Joe Anderson
ABOUT Joseph

As CEO and President, Joe Anderson has created a unique, ambitious business model utilizing advanced service, training, sales, and marketing strategies to grow Pure Financial Advisors into the trustworthy, client-focused company it is today. Pure Financial, a Registered Investment Advisor (RIA), was ranked 15 out of 100 top ETF Power Users by RIA channel (2023), was [...]

Alan Clopine

Alan Clopine is the Executive Chairman of Pure Financial Advisors, LLC (Pure). He has been an executive leader of the Company for over a decade, including CFO, CEO, and Chairman. Alan joined the firm in 2008, about one year after it was established. In his tenure at Pure, the firm has grown from approximately $50 [...]

Published On
July 7, 2020

What impact do ex-spouses, income, and early retirement have on collecting your Social Security benefits? Plus, indexed universal life insurance, estate planning with a step-up in basis on private placement real estate, and more on CRDs, RMDs, and stimulus checks. Joe and Big Al also submit their forecasts for whether Congress might tax Roth IRA growth in the future.

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Show Notes

  • (00:50) Can My Ex-Spouse Claim Social Security On My Record Even If I Haven’t Claimed Yet? When I Die, Will My Ex Get Survivor Benefits Before My Current Spouse?
  • (04:29) How Will Income Earned in the Year I Claim Social Security Affect My Benefits?
  • (07:45) I Retired Early. Will I Get Less in Social Security Benefits?
  • (10:48) Are You Sure Congress Won’t Ever Tax Roth IRA Growth?
  • (14:05) Should I Get Out of My Indexed Universal Life Insurance Policy?
  • (19:04) Private Placement Real Estate Step-Up in Basis: Should I Invest in My Name or the Name of My Living Trust?
  • (23:46) Followup: Coronavirus-Related Distribution Roth Conversion
  • (35:05) Will My Mother-in-Law Get a Stimulus Check?
  • (39:48) How Do I Suspend My 2020 Required Minimum Distribution?

Free resources:

ICYMI: Watch the YMYW Live Webinar and Open Q&A

WATCH | YMYW TV: Getting Your Estate Plan in Order

LISTEN | YMYW Podcast #249: What’s the Break-Even on a Retirement Roth IRA Conversion?

2020 Required Minimum Distribution Rules Updated: IRS Notice 2020-51

Listen to today’s podcast episode on YouTube:



The season 6 premiere of the Your Money, Your Wealth TV show is Sunday, July 12 at 6:30 am on CBS 8 San Diego, or watch it on-demand at YourMoneyYourWealth.com to learn about the COVID-19 pandemic’s impact on your finances and retirement! Today on the Your Money, Your Wealth® podcast, what impact do ex-spouses, income, and early retirement have on how much you or your spouse will receive when you collect Social Security? Plus, indexed universal life insurance, estate planning with a step-up in basis on private placement real estate, and more on CRDs, RMDs, and stimulus checks. Joe and Big Al also submit their forecasts for whether Congress might tax Roth IRA growth in the future. I’m producer Andi Last, and here are the hosts of Your Money, Your Wealth®, Joe Anderson, CFP®, and Big Al Clopine, CPA.

Can My Ex-Spouse Claim Social Security On My Record Even If I Haven’t Claimed Yet? When I Die, Will My Ex Get Survivor Benefits Before My Current Spouse?

Joe: John writes in from El Cajon. “If I pass away does my wife have to get to Social Security office and claim survival support before my ex-wife does?” Actually, yes it’s a race, John.

Al: No, it’s not.

Joe: When you die, the first one to the Social Security office is going to be able to get the survivor benefits. So tell your current wife get a fast car. “Is my ex-wife able to claim half my Social Security even if I’m not claiming Social Security although I’m eligible to claim it?” So ex-wife, remarried, he’s worried about survivor and spousal benefits. John, don’t worry. Your current wife is not going to get any reduction in benefit from- because your ex-wife is claiming on your same record.

Al: So just to be clear, there is no foot race. It doesn’t matter. In fact, John if you had been married 5 times, for 10 years or more and you’ve got 5 ex-wives, 4 ex-wives, plus your current one, they can all get the same survivor benefit as long as they qualify. There’s no family maximum on that.

Joe: And “can my ex-wife claim-?” Yes, if she’s at full retirement age, she should be able to claim on your record even though you haven’t claimed. Your current wife cannot.

Al: And again, that doesn’t affect your family limits or anything. If you had multiple ex-wives, they could all claim. It doesn’t affect your current wife.

Joe: I’m 90% sure there in regards to her claiming benefit even though he hasn’t claimed, because-

Al: No, that is true. I agree with that.

