BiggerPockets Money Podcast - Retiring Early in 5 Years? Do THIS First

Episode Date: April 10, 2026

Thinking about early retirement in the next 5 years? This episode breaks down exactly how to prepare—financially and emotionally—so you don’t just retire early, but stay retired. Mindy Jensen and Scott Trench walk through the critical steps to stress test your portfolio, plan for healthcare costs, optimize your tax strategy, and build a realistic withdrawal plan. Plus, they cover the often-overlooked side of FIRE: your health, purpose, and lifestyle design. If you’re in the “messy middle” or approaching financial independence, this is your blueprint to confidently retire early without costly mistakes. To go beyond the podcast: Kick start your financial independence journey with our FREE financial resources - https://biggerpocketsmoney.com/ Subscribe on YouTube for even more content- www.youtube.com/biggerpocketsmoney  Connect with us on social media to join the other BiggerPockets Money listeners - https://www.facebook.com/groups/BPMoney We believe financial independence is attainable for anyone no matter when or where you’re starting. Let’s get your financial house in order! Learn more about your ad choices. Visit megaphone.fm/adchoices

Mindy and I are so grateful for the following sponsors who make Bigger Pockets Money possible. When you want more, start your business with Northwest Registered Agent and get access to thousands of free guides, tools, and legal forms to help you launch and protect your business all in one place. Build your complete business identity with Northwest Today. Northwest Registered Agent has been helping small business owners and entrepreneurs launch and grow businesses for nearly 30 years. They're the largest registered agent and LLC service in the U.S. with over 1,500 corporate guides, who are real people who are real people who. know your local laws and can help you and your business every step of the way. Northwest makes life easy for business owners. They don't just help you form your business. They give you the free tools you need after you form it, like operating agreements, meeting minutes, and thousands of how-to

guides that explain the complicated ins and outs of running a business. And with Northwest, privacy is automatic. They never sell your data and all services are handled in-house because privacy by default is their pledge to all customers. Visit Northwest registeredagent.com slash money-free and start building something amazing. Get more with Northwest Registered Agent at Northwest Registeredagent.com slash money-free. When I evaluate debt funds, I look for things like first position loans, personal guarantees, deep experience by the fund operator, low fund leverage, fast liquidity, and consistent returns. These are some of the reasons why I'm excited to partner with Pine Financial Group. Their fund six offers investors exposure to real estate credit, largely for construction and rehab,

with loans originated by an experienced originator with over $1 billion in origination volume. They offer investors an 8% preferred return paid monthly and a 70-30 LP split of everything over 10% paid annually. The lock-up period is nine months with liquidity available within 90 days after that nine-month commitment. The fund is open to accredited investors only. The fund's minimum investment is typically $100,000. The Pine Financial is able to reduce that minimum for bigger pockets money listeners to a minimum of $25,000. Full disclosure, I am personally invested. in this fund through my self-directed IRA.

Pine Financial is sponsoring this message and our podcast. Go to BiggerPocketsmoney.com slash pine, P-I-N-E. Please note that returns are not guaranteed and may vary based on fun performance. When spring hits, some people suddenly just want to declutter the garage, clean out the closets, and get everything all organized. Whether or not that hits you, Monarch will do your financial spring cleaning for you.

One dashboard gets your entire financial life organized. No more clutter, no more mess, no more scattered logins, just accounts, investments, property, and more all in one place. One of my favorite parts is the Sanky diagram. Every month I open it up and literally watch the flow of money. It shows exactly where every dollar is going from income to all of my spending categories. It makes it so much easier to spot what's working and what needs tweaking. Get your first year of Monarch for half off, just $50 with the promo code Pockets.

Use the code Pockets at Monarch.com to get your first year half off at just $50. That's 50% off your first year at monarch.com with the code P-O-C-K-E-T-S. The last five years before early retirement are the most important. You've built the portfolio, but this is where mistakes can cost you years. Today we're covering the top five biggest things we think you need to keep in mind in your lead-up to retirement. Hello, hello, hello, and welcome to the Bigger Pockets Money podcast. My name is Mindy Jensen, and with me as always is my first is my last.

my semi-retired co-host, Scott Trench. That's right. In the five years leading up to your retirement, you start a podcast on personal finance and early retirement, and that is how you supplement your lifestyle here. So that's the topic for today's show is what do you do to prepare for early retirement? And while I'm making fun of me and you, Mindy, as podcast hosts here, that is like our intellectual passion, I think is this topic. And so I think that's what is yours finding that. I think is one of the first tips that you should be thinking about here.

What do you want to do with your mind and your mental energy that gets you going here? I like building spreadsheets that get through the right answer for financial portfolios. And I do not like, I do not like the idea of taking a client that I have to show up on time for and actually, you know, providing some kind of, you know, 15 hour financial plan statement for, for example. So like that's, that's mine. But anyways, what's yours on this path? I am very much looking forward to, well, not looking forward to. I am there now.

