I just got out of a meeting with my client and I said I want to record a podcast episode . Now , most of the time I will sit down and I'll run an outline , and that's not what I'm doing today , and I've recorded north of 150 episodes of this podcast . If you've been listening for some time , thank you .
But today might be one of the most important episodes I've ever recorded , and the reason for that is because you are probably a good saver . That is why you probably are where you are today , or you're on a really good track to be able to retire early , or you're just going . You know what ?
I don't know where I am and I want to distill a few really important things for you in a simple way , so you can have a successful retirement and I'm going to put it in one sentence for you and then , of course , give you some real life examples , because I just got out of a call an hour ago where I talked about this .
So you are a successful saver , that does not mean you're going to have success in retirement . In fact , you won't . And here's what my client said . My client said Ari , you're going to be so proud of me . I've got three million plus dollars and I have a very low withdrawal rate . I think I'll be a great client . I said no , you won't .
And I'm like what do you mean ? I heard your podcast episode and I think you said it's good to have below a four or 5% withdrawal rate or something like that . And I said , yep , I talk about that and they go . Well , then what's the problem here ? I go . The problem here is , if you want to have the lowest withdrawal rate , here's what I want you to do .
I want you to work 20 more years , don't spend any money or have any fun . Your withdrawal rate will look awesome . Okay , it'll be very low . That's not the goal here . And so I'll ask a client and I'll do this . Anytime someone will join or our firm or reach out to us , I'll say what's the most amount of money that you can spend without running out ?
And they go . I don't know . I just don't want to run out and I go . The point here is not to have the lowest withdrawal rate . The point is actually to have the highest withdrawal rate without running out of money . I don't want you to die with five or six or $10 million . To me , I don't imagine that's what success is in retirement .
Now , if you go , ari , yep , I want to leave a million dollars to each child or to a certain air . That's fine , but more often than not you will be kicking yourself if you stay a good saver in retirement . Now let me be clear . I am not saying go spend frivously .
I am saying please make sure that you have a strategy that tells you how much you can spend , kind of what is the maximum and what is the minimum . And I had a client come to me and they said Ari , I need to spend 8,000 a month to be able to do the things I want to do . I said how much could you spend if I forced you to spend ?
And they said I don't know . I've never thought about it that way . And I said well , dream . They said I guess I could spend maybe 10,000 a month , but I'm just not sure I haven't done it yet . Now this individual worked a really stressful job . It didn't really have time to explore other hobbies to see what they could spend money on .
But they're like are you saying I need to go buy a fancy car and this , and that I go ? Not at all . I want you to make sure that you are spending what you want to spend , because if you don't , here's what you're on track for it's 12 million dollars . Does that sound like success to you ?
Now , a lot of you have probably heard of or read the book Die With Zero , and it's a self-explanatory title . But I'm not trying to have my clients cash their last check . If you will , I do want to make sure that you're not going through life in retirement going .
Hey , I'm kind of curious if I spend too much on this travel , does that mean my long-term care is going to be an issue ? Or if I spend too much on my kids' wedding , does that mean I don't have to work six more months ? I don't want you to have to even deal with those thoughts . I want you to be in the know .
I want you to truly know what's the most you can spend and how to think through this . And so , to summarize it , if you stay a good saver , you will not have success in retirement . You need to become a successful spender , not an overspender . A successful spender . Let me be clear Now . A lot of you are going Ari .
It felt like if I was a good spender , I probably wouldn't be where I am today . I go , that's right ? I don't think you would be . If you were a great spender , you probably would not have two , three , four , five million dollars , which , for most of you that are reaching out , that is what you have . And I know that because you're going .
Ari , I'm a good saver . You're going to love seeing my account balance . And I don't . And the reason I don't and I'm half joking , of course is because I'm thinking could you have spent more along the way and had more memories with family ? Could you have traveled more ? What could you have done so you don't die with 10 , 15 , 20 , 30 million bucks ?
Now it's you know , I totally recognize there are people nowhere in this position , but I'm speaking to all of you who probably will be in a position like this at some point . So here's what I want to go through today . What are the five pillars I just wrote down when I got out of my meeting .