Joe: His current wife cannot because he has not claimed his benefit for the spousal benefit-

Al: I agree with that. I think-

Joe: But the ex-spouse will be able to claim a spousal benefit even though the ex-spouse has not claimed.

Al: Yeah, upon the ex-spouse’s eligibility.

Joe: Eligibility.

Al: Yes. That’s a true statement.

Joe: Ok. Very good. Fact check. We get that quite a bit. It’s like my ex-spouse could claim on my record? This is my ex-spouse. I don’t want that person-

Al: And what’s so weird is your ex-spouse can- like if they were married 2 or 3 times, they can keep changing the different ex-spouses-

Joe: -higher-

Al: -year in and year out, depending upon who’s better.

Joe: Exactly. Let’s say you have one ex-spouse and they have a higher benefit.

Al: So they’re claiming-

Joe: -the higher of the two.

Al: They’re claiming someone else and then you pass away. So your survivor benefit’s better so, oh I’ll do that. And then the other person died and his survivor’s better, so they switch over to that.

Joe: It’s a funny world we live in there John. But you don’t have a foot race. There’s no race to the Social Security. It’s like all right honey-

Al: It’d be cool if there was, right?

Joe: No, that’d be awful. Ok honey, I’m on my deathbed.

Al: It’s like-

Joe: I want you to practice. Let’s get in the car really quick, fast.

Al: It’s like you- I want you to be at the Social Security office- we’ll be on a cell phone.

Joe: Yes.

Al: And the nurse will tell you when I’m gone.

Joe: Yes. I’ll say my last wishes and I’ll say ‘Ok, claim. Claim. Claim now.

Al: I’m goin’.

Joe: I’m seeing the light. Ok, honey. Claim. All right. We got it. We beat that- oh my ex-‘ Oh boy the things that come out of our mouths.

How Will Income Earned in the Year I Claim Social Security Affect My Benefits?

Joe: This guy- I don’t know where he clicked. He just got on our website and started asking some questions. He goes “What is your cost to me to get an answer to this question?”

Al: Wow. It could be almost anything.

Joe: It could be.

Al: I guess we’re gonna do for free.

Joe: We’re gonna do it for free.

Andi: Which means don’t necessarily count on it being good.

Al: Everyone else hears the question at the same time.

Joe: I won’t say his name.

Al: No, no names.

Joe: No names. “My 63.25 years today-”

Al: “- old wife-” have to say that in the same breath.

Joe: I should read these before we go on the air. “My 63 and a quarter years old wife will retire on August 3rd 2020 with a likely last pre-tax payment to be received from her employer in August including accrued vacation of about $7000. She will not have a paying job after this date. Today she submitted her Social Security application to start monthly earning the Social Security of about $1600 in September 2020. I understand the first ACH check will deposit in October. Should the Social Security income have been set to start in the month of August since the $7000 would be below the standard annual earnings test?” Oh my God.

Al: So what he’s referring to is that you can make about $17,000- if you’re working- you can make about $17,000, a little over $17,000 per year up to your full retirement age and be able to keep all your Social Security. If you make more than that you have to give some of that back. But-

Joe: If you’re under full retirement.

Al: Under full retirement age, which this year is 66 years and 2 months. But what happens when you retire mid-year? That’s the question.

Joe: So she’s retiring early. She’s collecting her Social Security benefits early. She’s retiring in August. She’s 63 years old. Her income for 2020 is going to be about $7000.

Al: Well that’s her income for August.

Andi: “The last pre-tax payment will be about $7000.”

Al: In other words-

Joe: Including her vacation.

Al: Here’s the question. The question is she made over $17,000 for the first 7, 8 months of the year, so does that screw up Social Security? The answer is no. Because when you retire mid-year they look at month by month. They don’t look at what you made before you retired as part of that $17,000; they just look month by month.

Joe: Very good, Alan.

Al: You like that answer?

Joe: Well yes. It’s correct.

Al: It’s true.

Joe: I was afraid you weren’t gonna know the answer because of how you were looking at me. Because Social Security is always based on a monthly accrual. In a sense.

Al: Well it’s sort of- what she wants- it’s the following year. Then it’s an annual test, an earnings test is what she’s talking about- or what he is talking about because he’s referring to his wife.

I Retired Early. Will I Get Less in Social Security Benefits?

Joe: We got Nicholas. “Hi guys. Love your show. Been listening to your podcast for 10 years now.” Ten years now. Can you believe-

Al: Really? Wow, we’ve doin’ it like 15? We had a break there for a year and a half?

Joe: Where the hell was he the first 5?

Al: – Those were the practice days.