I am very much enjoying getting my health in order. I had worked at bigger pockets for the last 10 years and had gone to the gym very sporadically, like once a week, once every other week. And lo and behold, that's not the regular cadence you need to keep your body in tip top shape. So I steadily gained weight. and now I have been making it a point to get to the gym five days a week. I am lifting heavy, Scott. You wouldn't think it, but you know, you would look at me and be like, yes, that's great.

And I look at me and I think, yes, that's great. I lift weights three days a week. I do a hybrid workout two days a week, a hybrid cardio weights. And that is something that is making me healthier and making me feel better in general. And that is one of my favorite things to do. Of course, outside of this podcast, but we started this eight years ago, Scott, that five. This concept of having something to retire to. And I think fitness absolutely belongs in there, right? You look at the fire community and you talk to folks. And overwhelmingly, you see,

not everybody, but you see a huge, a disproportionately extremely healthy group of people because that is that, you know, these are very optimized people who have really put a lot of time and energy into thinking through how to build their finances. And that skill set translates directly into building a great body and optimizing for fitness. And that's also one of the best things you can do to safeguard your early retirement because if your body and mind are super smart, you can pivot and adapt later in life. And your health care costs are probably going to be lower, right? And that's going to be a major cost savings. I don't know when and where that risk will strike for now. Many of the fire community can receive health care subsidies. But that is a major threat to,

especially very early retirements, this kind of this health care concept. Yes. Another thing I want to do, Scott, is travel. I have a child at home still. She's a sophomore in high school. So that's not really a big option for us right now. But in a couple of years, she will go away to college. And then Carl and I will start traveling a little bit more. I'm very excited about that too. But for right now, I'm just, I'm working on my house, getting that all fixed up, working on my body, working on the other house, getting that finished, build. And then we're done with the flipping. And that's a very, very exciting thing to retire to. No more flipping. I need a new Tuesday once you're done working on your houses. Yeah, you know what? Tuesday's going to be the bike.

right day. All right. And Wednesday and Thursday and Friday. Mindy has a particularly excellent handle on biking, by the way, which is the, uh, the rag bry, right? The ride across the great state of Idaho or Iowa. Iowa. Yes. That is, that is such a fun. And you know what, Scott, in two years when Daphne's out of high school, I'm going to put out a call to all of our listeners and let them know, I'm going to ride ragbri again. And anybody wants to join me can join me. Love it. Scott, I don't know if you remember this, but the fall of 2028, yeah, fall of 2028, Daphne will be out of high school. Carl and I are going to walk the Camino in Portugal or France. I can't remember which one we're going to do. And I said, hey, does anybody want to join me? Come on and, you know, email me, Mindy at biggerpocketsmoney.com.

I had somebody email me. So already I am collecting people to go with me on my travels. Awesome. And for my part, I don't want to travel, you know, I don't want to get an airplane with our three old and one year old and go to other place. That's not a relaxing vacation, right? Maybe that was the idea, you know, seven or eight years ago. I'd do a lot of travel, but I think those days are coming in a few years for the trench household here. In the meantime, I'm like, I live in this awesome state of Colorado and I've barely explored any of it. I've been here 12 years. And that's starting to change this year. And it's awesome. I've been able to get out and actually ski, even though this season was terrible. I'll get my mountain bike a bunch. Should be a good season for that since we're going to

have no snow in the mountains and have plenty of chances to do that. And I, and I, and I, I got in a bunch of hikes toward the end of last year, and I'm planning on doing a bunch of those this year. So it's like this playground is right there. And I just, I never have taken advantage of it the way I probably should have. And that's been phenomenal. Scott, do you have a bucket list? No, I don't really have a bucket. I have like a set of goals that I want to achieve my lifetime. That's kind of what I work against. But this year's bucket list equivalent is basically a trip with my best buds from high school, which just completed four trips with Virginia, a couple of, one-night getaways with the little ones to try to get that habit built.

See how if we can get to a place where that's actually sustainable and manageable, so we can begin taking longer trips, and then 10 hikes, 10 bikes, and 10 ski days across the course of the year. So that's kind of more of my bucket list. And then I have a bunch of things I'm excited to work about here, work on here at Bigger Pockets Money. Yeah, but that's work. I'm talking about like things you want to do.

Carl and I were driving back home from California, which is a very long drive. and we had a lot of time to have conversations about things we wanted to do. And we started a bucket list because, you know, we're always so busy. We don't have time to sit down and talk about this. Well, we had, I don't know, 16 hours or something. And we created a rather sizable bucket list of like, I would love to swim with whale sharks in an like eco-friendly way. I haven't looked into it at all. If you know about it, please, you know, email me, Mindy at biggerpocketsmoney.com.

But just even having the bucket list made me even more excited to go travel and do these things and like start checking things off the list. So anybody who is thinking I'm about five or six years from retirement and I don't know what I'm going to do afterwards, sit down and think about all the things that you've always wanted to do and write those down and start doing them. I don't have a bucket list. Maybe I should think about doing that. But I have a different version of that.