What are some things that you need to think through if you want to be a great Spender . Okay , now , I'm not saying go spend like crazy , but I'm saying I want you to be intentional about the way you spend . And here's the first thing . The first thing is implement the guardrails approach now . If you're gonna already .
I don't even know what the guardrails approach is . I'm gonna explain it to you right now , but I did a separate YouTube video on it , and what this is is it's a way to spend money in retirement correctly . And I'm saying it correctly because I've read all the studies out there and I haven't one read one that's better than this .
And here's why most people just take money from their retirement accounts once they retire , regardless of what the market does . And is that a bad thing ? No , but are you leaving money on the table ? Yes , and here's why , when you retire , you become your own employer .
So , just like you're working today , a lot of you when you do well at your job , you might get a bonus because you did well , and if you didn't do well , maybe there's a smaller bonus or maybe there's no bonus at all .
It's the same way in retirement you become your own employer , and if markets are doing well , I'm gonna say , hey , please go spend more money . This is the year to do it .
In other years , I'm gonna say , hey , can we temporarily cut back spending not forever , but temporarily , which you won't love to hear but then you go wow , I see why are you saying this ? It's because there's a $300,000 trade-off by being willing to do something like this . So why do I get so passionate about this stuff ?
I don't want you to leave anything on the table . Most people are not coming to me so I'm saving their ship from sinking . They're coming to me to optimize what they've worked so hard for . So what are some of these areas where I want you to spend money ?
I want you to spend money assuming , of course , your plan tells you you're in a position to do so on your health , okay , and there's a so many different ways of going about this . But wealth without health , that's poverty .
Now , you've probably heard that term before , but whether that's a gym membership or a trainer or healthy food , a lot of you have healthy account balances and you are not going to the grocery store that you want to go to , or You're not spending more money on a trainer because it's a lot of money .
And it is a lot of money Unless you have a very healthy portfolio balance , unless you have a pension , unless you have inheritance , unless you have rental income , unless you have you name it .
For some people it is a lot of money , but what happens to most people , just like the client I spoke with , the idea of hiring a personal trainer to them was expensive , and it was expensive 20 years ago and it's still expensive in their brain to them right now , even though they have plenty of money to hire five personal trainers .
It doesn't mean it's easy to do it . So some people are going . Are you expecting me , in light of all of this , to flip a switch where I was a great saver and now I'm gonna be a great spender ? And the answer is no . It takes work , just like all of this does , but I'm inviting you to really think Excuse me , sorry for the hiccup there .
I'm inviting you to really think deeply about this . To go , okay , if I need to have a successful retirement , which you don't need to do , but if you wanna have one , I need to get serious about how much I need to spend . And most people go wait a second . I thought you were just an advisor that tells people to save and invest more . Yeah , to a point .
And then there's a point where I don't want you to save more money , and my basic example is this person came to me . They had $2 million . If they invest well and get 10% growth , that's $200,000 , okay . And they're saying , ari , I'm so stressed , I'd love to be able to hire a personal trainer , but the reality is I need to max out my 401k .
And I was saying , no , you don't they go , ari , but there's free money on the table , there's an employer match . And so I'll joke and I'll say , okay , I need you to do the employer match , that's free money . I need you to do that .
But outside of that , which is , of course , a joke , I want you to not max out your 401k , because if you add $30,000 , that's great , but it doesn't compare to adding $200,000 by investing the right way . So later on in your career , it's not as impactful to add more dollars , it's more impactful to invest the right way .
It's the opposite early on in your career . And you guys are gonna laugh at this quick story . But I had a client come to me and they're like Ari , I want my kid to hear what you have to say about money . I'm like okay , what do you want me to talk to you about ? What do you want me to talk to them about ?
They said , don't worry about it , just hop on the call and they'll ask you questions . I'm like , sure . So they hop on the call and they're talking to me about crypto and how they can put Bitcoin and Ethereum in their 401k . And you know I told them you all laugh . I said shut up .
I'm like Ari , I've never spoken to that way and you know the clients loving it because their kids never been spoken to that way . Now , okay , I said it nicer than just shut up . But I was like , okay , let's think through this . And what I showed them is the fact that I don't care what their return is . And they're like what do you mean ?
