money .

But if you said , hey , we wanna spend more than this , we'd say , hey , that's kind of that spot where we'd say , hey , now we're jeopardizing future income , but this is the least that if you don't at least spend the , at a minimum spend this , you're gonna be kicking yourself later .

So we almost like encourage you if you don't wanna spend , go pay for the groceries of the person behind you , go do other charitable giving , go do other things . And we're also , like I said , not , mr Nice Guy , where we're gonna say , hey , I know you really wanna take the trip this year . Markets are down 20 , 30% . Don't take them never .

I'm not saying never take these trips . I'm saying let's temporarily scale back on taking these trips for just three , four months , because markets are in this current position . What do you think ? And you , michael , ari , we're taking the trip anyways , we don't care . And we say , great , here's the magnitude of that decision .

And some people go , wow , that's not a big deal . Like , over time , yeah , it's a few thousand bucks that it could have I use for something else . But I still see , I'm fine , I'm taking the trip anyways . Other people go , wow , I didn't know that it was an $80,000 decision .

So the way I phrase it to people is a really , really good advisor should quantify the trade-offs of every decision so you can understand the magnitude of that . Now , for some of you you're like okay , this is what I love doing in retirement . I wanna read tax law , I love prospectuses , I wanna be proactive , long-term care laws , that's my thing .

That's when I say don't hire an advisor , if you love doing it , go do it . We are the weird advisors that say everyone shouldn't work with an advisor , and some advisors are like emailing me that list of the podcast , going Ari , stop saying that you're hurting my business and I reply back I don't care .

I think it just depends on the stage of life you're in and what experience you're looking for . Everyone does not need an advisor . It makes sense to hire an advisor if they can add quality of life and let you live the life you want to live . So what I wanna make sure you all know is I do not recommend all of you work with us .

We work with a very limited number of people , but a lot of you are reaching out , going , hey , can you give me custom guidance on this ? And we love that . Like that's why I do the show , and I want all of you , including current clients that are listening , to go yep , I absolutely resonate .

I get to know once you become a client , by the way , a pro tip guys , you become a leisure listener and LL . We go , wow , it's really nice listening , knowing , hey , I shouldn't be worrying about that , that's something that is being taken care of , or should I be doing that ? Like those thoughts go out of your head , which is really nice .

So I mentioned the three feeling like you should be running . That's a classic earlier time mistake Not knowing how much you can spend . So level one is like can I retire ? Level two is how much can I spend ?

Then level three is investing too aggressively or making a big mistake , such as investing a certain way , not having umbrella policy , not being ready to do proactive tax strategy , not having a clear strategy so that , god forbid , if something happens , your wife knows where to get everything , your children know where to go for everything , not creating a huge hassle

upon unforeseen event . This is that next level . These are the classic mistakes . There's a whole lot more here . I will tell you a few , just quick . Two classic ones that come to my mind right now , where one client came to me and said Ari , I can't wait to retire . I said what are you gonna do ? They said I'm gonna go to Hawaii .

I said awesome , what are you gonna do there ? They go I'm gonna surf and I'm gonna learn to do all these things I wanna do . They get over there and they go Ari , it's too hot . I go okay , what are you gonna do now ? They go well , I think we're gonna sell and move back to Colorado . And I said I'm gonna go to Hawaii Really , and they go .

Yeah , I know it's a big financial hit , but it's just we love Hawaii for six weeks , not forever , I go okay . So the premise here is you want to make sure you're doing the right things , but not kind of going all in and I've seen people go I'm tired of my job , I'm out , I don't care what happens , I've got to leave .

They go , make a really rash decision and then all of a sudden that they regret it because they just made a big decision . I'd say you know what ? Go rent a house for six weeks , see if you really want to live there . If after that you still love it , great , go buy it .

But you're not making these big decisions and all of a sudden now you're taking a big loss on a potential property which could be of hundreds of thousands of dollars . Of course , that's kind of number one .

The other two , so second mistake this is the big one that I do see a lot is where people reach out and they go Ari , I know I should be doing some Roth conversions . I get really excited . I don't want to pay a dime more in taxes than I need to Tell me exactly what I need to do to minimize my taxes . And I'll say I don't want you to do that .

And they go what do you mean ? Like I'm coming to you to minimize my tax bill . I love this concept .

I go I don't want you to pay more in tax than you need to , but I also don't want you to go wow , I minimize my taxes so perfectly , but I didn't take all these trips I wish I would have taken , and now I'm not in good health and I can't take these trips . So too often I see people let the tax tail wag the life dog . You don't want to do that .

What you want to do is go hey , let me go live an awesome life and , in light of that , execute great planning both tax , investment , income withdrawal , estate , do all that stuff . But after you determine hey , what do I really want most out of life ?

So I want to always make sure that you guys are living your dream life and letting your finances be reflective of that . So hopefully this was helpful . These are the three classic earlier retirement mistakes . If you're looking for custom guidance , of course , this is what we love to do . You can see in the description below exactly how we work with clients .

So get a good sense there . And if any questions come up , of course , drop a comment here on YouTube , shoot me an email or just leave a review on iTunes . I know I don't get to work with all of you , but for those that I do get to work with I love it . So please do certainly shoot me an out , drop a comment , leave a review .

This is why I love doing the show . Love you , guys . Thank you for listening to another episode of the Early Retirement Show .

If you have a question that you want answered in a future episode , you can always go to my website , earlyretirementpodcastcom that's earlyretirementpodcastcom and you can go ahead and submit a question that I'll look to answer in a future episode . Thank you all for listening .

Please do rate it , review it and share it with someone who you think would benefit from this information . If there's anyone out there that you know , I certainly appreciate it and I will see you all each week . Hey guys , it's me again . Please be smart about this . Nothing in this podcast should be construed as financial , tax or legal advice .

Consult with your tax preparer or financial advisor before taking any action . This podcast is for informational purposes only .