You Might Also Like: The Personal Finance Podcast

**Andrew Giancola** (0:00)
If you've watched the video version of this podcast lately, you've probably noticed the wood slat wall behind me here. Now, that's actually one of my favorite upgrades we've made, and we got it from Wayfair. I wanted something that looked clean, professional, without spinning a fortune, or making the project overly complicated. And the slat wall completely changed the look of the studio, and it's now the backdrop for every single episode we record. You're probably looking at it right now if you're watching on video. And one thing I appreciated was how easy Wayfair made it to compare options. Between the customer reviews, real photos, and Wayfair verified products that are hand vetted for quality and durability, I felt confident I was getting something that would look great and last. And if you're planning a home project of your own, Wayfair Rewards gives you 5% back every day, making those upgrades at an even better value. So join Wayfair Rewards today to get 5% back on every purchase and start saving on your next home upgrade. Head to wayfair.com to shop all things home. That's wayfair.com.
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**SPEAKER_2** (1:03)
Every style, every home.
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**Andrew Giancola** (1:35)
On this episode of The Personal Finance Podcast, how to shave off seven plus working years and retire early.
What's up everybody and welcome to The Personal Finance Podcast. I'm your host, Andrew, founder of mastermoney.co.
In this episode of The Personal Finance Podcast, we're going to be talking through how to shave off seven plus working years and retire early. If you guys have any questions, make sure you join The Master Money Newsletter by going to mastermoney.co/newsletter.
Don't forget to follow us on Spotify, Apple Podcasts, YouTube or whatever podcast player. You love listening to this podcast on it. If you want to help out the show, consider leaving a five star rating and review on Apple Podcasts, Spotify or your favorite podcast player. Now, in today's episode, we're going to be diving into a number of different strategies that could help you shave off working years and give you the ability to retire early. Now, a couple of things in this episode that I want to note is we're not going to be talking about the basics in this episode. Sure, you can save more money. You could put dollars in your emergency fund, those types of things. But in this episode, I'm going to give you some advanced strategies and some less talked about strategies when we go through some of the ways that you could shave off time when you are working. Because if your goal is to retire early, sometimes you can make some tweaks to your financial plan that can make a big difference long term so that you can shave off three years, four years, five years, seven years, 10 years. And in some of these instances, we're going to be talking through the strategies that could shave off just a couple of years. And we're also going to be talking about those strategies that will shave off seven plus years. And between all of these, if you start adding some of these to your financial repertoire, you will be able to see a big difference long term in your overall financial health. And so this is something I'm really excited to dive deeper into, so I'm not going to waste any more time without further ado.
Let's get into it.
So number one is going to be tax location. Now what you're going to see is with each of these instances, I am going to also give you a case study to show you how many years you can actually shave off when you do some of these things. Now when it comes to anything tax related, obviously you want to have a conversation with your CPA if you have one in your corner, or even an advisor if you have one in your corner, to make sure that this works for your specific tax situation. But putting the right asset in the right location can be very important. If you put the wrong assets in a Roth IRA or the wrong assets in a taxable brokerage account, you could be giving yourself a larger tax bill than you originally anticipated. And so each of these different locations is going to have some optimal investments that you could add into that location. So some of the things that are out there is I want to give you a couple of basic rules as we talk through this. And then we can figure out what works best for you. And I'll show you a case study, then have a conversation with your CPA, take some of this information, go back to them and say, hey, do I have the right investments in the right accounts? So one of the things that you can think through is tax inefficient assets go into tax advantaged accounts. So what is a tax advantaged account and what is a tax inefficient asset? So things that are like bonds or REITs or actively managed funds or high dividend paying stocks throw off your ordinary income and they can increase your ordinary income if you are not careful. And that income can get taxed at your full marginal rate every year if it sits in a brokerage account. See the brokerage account is tax inefficient when it comes to some of these assets. So if you hide them inside of your 401k or even your IRA where the tax doesn't hit as hard, that could be something that could be very helpful. Now things like tax efficient investments can go into your brokerage. So things like broad base index funds, if you invest in something like VTI, which is Vanguard's total stock market ETF or VOO, they can barely throw off any taxable income. And so they are much more tax efficient investments than maybe some of the other income producing assets that are out there. And so they thrive in something like a taxable account if you are trying to decide where to place some of these things and then some of the highest growth assets can go into something like a Roth. Why would they go into a Roth? Well, a Roth IRA can grow tax free. And so this is really powerful and why Roths are so incredibly amazing when it comes to some of these big growth assets. You may have heard of Peter Thiel. And Peter Thiel is the guy who is in Silicon Valley, who started PayPal and a bunch of other companies. He is a very wealthy individual. And one of the things that a lot of people talk about when it comes to Peter Thiel is he has $5 billion Roth IRA. You can go look this up, look up the assets that he has in this Roth IRA. But what he basically did was he took some of the biggest income producing assets that he had and he put them into a Roth IRA. So they got this tax free growth and you could pull the money out tax free. In fact, it is stated that he probably has one of the largest, if not the largest Roth IRAs of all time. And so this is one of those things where if you can get some of those high growth assets into a Roth, you can get that tax free growth, which is going to save you so much money. Now, why does this all matter? And why does this matter, especially when it comes to your working years? Well, a poorly located portfolio, when this stuff is not thought through, can lose roughly a half a percentage, 2.75% to tax drag alone. And so on a $1 million portfolio, I want you to think about this for a second. Over the course of 30 years, tax drag, when it's in that range, can cost you anywhere from $400,000 to $700,000.