How Do I Start Saving For An Early Retirement?

[Music] alex is in houston texas hey alex what's up hey nothing much dave and john hey so i've got this question that i haven't been able to find a good answer to and essentially it has to do with early retirement and how best to fund that via mutual funds or or however that best looks as to be able to access it you know when you're oh so you'll need an income prior to the 59 and a half to be able to cash out your other stuff yes sir gotcha okay how old are you now i'm 26 right now okay and um so you are debt free debt-free um currently cash flowing my wife's college but trying to get a few things lined up uh once that's over and and kind of hit the ground running okay well my point is i want you to work the baby steps before you worry about the answer to this question so that this this discussion is fine to have but i want it to be a little bit theoretical for right now okay okay i don't want you to take your eye off the ball and go work on this stuff we're getting ready to talk about until you've worked the baby steps in other words you're jacking up your regular retirement first because we don't need to talk about retiring early and you have no money in your 401k or roth iras you follow me yes sir okay now two ways that you can do that once you are debt-free housing everything and you're starting to really load up your regular retirement funds and you want to do some additional investing that you can access earlier before 59 and a half one is you can begin to save and pay cash for real estate and obviously real estate throws off an income from the first day if it's income producing real estate which is the only comment i'm suggesting right now but you save up and buy a rental house you save up and buy a a small apartment complex or a little office building or something and you begin to work that way that is obviously money you can access at any time and you you have to access it the rent that comes off of it it's not optional the second thing you can do is you can invest in uh what are called low turnover mutual funds now the way a low turnover mutual fund works is they don't turn the stocks in the mutual fund over they don't sell anything it's a buy hold strategy by and large so if you have a five percent turnover ratio that means they only sell five percent of the holdings a year does that make sense yes sir and that if it if they don't sell it and you don't sell it it's a capital gains growth meaning that you have the growth but you don't pay any taxes on it until you actually sell some of it so an example of that that's easy to do is an s p 500 index fund and so i dump some money in an s p 500 index fund almost every month i've got a good deal in there uh as my overflow funds because that money then grows and i don't pay any taxes on the growth or hardly any until i actually pull it out and use it and if i've left it in there at least a year when i pull it out and use it i pay capital gains rate on the taxes rather than ordinary income rate on my taxes so in in most people's cases that'd be 15 instead of 30 or 40 or whatever your tax rate is okay my case i make too much money so my capital gains is way more than 15 but um so because i'm rich and i must be punished and that's how that's how the thing works these days but uh but anyway the the the point being that you're getting two benefits here one you're not paying taxes until you take it out and then b when you do take it out you're paying less taxes okay so the low turnover mutual fund works no matter how much you take out exactly whatever you take out is going to be taxable on the gain so it works like it works like this easy way to remember is let's just take a single stock let's say you bought a stock of a share of home depot and i don't even know what home depot sells for okay i'm just making this up but um you bought it for fifty dollars and next year it's worth sixty dollars you do not pay any taxes on that ten dollars in gain unless you sell that stock and you'll pay taxes on that ten dollars then but if you hold it ten years and it goes up from fifty dollars to 150 you don't pay taxes on that hundred dollar gain until you sell that stock and what we're doing inside that low turnover mutual fund is there's a whole bunch of home depots in there they're just holding them all and they're all going up up up up up up up up up up up up up up up up and you're not selling them and so you're getting the value going up without paying any taxes until you do sell it and you only pay taxes on the amount it went up and the amount you sell and it's only at capital gains rate so it's at a reduced rate and it is uh gives you a delayed a tax deferred growth the capital gains growth on it and that's that's what a whole lot of people do for their what we call bridge uh investing to make the bridge between 50 and 59 and a half work dave i hear this question a lot from people in the early 20s what do i have to do to be able to retire sooner rather than later my initial pushback on that question is always why are you already planning on what what is it about the life you're setting up for yourself that you can't wait to do something else with it yeah and agreed is that a great am i off because there's something about like man if you love coaching then be the best coach you can be and love coaching and i don't i don't have any plans to quote unquote do nothing you know what i mean that's not one of my life goals i like what i do i've always liked what i do to your point if that young man is uh wanting to do this his motivation is because he hates his job today right but go and change shout outs yeah get ken coleman's book paycheck to purpose and start making plans to go do something you love and you'll make more money anyway so uh if you're doing something you love if that's the point i have already done the flip and sometimes it's wrong when i've done it because i'm when i hear people say retire what they're really saying is i want wealth that i can i want to be able to access some of my wealth there you go okay before i'm 60. gotcha before i'm 59 and a half and so that's how i interpreted the question okay and if i was wrong and you were right then your advice is actually correct because i don't know i didn't ask him that i didn't i didn't think about that question that's i just i just you know how can i get to some of my money before i'm 60. uh okay because i don't want it all kind of trapped over there in retirement and he's already he's he's running spreadsheets this guy's running spreadsheets that's exactly right he's he's 26 and he's projecting he's nerding out right and uh because i know him because i do it all the time so i did it all the time when i was here how quick can i get out of this this quote unquote life thing right yeah well how how quick can i get to make get access to some of this money the live like no one else portion of dave said yeah yeah yeah yeah if that's what he's saying then i'm fine with it but if he's saying oh i hate my job and i can't wait to figure out a way to not have to do it anymore that's what retirement means that's when i look at the retirement data and that's where people just die yeah right or their bodies fall apart yeah man and so it's time to go and start doing something set up the life you love yeah something and you don't have to make less money to do it either no you just get king coleman's book and you learn the clear path that he's got there it's very clear on exactly what to do we talk about in the ramsey show all the time but you're exactly right so it's uh i didn't thought about that chris hogan was ramsey personality did that book retire inspired we kept dealing with that a lot that you know one of the things chris used to say is beautiful saying and i'll steal it uh is uh uh retirement is not an age it's a number yeah yeah and and really what we're saying there is wealth is a number yeah accessible accessible that i can get my hands on so it's a good good clarification to talk through

Channel: Ramsey Everyday Millionaires

Views: 134,756

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Id: 96wZTUq6kcU

Length: 8min 15sec (495 seconds)

Published: Mon Jan 24 2022