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Paul and Angela in Florida are 52 and 45. What’s the earliest the two of them can walk away from work at the same time, so Paul can spend a whole lot more time in the boat? That’s today on Your Money, Your Wealth podcast number 593. Then the fellas spitball for Mike in Riverside. His mom inherited his dad’s IRA at age 84. Can she still roll it into her own? Edward in Illinois is watching his bond funds lose value even while they pay him interest, and he’s wondering if treasuries are the fix. Blanche Devereaux in California is 55 with one-point-one million dollars in pre-tax. Should she go all-Roth for her last five working years? And Mr and Mrs Smith on the Carolina coast want to know if they can afford to retire at age 59.
Should you contribute to a Roth or a traditional 401(k) when you have a high income?
At a high income, traditional 401(k) contributions are often the stronger move, because they lower your taxable income while you’re in a top bracket. Roth contributions usually make more sense when your current tax rate is lower than the rate you expect to pay in retirement. It comes down to your bracket now versus your bracket later.
Frequently Asked Questions
Q: How do you retire at the same time when spouses are different ages?
A: When spouses are different ages, planning covers the gap until each person’s Social Security and Medicare begin, along with coordinating withdrawals across both sets of accounts. The younger spouse needs income to last longer, which can raise the total you want saved before you both stop working.
Q: Can a surviving spouse roll an inherited IRA into their own IRA years later?
A: Yes. A surviving spouse can move an inherited IRA into their own IRA at any time, and it’s treated as a tax-free rollover. Consolidating leaves one required distribution instead of two and lets the spouse name new beneficiaries. Any required distribution due that year has to be taken before the transfer.
Q: Why do bond funds lose value when they still pay interest?
A: When interest rates rise, older bonds paying lower rates are worth less, so a bond fund’s share price can drop even while the fund keeps paying interest. Buying individual Treasuries and holding them to maturity returns your principal at the end of the term, which sidesteps that price swing.
Q: How much do you need to retire at age 59?
A: It depends on your annual spending, your other income, and how long the money has to last. A common starting point is to subtract fixed income from your yearly spending and multiply the gap by about 25. Retiring before 65 also means covering health insurance until Medicare begins.
Q: Is a MYGA the same as a CD?
A: A multi-year guaranteed annuity pays a fixed rate for a set term like a CD, but it’s issued by an insurance company and grows tax-deferred until you withdraw. CDs are bank products, are FDIC-insured, and their interest is taxed each year. The tax deferral can help savers in higher brackets.
Before she retires next month at age 52, Rowan in Georgia wonders how to maximize growth in her IRA, which will be funded with 72(t) early retirement withdrawals. What do Joe Anderson, CFP® and Big Al Clopine, CPA think of her substantially equal periodic payment plan? And how should she allocate it? Michael in Virginia isn’t interested in any international investments and is instead invested in stocks like Google, Amazon, Microsoft, Meta, and Berkshire. What adjustments would the fellas make to his portfolio for long-term growth? That’s today on Your Money, Your Wealth® podcast 533. Plus, our friend Will, who is not a gas siphoner, wants Joe and Big Al’s opinion on “backdoor Rothing” his solo 401(k) instead of having an emergency fund, and on what he should do with his annuity. Also, the fellas explain ESOP and NUA – that is, employee stock ownership plans and net unrealized appreciation – for Tess and Finn in Texas.
It’s a common question: should you pay off your mortgage when you have extra cash, or invest for retirement? Joe and Big Al spitball on how Ms. Moneybags and her wife-to-be should use their upcoming windfall. Plus, what should Bob’s asset allocation be as he nears retirement? Should Harley and Harlene do Roth conversions after tax rates increase, and should they take advantage of net unrealized appreciation (NUA) on Harlene’s company stock? Pete needs a 13-year retirement plan sanity check, Lauren wants to know if she can retire early or at least go part-time, and Michael and Carol want the fellas to spitball whether they’re on track for retirement.
Spitballing retirement readiness for Sean in Texas and for Little Al in Chantilly, VA, who has UK retirement funds and is desperate to quit work now. Plus, how can Doug in Missouri do some tax arbitrage with pensions, Roth conversions, and Social Security? Can Mary switch to her ex-spouse’s Social Security benefit? But first, Tyler in Ohio has questions about restricted stock units (RSUs) and net unrealized appreciation (NUA).
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Private equity, venture capital, hedge funds, real estate investment trusts (REITs) and angel investing: Joe breaks down what these alternative investments are and whether they belong in your portfolio. Plus, the fellas talk about risk parity investing, net unrealized appreciation, what to do with a large settlement and the break-even point for Social Security benefits. […]