And there are work related things, not necessarily. money-making things, but projects that I want to complete that are more, I would say, my bucket list on there. So that's kind of how I think about it. I like my routine. I got my set up here with it and then maybe in a few years when the girls are a little older and more travel is more realistic. Maybe that bucket list will evolve to incorporate many of the things you just said. But yeah, I think that that's the important thing is like, why are we doing this? Right. And I think that a challenge that a lot of people in the fire community have is after 20 years of doing the same thing or this very similar type of work in there, it's very hard. Like now my brain has been wired to do that.

And that's my skill set. And that's what I'm comfortable with. And the fire goal, I think, can get lost in that grind towards it. And I think that's a major challenge that we know comes up over and over and over again. And that needs to be addressed. And there has to be a specific plan of action because otherwise the goal gets lost. We begin deferring. We don't actually realize the fruits of this major sacrifice,

the labor that has been a major sacrifice for us for a very long time. Yeah. Yeah. If you don't know what you're going to do after you retire, go back to the beginning. Why did you want to stop this in the first place? Usually it's I hate my boss or I hate my job or both or I don't have enough time to. Great. There's where your bucket list starts.

Mindy, what is something practical you can do to actually address this, how to what I retire to? How do I make it not so fuzzy? Well, Scott, you have created a beautiful document called the goal setting worksheet. It's a nine-page document you've given your example of how to fill it out and given a lot of space for people to really think about what their goals actually are. And you can find that at bigger pockets money.com slash resources. Scott, you're clicking it open right now. It is downloadable as a Google slide. Google slide or as a, I think it's a doc X. So you can just download this thing and modify it.

It's just free. There's no email required or anything like that. But we find a lot of the times people come to us with, what should I do with my money? And while it's like, well, where do you want to get to? If you want to have $10 million, there's a very different approach you're going to take than if you want two and a half million dollars and to enjoy Tuesday on a mountain top. The challenge here is you must be clear in what you want heading into early retirement. And so this is a free template that helps analyze that. And I recommend that the output is a draft, a first draft, you plan to modify this every 90 days for a year or three.

Because figuring out what you want is hard. And then you can see what I want as an example. This is how I do it. Literally with my wife, it's the exact same output from like six months ago that my wife and I do this. We update this on every six months. And there's just a process for arriving at that. And I think that's really important because that will either move the goalposts appropriately or stop them. moving once you're clear on what you want. And this moved all over the place for us for the first

few years of our marriage. And now it's kind of settled. And we make very few changes to it each, each time we revisit it, although we almost always make a change. But that helps us be very clear in what we want. And I think it's a really powerful tool. It's very woo-woo. But it's also, it takes this abstract kind of end game and puts it into something very tangible that you can now actually engineer for. So I think it's hilarious that you design something that's very woo-woo. I would not call this very woo-woo. I would call this something to help you get very clear on what your, what your goals to be. Carl and I downloaded this, and we're still working on it because it's a lot, but it is so clarifying when you finally get to the end of this. Set actionable goals,

and there's examples. Build a system and cadence for accountability, and there's examples. This is nothing like crazy original. I didn't come up with any of this. I just took the various pieces from various goal-setting gurus over the years and compiled my own version of it. And it's just available as a document, right? There's no secret sauce to this stuff. It's just you have to have it some way.

And hopefully this isn't a reasonably accessible one to do it. But I think that's the first thing you should do. If you're thinking about five years out from early retirement is figure that out and write it down in great detail so that you actually move towards that and allow yourself to make it low stakes. It's a draft each time. it's going to stop moving after a while and you're going to know that you really know what you want at that point. I think it's super powerful. And I think fitness, family relationships, finance or business,

and some kind of mental challenge all belong in there. The wheel of life, right, that these other, I don't have that in there. But that's like all these goal setting things have. There's like six dimensions or eight dimensions of life, you know, list them and say what I want in those categories. Okay, Scott, what is the second point that our listeners should be thinking about in the five years leading up to retirement. I think it's the portfolio, right? Now we have to actually get comfortable with portfolio theory and what the best research is, what's unknowable and what the risks are that are inherent to that. So what do you think about this, Mindy? Yeah, can your portfolio actually handle your retirement? You know, average returns really don't matter. Your returns matter.

So if the entire stock market on average returns 8 to 10 percent and you're seeing 4 percent, something needs to change. And if you're seeing 14% or 24% call me up and tell me what you're doing, but also maybe that's a little too risky. Can your portfolio handle retirement? You're going to need to stress test your portfolio. You are going to need to consider your withdrawal rate. Do you have a cash buffer? How are you getting from retirement to age 59 and a half? Are you just hoping that your portfolio goes up? Like, are you truly five years away from retirement? Yeah. And I think that the more we learn about this, right? So the 4% rule is a wonderful gift that Bill Bing and others have provided to the fire community and refined Michael Kitsis,

for example, right? And it's also the starting point, right? As, you know, the first, I think there's like levels of understanding portfolio theory where you start out in the fire journey, you're like, oh, I get to 4%, I'm done. Now I have an actual tangible goal. Then as you learn more, you're like, oh, wait, the 4% rule doesn't work in 4% of 30-year withdrawal scenarios. And it only lasts, it's only for 30-year withdrawals and other retirees are going to have longer retirements there. That's like this next level. Then it's like, well, once you incorporate any flexibility and you realize that the 4%

rule doesn't include social security or flexible spending or any type of part-time work, inheritance, any advantage whatsoever, that kind of negates this small risk profile of your portfolio dropping. As you continue to model this out in more and more detail, you realize, well, there actually are edge cases where the 4% rule is pretty dangerous for certain parts of the population and parts of the population that are kind of saved by various components in their portfolio. So let me give an example. A lean fire that household with a million bucks spending $40,000 a year.

