Published On
December 2, 2017

9 Retirement Tips If You Don’t Plan To Retire

Retirement planning tips and benefits when you don’t plan to retire. Plus, how much should you have saved for retirement at different stages of life, how much has the average millennial saved, and the Roth 5 year clock: should you get married so you can take advantage of the fact that your new spouse’s Roth is already over 5 years old? And, should you really be asking marriage advice of Joe and Big Al?

Show Notes


Some people want to retire as soon as humanly possible, some have to keep working, and some people really just want to stay on the job. Today on Your Money, Your Wealth, some tips, considerations and benefits of planning for retirement when you don’t plan to retire. Plus, how much should you have saved for retirement at different stages of life, how much has the average millennial saved, and what’s the deal with the 5 year clock on a Roth IRA – should you get married so you can take advantage of the fact that your new spouse’s Roth is already over 5 years old? And, should you really be asking marriage advice of Joe and Big Al? Here they are now, Joe Anderson CFP, and Big Al Clopine, CPA.

:40 – How Much Money the Average American Has in Savings

AC: I thought it would be kind of fun to talk about how much money the average millennial has saved. I’ll tell you right off the bat, this is GoBankingRates surveyed in 2017, 57% of all Americans, not just millennials, all Americans, have less than $1,000 in their savings account. 39% have no savings at all.

JA: Say that again. Yes.

AC: So 57% have less than 1000 bucks. So let’s call it 60%. And of that, about 40% of the 60 is no savings. So I’ll put it this way. In round numbers, 40% have no savings at all, and then 20% have less than $1,000. So then it’s like well, how about the millennials. Maybe they’re doing better? Of course, they’re younger, they’ve had less time to save. But according to this article on CNBC by Kathleen Elkins, the young people are no exception. So she looked at young millennials and then older millennials. So young millennials are between age 18 and 24. And here, she says 67% have less than a thousand bucks in savings. To me, that doesn’t surprise me.

JA: When I was 24 I had less than a thousand bucks.

AC: Ryan my son’s 24, he’s got less than a thousand bucks. (laughs) You don’t have a lot of money then. Paying off student loans and all kinds of stuff. But at any rate, interestingly enough though, I’ll give you a couple of stats here, let’s see, 46% have zero. 13% have $10,000 or more. So that’s pretty good for that age. But then what about older millennials? So that’s 25 through 34. And it’s a little better, but Joe, not much. So we’ve got 41% that have nothing. We’ve got another 20% that have less than a thousand. And at the other end of the spectrum, we’ve got only 20% that have $10,000 or more. So there’s work to be done.

JA: Yeah, it’s tough. if you take a look at what people in their 50s and 60s have. What’s a median? $14,500? I forget where we got that stat from. So we have no source backing that. (laughs)

AC: I think it was Fidelity if I’m not mistaken. And I think it’s – don’t quote me exactly, but it’s in this range, that the average 401(k) balance is – I thought it was more like ten thousand bucks.

JA: Well it’s not the average, it’s the median. So whatever’s in the middle.

AC: The median of all people, but that includes people that don’t have a 401(k). So if you take those out, you take people that don’t have a 401(k), then the median is like $97,000. That was the latest that came out of Fidelity. I think a few months ago, something like that.

JA: That’s not the average? Explain what’s the difference between average and median, please?

AC: (laughs) Okay. The average is by taking all the totals of all the accounts and dividing by the number of participants. And so you have certain accounts that have a really high balance that sort of skew the average. The median just says half the people have more and half the people have less.

JA: So they take a look and if you could think of all the people in a line. So the people with the millions are on one side, the people with the zero are on the other side. And if there are 100 people, then they look at the 50th person, and then they say how much does this person have. Because they got more than half, but less than the other half. That was $14,500.

AC: Yeah, and it’s widely thought that the median is a better gauge because the averages can really skew it. You’ve got some people, like Mitt Romney’s 401(k), where he’s got multi-millions. So you got his $100 million, you got two other people with zero. So the average is $33 million. The median is zero because there’s one above that, one below that. So it’s a little bit more accurate representation. That’s the idea. And Joe, to kind of give you some guidelines here, based upon age, and this came out of Fidelity, just to give you an idea, they’re recommending by age 30 you should have 1 times your salary saved, 35, two times your salary. 40, three times your salary, by 45 have four times your salary.

JA: Is this just liquid or does this include the home equity as well? What do these numbers represent? So I’m 40 years old. I make $100,000 a year, so I should have $300,000. Is that my net worth, or is that retirement assets? Is that liquid assets?

