Early Retirement in Your 40s: Are You Actually Ready? A Financial Checklist | 093

Think You're Ready to Retire in Your 40s? Start Here.

Retiring in your 40s sounds like the ultimate dream, kind of like your band selling out arenas, right? Everybody wants it. Most people talk about it. But very few actually pull it off, and even fewer do it without a few surprises waiting on the other side.

In this episode, Chris breaks down what early retirement actually requires, beyond just hitting a number in your 401(k). From getting brutally honest about your real financial picture, to the healthcare costs that catch most people off guard, to the growing FILE movement (Financial Independence, Live Early) that might be a smarter path than going cold turkey on work entirely.

What we cover in this episode:

• Why assets and net worth are two very different things, and why confusing them can derail your early retirement plans
• The healthcare reality gap: what coverage actually costs when you're under 65 and on your own
• FIRE vs FILE: why more people in the financial independence community are choosing to turn the volume down instead of shutting it off completely
• When and why to bring in a fee-only fiduciary financial advisor
• The stuff nobody wants to think about: taxes, estate planning, and lifestyle costs in retirement
• Why early retirement is absolutely possible, but only if you do the work first

Whether you're actively planning to retire early or just starting to wonder if it's possible, this episode gives you a practical, honest framework to figure out where you actually stand.

Subscribe to the Extreme Personal Finance Show wherever you get your podcasts.

Horns up.

Subscribe to the newsletter at moshpit.heavymetal.money

Contact Chris:

https://heavymetal.money

https://www.facebook.com/MoneyHeavyMetal

https://x.com/MoneyHeavyMetal

https://www.instagram.com/chrisluger

https://www.tiktok.com/@heavymetalmoney

email: chris at heavymetal.money

Resources and Links:

• Your state's healthcare marketplace: healthcare.gov
• Find a fee-only fiduciary advisor: NAPFA.org or garrettplanningnetwork.com

