How to Retire Early Using Phases

Speaker 1 (00:00):

So can you retire now and get more freedom sooner? The answer might be yes, but the way to get it done might not be exactly how you're picturing. And what I'm talking about is retiring, but doing it in phases. See, most people think about retiring and they think of going from working 40 hours a week to zero hours a week. However, if you add a semi-retirement phase, it can give you a taste of retirement and it can come with additional benefits as well. Welcome everyone. This is the Retirement Power Hour, episode 30. I'm your host, Joe Allaria. Joined today by my co-host and fellow wealth advisor at Carson Allaria Wealth Management, mark Allaria. Mark, thanks for joining the conversation today.

Speaker 2 (00:46):

Yeah, I'm excited to have a good discussion about retirement here.

Speaker 1 (00:49):

Well, we're talking about retiring in phases and really what we're talking about is something a lot of people overlook, and I think that's, it's semi-retirement and semi-retirement is something that I've witnessed personally. I think you have as well with clients. It's something that has gone very well for the clients who have entertained it as a strategy. And a lot of people out there are dying to get out of their job, whatever it is, whatever they've been doing for a long time. Some people, they're at the point they'll do anything else. They just want to get out, but they may not be ready to fully retire. And like I said in the opener, a lot of people are just looking at this thing like, I have to go cold Turkey, right? I have to go from 40 hours a week to zero. And that's not really the case. These people have a lot of expertise built up, and this phased sort of retirement is something that gets completely overlooked, but I think is an extremely valuable solution for people.

Speaker 2 (01:42):

Absolutely. Just some strategic outside the box thinking has been very beneficial to a lot of the people I work with on slowing down, but not completely quitting. And it's really enhanced their, their lifestyle in general.

Speaker 1 (01:53):

I'm picturing people that, that have expertise in a specific field or area, but they really don't want to keep working. And sometimes we, we sit down, we do retirement plans for people and they kind of need to keep working for a few more years. And, but there's some people that they'll do anything. They're to get out of their current position, they're overworked, stressed, burnt out, whatever it is. And so, you know, we're gonna talk, I mean, we're just gonna dive right in and start talking about this because we've got stories, we've had clients that have fallen into this. We've counseled clients into trying to create these situations. I've seen it only go extremely well and it starts with the financial side. Okay. Instead of going from earning my full salary to nothing, I'm gonna actually keep earning some money in retirement.

Speaker 2 (02:39):

Well, sure. The first thing is when you completely cut cold Turkey and you reduce all that income, the first thing you gotta d is where am I gonna get this income? And always comes from the portfolio, right? Social security and the portfolio. Yeah. So if you can lessen the draw from the portfolio for a few years, it certainly helps the longevity of your assets and gets you to, uh, a more promising look at having assets through your lifetime.

Speaker 1 (03:01):

There's things that when we do retirement plans for people, there are factors that people bring up, uh, in retirement. Like, well, what if I have to buy a car or if I work a few more years? And the, the impact of each factor, I think it's hard for people to wrap their head around, for example, a one-time expense in retirement, very little impact, right? But this is something right here where we're talking about if, if you're gonna add 50% of your normal salary for five extra years in retirement, that's gonna have a significant impact from just retiring cold Turkey. I don't think a lot of people know that or understand it until you sit down and you, you pull up a retirement planning software and you show 'em what it looks like.

Speaker 2 (03:48):

Oh, absolutely. I mean, you think about, you know, people that are making, uh, six figures a year, say a hundred thousand dollars a year, and that's a, that's a lot of money. Sure. And then, uh, they go to a part-time role or, or some kind of a modified role and they make 50. Well, it feels like such a huge pay cut, right? The way to look at that is like, I got 50 coming into my household that I don't have to pull my portfolio a million dollar portfolio. That's 5%. You're not withdrawing.

Speaker 1 (04:13):

And I think it, it feels like not a big deal because you're thinking, I'm used to making a hundred, I'm used to making 150 or 200, or whatever it is, right? What difference is it gonna make if I make 30,000, 40,000, $50,000 a year? Because that's way less than what I'm used to making. It can't be that significant. But like you said, if, if I have a million dollar portfolio and I'm all of a sudden not taking out 40,000, that's 4%. That may be all I need when I couple it with social security or a spouse's income or something like that. You think about the factoring or the compound effect of that and factoring in compound interest, not only in those years, but if it's 50,000 a year that you left in there for five years, that's 250,000 above where you would've been, that's compounding every single year. So