Returns are very important . I think returns are very important . I go of course , returns are important , but right now , what's important for you is that you max out your 401k . So , focus less on crypto , focus more on maxing out your 401k and figuring out how to do that with your income and making sure you're saving at least 15% .
Okay , that's why I tell the child Now you are in a different spot . Okay , you're listening to this right now , maybe you're in your 50s or 60s , maybe even 40s for some of you and you're like okay , what do I do ? How should I think through this ? Well , adding new dollars just isn't as important , and that is the reality .
So number one is spend money on your health . Okay , realize that truly is an investment , so you're not paying a ton more in the future . But that's not really why you're doing it . You will not get your health back . So that is the number one most important thing I like my clients to spend money on . Number two is experiences .
No one's ever said Ari , I am so grateful that we did a Roth conversion so that I have 80,000 more tax-free dollars . Okay , they say , ari , I'm really glad we did it and I'm happy I'm paying you to do it , but I'm actually happier if I just spent more money on trips or experiences , things that really add value to my life .
We're doing Roth conversions in light of what you wanna do , okay . So here's a dopey joke for you , and my clients have already heard a lot of these . But someone came and said Ari , you seem really excited about these conversions and I don't really wanna upset you because you seem so excited . But I was thinking , can I just run an idea by you ?
And I said , sure . And they said what I want to do is I'm going to retire early , but I'm not going to have any fun . Okay , I'm not going to do any trips or anything like that , so we can do an amazing conversion strategy , because I heard if we're able to convert money , that will be tax-free forever . And I heard there's no limit to doing it .
It's not like a Roth contribution , you know where . There's only 7500 or 6500 . No , I heard we can do an unlimited amount . Is that correct ? I said yes , that's correct . They said , great . Then that's what I'm going to do ? I said no , it's not . And I'm like what do you mean ?
What I mean is I don't want you to have the best conversion strategy , I want you to have the best life ever and , in light of that , let's do great conversion so you don't pay more in taxes than you need to . But it has to be a secondary consideration , not a primary one . Okay , so fun joke for you there . So I want you to spend money on experiences .
I want you to travel and not just travel in terms of , okay , I traveled , I did it . Travel in terms of what if you could bring family with you ? What if you could bring friends with you that maybe didn't save to the degree that you saved ?
And it depends , of course , on your level of wealth , and sometimes the biggest limit that we can do is your imagination . You've maybe never thought hey , what if I did take my whole family on a trip , not just for three days , but for a week , a true week off , and you're going , ari , I didn't even think about that .
And I'll say I want you to think about it . And I have clients that know they're going to get a not so fun call from Ari if they didn't buy a first class ticket because they've saved and invested . Well , now , if they don't want the first class ticket because they don't want it , that's a different story .
But I have clients that are in a very healthy position to do so and if they don't do it , I will tell them I'm not happy with them . Now I'll say , of course it's okay , but that's something I want them to do and really practice doing more than anything . The other one I want to go to right now is giving .
I want to make sure I'm not saying you have to give to all these institutions , but I'm saying you are going to give millions of dollars , whether you want to or not , and when you pass . That is what giving means . That's either going to go to your heirs and your heirs may say , oh my God , we have $3 million , we're going to quit our jobs .
Or they might say you know what ? Nope , we've been raised well , we're not going to quit our jobs , we like what we do and we're going to set up a charitable foundation .
Okay , it can go one of two ways , and I've seen both where people now squander their lives because they have tons of money , or people go hey , I'm overwhelmed by all of this , I'm just going to give it away . So I'll tell people what's your state planning , excuse me . I'll ask them . I'll say what's your state planning strategy ?
They go Well , I don't really have one , but I think I have a trust or a will . I go . No , that's not what I'm talking about . Your state planning strategy is what are you trying to do so you don't die with $10 million ? Like , well , I don't know , I'm just trying not to run out of money once again , ari .
And so I'll rephrase it for them and I'll say your state planning strategy is not dying with $10 million . And in order to do that , can we gift along the way , can we help kids with down payments today ? What can we do today to be able to help them out more , so that they don't just go ?
Oh , my God , I've got a ton of money , but what good is it now , when I'm 80 or 90 , if that makes sense ? So hopefully you're thinking through charity as a really big part of your plan here , and I would love to see if you could do some good while you're here , versus just waiting .