Contact Chris:
https://heavymetal.money

https://www.instagram.com/heavy_metal_money/

https://www.youtube.com/@heavymetalmoney

https://www.facebook.com/chrisluger

email: chris at heavymetal.money

Transcript

SPEAKER_00 0:00

Can you really retire in your forties this week on the Extreme Personal Finance Show? So retiring in your 40s is possible with some careful planning and a realistic understanding of your financial situation. Consider your assets, your liabilities, your monthly expenses, including your healthcare costs. Look, I totally get it, man. The dream of retiring in your 40s is basically like the equivalent of your band playing arenas, right? Everybody wants it, right? Most people talk about it, but very few actually pull it off. And even fewer do it without some surprises waiting on the other side. But here's the thing, retiring in your 40s can be possible. However, it's just not as simple as adding up your 401k balance and deciding you've crossed some sort of finish line. There's a lot of moving parts. If you miss just one of those, you could find yourself in a situation that's less living the dream and more anxiously like watching your bank account drain. Let's see if we can break down what actually goes into figuring out if you can retire early in your 40s. First, we need to get brutally honest about your financial picture. So before we even start planning a retirement party, you really need to sit down, take a hard, unfiltered look at where you actually stand, not where you think you stand, where you actually stand. A lot of people may assume that because they hit a million dollars in assets, they made it, right? They're golden. But remember, assets and net worth are two very different things. And confusing them is some of the most common mistakes people make when they're thinking about early retirement. So let's say you own a home worth, I don't know, let's say$350,000. Maybe you have a rental property, SEP IRA, maybe a$401. And on paper, you feel like you're sitting pretty, right? But check it out. If you still have, I don't know, let's say$140,000 left on your mortgage and another$65,000 in business debt, then that totally changes the math, right? You're not really working with that million dollars in freedom money. You're working with a million dollars in assets minus a pile of liabilities. Now, again, this isn't meant to be like discouraging at all. That's not what I'm trying to do. It's I'm trying to like, let's talk about, you know, taking a reality check because the people who do retire successfully in their 40s aren't the ones who are too optimistic about their finances. They're the ones who are dialed in and accurate. So before anything else, let's just write it down, man. Let's do this. Every asset, every liability, every monthly expense, your mortgage, your insurance, your groceries, your streaming subscriptions, yes, all of them, right? Um, hey, I'm not judging. Is there only fans in there? No, I'm just kidding. Um, but you need a complete picture. You need a complete picture before you can make any intelligent decision of where you stand currently. All right, next, the healthcare question that nobody really wants to deal with. Okay, this is one that can catch people off guard. More than almost anything else, it deserves a full conversation. This is one of the questions I get asked most often about retiring early. When you retire before the age of 65, you wouldn't have access to Medicare. That means you're on your own for health insurance. Health insurance in the US is not cheap, and there's a lot to think about. Depending on your situation and the level of coverage, you need, you could be looking as much as$20,000 to$30,000 a year for a solid plan, especially if you're going to go with a gold or platinum tier package in the healthcare marketplace. If you or anyone in your household has ongoing health concerns, you're going to want more robust coverage. Now, this really isn't one of those places that you can cut corners. You know, a catastrophic health event with inadequate insurance, it can wipe out years of careful saving in a really short amount of time. Now, if you're self-employed and running a business, there is some relief available because you can deduct a portion of your health insurance premiums. Now that takes some of the sting out of it, but it's still a significant expense that needs to be built into your retirement math from day one, right? This should not be treated as an afterthought. The bottom line here is that if you're planning to retire in your 40s, go look up actual plan costs on your state's marketplace right now. Plug those numbers into your budget. Make sure the math still works. If it does, great. If it doesn't, well, you just save yourself from a very unpleasant surprise. Next, I want to talk about something that I just recently learned. And this is something called file versus fire. We've talked about fire a lot here on this blog and on this podcast, about finding financial independence with the option to retire early. But I've learned something called the file movement. And this is where you reach financial independence and you live early. So it's file versus fire. And maybe you don't need to go all in with retirement. So here's where things get interesting, right? So I learned about this, and honestly, the conversation has evolved a lot in recent years, right? So financial independence, retire early was the concept most people were watching, you know, we widely talked about. Peeps would save wicked aggressively, they'd hit a number, and then just stop working entirely, right? They'd stop working completely, they'd live off their investments, clean, simple, boom, in theory, right? That's what it, that's what a lot of people would do. And that's kind of how it all started. But a lot of people in the financial independence community are shifting towards this thing that I mentioned. Financial independence live early. This is the idea that instead of cutting everything out and just grinding hard until you hit a magic retirement number, right? And then once you hit there, you'd like flick a switch, right? This is where you start designing the life you actually want to live now on your own terms. Again, with or without a paycheck. So what does that actually look like in practice, right? What does it look like for you? Well, for some people, it's dropping to part-time hours in their current career. For others, it may be stepping away from their nine to five and picking up freelance projects or consulting work, right? It keeps them engaged without the total burnout. Some people start a small business around something that they really enjoy. The beauty of this approach is that even a modest part-time income can bring in$20,000 to$30,000 a year, and that dramatically changes the retirement math. I mean, think about that. It covers a big chunk of what your healthcare costs could be. It reduces the pressure on your overall investment portfolio and it gives you something to wake up for, right? We talk a lot about creating our purpose, and it really does help us be engaged in our retirement years. Research consistently shows that people who have structure and purpose in retirement report higher satisfaction. And those who make a clean break without a plan. So if you're sitting there thinking, man, I'm kind of burned out, but I don't know if I can actually afford to fully retire, hey man, semi-retirement might be just the kicker you've been looking for. Turn the volume down, but not all the way up, right? And I do want to mention there is a time when you might need to bring in somebody else, a third party, maybe a financial advisor, right? I'm a big believer in learning this stuff yourself, right? That's kind of the whole point of what we do here at Heavy Metal Money, but there's a point where the complexity of your situation warrants bringing in a professional. The early retirement planning is often the point. If you're dealing with multiple income streams, business ownership, real estate, significant debt, or health considerations, that could dramatically affect your financial planning. And a good fee-only fiduciary financial advisor is generally worth the investment, right? They can help you map out an overall strategy that covers your investments, your tax situations, your healthcare options, and your long-term estate planning as well. They can do this all in like one cohesive, holistic plan. So the keywords here are fee-only and fiduciary. A fee-only advisor gets paid directly by you, not through commissions on products they sell to you. Remember, a fiduciary is legally required to act in your best interest. So what you can look for is someone who can look at your entire financial life and help model out scenarios like what happens if you retire at 42 versus 45, right? What does your spending need look like for your portfolio the last 50 years of your life? What kind of tax strategies should you be using now to set yourself up better later? Right? These are some of the questions and having an expert in your corner to work with you and work through them is, I think, money well spent. And let's not forget some of the stuff that nobody wants to talk about. When peeps imagine early retirement, they picture all the good stuff, right? They imagine sleeping in, traveling, having time for hobbies, not checking work email, um, and in my case, not having a work calendar. What they often forget, though, is to plan some of those administrative things, like taxes, for one. Early retirement doesn't mean you stop paying taxes. So depending on how your income is structured, you may owe taxes on investment withdrawals or social security benefits down the road. You may owe taxes on rental property income as well as any part-time work that you pick up. Tax planning should be part of your retirement strategy, not something you just figure out in April, like I'm doing right now. To be honest, we often kind of all wait till April, right? Anyway, let's also not forget estate planning, right? It's another one of, you know, we tend to kind of push it to the back burner. And if you have property, retirement accounts, and potentially those dependents, you really need all that shit, like a current will, powers of attorney, benefit uh beneficiary designations that actually reflect what you want and when you kick it, right? So, like when you're done, how is this gonna, how is it gonna function? How's it gonna work? You know, this stuff isn't fun to think about. I get it, but getting it sorted out now while you're healthy and while you're still with it is one of the most responsible financial moves you can make. And then there's the lifestyle question, right? What does spending actually look like in retirement? People often underestimate this with some sort of structure of work, discretionary spending tends to go up, especially in the early years of retirement. When you're more active, right? You're you're active and healthy and you want to do like all of the things. And I will tell you, can you say Iron Maiden's 50th anniversary celebration in London? Yes, I'll be there. But again, you want to do those things when you're young enough to do those things. So you got to build all that into your projections, right? And so then you got to ask your question, right? You've done all this planning. Now you got to say, can you actually do it? Well, I think retiring in your 40s, absolutely, it's possible. And people do it every day. But the ones who do it successfully aren't the ones that just got lucky or hit a big number. They're the ones who planned carefully, understood real expenses, accounted for healthcare, they thought through what they actually wanted their life to look like, and built a strategy around those realities. If you're thinking about making this move, start with the math. Get honest about what you have, what you owe, and what your life actually costs. Then look hard at your healthcare options and build those costs in as well. Explore whether semi-retirement might give you more flexibility than just a full stop. And if your situation is more complicated, find a financial advisor who can help you see the full picture. Early retirement doesn't just have to be a dream, but you also don't want to just wing it. Do the work now so your future self can actually enjoy the payoff. Horns up, my friends, you've got this. Please like and subscribe wherever your podcasts and on YouTube. And we will see you next time on the Extreme Personal Finance Show. See ya.