If they fire on the 4% rule as renters and all their expenses are inflation adjusted, then health care becomes a huge risk that basically negates the safety of this 4% withdrawal plan because they're basically relying on Affordable Care Act subsidies that are intended to fund very low-income households. And we've talked about this at length in the Bear Progets Money podcast in prior episodes. That's a real killer if those subsidies go away for that person. And their health care costs are going to inflate at a much faster pace than inflation, not because health care costs, the underlying costs are going up, but because insurers are allowed to charge you much more up to three times more as you age,

like a 65-year-old, they can charge a 65-year-old three times more than a healthy 20-year-old. And that's a curve that you need to plan on being able to fund, right? Now, if you have a house that has a mortgage on it and that there's 20 years left in the mortgage and you're retiring at 35, that completely offsets that risk because that principal interest payment is going to stay static with inflation and then it will roll off right when those health care costs potentially peak. So that's an accidentally correct 4% rule, right? And the most rigorous work done on withdrawal rates from that 4% rule is Karshton Jeski over

at early retirement now, can't talk.com, can't speak highly enough about his work in there. And there's reasons to be more conservative about the 4% rule that are very well addressed on his blog. And there are counter arguments from people like our friend Frank Vasquez who have come on and been very strongly opinionated about, hey, you can actually defray those risks with different factor portfolios. So this is complicated stuff. If you're not following what I'm saying here, then in the five years leading up to your early retirement, you should probably become very well versed in these things and have a very strong intellectual foundation for what your situation is going to call for in an early retirement and whether you have enough.

And this is not a be optimistic or a be pessimistic. This is a be right in your situation. That's really important. And I get a little annoyed by people who say it's all going to work out and my people who are. overly doom and gloom because it's a real, real prize to retire early, and it's also a real risk. When you want more, start your business with Northwest Registered Agent and get access to thousands of free guides, tools, and legal forms to help you launch and protect your business all in one place. Build your complete business identity with Northwest today. Northwest

Registered Agent has been helping small business owners and entrepreneurs launch and grow businesses for nearly 30 years. They're the largest registered agent and LLC service in the U.S. with over 1,500 corporate guides who are real people who know your local laws and can help you and your business every step of the way. Northwest makes life easy for business owners. They don't just help you form your business. They give you the free tools you need after you form it, like operating agreements, meeting minutes, and thousands of how-to guides that explain the complicated ins and outs of running a business. And with Northwest, privacy is automatic. They never sell your data, and all services are handled in-house because privacy by default is their pledge to all customers.

Visit Northwest Registeredagent.com and start building something amazing. Get more with Northwest Registered Agent at Northwest Registeredagent.com slash money free. When I evaluate debt funds, I look for things like first position loans, personal guarantees, deep experience by the fund operator, low fund leverage, fast liquidity, and consistent returns. These are some of the reasons why I'm excited to partner with Pine Financial Group. Their fund six offers investors exposure to real estate credit,

largely for construction and rehab, with loans originated by an exceeding. experienced originator with over $1 billion in origination volume. They offer investors an 8% preferred return paid monthly and a 70-30 LP split of everything over 10% paid annually. The lockup period is nine months with liquidity available within 90 days after that nine-month commitment. The fund is open to accredited investors only. The fund's minimum investment is typically $100,000, but Pine Financial is able to reduce

that minimum for bigger pockets money listeners to a minimum of $25,000. Full disclosure, I am personally invested in this fund through my self-directed IRA. Pine Financial is sponsoring this message and our podcast. Go to biggerpocketsmoney.com slash pine, P-I-N-E. Please note that returns are not guaranteed and may vary based on fun performance. When the change in season hits, some people suddenly just want to declutter the garage, clean out the closets, and get everything all organized, and that's great. If that's you, or if it's not you, either way, let Monarch do the financial spring cleaning this year for you. One dashboard gets your entire financial life organized. No more clutter, no more mess, no more scattered

logins, just accounts, investments, property, and more all in one place. Another feature I love about Monarch is the weekly AI recap. It catches spending spikes before they become problems and flags big net worth shifts or upcoming expenses. It's like having a quick personal check-in every week, so nothing sneaks up on me. Get your first year of Monarch for half off, just 50 bucks, with the promo code Pockets. Use the code Pockets at Monarch.com to get your first year, half, off at just $50. That's 50% off your first year at Monarch.com with the code Pockets, P-O-C-K-E-T-S. Everybody's specific situation is different, and the 4% rule is rule of thumb.