Joe: “My question is I retired January 2020, age 55. I worked for 35 since 1984. Will I get less benefit with my Social Security since I retired early? On the SSA.org, I will get $3000 a month if I earn the same until full retirement age. Thank you. God bless. Be safe.” Yes. You will probably receive a little bit less. Or it could be the same because you’re going to get a haircut on some things and not on the other. You’re right. They take a look at 35 years of work history. They also adjust the work history for inflation. So the job that you are making 35 years ago they index that with inflation to keep it relevant if you will. But when you look at your Social Security statement they’re assuming that you’re making that same wage up until full retirement age. And usually, your later years are your higher-earning years. So they’re anticipating those higher earning years throughout. If you were making more money- so it really depends on how the math works out for your 35-year work history, but they’re assuming that- they’re saying you’re going to get $3000 but that $3000 does not include any type of cost of living adjustments that Social Security is going to give us over the next 10 years. So it could work out where you would receive $3000 just because they’re not including the inflation factor.

Al: That’s true. Social Security takes your highest 35 years of salary and the older years, you’re right, are indexed for inflation. But when you- but I think this is a mistake that people make as they retire after working 30 years, they retire at 60 let’s just say and they think they’re getting a certain amount at age 66 and they’re not. Because that’s assuming they’d work another 5, 4 or 5 or 6, 5, 6 years at the same pay.

With over 2700 rules around claiming Social Security, reading our Social Security Handbook before you claim might be a good idea. It’ll walk you through who is eligible, how benefits are calculated, the difference between what you’ll get when you collect early vs. late, working while taking Social Security, the rules around spousal, survivor and divorced benefits, and how your Social Security benefits are taxed. Click the link in the description of this episode in your podcast app to visit the show notes and download The Social Security Handbook, yours free from Joe and Big Al and Your Money, Your Wealth®. Still got question? Click Ask Joe & Al On Air and send them on in to be answered here on YMYW.

Are You Sure Congress Won’t Ever Tax Roth IRA Growth?

Joe: We’ve got Philip. He writes him from Redlands, California. “I enjoy listening to your podcasts and I listen to them every Tuesday. You always say that Roth IRA withdrawals are tax-free forever. Do you think there’s a chance that 5, 10 or 20 years from now Congress will see this giant pile of money and will figure out a way to tax it again? Do you trust Congress enough to state that this will never happen? Thanks again for your reply.” I believe that they will be tax-free forever. Yes. I truly believe that.

Al: We cannot guarantee it.

Joe: No. I believe it. I didn’t say guarantee it.

Al: No, I understand. But it says ‘Do you trust Congress enough to state that this will never happen?’ I don’t like to use the word ‘never’. That’s too final of a word, but it seems unlikely to me too.

Joe: Was Phillip on our webinar?

Al: No, that was Todd. It was the same question. The reason I remember that is because I have a brother named Todd.

Joe: Yes. Thank you, Al. Todd Manchester.

Al: That’s right. He already changed his name to Manchester. I wanna do the same.

Joe: I guess there are no guarantees in life with anything.

Al: Why do you think it’s always gonna be tax-free?

Joe: Well because I believe at this point- two reasons- and I got a minute and a half to explain this- is that most of the money in retirement accounts are in 401(k)s, IRAs or 403(b)s that are pre-tax, not Roth.

Al: True.

Joe: And so there’s a big pile of money sitting in those accounts. And if you take a look at the percentage of what money is in Roth versus pre-tax, the percentage of Roth is very small compared to the overall pie of all retirement accounts. Congress right now is encouraging us to convert because then that gives them a little bit of tax money upfront versus a lot of individuals deferring it forever. So it’s a win/win for us and for the IRS. If I look at the majority of the Roth money or the people that are taking advantage of Roth planning more is younger individuals. 401(k) participants that are in their 20s, 30s, and 40s are probably doing more Roth and pre-tax because Roth just came about. People are still confused. You know we poll thousands of people and still, about 60% some odd or more, have never heard of a Roth or don’t think they qualify for a Roth. So most of the Roth money is in a younger person’s hands. So let’s say 30, 40 years from now, do I trust Congress? Well, who’s going to be in Congress 30 or 40 years from now? People that have all of their money in Roth. So do you think they’re going to hurt themselves?

Al: That does seem unlikely and you think of any other change they’ve made with pension and retirement planning and those types of things it’s always the old rules have been grandfathered in. I think it’s likely they may stop Roth contributions and conversions at some point. But I don’t think they’d ever tax it.

Joe: I agree with that wholeheartedly. They could stop the contributions and conversions but if you have money in a Roth I don’t think they’ll tax.

Should I Get Out of My Indexed Universal Life Insurance Policy?

Joe: Lisa. She writes in from Los Angeles, California, Al. She goes “Hi Joe and Big Al. I got sucked into the IUL business when I was really young at age 20, by my relative.” Imagine that.

Al: Oh boy.

Joe: Hey Lisa. Uncle Bill here. Just curious if you got a little time maybe we could grab some lunch.

