How to Bridge Your Retirement Savings Gap (The Right Way)

March 23, 2023

In this highlight, Brian and Bo discuss different ways to approach pulling out contributions in retirement.

Are you on track to be a millionaire by 65? Do you want to invest a small lump sum to make sure your children become millionaires? Check out our free deliverable, “Are You on Track to Be a Millionaire?”


LLTR fan 18 asks, for early retirees, you’ve said in the past that the after-tax bucket is needed to help bridge the gap to when you can withdraw retirement account funds. Why not pull Roth contributions instead?

Oh, man, we get this all the time. People say, hey, you know what? I know about, well, one, if I’m over 59 and a half, well, I can just pull out my Roth contribution completely tax-free. I don’t have any taxes, I don’t have any penalties. I know about the special secret, super emergency way that I can actually start pulling basis out of my Roth IRAs early if I need to and while that is true and while that is something you could do, we don’t often recommend implementing that strategy because the beauty of the Roth is not only that you get to pull those dollars out tax-free, but it’s really that those dollars can grow tax-free.

So when you think about your distribution strategy and how you’re going about pulling money, you really want to let those Roth dollars grow for as long as possible because the more time you can have the dollars invest, the more time they can compound, the bigger the tax-free growth will be. And then you’ll recognize, as you advance in age, as you get later on into your financial plan, one of the beautiful benefits to Roth is they don’t have required minimum distribution. So when you do hit 72 or soon to be 73 and will one day be 75 and you have to start pulling money out of those pre-tax accounts, you’re not required to do the same thing for the Roth. So all else equal, we try to tell folks, if you can let your Roth book, it’d be the last bucket you pull from because those dollars are so, so, so valuable. I wrote down three key points.

Number one, the opportunity for the long term that Roth money boat just hit on a lot of that stuff is that I love the tax-free growth opportunity, the government restricts how much you can put in these accounts. So if you have the choice of either or, obviously the after tax is the easiest to put money in, the easiest to replenish. It’s, so take advantage of that. And then I love the opportunity of the Roth because the compounding, the exponential growth, I don’t know, I talk about the 88 times over for the 20 year olds, but think about this for yourself. If your person is thinking about retiring early, that money that could be working in the background, growing completely tax-free for 10 years, 20 years, 30 years to really exponentially be bigger, it’s going to do a lot more when it doesn’t have the drag of taxes kind of as a strong headwind.

That leads to number two, on my list, is it’s hard to replace these, these, these money. Once it’s out, now look, the government is making it easier. I think this is a very positive thing. The secure act 2.0, we’re going to have special content coming out on that in the next week. So all of you that are interested pay attention. If you’re watching this as it gets released as a highlight, go check out our secure 2.0 deep job. I think it will benefit you tremendously, but it’s hard to get this money in because the government restricts it because it’s that powerful with the tax-free growth. It gives me pause to pull out of that. That’s point two.

Number three is this is great legacy slash estate planning. Remember, it used to you could do what was called the stretch, but they’ve changed that with past legislation to where now that you can only extend your beneficiaries for 10 years, unless there’s a special needs situation or other unique one off things. But still 10 years of tax-free growth is a long time for compounding to work. So I love between those three things. Opportunity for the long term number one. Number two is it’s hard to replace these dollars. And number three, Roth money is great for legacy planning and the estate. Don’t lean out of those three key points when you’re making that decision between aftertax versus Roth.

Find out how much wealth you need, when you’ll get there, and ways to speed the process. Own your time with the Know Your Number course!



Most Recent Episodes

The Best and Worst Types of Life Insurance!

No matter how much you know about finance, you’ve definitely heard about life insurance: maybe from commercials pitching it as something to buy your baby, or a family member or friend that got into the industry. Is life insurance worth getting or something you should...

How to Recover From 4 HORRIBLE Financial Mistakes!

In our nearly four decades of combined experience managing money, we’ve seen some horrible financial mistakes - here are the four worst we’ve seen first-hand and what you can do to avoid making a similar mistake. In this episode, you’ll learn: The worst financial...

New Data: Active Investments Are Better Than Index Funds?

A new research paper is out that claims active funds from two large providers, Vanguard and Fidelity, beat their own index funds. Are active funds beating index funds? What’s going on here? Let’s find out! For more information, check out our free resources...

Why Americans Are Actually Broke! (2023 Edition)

Americans might be bad with money, but you don’t have to be. In this episode, we discuss the underlying reason why Americans are so bad with money and how you can do it better. In this episode, you’ll learn: Common financial pitfalls you should avoid Practical steps...

Build Wealth With the 3 Bucket Strategy! (By Age) 2023 Edition

We believe there are three distinct taxable buckets you have the option of investing in for retirement. We’ll talk about how to balance those buckets by age and show a case study by age that shows what your buckets may look like! In this episode, you’ll learn: The...

Debt Ceiling Crisis: World’s Financial System at Risk?

Should you be worried about the debt ceiling crisis? Although political leaders have so far been unable to come to an agreement, we'll tell you what history says will happen and what it means for your finances. For more information, check out our free resources...

Financial Advisors React to INSANE Money Advice on TikTok!

Is financial advice on TikTok all bad or is there some good advice out there? Check out our brand new TikTok react show where Brian and Bo give their honest reactions to trending financial advice. Enjoy the Show? Sign up for the Financial Order of Operation (FOO)...

How to Save Thousands of Dollars in Taxes in 2024

Tax season is over for most of us, but that doesn’t mean it’s time to stop thinking about your taxes! Planning out your tax strategy in advance can save you time and money on your taxes. In this Q&A, we’ll discuss the line items on your return to pay attention to...

Average 401(k) Balance by Age (2023 Edition)

Are you doing better than the average American at saving in your 401(k)? We'll talk about basics of a 401(k), including new limits, employer matches, and vesting schedules, how many millionaires are created by 401(k)s, and of course the average 401(k) balance by age....