It's not a hard and fast rule. I think that there's a lot of opportunity for interpretation. I'm sad for people who are so doom and gloom about it. They're like, well, it's got to be 3%. It's got to be 2.5%. It's got to be 1% withdrawal rate. So they're saving way more money than they need to and kind of wasting a part of their life that they don't need to waste this time at work. If they truly don't want to, they've thought about number one and they've got a place to go

and things to do and people to see. And they're just waiting to get there. Stress test your portfolio. Look at what your plan actually needs. I think that's great, Scott. If you make way too much money and then your 30s and 40s and 50s go by needlessly, not doing the things that you love, that's a shame, right? But it's also a shame if you're at your peak earning years and you retire a little too

early and then you come back into the workforce 10 years later at a much lower rate with much worse opportunities, right? I think there's a realism that has been lost in some parts of the fire community over the years that has not addressed those risks rigorously enough. And we've been billed out by wonderful market performance. for five, 10 years now. That's made my prognosticating about being realistic about this completely unnecessary for almost everyone has retired in the last 10 years.

But I'd guess. But that's everybody that's retired in the last 10 years. We're talking about people that are going to retire in the next five years. Right now we've got some pretty iffy situations going on in the world at large. And those are going to affect our retireability. Just be aware. That's the new word the fire community needed. Retireability.

What is your retirement? All right. Scott, what are some action items that our listeners can take to make sure that they are testing their portfolio so that they can be comfortable and sure that it will handle early retirement? First thing you should do is start researching portfolio theory. And I think there's conflicting information out there from really smart people, maybe even people I would go so far as the call genius level in this area. So one of them that we really love is Paul Merriman. And you can go to Paul Merriman.com, for example. And he's got a really wonderful, set of research on factor investing. That could be really powerful for somebody who wants to keep growing, but doesn't want it to all be in the S&P 500 or one index fund, wants to have exposure to small cap, large cap, growth, value, those kinds of things. He's done some wonderful research on how that can change, you know, the smooth, the ride of what is still a permanently a growth portfolio. Next up is Big Earn. He's the one that I think is most rigorous and perhaps conservative in the

space in terms of analyzing safe withdrawal rates and how the 4% rule applies to early retirees. So that's kind of like the PhD, I would argue, in sequence of returns risk and safe withdrawal rates. Bill Bangen did the original research on this. You can read his work. And then Frank Vasquez has come in and I think Chetwood challenge some of the work by Paul and Carson Jeski at early retirement now by putting in factor investing in a risk parity style portfolio that has large amounts of uncorrelated assets. There are tradeoffs in each of those portfolios and familiarizing yourself with those tradeoffs I think is a really good intellectual exercise. It will make you much more comfortable with early retirement. The second tip I'd have for people that are thinking

about their portfolio actually handing retirements is building towards balance in their asset location. So there's what kind of portfolio do I want? Do I want S&P 500? But there's where do I want that portfolio? How much do I have my traditional free tax retirement accounts? How much do I have my Roth retirement accounts or the equivalence, whatever, if you're Canadian or, you know, has a sort of government or military accounts. But how much is my pre-tax and how much is my post-tax, my Roth accounts? How much is my taxable brokerage and how much do I have in an HSA or equivalent? And what we want when we go to become early retirees is we want that to be reasonably in balance, right? Nobody's ever perfect with this. But the more balance you have,

the better off you're going to be because you're going to be able to pay less taxes now if you're contributing appropriately to a pre-tax account in a high-income tax bracket and withdrawing later in a lower one. But you also want to have portions in the Roth and the taxable account to provide flexibility in there. And so I always bias toward balance when I'm looking at these things because I think that that helps make better decision-making and provides reasonable tax efficiency along the way. So optimal can be the enemy of options in the last few years leading up to early retirement. So if everything's in the free tax, that could be optimal, but it also may limit your options and maybe put you in a tougher position later.

So balance is the key there is the bias I would encourage folks to have. And then the last tip I think is I'll leave you with Mindy that because you're practicing what you're preaching with this. Practice with a small portfolio that you actually spend. So a few months ago, actually it was like last July now, Frank Vasquez came on the show and helped me set up a risk parity portfolio with $10,000. And as I log in right now into my account to check on my Frankenomics portfolio, I see that my original $10,000 that I have been withdrawing the equivalent of 5% per year out of. I withdraw $42 a month. And I now have, I've taken that $10,000 and turned it into $11,032.

It just keeps going up and I keep withdrawing from it. There's something to be said for this portfolio. However, this has only been in play since July. So not even a full year yet. I am having a lot of fun with this portfolio. I don't check it every day. I used to check it like multiple times a day when I first did it. It did dip down into the nines at one point, but then it popped back up and now it keeps going.