Speaker 2 (05:05):

Yeah, the compounding effect's huge. You know, I can just visually look at our cashflow analysis and again, to your point, Joe, taking 50 grand a year outta your portfolio for five years, it's a quarter million dollars you're pulling outta your portfolio. Well, if you're making $50,000 a year for five more years, even though it's a third of your income or even 25% of your income, it's $250,000. You didn't have to take outta your portfolio, which takes years and years to save. So that's a big component. The other component on the financial side, I would, I would say that we can't leave out, 'cause it's a very big deal, is the health insurance side of it. So we've got a lot of clients go from working 40 hours a week to 30 hours a week, and they stay on the health insurance for the company, which is a big deal. 'cause as, as, as everybody knows, you could be spending a thousand bucks, 1200 bucks a month on health insurance for, for just you not, not, not including your spouse. So another huge financial benefit is being able to stay on the, on the benefit side of the health package,

Speaker 1 (05:58):

Especially if you're under 65 because the coverage could be expensive. It's a lot to wrap your head around. But if you're trying to get health insurance coverage before age 65, you know, maybe you wanted to retire at 60, but you decide to, to maybe work part-time or semi-retire and you can retain that, that's a huge benefit to just be able to continue to do that, especially if your company's paying for it. And you might be getting that 401k match too. It might, you know, three or 4%, but it's something and, and the financial benefits are all good and some people out there don't even necessarily need the financial benefits. Maybe you're in a great position to retire financially. Right. But there's other benefits too. You know, I'm talking mental emotional. If you're in a very stressful position and you just want to get out of it, but you maybe you maybe you sort of enjoy what you do. I've talked to some clients that it's not, it's not really what they do, it's just, it's how

Speaker 2 (06:54):

Hard they do it <laugh>

Speaker 1 (06:55):

How hard they do it. Yeah. How much they're working. I mean, I could see it in our job. I I enjoy what I do, but if I was overworked doing it all the time, burnt out. Yeah. That's not as fun. It's

Speaker 2 (07:04):

A great point. I see that often is people are just at their end, you know, and what we find in, with a lot of our client base is they've worked with a company or in an industry for a long time and they've become very valued Right. From their employers and they're valued because they're good at what they do and the more value they become, the more work they get. Right. And now they, they take more of it with home with them and there's more stress that comes with it. So a lot of times it's just, I gotta run and get away from this 'cause I don't wanna do this very much longer. So Right.

Speaker 1 (07:33):

The responsibility <laugh>.

Speaker 2 (07:34):

Correct. Correct. Yeah. So the stair stepping down of things becomes very valuable because not only are you getting some time back, maybe you're getting some of your stress relieved as well. And again, that's, that's a huge emotional component to this.

Speaker 1 (07:48):

But on the other side, I think the mistake you can make is, all right, I just wanna get away from this, but now I'm gonna retire and I haven't really thought about what I'm gonna do every day and, and I'm gonna spend, you know, eight hours a day now on my couch. Or I heard, I heard a story of a conversation that we had with, um, someone that we met with, one of our advisors met with, and he was like our advisor. I said, what are you, what are you doing to fill your time? And he is like, I spend a ton of time on TikTok now. I mean, yeah, he literally, and that's no, no judging, but that's not good for you. That's not good for your mental no, uh, capacity and your cognitive, not development, but maintaining that, your level of cognitive function, that's a good way to put you in the vortex and take you downhill mentally. You're just scrolling all day long, that's not good for you. Right. So finding like a happy medium, you know, staying engaged with a job. I think from a mental standpoint

Speaker 2 (08:41):

Yeah. And that, again, quitting anything cold Turkey is really challenging. And I think that people don't often think about, while they might be drugged down from how busy and how stressed they are, their mind is engaged every single day. So it's one thing we often talk about to clients who are getting ready to, to uh, retire is, Hey, what are you gonna do? Because we've seen that six months and the year end of retirement's like, Hey, this isn't all it's cracked up to be. 'cause they're bored, they don't have another hobby or something to do. So we always challenge them to, Hey, make sure you have something that you can keep yourself sharp and engaged in. If you are gonna step away

Speaker 1 (09:17):

And give you a reason to get out of bed, absolutely have some people that are depending on you for something. It gives you a sense of purpose. You know, I, yeah, I'm not saying your job, someone's job is their purpose. Right. I don't, I don't believe that at all. But it, it gives you a sense of purpose to have something and get up and say, someone's counting on me to go do something today. I'm gonna go do it and then, then I'm gonna feel like I accomplished something and, and had a good day. Then the social aspect, a lot of people, when you go to work, you're around people and if you're older or near retirement, a lot of times it's natural. There's a lot of folks in your workforce who are younger than you. It's like when you have kids, it's like you hear the phrase Yeah, they kids, they'll keep you young. Keep you

Speaker 2 (10:01):

Young.