AC: That would be liquid assets, so that wouldn’t necessarily include your home because you have to have a place to live anyway. Although, a lot of people in California, their home becomes a retirement asset because they’ve got a lot of equity in it. But just as a guideline, and I don’t care whether it’s in retirement accounts, or outside of retirement accounts, or a combination. That’s what’s being recommended by age 55, six times, age 60, seven times, and age 65, eight times. Although Fidelity, this is an older source, because Fidelity updated that and said at 65 you had to have about 10 times your salary. And the reason they’re saying that is because, when you think about how much you can actually withdrawal from a portfolio, let’s say you make $100,000 a year, and at age 65, ten times would be a million. The $1 million, as a quick rule of thumb, you can take about 4% of that $1 million. That’s $40,000. And then you figure, if I was making $100,000, I’d probably have around $30,000 in Social Security, so that’s $70,000, and maybe I’ll spend less in retirement. A lot of times people spend equal or more. But let’s just say, if you can spend a little bit less in retirement, you at least have some quality of life. So that’s kind of where this 10 times comes from.

JA: Yeah. Because I think with a lot of those different calculators online, they assume 75% of what you’re currently spending in retirement. So if I’m spending $100,000 today, well in retirement you’ll spend $75,000. And then they can kind of do this quick math. It’s a good rule of thumb.

AC: Of course that’s all it is.

JA: Right. Sometimes people will go into retirement with maybe $300,000 saved, and they’re spending 100 grand.

AC: Yeah, and they’ve never done that simple math.

JA: Right, because $300,000 is a lot of money, but if you don’t understand the arithmetic, you’re going to blow yourself up fairly quickly.

AC: Yeah, so if that’s you. $300,000 times 4%, so that’s $12,000. Social Security is $30,000, so that’s $42,000. That’s about what you can spend. And if you’re spending $150,000 a year right now, it’s not going to add up.

JA: It’s not gonna add up at all. So I think it helps to some degree. But you want to make sure that you pinpoint this a little bit more. I was teaching at Southwest College this week, and a gentleman – and by the way too, this guy, really good guy, I set up class, it’s a two-part class, you get two nights. You know this, right?

AC: I do.

JA: Are you sure? (laughs)

AC: I’ll confirm that. Have I been to your class?

JA: No! Never. Never. (laughs) It’s been over 10 years.

AC: I think I went to the first one.

JA: Yeah maybe you went to USD early on. So anyway, I’m setting up, just walk in, and then he’s sitting in the front, and he’s like, “hey, does Big Al ever come out?” I was like, Big Al? He’s probably got three beers in him by now on the couch.

AC: No, I’ve got family, I’ve got kids, family responsibilities.

JA: But anyway, I think he has to be a fan of the show to ask about you. Maybe he was your neighbor. (laughs) So we were getting into some tax planning. We talked about Roth contributions and conversions, and tax diversification of assets and so on. So the next class he’s like, “online on these calculators, it’s kind of telling me that it may or may not make sense,” and I was like, “well how many inputs did you put in the calculator?” He’s like, “I think they just asked for like three.” And I was like, “well that’s the problem. Your age, how much money.” You’ve got to dive in a little bit deeper to kind of figure this stuff out versus some of the calculators that are online.

AC: And sometimes the retirement calculators, they’re OK but the Roth ones, I agree. There’s not much value in that.

JA: They’re awful.

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Time now for Big Al’s List: Every week, Big Al Clopine scours the media to find the best tips, do’s and don’ts, mistakes, myths and advice to improve your overall financial picture – in handy bullet-point format. This week, 9 Tips to Plan For Retirement If You Don’t Plan To Retire

10:28: Big Al’s List: 9 Tips for Retirement If You Don’t Plan To Retire

AC: So Joseph, this is an article I found in MarketWatch, written by Ken Tacchino. Ken Tacchino of Widener University.

JA: Okay. Never heard of it.

AC: Me neither but I liked the article and it’s interesting.

JA: Did our crack research team get you with the title?

AC: Yeah. Nine Tips to Plan for Retirement if You Don’t Plan to Retire. Let’s think about that. Nine tips to plan for retirement if you don’t plan to retire. So think about most people or many people I should say. Some people are counting the days until retirement, can’t wait.  Some people have to keep working just because they haven’t saved enough. But some people actually choose to continue working, even though they’re financially able to retire because they like their jobs. They’re fulfilled. It’s like why try to get fulfillment somewhere else and reinvent yourself if you’re already enjoying your life? So this article is written for you guys.