And that's without even talking about the tax deductions that come along with doing so . The next one I want to talk about is spending money to improve your overall environment . Okay , this is the big one . Have you ever thought through I'm going to the grocery store .
Could I pay for the groceries behind me , of the person behind me , because it looks like they're struggling ? I'd love to be able to do that . That's , you know , of course , a giving idea . But on top of that , it's improving your environment , improving your community .
Now , I would argue it is impossible to do that if you don't know that you have the disposable income to do so . So I'll tell my clients . I want to make sure you know what's the most that you get to spend every month . And so I'll tell a client hey , your maximum this month is $12,000 . And they'll say , great , I only need 10,000 to live .
So I say I don't care what you do with the other 2000 . Go travel or give it away or do whatever you want . Now , of course , I'll say it in a nicer way , but I want them to know that you have options and those options can be deployed as as however you see fit . Should I say Now , what this does to your mental and emotional state can be huge .
How cool would it be if you got to gift and pay for the person's groceries behind you every single time you went . Some people it's like all right , I just love to do that . Other people it's no , I'd really love to just be done earlier . To me , it's less about giving , it's more about when can I be done ? Working I am stressed , I want to be done .
Okay , well , you might retire . I have a client , a CFO of mine , who just retired at 48 years old . Okay , now , many people would go . That doesn't make sense . 48 , they need income next 50 years . They saved and invested really well , they're in an awesome spot , so they get to do that .
So this idea that you retire based on your age and risk tolerance is just complete doo-doo . Okay , I , and you know this a lot of you . I have a jar that was sent to me , one of my favorite gifts ever , and it's called the anti-cookie cutter jar because I am anti-cookie cutter . I will not ask you your age and risk tolerance .
I want to know those things , but not that's not what's creating my asset allocation for them . So I want to make sure that if you're investing well , you know how much more income that could create for you . And you might go wow , if I invest this way , that's $3,000 more a month . Okay , good to know . You also might go . You know what .
That's not worth it to me . I'd rather invest , you know , less aggressively , meaning there's less dollars left over , but I'm going to sleep better , and so that's what's more important to me . So these are the trade-offs I want you to think through . The other thing in terms of environment I'm often asked is Ari , should I move ?
Like what if I move to Florida ? Better taxes or Texas , you can always do that . But I'll say do you want to do that ? I'll say , no , it's just the tax consequence would be so much better there . I say so let's do an analysis , let me show you the difference . And they'll go wow , that's a $2 million difference .
And they go , yeah , like Ari , I think I should make the move . And I go wait a second . Do you need to make the move and they'll go ? No , I just see I could save like $2 million over time . That's pretty big . They go . It is big .
But if you don't want to move there and you see you're still going to be okay , do you want to move there and they go ? Oh , no , I don't want to move there . I just kind of thought it would be such a big difference . I kind of had to . Now , some people go hey , I want to go to Florida anyway . In that case , win-win .
But if you're like , hey , I'm trying to move to another state just for tax purposes , even if you don't need the money , I don't love that idea , to be honest .
I'd rather you live where you want to live and then you're paying taxes , like California , where I am , or in New York or other states that are relatively high but you're getting value for it , assuming , of course , you want to be there . So hopefully this has been helpful to think through . Just some ideas . I came right out of a client meeting .
I wanted to record this , so you all know I record every Monday . These are huge for me . I want to make sure that you guys are living your best life , not just saving and investing for this arbitrary future date that more often than not , people just keep working because it's easier and it's scary .
This unknown of , oh my God , what am I going to do when I don't work any longer ? And I think you guys know this , but we have a retirement lifestyle coach on staff and I'll joke with clients . I'll say it sounds like everyone kind of calls themselves a life coach nowadays , but the reality is this is all she does .
Okay , I love numbers and optimizing them , but she is a lifestyle coach and we have her on staff to speak with our clients , so that you don't just have $10 million but you go . I have a plan for fulfillment . I have a plan for purpose . I have a plan to make sure I'm going to start building these habits to last over time .
So hopefully , this was helpful for you guys and I will speak with you all next week . If you guys , of course , want a custom plan , this is what I love to do , so reach out to me in the description below and you will see how we help clients do just that . 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 .