Speaker 1 (10:02):

Yeah. People around you will keep you young.

Speaker 2 (10:04):

Yeah, absolutely. Um, yeah, the, the larger the work environment, the often the, the more times you see that. But again, it, it just goes back to staying engaged, right? If it's staying engaged intellectually staying engaged emotionally with your company or staying engaged socially with the people, being a recluse is not good. Right? Yeah. From a middle standpoint or a social standpoint. So

Speaker 1 (10:26):

That sense of community that you could get going to work and then maybe opportunities for mentorship when you go into the office. Those, those are all that, those, those social aspects. I had one a client that he was one of those really wanted to retire and wasn't quite ready yet from a financial standpoint. He was ready mentally, emotionally, and just was burnt out, wanted to get out and kind of fell into this because he ended up taking the leap and just was like, I have to do this, I have to retire. And then his company had someone else retire and they ended up contacting him back to say, there's only so many people we had that knew this system. You're one of them. We have no one else left, will you please just consult for us? And he is making about, he was making maybe 20% of his salary, but his requirements were, were so little. It was, it was basically just like, check your email if any problems come up right. Can we please contact you? That's it. And so it was the absolute cake dream position and although 20% of his in, of his income, it made a huge difference as far as his retirement track.

Speaker 2 (11:39):

Yeah. I, I could use a number of medical professionals and that doesn't obviously only go to this industry, but a lot of medical professionals that'll, they're working five days a week and, you know, seeing 15, 20 patients a day, and the next step is you're gonna go to four days a week and then three days a week, and then even down to one. And again, they love what they do, it's just the five day a week grind. They've done it for 25, 30 years, it's just, they're ready to take a step back and, and they can still make good money right. In four days or three days and still stay plugged in. So that's been, uh, a very common one that I've seen. You know, I, I think that as an employee, I, I often see is you start in the workforce and you're 21 or 22 and you're a yes sir. Yes sir, I'll do anything you say, sir. And you're just thankful to have the job. Sure. And again, I'm not saying this in a negative way, like you should be looking for leverage, but as you've aged in your, in your career and now you're in your fifties,

Speaker 1 (12:31):

Yeah.

Speaker 2 (12:31):

You're still a yes or no sir, or yes ma'am. No ma'am. Guy. However, you become way more valuable to your employer than you were when you were 21. And I think sometimes our clients lose sight of the leverage that they might have of thinking like, I have to do it exactly this way, or I can't do it at all as a employer, I know how valuable our people are and I want to make sure that our company continues to run smoothly. And sometimes losing somebody is not great.

Speaker 1 (12:56):

And we were talking about this. Yeah. I had, like, we had one of our longtime employees retired and we were talking like, and I had joked with her about this Yeah. Like, Hey, what, what if, what if we had you work two or three days a week and we'd pay you this much? And, you know, it wasn't for her, but I was 100% absolutely ready to offer that. And because it's much easier to do that than to go find a new person that you can trust who knows your business, who can do the tasks in your business. That's, that's, that's hard. So I think you're right, like leverage that. And I, after kind of stumbling upon this idea as a, as a really good strategy, I had a client who's in sales and she told me that, she's like, I love my clients. Uh, you know, I've, I've x amount of clients, I, I love working with about 80% of them.

Speaker 1 (13:45):

They're great, we have great relationships. They're almost my friends at the, you know, at this point, but there's 20% that it's like work. And I said, and she's pretty much ready to retire. And I was like, just go to your employer and tell 'em, hey, I have these relationships on these 80%, I'm more than happy to keep working on them, but I wanna scale back and so I want to reassign the 20%. But in that type of position in sales, when it's relationship based, that's valuable for an employer. Absolutely. Like all they have to do is they know they're gonna keep those 80% as long as we keep this person, the, the 80 percent's not going anywhere. Yeah. So why would you wanna disrupt that?