Al: Got this great new product and tax-free earnings for life.

Joe: Because I really think this is going to benefit you. “I’ve been contributing to this account until it was maxed out. And now I’m just watching my money chip away due to the insurance policy costs.” So for those of you that are not familiar with IUL, it’s Indexed Universal Life insurance, which I am not a fan of at all. “I’ve had the policy now for some time and I don’t think my money is working properly. I’m much too young to be worried about preparing a family I don’t even have.” Wow. “How do I get out of this mess? I want to put my money into something else. Would it be beneficial to eat the cash surrender policy? Thanks.”- or “penalty. Thanks.” So when she was young, 20, she got sucked in by a relative.

Al: I bet it was Uncle Bill.

Joe: I wonder if Uncle Bill’s still in the insurance industry. Oh, it’s awful.

Al: I know right?

Joe: I was gonna go to your nieces, nephews selling this crap.

Al: I bet Uncle Bill lives in Vegas and he came out and said ‘here, when you’re 20, this is the best time’.

Joe: Oh look at the cost of insurance is nothing here. And what does a 20-year-old need is like a $500,000 IUL policy to fund when you don’t even have a family? There’s no insurance need. So when you die, your mom and dad will get $500,000. Or maybe you put Uncle Bill as your beneficiary.

Al: And if there’s no family and Uncle Bill’s gone then I guess it’s your nieces and nephews.

Joe: So she’s single, in her 20s.

Al: We don’t know how old she is.

Joe: Well she got sucked into-

Al: -at the age of 20. Probably- if there’s still a cash surrender it’s probably 10 years or less that she’s had it.

Joe: I don’t know.

Al: It could be longer but that would be-

Joe: I would see- if I was Lisa and I got suckered into this IUL policy there’s no need for me to have the insurance, this would be a lesson learned. My father always used to tell me, Al, he goes ‘every education costs you a little bit’.

Al: There’s a cost, whether you go to school or get schooled on a poor decision.

Joe: Yes. And so I think this is your tuition cost, Lisa, for listening to a relative that sold you an insurance policy in your 20s. So I would cash out of the thing.

Al: If she cashes out she’s got to pay taxes on the earnings plus penalty.

Joe: I guarantee you she does not have any tax problems because there is no growth. There is zero growth in this thing. She says- because basically she is putting money in this IUL. And all of a sudden now the cost of insurance and policy costs and everything else is eating up her cash value. So take a look at what she put into it versus what the cash value is now. I guarantee- I’m not going to guarantee-

Al: You can’t do that.

Joe: -but I would if I were a betting man, I would say it’s lower than her basis. So the account balance is lower than the amount of money that she totally put in. If that were the case, I would cash out, take it out, do something else with it.

Al/Joe: Start over.

Al: What if it’s not lower? So what if there are some tax and penalty?

Joe: Well there wouldn’t be any- the surrender penalty is gonna be the probably the biggest on the commission that the relative made.

Al: I agree. But on the gain. If there were a gain that she’d have to pay tax and a 10% penalty.

Joe: It’s not a 10%, it’s not an IRA. It’s an index universal life insurance contract, so there would be a surrender penalty to getting out of the contract and there would be taxes on any gains. But I doubt there’s any gains and the gains will probably be minimal. So what she’s concerned is that there’s a cash surrender penalty because you’ve got to keep it in there for so many years. Because the cash surrender penalty or the penalty to get out of these things is because they already paid Uncle Bill the big commission. So you got to keep it in there so the insurance company makes up on the commission that they paid him.

Al: Makes enough money and if you get out early they charge ya.

Joe: -yeah. But that’s what I would do Lisa. I would- I would cash out. I would absolutely cash out. There’s no need for the insurance. You’re going to continue to feed this beast and the beast is gonna win. If you had an insurance need, and maybe a permanent insurance need then I would reconsider, but just take it as some tuition.

Private Placement Real Estate Step-Up in Basis: Should I Invest in My Name or the Name of My Living Trust?

Joe: We got Michael from Massachusetts. “Hello, Joe, Al, and Andi. Excellent show.” Thank you, Michael. “Keep adding value.” That’s all we do Mike, just add value.

Al: Well I would say we try. I don’t know that we do. But we give it our best effort.

Joe: We do. That’s all we can ask for. “I’m thinking of investing in a private placement real estate opportunity with no exit date. Should I invest in the name or- in my name-” I’m sorry. “Or through my living trust? In my mid-50s, married, with 4 grown children. My question is, do I forfeit the step-up in basis by investing through my trust? Thank you.” You know what’s funny about some of these questions we get Al, is that we ask for information and then so some people give us a ton of information that is totally irrelevant to their questions.

Al: True.