Yep. And I think this is just great advice of just taking $10,000. If you're trying to retire early, $10,000 should not be a major sacrifice. And putting that into one or maybe two versions of the, retirement portfolio that you're considering and then actually withdrawing and spending that on dinner, on drinks, on breakfast, whatever it is. That was a great tip from Frank that I think has been really helpful. I've done that with a similar version of the portfolio there as well, although I have much more illiquid assets like real estate and my portfolio. Scott, you touched

on this, but we're going to go a little bit further. Healthcare is the biggest wildcard in your early retirement because you are leaving your job. that is providing you with health care. Now you've got to go out and get it yourself. It's the biggest wild card, but it's also not the biggest wild card. I mean, people have inflated this to be such a huge thing. Healthcare is going to be a fixed cost in your budget moving forward when you no longer have employment.

And it is either going to be the entire amount of the plan that you get on the ACA. And I don't care what politician is saying what they're going to do. the ACA is not going to go away. And if it does, you can email me and tell me, I told you so. But the ACA is going to be around. It is just not tenable to remove it. So your ACA price is X. Let's say it's $1,300. But with subsidies, you can get that down to $500. Great. That is your choice to take subsidies or not if you qualify for them. Subsidies were not intended for millionaire early retirees to get cheaper health insurance. So plan on the $1,300 line. Make that part of your budget.

You think you need $3,000 a month or $4,000 a month. Now you need $5,300. I think that, yes, it's probably wise to plan on the ACA continuing and not the subsidies for those plans continuing for the fire population. Maybe they do. Maybe you spend the next 20, 30 years in early retirement having taxpayer-funded federal poverty, you know, low-income tax credits offsetting your health care costs. That's fine. Take them if they're available. But I think it's a bad plan.

It's a very specific political bet that you're making that the American taxpayer is going to fund your early retirement as an possibly able-bodied millionaire and defray your health care costs. I think that's not going to happen. And I think that's a bad plan A, but I think, again, it's not bad to take them. In addition to Manny's great point about planning on paying the full amount, remember that that amount, that premium is going to go up every year, right? I'm going to pay, what, like $20,000 in premiums for my family of four if I did not receive any subsidies for health insurance on an ACA, bronze plan in 2026. If I just change those numbers and I'm 60 years old with two adult children, those premium costs go up to like $35,000 or $40,000 per year. That's not inflation. That's the insurers being allowed to charge you more as you age and you've got to bake that into your

plan. So that's a real threat to a lean fire portfolio in the million dollar range and it's noise in the chubby fire portfolio in the three to half to $5 million range. Right. And so know where that is. If you're in lean fire, you're going to want to plan and set aside some additional cash to defray that risk, maybe to lay your fire timeline by a little bit. If you're chubby fire, it's probably noise and there's going to be enough wiggle room in your budget and your flexible spending. You don't have to worry about it. And that's where this is all gets so context specific. The best thing you can do, though, is as you're approaching fire and after you fire is maintain excellent fitness, right? Hit you go, go running, get that VO2 max up, lift weights.

that's going to defray or reduce a lot of the risk associated with health care costs. And that can only mean good things. And Scott, that's not available to everybody. You know, if you've got a chronic health condition, this might not be an option for you. But while I said that the ACA is never going to go away, I can absolutely see a net worth cliff as well for the subsidies so that people who don't need the subsidies aren't getting them. And that does include the Phi community. We don't need these subsidies. We can afford health care without them.

They were meant for people who couldn't afford health care without them. That's where they came in. So plan for the highest health care premiums to be a line item in your budget. And if that doesn't come to fruition, you just have a little extra money. I think the takeaway for healthcare is you need to model this out and understand that, right? So I would go to kff.org and look at their health care cost calculator. And I'd put in your information today in five years, in 10 years, in 15 years, and I put your income at like a million bucks, something so high that you won't confuse yourself by seeing

what's subsidized in your premium costs. And I think that would be really powerful for you to see, here's what I would pay if I didn't receive a subsidy today. Here's what I'd pay if I didn't receive a subsidy. And I just changed my age to 45 or 55 or 60 or 65. And look at those numbers. and watch them grow. That's not inflation in health care costs.

That's the cost of your premiums today if you change your age. That's the risk I'm trying to talk about here. And then take those numbers and feed them into your favorite AI. I'll try to build a model for this at some point in the next few months. But for now, put it into an AI and ask it, what's this curve look like for my health care costs based on these numbers and how much more will I need to retire early than a traditional 4% rule. If I assume the rest of my spending will grow at 4% and healthcare will outpace it at these

levels. I think that's the responsible way to plan for fire and health care costs in 2026. Yep. That's K as in K-as-in-Klo, F-as-and-Frank, F-as-and-Frank.org. Yep. Okay, Scott, next up, you need a bridge strategy. If you are going to retire early, you are not going to be able to get access to your retirement accounts until age 59 and a half without paying taxes and penalties. Of course, you can always access your money. You are going to pay taxes and penalties, but I know the FI community and they don't want to pay anything. And I don't either. Like, I'm not throwing them under the bus and being like, oh, I'd love to pay taxes. I don't want to pay them either. So what are you going to do between the time you retire and age 59 and a half?