JA: That was a great intro by the way. Well thought out.

AC: Wonderful. Big time. I just read the first paragraph. Anyway, here’s a stat, Joe. In the second quarter of 2017, 19% of those age 70 to 74 were still in the workforce. 19%, now that’s a lot higher than other things that we’ve read and seen. And unfortunately, this article does not give us a source. I’m just going to take his word for it.

JA: I wonder… I guess we could slice and dice numbers until we’re blue in the face but 20%. How many out of that 20% are people that need to work versus want to work?

AC: Yeah, and I don’t know. But here’s the comparison. So 19% in 2017. In 1994 it was 11%. So we’re up, more people are working age 70 to 74. So if that’s you. you’re working in your 70s because you want to work.  What are some of the planning opportunities for you? Maybe you don’t even ever want to retire. We’ve heard people say that, especially if you’re a business owner, and you like what you’re doing. It’s like I don’t ever plan to retire.

JA: Yeah I’m not doing anything, I’ve got a bunch of employees, I just collect checks!

AC: Yeah, I like that. I’m the CEO. (laughs) So here’s one thing you might consider is you may be able to avoid required minimum distributions, because for most people, at 70 and a half, you have to start taking money out of your 401(k).

JA: That is why I’m going to continue to work. To avoid required minimum distributions. (laughs)

AC: Well no, but in context. These are people that want to work because they are getting fulfillment out of it. And here’s things that you can do if you’re in that situation, and one is you can avoid required minimum distributions in your company’s 401(k). As long as you’re not a 5% owner or more, so in other words, it can’t be your sole company. If you’re an employee of a company and you own less than 5% of that company, your company 401(k), you do not have to take a required minimum distribution.

JA: So they look at that ownership exclusion, I guess, for lack of a better word, on your RBD, on your required beginning date. Which, we’ve found out the hard way, Alan and I, is that it’s going to be under an ERISA plan. So if you’re a sole proprietor and you have a solo 401(k), and you’re still working in your 70s, and you roll all your money into the solo 401(k)s because, “hey, it’s a 401(k) plan, I don’t have to take a required distribution, because I’m an active participant in that plan,” But you’re over 5% owner of that. Because you’re a 100% owner of it. But what I read is that they look at your required beginning date. Your required beginning date starts April 1st the year after you turn 70 and a half.

AC: Normally.

JA: Normally… Well no, always. Unless I’m still an active participant in the plan.

AC: That’s where you’re going. OK.

JA: So let’s say April 2nd, I’m not a 5% owner of the plan or things like that. You could – hypothetically – this is really grey, and it’s probably tax fraud. But people were opening up a 401(k) plan then and then rolling their money in because at that point I was not a 5% owner at my required beginning date, it happened afterward. Anyway.

AC: A little semantics there – you went into the weeds on that one. (laughs)

JA: I did. I really want to show I’m the smartest guy in the room. (laughs)

AC: That’s why I respect you. Anyway. Couple more things on that are, if you have an IRA, you still have to take the required minimum distribution. Or if you have another 401(k) from an older employer, you still have to take a required minimum distribution, so if your current 401(k) allows you to roll in older, other assets from other plans, including your IRA, you might want to go ahead and do that. So you can avoid the RMD.

JA: But you don’t ultimately avoid it forever. As soon as you retire, then you have your required distribution.

AC: Right, you just defer it.

JA: You defer your RMD until you decide to separate service.

AC: And let’s say you retire at age 79. So the following year, what is it, April 1st of the year after you retire? Is that what you just said.

JA: Yeah but then you would have to do two. You would still have to satisfy the RMD the year that you retired. And then those would be pretty large.

AC: Because now you gotta do the table as a 79-year-old and 80-year-olds, you’re going to have a higher percentage coming out than as a 70 and a half-year-old.  In other cases Joe, you may be able to take retirement distributions while working. Like if you have some extra expenses, and maybe you are in a low enough tax bracket. Of course, we know that when you’re over 59 and a half, you can take distributions without the 10% penalty. You will pay taxes on them. But even better than that is, if you’re in a low-income tax bracket and you’re still working, why not do some Roth conversions? Fill up those lower tax brackets, so that eventually when you do retire, you won’t have to take the required minimum distribution from the Roth, because there is none.