Joe: It’s like he’s asking should I name it in my trust or myself because he’s worried about the step-up in basis, but then I have 4 kids, 3 dogs-

Al/Joe: And an IRA.

Joe: -and I’m not married.

Al: -and I drive a Ford.

Joe: I do like to know what people drive.

Al: Yeah you do.

Joe: Because when they say I’m driving to work, I listen to you guys when I’m driving to work. I just want to visualize myself in the back seat of the car telling them about private placement.

Al: Got it. And you’re watching them listening to you.

Joe: Yes. Yes.

Al: Got it. That’s what you wanna do.

Joe: That’s my visualization.

Andi: So why are you in the backseat instead of in the passenger seat?

Al: Because he likes to be chauffeured.

Joe: I like to- yes.

Andi: Makes sense.

Joe: Social distancing.

Al: Yeah, right. With mask. So anyway, put the investment in the name of your living trust.

Joe: Yes.

Al: Because if you pass away then that avoids probate which is very important because probate essentially- there’s costs of probate and it becomes a matter of public record. And it takes longer to transfer assets to your heirs so that’s what the living trust helps avoid. And that step-up in basis- there is no difference whether it’s in living trust or not. The only time there is a difference Joe, is when there’s an AB provision in a living trust.

Joe: Well if it’s irrevocable.

Al: Well right. Which becomes irrevocable if husband or wife passes on an A/B split.

Joe: So let’s say a living trust has an AB provision in the living trust. And so Michael here passes and then those real estate investments that are named in his living trust at his passing goes into a B trust of the living trust.

Al: So he gets a step-up base in basis at that time.

Joe: At his death.

Al: But then when the spouse passes there’s not a step-up in basis, that’s when there’s an A/B provision. So in most cases nowadays there’s not much need to have an AB provision unless you’ve got second marriage and different beneficiaries. So for the most part you don’t want an AB trust. And so if it’s a living trust all that happens is the step-up in basis occurs on the second person’s passing; it actually occurs in the first person’s passing. In a community property state, you get a full step-up in basis and in a non-community property state you get a 50% step-up in basis on the first spouse’s passing and then a complete basis on the second one.

Joe: You know how many times you’ve said ‘basis’ in the last 30 seconds?

Al: Lots. And I’m having trouble with my front teeth and I can’t even say the word. And I’m listening to myself say ‘basis’. It’s like- oh man this- I gotta get this tooth fixed. It’s bad.

Joe: Gotta fix it.

I’ve put some estate planning resources in the podcast show notes, including the YMYW TV episode on Getting Your Estate Plan in order – did I mention that season 6 of YMYW TV begins this week? – and also our Estate Plan Organizer from the podcast show notes so your loved ones have all the information they need in the event something happens to you. It’s divided into fourteen sections, ranging from the names and contact information of your advisors, to your account details, insurance policies, and final wishes. Collect ALL the relevant information, put it in the organizer, tell your loved ones where to find it or make sure they have a copy, and don’t forget to update it regularly with any changes. Get the Estate Plan Organizer and watch YMYW TV in the podcast show notes at YourMoneyYourWealth.com. Just click the link in the description of today’s episode in your podcast app.

Followup: Coronavirus-Related Distribution Roth Conversion

Joe: We got David from Allentown writes us back. “Hey Joe, Al, Andi. This is David from Allentown, one more time.” Remember we were talking about David from Allentown?

Al: I do.

Joe: You were gonna be the president of Allentown

Al: I’m still thinking about it.

Joe: Still thinking about moving to PA.

Al: If it were Allentown, Hawaii, I would be there.

Joe: He goes “My initial question was presented on show 278. But Joe and Al wished I had provided more information. The answer they gave me went into a direction I was not expecting. So I’d like to try this again.” I wonder what direction we took him in.

Al: I guess the wrong direction.

Joe: He’s like what the hell are these guys talking about?

Al: This isn’t what I asked.

Joe: This is not what I asked. It’s like a kid asking for something for Christmas and then they get something else and they get all pissed off-

Al: You gotta be very specific with us. We may take it any direction we feel like.

Joe:  I’m going to try this again. Hopefully, you guys get your head out of your ass.

Al: Actually he said “So I would like to try this -gain.”  You put an ‘a’ into it.

Joe: I did.

Al: Did a little editing on the spot.

Joe: I got it. Yes. I saw that. I was quick.

Al: It was, yeah.

Joe: “I hope I provide the right information this time. Little background: 45, single-” All right David in Allentown.

Al: Now we know, single.

Joe: “I’m not planning on retiring until age 70 plus. I’m in the 37% plus tax bracket with an income short of $1,000,000 a year.” Come on David.

Al: Look at that. Right?

Joe: He’s killing it.

Andi: I think that’s what he hadn’t told you specifically last time.