And one of the things that pops up all the time is the 72T. And this is great if you're my age. I'm 53 years old. 72T, you have to take for at least five years or until you're age 59 and a half, whichever is longer. So if you're a 50 year old early retiree, that's not nearly the commitment as if you're a 40 year old early retiree. So while you might be thinking to yourself, oh, I'll just do a 72T. That might not be the best option for you. This is where the fun begins. You can do this on your own. There's a great book called Tax Planning to and through early retirement written by our friends, Cody Garrett and Sean Mullaney. They've been on Bigger Pockets Money to talk about this book. It's fantastic and it talks about this stuff. The challenge with

realizing income and early retirement is accumulation is so simple, right? You pick your accounts and then you invest in, I think a lot of people would argue, invest in low cost, broad-based index funds until you get pretty close to, you know, fire until you get to the five-year mark here and begin thinking about these changes. Once you go to decumulate though, you now have like seven different things that you need to be considering. here, right? First, you're going to get yield from your cash that you're holding. You're going to get some kind of yield from the dividends if you hold index funds, for example, in your after-tax accounts. Then you're going to have an income challenge. How much income do I want to realize? And am I

staying below the Affordable Care Act subsidy cliff? Because you don't want to have your income going over 400% of the federal poverty line. So you disqualify yourself from health care subsidies, at least in the next few years. That's the binding constraint for all of these withdrawal strategies, You can pick and choose what you have in theory all you want, but you're not going to forego those while you're out there. So that becomes the first factor. Then it's how am I going to access the rest of my funds here? If everything's in a 401k, that's all ordinary income for every withdrawal. And like Mindy mentioned, there are real challenges for accessing those early.

72T is a very real way to access them, but it also requires pretty sophisticated and clear planning and income planning for the next five years. And you better not overshoot it or are you going to hurt yourself on the ACA, side. And the other option is to do a Roth conversion, which requires the conversion amounts to season for five years in the Roth accounts before they can be withdrawn, penalty-free. These are complicated, convoluted strategies that require careful several-year planning in advance. And I think that if you're at that phase, this is where I think it can make sense, a lot of sense to engage a certified financial planner. We like hourly advisors, advice-only planners, and we like flat-fee planners and we've partnered with domain money and David Jackson, who actually is the financial

planner for Mindy and I, and we have a partnership with them. Those guys can be found if you want to learn more about that at bigger pocketsmoney.com slash CFP, if you want to chat with David and interview him as one of the potential CFPs that you work with. But I think that this is a great case for engaging somebody to go through this. Look at where your accounts are and maybe think about what I'm going to do over the next few years and how I'm going to withdraw in the first year of early retirement to make sure that you don't go over that ACA subsidy cliff. And you're also making a thoughtful decision about using up the 0% and 12% income tax brackets. Yeah, Carl and I started talking with David because we didn't need help with the investment side, but we definitely

needed help with the strategy and the withdrawal plans. This is a legitimately complex planning challenge. We plan to provide free resources on this and it will still be overwhelming and there will be judgment calls no matter what, right, what our tax bracket is going to be in the future. what's going to happen to ACA credits. Am I really going to plan 30 years on that, but I'm certainly going to plan on the next two or three years on receiving them and optimizing income around there. So it's a real challenge, I think, here that is appropriately discussed,

again, in Cody and Sean's book, great place to start. And the other place is maybe to think about hiring a CFP to help you with that. Next up is your spending. In retirement, your spending needs to actually be real, not theoretical. So Carl and I first started our financial independence journey with the idea that we would be spending about $40,000 a year. We don't spend only $40,000 a year anymore. And it took many years for me to realize that. I think in my mind I'm spending 40, but I'm actually spending 60.

Well, if I only had a million dollars, then that would really mess up my, retirement plan. I'm spending 1.5 of the 4% rule instead of 100% of the 4% rule. So a lot of people build their retirement plans around a number that they think is true or that they want to be true, but it's not actually reflecting how they live. They'll list out expenses in a spreadsheet and then they forget about like, this is my monthly expenses for three months in a row. That's clearly what it is. well, was that the month that you paid your annual homeowners insurance, your annual car insurance, your annual, all these annual payments that you're not really remembering because it's been six months since you paid them? There's like all the irregular stuff. I think you should be

tracking your spending for the last five years leading up to your retirement. So you can see, oh, I thought I was spending 60. I'm actually spending 61. Okay, that's probably more like a rounding error. But I thought I was spending 40. I'm actually spending 61. That's a problem. Yeah, we pulled the bigger pockets money audience, and half of you guys said you're sort of confident and you're spending, but buyers so far away, that doesn't really matter at this point, right? But for the other half of you, you know, you were basically split down the middle about whether you're very confident, 95% plus confidence in your annual spending target, or whether you, if you're being honest, you call it a moving target. And the 4% rule is all the safe withdrawal research that goes,