JA: If it’s in a Roth IRA. When it comes to distribution planning there are so many things that you have to look at, because now you’ve got the Roth 401(k). So Roth 401(k)s have required minimum distributions, the Roth IRA does not have required minimum distributions. And then they’re going to take a look at when you start taking distributions from the 401(k), you have pretax dollars because you’ve maybe contributed to them, you have a match, and then you’ve got Roth dollars. So just be careful when you start taking distributions. If you have after tax, post-tax, Roth accounts, pre-tax. Just understand how to segregate all that stuff.

AC: Yeah. Here’s number three, Joe is you may be able to keep making Roth IRA contributions because you’re working. You have earned income. And right now, if you’re single, for 2017, you can have up to $118,000 of income, adjusted gross income, and still, make a full $6,500 Roth IRA contribution. And once you get to $133,000, then you can’t make any. And then there’s that phase-out period. And if you’re married, it’s from $186,000 to $196,000. So if you’re able to do a Roth contribution, and you have the money to do it, why not do it? Because all future growth and income and principal in that Roth is tax-free. And don’t forget, your spouse, even if they’re not working, they can do a spousal Roth IRA contribution. So that could be $6,500 plus $6,500, $13,000 each and every year that you get into a Roth IRA if you qualify.

JA: Yeah. That’s key, that’s missed all the time. So IRAs, you’re right, 70 and a half. But Roth IRAs, there is no age limitations. So if you’re continuing to have earned income, might as well. If you can afford to.

AC: Yeah, if you can afford to, you may be able to take Social Security without losing benefits, and a lot of people feel like when they’re working, they’re not allowed to take Social Security without losing benefits. Here’s the rule. Just so you know. Once you reach full retirement age, which this year is 66 years and two months, then you can take your Social Security. It doesn’t matter how much money you make. Then you get every dollar that is coming your way. Now if you’re younger than full retirement age, there are all these formulas, Joe, you get to keep a certain amount of benefits, but you may have to pay some back.

JA: Well how it works is that, if you take your retirement benefit early – let’s say you take it at 62 and two months – you’re going to receive a haircut. Roughly 25% haircut on the benefit. So your benefit is $1,000, it’s going to go to $750. But if you’re working, if you make more than $16-$17,000, then every $2 that you earn over that, they’re going to take a dollar back from your Social Security benefit. It’s not like they’re stealing it from you, they’re just going to say that you never really claimed it. So your benefit would increase, so you don’t get that 25% permanent haircut. It’s going to be something less than that. So taking your benefit early there are just two of those phase-outs. There’s an income threshold that you have to consider. And then also, you’re going to receive a permanent haircut on that benefit just because you’re getting it early. But let’s say you take it at full retirement age and you’re still working in your 70s. The benefit will never go down. It won’t hurt you. It will only help you because they take a look at 35 years of work history. And if I’m still working in my 70s, I’d better be making some money. (laughs) It’s like, “man, I can’t stop working because the damn income is so good!” So if I’m making really good income, it’s probably better income now than I was making 35 years ago. So they’re always going to replace the better income year with a lower income year, so they recalculate your benefit every year so your benefit will increase. It will never go down. It’s  like, “oh, I had a lower year, I had 35 years of really good income, and I’m still working, but I’m only working part-time and I’m only making $30,000 a year, while I was making $200,000. Is my benefit going to go down because they take an average?” No, they take an average of the 35 highest years.

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21:03 – Big Al’s List: 9 Tips For Retirement If You Don’t Plan To Retire

JA: Getting into your list. What number are we on?

AC: Oh, we’ve only done four, got five more to go. (laughs) Nine tips to plan for retirement if you don’t plan to retire. And so these are for folks that are working because they want to work, but yet, there are some cool planning things that they can do. One is that if you’re in a retirement plan still, like a 401(k) plan at your work, you can still contribute to it in most cases, and your employer will probably have a match, or likely have a match, so you will still get retirement contributions. The only exception is if you’re in a defined benefit plan and you’ve already capped out on your benefits, maybe you don’t get anything there. But yeah, don’t forget that one. But Joe, I want to go back to Social Security. We were talking about that at the break. And that is, here’s another real huge benefit of working until at least age 70. And that is, if you’ve got the income to cover your lifestyle, you can afford to wait to collect your Social Security to age 70. And when you do that, your benefit will be a lot higher. In fact, from full retirement age, which right now is 66 years and two months, each and every year thereafter till age 70, your benefit grows by 8%. And that means, simple calculation, if you would have gotten $10,000 of benefits every year you wait, now it’s $10,800. Now it’s $11,600 and so forth. So hat’s a pretty good benefit because Social Security is one of those things that is there as long as you live, it doesn’t go away.