Joe: Yeah that probably helps.

Al: What his income was.

Joe: You’re making $1,000,000 versus $50,000, our advice might be a little bit different.

Al: Could be different, you’re right.

Joe: Just a smidge.

Al: Well he did say it was in the 37% bracket before. I remember that.

Joe: Maybe we were like-

Andi: Oh, did he say he was ‘deep in a high bracket’?

Joe: Oh yeah.

Al: So that wasn’t specific enough. We need to know the figures.  Seven figures or-?

Joe: He’s modest but not that modest.

Al: Because he came right back. Guys, I make $1,000,000 a year.  Come one.

Joe. Can I get you to please put this on the next episode? My girlfriend, she’ll be listening.

Al: She wasn’t sure what that meant.

Joe: Yeah right. You know when I was telling her ‘hey they’re talking about me, honey.’ She’s like well ‘I don’t understand what the 37% tax bracket is’. So now he’s got to come back and say ‘hey I make $1,000,000 a year.’

Al: I make $1,000,000.

Joe: This is David from Allentown.

Al: Wonder how many Davids in Allentown make $1,000,000. Probably narrow it down.

Joe: We can narrow that down. Well, she can. A year. “I have a 403(b) and a 457 with about $250,000 dollars each, I contribute the max every year. I also have a deferred compensation plan with about $75,000; an after-tax brokerage account of about $200,000 to which I only add about $7000 hours a month; I have a traditional IRA with zero balance that I used to do Backdoor IRA conversions, that has $15,000 in it. I started to do those after I learned that on your show 3 years ago. I qualify for a CRD. I do not need the money but I would like to take the $100,000 out of the 403(b) where the investment options are very limited. I was planning to leave the money for a month or so in a bank account and then put- and then pay myself back the full amount into a traditional IRA avoiding any taxes at this time. Is this strategy going to affect the ability to do a Backdoor conversion in 2021?” Yeah. David, I thought we answered that. We’ll do it again. “Is there anything else I should be doing for tax diversification? My retirement plan does not allow for after-tax contributions or in-service distribution. Thanks again for all you do. P.S. or PD.” What’s PD?

Al: Police Department?

Joe: “I did fire my financial advisor. He was just collecting the fees from insurance products.” Perfect. PD.

Al: Post– something.

Andi: I think it’s a misspelling, guys.

Joe: Really? It’s not something new?

Al: Well the ‘D’ is next to the ‘S’ on the keyboard, so probably-

Joe: Got it. Okay so CRD, coronavirus related distribution- he qualifies for a CRD so he can take the money out of the CRD- I mean take the money out of his retirement account. He wants to take it out of his 403(b)-

Al: To get better investments.

Joe: Yes. So you can absolutely take the money out and put it into a brokerage account and then he wants to pay himself back. He has 3 years to pay himself back and that would avoid any type of taxes that he would have to pay at the 37% federal rate.

Al: So if he does it the way he’s saying, yeah it does screw up his Backdoor Roth. Because he’d have money in an IRA. So if you wait to put it back in year 3, the Backdoor Roths still work. The problem with that is you still have to pay 1/3 of the tax this year, 1/3 of the tax next year. Then you have to file amended returns to get the money back. So it’s a little tricky.

Joe: I still think our initial recommendation or idea for David is the way to go. And now it’s coming back to me which I think is what we said, is to do the CRD and put a half in the brokerage account and the half in the IRA; and convert the other half and use that money to pay the taxes. Now do some calculations for me. Because he’s 45 years old. He’s making $1,000,000 year and he’s maxing out his 403(b) and 457 so he’s got $250,000 in each. So he’s got $500,000 in retirement accounts, saving $40,000 into those accounts. So $500,000 present value, $40,000. Oh, he’s saving into the Roth too at $6000. So call it $4600. Plus he’s also saving $70,000, $84,000 a year?

Al: So $4600 and what’d you say?

Joe: $84,000?

Al: $84,000. That’s $130,000.

Joe: So break that out again.

Al: So we’re doing-

Joe: I want to go his retirement accounts to age 70.

Al: 25 years.

Joe: But let’s just do the retirement accounts first.

Al: OK.

Joe: So he’s got $500,000. $20,000- or $40,000 a year; 25 years; 7%.

Al: $40,000 year 7%. 25 years. It’s $5,200,000.

Joe: $5,200,000 in retirement accounts. He’s going to put $7000 a month into a brokerage account. He’s gonna do that for the next 25 years. And he’s got $200,000 there.

Al: We’ll go with that. That’s $84,000. We’ll start with $200,000. That would be $6,400,000.

Joe: So then he’s got $6,400,000 in brokerage accounts. He’s got $15,000 in a Roth and he’s going to put $6000 a year into the Roth.