around retirement planning or early retirement planning is based on converting a portfolio into a reliable and sustainable income stream. And if you're not clear on what you need that income stream to be, you're at really big risk because that's not a risk that you can analyze away in all this rigorous safe withdrawal rate research that people like Big Earn have done on this. You have to nail that number if you want to do this or have a big margin of safety if you don't have it nailed. And so these next five years are a great time to really dial

in what your actual annual consumption is and what it ought to be. And you can practice that skill. You can get much, much, much more confident in your early retirement number. And Scott, the best way to do this is to either track by every penny or sign up for an account with Monarch. Monarch.com is the best way to track your entire net worth, your entire financial situation. I have set up the dashboard a little bit differently than you set up your dashboard, but in my upper right corner is my monthly spending. And it's so easy to just jump into my account and look and say, oh, I'm on track for this month. We're on day 15 and I've spent about half of what I thought I was going to. Or I spent a little bit more because my mortgage comes out first and,

you know, there's things that are frontloaded in the month. But once you get used to tracking it, it's just a glance. You can see like this month versus last month. You can see this year versus last year, it's really easy to get an idea of where your money's going. And you can either make changes in your spending or make changes in your five years beforehand, not be retired and say, oh, looks like I needed a lot more money. I'm going to have to change my whole spending habits. Yeah. So that's what we got. I think those are the big five things to do here, right? Have something to retire to and use the toolkit at biggerpocketsmoney.com slash resource at the goal setting workbook, if you're not clear on what that looks like. That's a moving target and allow it to

iterate a few times. So you're not making that guess and highly likely to be wrong with your first guess right at the time when it's when it's time to transition out. The second is make sure you actually have an intellectual basis for what your portfolio ought to look like. That's real work. Dozens or hundreds of hours, I believe, for an early retiree to get comfortable with it. And you should read the conflicting schools of thought from really serious smart people that have strong opinions on this, sometimes conflicting. The third is map out health care costs. KFF.org has got your back there. The fourth is to make sure that you have your asset location dialed in and you have the beginnings of a plan for how you're going to withdraw that, right?

I would say that at this point, this requires another serious round of self-study and is probably a great time to engage some kind of CFP that is very valuable with that. And again, we have the partnership with domain money at Bickerpocketsmoney.com slash GFP, if you'd like to include dated as part of your interview process. And then fifth, you need to dial in that spending number. And the best way to do that is to maintain a rigorous budget and make sure you adhere to it and track it rigorously over the course of the next several years. We think Monarch is the best tool for that.

And we're very lucky to have partnered with them as well. That's our five years out roadmap there. Yes. And if you are five years out and you think you should be looking at, at something different, please let us know. Comment below or reach out to Mindy at BiggerPocketsMoney.com or Scott at BiggerPocketsMoney.com and let us know what things you think you should be focusing on in the five years leading up to retirement. All right, Scott, this is a lot of fun, but we're done. Should we get out of here? Let's do it. That was a great, great time.

That wraps up this episode of the Bigger Pockets Money podcast. He is Scott Trench. I am Mindy Jensen saying, see you soon, Loon. When you want more, start your business with Northwest Register agent and get access to thousands of free guides, tools, and legal forms to help you launch and protect your business all in one place. Build your complete business identity with Northwest Today. Northwest Registered Agent has been helping small business owners and entrepreneurs launch and grow businesses for nearly 30 years. They're the largest registered agent and LLC service in the U.S. with over 1,500 corporate guides who are real people who know your local laws and can help you and your business every step of the way. Build your business identity fast with Northwest

registered agent and get access to thousands of free resources, forms, and step-by-step guides without even creating an account. Northwest makes life easy for business owners. They don't just help you form your business. They give you the free tools you need after you form it, like operating agreements, meeting minutes, and thousands of how-to guides that explain the complicated ins and outs of running a business. And with Northwest, privacy is automatic. They never sell your data. And all services are handled in-house because privacy by default is their pledge to all customers. Don't wait. Protect your privacy, build your brand, and get your complete business identity in just 10 clicks and 10 minutes. Visit northwest registeredagent.com slash money free and start building something amazing.

Get more with Northwest Registered Agent at Northwest Registered Agent.com slash money free. When I evaluate debt funds, I look for things like first position loans, personal guarantees, deep experience by the fund operator, low fund leverage, fast liquidity, and consistent returns. These are some of the reasons why I'm excited to partner with Pine Financial Group. Their fund six offers investors exposure to real estate credit, largely for construction and rehab, with loans originated by an experienced originator with over $1 billion in origination volume. They offer investors an 8% preferred return paid monthly in a 70-30 LP split of everything over 10% paid annually. The lock-up period is nine months with liquidity available within 90 days after that nine-month commitment. The fund is open to accredited investors only.

The fund's minimum investment is typically $100,000. The Pine Financial is able to reduce that minimum for Bigger Pockets Money listeners to a minimum of $25,000. Full disclosure, I am personally invested in this fund through my self-directed IRA. Pine Financial is sponsoring this message and our podcast. Go to BiggerPocketsmoney.com slash pine, P-I-N-E. Please note that returns are not guaranteed and may vary based on fund performance.