BiggerPockets Money

Retiring Early in 5 Years? Do THIS First

April 10, 2026

early retirement planning finance retirement goals post-retirement activities investing safe withdrawal rates 4% rule healthcare costs affordable care act (aca)retirement account access 72t distributions roth conversions asset location spending tracking budgeting financial literacy certified financial planner

Retiring Early in 5 Years? Do THIS First

Episode Summary

AI-generated · Apr 2026

AI-generated summary — may contain inaccuracies. Not a substitute for the full episode or professional advice.

Mindy Jensen and Scott Trench, co-hosts of BiggerPockets Money, assert that the final five years leading up to early retirement are the most critical, a period where missteps can severely delay financial independence. This episode provides a comprehensive roadmap, outlining five essential considerations for prospective early retirees, ranging from defining post-retirement purpose to meticulously stress-testing financial portfolios and navigating complex healthcare costs.

👤 Who Should Listen

Individuals who are within five years of their target early retirement date and seeking a practical preparation checklist.
Anyone pursuing Financial Independence, Retire Early (FIRE) who wants to move beyond accumulation to the de-accumulation planning phase.
Listeners concerned about the nuances of the 4% rule, safe withdrawal rates, and asset location for extended early retirements.
Prospective early retirees looking for strategies to manage healthcare costs in a post-employer benefits environment.
People exploring options like 72T distributions or Roth conversions for accessing retirement funds before age 59½.
Individuals who need to create a realistic spending plan for retirement and track their actual consumption effectively.

🔑 Key Takeaways

1.The five years immediately preceding early retirement are crucial for preventing mistakes that could cost years of financial independence, emphasizing thoughtful planning over mere portfolio accumulation.
2.Cultivating a clear vision of "something to retire to" is paramount, focusing on intellectual passions, health, travel, and personal projects to fill post-retirement time, as discussed by Mindy and Scott.
3.A deep, nuanced understanding of portfolio theory and safe withdrawal rates beyond the basic "4% rule" is essential, particularly for longer early retirements and in varying market conditions, necessitating research into conflicting expert opinions.
4.Healthcare costs are a significant "wild card"; early retirees should plan for the full, unsubsidized cost of Affordable Care Act (ACA) plans and account for age-related premium increases, rather than relying on current subsidies.
5.A robust "bridge strategy" is required to access retirement funds without penalties before age 59½, involving complex considerations like 72T distributions and Roth conversions.
6.Accurately tracking actual annual spending for several years prior to retirement is vital to ensure your financial independence number is based on real consumption, not theoretical or aspirational budgets.
7.Maintaining excellent physical fitness is one of the best ways to mitigate healthcare risks and potentially reduce costs in early retirement, as healthier individuals can adapt better and face lower medical expenses.

💡 Key Concepts Explained

The 4% Rule

A guideline suggesting that retirees can safely withdraw 4% of their portfolio's initial value (adjusted for inflation) each year for a 30-year retirement without depleting their funds. The episode highlights that this rule needs rigorous stress-testing and adaptation for early retirees with longer time horizons, flexible spending, and specific healthcare risks not accounted for in its original formulation.

72T Distributions

A section of the IRS tax code that allows penalty-free withdrawals from retirement accounts before age 59½, provided they are made in a series of "substantially equal periodic payments" (SEPPs) for at least five years or until age 59½, whichever is longer. The episode points out its complexity and the need for careful income planning to avoid triggering tax penalties or impacting ACA subsidies.

Asset Location

The strategic placement of different asset classes (e.g., stocks, bonds) into various account types (e.g., pre-tax 401k/IRA, Roth IRA, taxable brokerage, HSA) to maximize tax efficiency and provide flexibility during the accumulation and de-accumulation phases of retirement. The hosts recommend biasing towards balance across these account types to create more options later on.

Bridge Strategy

A financial plan designed to cover living expenses and access funds during the period between an individual's early retirement date and the age of 59½, when traditional retirement accounts become accessible without penalty. The episode discusses mechanisms like Roth conversions and 72T distributions as components of such a strategy.

⚡ Actionable Takeaways

→Download and utilize Scott Trench's goal setting worksheet from biggerpocketsmoney.com/resources to create an initial draft of your post-retirement aspirations, updating it every 90 days for refinement.
→Research diverse perspectives on portfolio theory and safe withdrawal rates by exploring work from experts like Paul Merriman (paulmman.com), Karsten Jeske (Early Retirement Now), Bill Bengen, and Frank Vasquez.
→Practice withdrawing from a small, dedicated "practice portfolio" (e.g., $10,000) to simulate retirement spending and gain comfort with the de-accumulation process, as Mindy Jensen has done.
→Model your future unsubsidized healthcare costs by inputting your current and projected ages into kff.org's healthcare cost calculator to understand the financial curve.
→Balance your asset location across pre-tax, Roth, taxable brokerage, and HSA accounts to optimize for tax efficiency and provide flexibility in your early retirement withdrawal strategy.
→Consider engaging an hourly or flat-fee Certified Financial Planner (CFP) for complex de-accumulation and bridge strategy planning, especially concerning ACA subsidy income cliffs and tax brackets (e.g., biggerpocketsmoney.com/cfp).
→Rigorously track your actual annual spending for the years leading up to retirement using a tool like Monarch.com to establish a realistic and accurate financial independence number.

⏱ Timeline Breakdown

00:00Introduction: The critical importance of the final 5 years before early retirement.

00:40Tip 1: Establishing 'something to retire to' – identifying passions and purpose.

01:10Mindy shares her personal focus on health and fitness as a retirement pursuit.

02:20Scott discusses how fitness safeguards early retirement and potentially lowers healthcare costs.

03:00Mindy talks about her travel goals and creating a bucket list.

08:20Actionable item for Tip 1: Using Scott's Goal Setting Worksheet (biggerpocketsmoney.com/resources).

11:30Tip 2: Understanding portfolio theory and stress-testing your retirement withdrawal strategy.

12:20Discussion on the limitations and complexities of the 4% rule for early retirement.

17:40Actionable item for Tip 2: Researching portfolio theory from experts like Paul Merriman, Karsten Jeske, and Bill Bengen.

19:00Actionable item for Tip 2: Building balance in asset location across different account types.

21:00Actionable item for Tip 2: Practicing spending from a small 'practice portfolio'.

22:20Tip 3: Acknowledging healthcare as the biggest wild card in early retirement.

23:20Planning for full, unsubsidized ACA costs and the potential for subsidy changes for FI individuals.

26:30Actionable item for Tip 3: Using kff.org to model future healthcare costs based on age.

28:00Tip 4: Developing a bridge strategy for accessing retirement accounts before age 59½.

28:30Discussion of 72T distributions and Roth conversions as bridge strategies.

30:40Recommendation to engage an hourly or flat-fee CFP for complex bridge strategy planning.

32:10Tip 5: Ensuring your post-retirement spending is based on real, not theoretical, numbers.

34:30Actionable item for Tip 5: Rigorously tracking spending using tools like Monarch.com.

36:30Recap of the five key action items for the 5-year early retirement roadmap.

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Best early retirement planning episodes →Best finance episodes →Best retirement goals episodes →Best post-retirement activities episodes →Best investing episodes →

💬 Notable Quotes

“"The last 5 years before early retirement are the most important. You've built the portfolio, but this is where mistakes can cost you years." (00:00)”

“"The fire goal I think can get lost in that grind towards it... there has to be a specific plan of action because otherwise the goal gets lost." (07:50)”