Podcast Episode 206: Claiming Social Security Early + Other Retirement Questions

Today’s Wisdom:

Many people look to real estate to generate income, but would it make more sense to put that money towards paying off the mortgage on your primary residence? Let’s look at that question and a couple of others that came into the show. Plus, Joel shares his thoughts on the labor shortage happening across the country.

Want to save time? Click the timestamps below to jump ahead to specific spots in the episode.


What You’ll Learn:

Rental properties can be a great investment, but they also take a lot of work and money. So much so that the return often falls short of what you could be earning in other investments.

At what point would it make sense to sell your rental property and put that money towards paying off the mortgage on your primary residence? That’s a question we recently received on the podcast along with a couple of other good retirement topics. Joel will answer those on the show today.

So, let’s start with this first question. Should you look to sell rental properties and use them towards your mortgage? The key thing to figure out is what rate of return are those properties generating? If you’re not netting a 6% rate of return on the properties, you can likely do better. Examine those investments closely to determine what that ROI is because that will give you the answer. If they are providing a strong source of income, then it likely makes sense to hold onto them.

The next question we have is whether it would be foolish to retire before the full retirement age for Social Security benefits? In this case, the listener plans to stop working and provide childcare to their grandchildren.

To figure it whether or not you can financially retire early, you need a retirement income analysis. The other part of the question is whether you should trigger Social Security before your full retirement age. One thing to know is that the full retirement age is kind of insignificant unless you plan to work in retirement. You could be penalized for those earnings in terms of your benefit. This scenario seems like additional income won’t be a factor so it’s all about determining whether you’re financially able to. Get with a professional to help get that answer.

Finally, there’s a question about how much cash is too much to have sitting in a savings account. This one also has a couple of different segments to the answer. First and probably most important is that we need to know what your income and expenses total up to. That’s the only way to get a true grasp of how much needs to be in cash to cover you in an emergency. The general rule is to keep 3-6 months in living expenses in the bank.

The other part of the question deals with the peace of mind aspect of having cash on hand. For Joel’s father, he always kept $100K in cash because it helped him sleep at night. That’s not something an advisor should try to convince you otherwise if that’s what it takes for peace of mind.

The last thing we touch on during this episode is the current labor shortage many businesses are facing right now. Is this a problem long-term and what does it mean for the economy right now? Joel will share his perspective and what he thinks could be happening in the future.

Let’s get started with the show. You can listen to it by using the audio player above and click on the timestamps to skip to a specific topic of conversation.

[1:49] – Employment struggle and its impact on the economy

[4:06] – Tight labor market: good or bad long term?  

[5:36] – Mailbag question on childcare expenses  

[7:51] – What the retirement income analysis process looks like  

[8:59] – Mailbag question on how much to keep in the bank

[11:27] – Mailbag question on rental properties  

Thanks for listening to this episode. We’ll be back again next week for another show.


Final Thoughts:

“I don’t know if it’s fear right now that people don’t want to switch jobs, or they’re just sort of tired and fatigued from the whole COVID situation we’re just coming out of, but I’ve never seen a labor market like it is right now.”

– Joel Johnson

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