Speaker 2 (14:27):

Yeah. I I think it really comes down to understanding who you are and your value to the company, and then having the courage to go in and speak with your boss. One recently, the, just the typical, um, I've been here for a long time and I'm extremely overworked. I don't feel like I can even take my vacation days. I have plenty of vacation days. I'm sure we've had a number of clients feel like this, right? I have vacation days, but when I take 'em, I come back, I'm just absolutely slammed, right? Yeah. And we have all these new people and I'm training 'em and I'm really the only one that knows what's going on at the level I know. And it's not that they hate what they're doing, it's just they just hate the level of stress and, and that it, that brings on 'em and the pressure.

Speaker 2 (15:04):

This person itself had the courage to go in and talk to and came up with a great strategy that's probably gonna keep him working three or four more years. But again, he was willing to say, I'll take a little less money and could easily do that, but I want less responsibility, less days a week. Right. And the employer's on the other side thinking, holy cow, you'll stay for three more years and train the next person and it's just a burden off the employer. So it was a really, really good fix. So yeah, that was a really recent one that, um, really worked out well for our client.

Speaker 1 (15:34):

Our dad is another example who, he is a guy that had to be done doing what he was doing. And from a financial standpoint, obviously anyone, it's like, financially it's gonna be the best if you keep doing what you do, full-time as long as possible. But in his case, he was like, I just, I just can't do it. So he went from doing that to something and, and working in it to something totally different, driving a dump truck for a while, which that wasn't for him either, but he was willing to do anything to just get out of that office in the cubicle because they'd done it for 38 years, which I get that now. What we do is different every day. So I guess I, I don't relate as much, but I understand where they're coming from. And another client I had was tossing the same idea around and with COD people, a lot of people were working from home and companies were bringing people back to the office after Covid. And so she just, she was ready, she expressed that she's ready to retire and then her company again is like, can we, is there anything we can do to keep you? Yeah. And so she negotiated to continue working her normal job, but to just be remote. So she's like, well, if I don't have to go into work and I can make the same money and do my job from home, that's got some benefits. Yeah.

Speaker 2 (16:46):

Stick around. Yeah.

Speaker 1 (16:48):

The takeaway is to go make it happen. If this is you and you, if you haven't thought about this and you're wanting to retire, these are conversations that I think would be useful. Go to your employer, first of all, look, look around in your industry and see if you find any opportunities. But if not, like you said, mark, go to your employer and just draft up the most, the dream situation for yourself, whatever you want, and bring it to him. The worst thing can say is no, that's

Speaker 2 (17:16):

Right. Again, going back to my original comment, and I keep you as, I just, I, I try to impart this in clients that have done this on just you have leverage and that leverage sometimes be a nasty word. I don't mean to be, but you have a extreme amount of value to your employer and very few employers are gonna be caught off guard by the fact that, that you're feeling the way you're feeling. They may just not know how to fix it. What we found is together you can and, and make it work for everybody. It's coming up with a plan and, and having the courage to have a discussion about it.

Speaker 1 (17:45):

I don't think that we're necessarily saying instead of retiring at at 62, just tack on an extra five years, what I'm kind of saying is maybe, maybe you get to 60, maybe you get to 59 Yep. And say, man, I'd I'd sure like to start traveling more and doing more now and reducing my stress now. Well, maybe you can enter that semi-retirement phase instead of retiring fully at 62. Maybe you go 60 to 64 or 60 to 65 in, in some sort of easy semi-retirement mode where you're good. I mean, that, that's what you're trying to design is a dream situation, a part-time job that you're using expertise, but you're, you're not overworked. You're working two days a week, right? You're working three days a week, maybe you're working remote, you've removed all the negative parts of your position and you're only doing the things that you enjoy and you've got flexibility, benefits and all that.

Speaker 1 (18:40):

People can usually do that for longer and have, have really no problem doing that. So this gets you that, you know, maybe gets you the taste of retirement sooner so you can start having more freedom. So with that, I wanna thank everyone for watching. I wanna remind everyone you can go to retirement power hour podcast.com, retirement power hour podcast.com and view all of our past shows. You might be watching us on YouTube. If you're not, you can go to YouTube, watch all of our past videos. If you're someone who's wondering if you can retire again, go to retirement power hour podcast.com and submit a question or you can click work with me. And that is gonna start the process of the first step is just having a phone conversation with us and we will see what you have going on, get some information and see if you're a candidate to retire, or maybe you're a candidate to semi-retire. So do that retirement power hour podcast.com. If you enjoyed this episode, we would really appreciate if you leave us a review on Spotify, on Apple, or on YouTube or Google. Thanks to Mark for joining. And thanks to everyone for listening and watching The Retirement Power Hour where we help listeners invest weiser and retire better.