Al: $15,000; $6000; that would be, call it $500,000.

Joe: So he’s got $5,000,000 in a retirement account; he’s got $6,000,000 outside of the retirement account; in a Roth account he’s got $500,000. So the diversification is good from brokerage to tax-deferred. But the Roth is very limited. If he’s at 45, he’s already making $1,000,000 a year and he wants to work until age 70. I would imagine, he’s never going to qualify for a Roth as a contribution, just because the income. I’m assuming he’s probably a doc because 403(b), 457 plans. Maybe, maybe not. But I would do the conversion. At 45 years old, I’d bite the bullet at 37% because it’s going to be 39.6% and it could be a lot higher. You’re gonna have millions inside of a retirement account plus not to mention the deferred comp that he’s got that he’s putting in another $75,000 in. So he’s going to have a ton of money that is deferred. That’s going to be taxed at ordinary income in the future. If you believe that tax rates are going to go up; yes, you can take the CRD and put it into a brokerage account and pay the tax on it if you choose to. That’s 1/3, 1/3, 1/3, over the next 3 years. That would break out the tax that will give you the diversification that you need or you can pay yourself back and put it into an IRA. But you’re not going to be able to do Backdoor Roth IRAs of only $6000 because it’s the pro-rata rule. Because every $6000 that you put in you’re going to have $106,000 of an IRA; $6000 into $100,000 is what? some-odd 6%.

Al: I was seeing if you could figure it out.

Joe: I needed my calculator real quick. But $6106, so it’s a little- He’s only going to be able to- if he does a Backdoor Roth, he can still do it, but only 5%  or 6% of it is gonna be tax-free. The other is going to be taxed at 37%. So he’s going to be stuck in that bracket or keep the money into the 403(b) that he doesn’t like the funds. He’s going to have very little money in Roth IRAs because the income that he makes. He’s 45, so he’s super young. He’s going to work for another 25 some-odd years. I would pay the tax now. I would get it- I would do a CRD. I would repay $50,000 into the IRA. I would have the other $50,000 into a brokerage account. So that gives you more money you can convert because he doesn’t have access to an in-service withdrawal or distribution. If he works for the same company or maybe the same hospital wherever he works for, he’s going to be stuck with that account forever. He can’t take the money out until he’s- it’s too late.

Al: I agree with all that. But I’m going to be David for second and ask you a follow-up question. Joe, I’m in the highest tax bracket, it’s going to be a lot of tax. What’s my break-even point? How many years to break even?

Joe: You break-even day one, in a sense.

Al: Explain that. Because people don’t get that.

Joe: Because- well he’s at 37% tax bracket. But his IRA is every dollar that comes out of the IRA- especially is we just did a forecast. Who knows? He said to us he’s going to work until 70. And with the amount of money that he makes and the amount of money that he’s saving, plus he’s single. And don’t get married now David.

Al: -without a prenup.

Joe: I’m kidding. You know Dave and I are similar in age.

Andi: I thought you were gonna say in income.

Joe: Oh no. David kills me in income. I just do this podcast. It’ll take me 1,000,000 years to make that. Big Al, on the other hand, very similar in income. But no, you have to look at the net after-tax of these retirement accounts and it’s going to be a giant account at some point. So pay the tax now, get it off the balance sheet and then have 25 years of tax-free growth.

Al: Because people forget. So the $6,000,000 that we just calculated-

Joe: -it’s not $6,000,000.

Al: No. Because you got to pay tax to pull that out. So it’s really only worth $4,000,000 or $3,000,000, whatever your tax rate is. So you have to look at it that way.

Joe: Look at the after-tax effect. David, I know we went on a little goose chase there again. Hopefully, this helps. So thanks for the follow-up. And keep ’em comin’ folks.

Will My Mother-in-Law Get a Stimulus Check?

Joe: We got Bob writes in from San Diego. He goes “My 88-year-old mother-in-law is having trouble finding out if she qualifies and when her check will come.”

Al: Stimulus probably.

Joe: Yeah. What check is he referring to?

Al: First Social Security check? Finally remembered to file.

Joe: “She did not file taxes in 2018 or 2019 or 2020. She has no income other than Social Security and California SSDI which totals less than $1000 a month. Her Social Security and California Social Security Disability goes directly into her bank account. IRS website says she should get a check but no timeline. Can you comment on if she qualifies and when it may come for her? Do you know of any ways to contact the IRS to find out if she qualifies and when it may come for her?” Oh Bob, what a good son you are looking out for mom.

Al/Andi: Mother-in-law.

Joe: Mother-in-law. So he’s referring to the rebates, the recovery rebates.

Al: The $1200 check per person which it sounds like she would qualify for.

Joe: And I don’t know what the hierarchy is.

Al: I don’t either but what I’ve read is you don’t necessarily have to file a return as long as you’re receiving Social Security. And if it’s going directly to her bank that should be the same way it comes to her. I would actually go back in her last couple of bank statements; she may have already got it.

Joe: She could have.

Al: And you don’t know it. So that’s one thing but-

Joe: Because it lets say it’s $1200 and her Social Security is $1000 so it’s very close. So maybe-

Al: That would be my first thought is maybe she got it and you didn’t realize it, but let’s say she didn’t get it. We’ll answer his question. You go to the IRS website, IRS.gov, and it’s a button that’s like Check My Payment or something like that. You click on that. You put in a little bit of information on your mother-in-law, like her name, Social Security number. You may want to do it with her, to get her permission.

Joe: Yes, privacy Al.

Al: That’s right. But on there it’ll tell you what the status is and when it’s due or whether it was already paid.

Joe: I don’t know. I could be making this up.

Al: You could.

Joe: But I was listening to a-

Al: -podcast? Was that Your Money, Your Wealth®?

Joe: No. I would never listen to that garbage. There was – is it possible that someone received the stimulus check in a debit card?

Al: I have not heard of that.

Joe: Okay.

Andi: My mother gets her Social Security on the debit card and she was expecting that, and she ended up getting a check in the mail.

Joe: Huh.

Andi: Because she was told however it is that you receive your Social Security, that is also how you will receive your stimulus check. And that’s not what happened for her.

Joe: I don’t know the answer. Well, I listened to it too. Here’s what I’m thinking. I was like oh that’s interesting. But I wasn’t sure if they were talking about the stimulus rebate checks. And I was like I should talk about that on the show. And I never went back and listened.

Al: I forget it. Oh well.

Joe: That’s my research. That’s my crack preparation.

Al: That’s pretty good. Kind of overheard something while I was on the elevator. What do they call that, the monitor in the elevator where we get our news?

Joe: That’s what everyone else does to us. They listen to like a small-

Al: And they say what about this? So, first of all, they took it completely out of context and secondly they substitute their own words which makes it totally different. And then we’re trying to figure out- mmmm, never heard of that.

Andi: So Joe, you need to write in a question to that podcast that you were listening to and ask them.

Joe: Nah, I maybe I’ll re-listen to it at some point.

Al: You know one of my Facebook friends just posted a picture of the stimulus check. It’s like I guess had nothing better to do. And it was $18 dollars. So for those in the know like our listeners, if you got a stimulus check for $18 dollars, you make a big pile of money every year.

Joe: Right, you make $200,000 a year.

Al: So you’re bragging how much you make by how small your stimulus check is.

Joe: So that’s the guys you hang out with Al. Those are your boys.

Al: These are my boys. We got nothing better to do.

Andi: Big friends with big wallets.

Joe:  Post a picture of yours, zero. Eat on that.

Al: It’s like where’s Al’s check? No check.

How Do I Suspend My 2020 RMD?

Joe: Clovis, what’s his name?

Andi: No, it’s Marion from Clovis.

Al: Clovis is a town. Near Fresno by the way.

Joe: Marion from Clovis, California. Marion writes “It’s my understanding that RMDs are not required during 2020. Is this correct?”

Al: Yes.

Joe: It is correct Marion. “Is this automatic or must I contact 457(b) administrator and request no RMDs this year? Still like podcasts, and listen to all of them.” Still- she still- or he still likes them. Marion still likes them.

Al: Marion? Yeah. That’s amazing. Someone still likes them. After listening for a while.

Joe: You will have to contact your 457(b) administrator because I’m guessing Marion has maybe a monthly payment.

Al: Probably like an auto maybe auto withdrawal.

Joe: You’re going to have to contact them to say stop the distribution coming to me. You can pay those back if you’ve already received them. Unless you received a payment in January. So that’s the only one that you will not be able to pay back. But if you’ve got one thereafter you will still be able to pay those back using the 60-day rollover rule which they expanded.

Al: Yeah but if you’ve got a payment every month you can only do it with one of the payments; not all of them.

Joe: Because you can only do one 60-day rollover.

Al: So you’re kind of stuck there. Unless you qualify for the CRD, coronavirus distribution.


It’s worth noting that late last month the IRS once again changed the rules on 2020 RMDs – if you’ve already taken your RMD for 2020 but want to put it back, you can now do so until August 31, 2020. Check the podcast show notes at YourMoneyYourWealth.com for the link to that IRS notice for more info.

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Pure Financial Advisors is a registered investment advisor. This show does not intend to provide personalized investment advice through this broadcast and does not represent that the securities or services discussed are suitable for any investor. Investors are advised not to rely on any information contained in the broadcast in the process of making a full and informed investment decision.