JA: Right. It’s permanent insurance if you think about it. Or longevity insurance is a better word. So yeah, people are going so back and forth on this lately. Do you take it now, is it going to be there, it’s getting political, means testing, and I don’t trust it, I want to take it. I guess that’s always been going on. But I think there’s so much more information about claiming strategies than ever before, because the last, I don’t know, I guess five years, there are so many more baby boomers that are at that age to collect that were searching for information, and then it kind of flooded the Internet. And so, type in Social Security on the Internet, you’re going to get five hundred thousand opinions on what is the best way to do it. So it’s very specific I think, to someone’s overall situation. There are rules of thumb that you want to take a look at. I think Al and I are big believers in trying to push it on as long as you can, just because of the fact that you’ll never outlive it. You want to get that base of guaranteed fixed income as large as you can, and we’re not huge believers of purchasing insurance products. So if the federal government is giving you a little bit bigger bone, I think it’s a pretty good idea to take it.

AC: Yeah and it’s tax-favored, in California anyway, it’s tax-free in California. And on the federal return, worst case, 15% of its tax-free. You pay tax on 85% of the benefit. Number seven, Joe, is you may want to recalculate the amount you’ll need to save for retirement since you will be spending less time in retirement. So it’s like, sometimes if you retire at age 60, it’s like you’ve got to be more careful with your money. Now you retire at age 75, it’s like, spend money.

JA: Yeah that’s right. And I’ve seen studies now too is that the people that are working later actually are living longer.

AC: And I was going to say that too, that’s the flip side to that, which is, don’t go too crazy. Because it’s those that are working and engaged and passionate about what they’re doing, they will likely live longer, because they had a reason to live longer.

JA: Sure. Let’s say you retired early and then all of a sudden you got bored, now you’re a couch drunk. (laughs) Your life expectancy… The fact is there’s a lot of you out there, don’t kid yourself. I know who you are. You’re like, “damn, it’s noon, I’m a little buzzed.” (laughs)

AC: Right. Number 8, Joe, is you may want to ignore the 4% withdrawal strategy.

JA: Ignore it completely? Are you supposed to take 6%? Something like that?

AC: 5%, 6%, 7% even?

JA: I would be very cautious with that. Again, I think the 4% rule is to help people identify a target nest egg. Not necessarily a distribution strategy. Taking money out of retirement accounts, you’ve got to get a little bit more sophisticated in my opinion. Al and I’ve been doing this a couple of days. And if you’re just going to go into retirement and say, “what the hell, I’m just going to pull 4% out, because that’s what I heard on the radio.” You might blow yourself up. The 4% rule is a good tool to work backward, to figure out, “hey, how much do I need in a nest egg.” I think that’s the only way that you should use that because we see people that retire with a lot less nest egg than they should have, and they’re taking way too much money out of it because they don’t really understand. “I have $100,000, that’s a lot of money.” So they’re taking $10,000 out a year. OK. Well, that might be a little bit too much. So if you want to take $10,000 out per year, well, you do the math. Well 4% into $10,000 is what. So it’s not $100,000, it’s $400,000. I think. No.

AC: You lost me on your example. So if you have $100,000, 4%, you can take out $4,000. Not $10,000.

JA: Correct. If I’m taking 10, people get confused. So I have $10,0000 saved. I believe I can take $10,000 out. No, you cannot take $10,000 out because you’ll blow yourself up. You could take $4,000 out, or something less or something more, depending on markets, taxes, your other fixed income, and so on. But if I’m looking at, if I need $10,000 per year, what’s 4% divided into $10,000?

AC: Well then you want, what – is that $400,000? No. It’s $250,000.

JA: 4% of $250,000 is $10,000. Yes.

AC: I finally got that.

JA: Yes. So but it’s easy to say $400,000 isn’t it? 4% into $10,000. I guarantee you. Andre, what did you think? Did you think $400,000 too? Open up a Roth IRA, dammit!

AC: He was thinking about the Roth, he wasn’t paying attention. So the last consideration, Joe, is kind of a catch-all. It’s other things you might want to consider, like if you’re still working in a job, you probably have better health insurance coverage, maybe, than Medicare, and supplemental.

JA: I doubt it. (laughs) That was a joke.

AC:  (laughs) Another one would be, you might invest your portfolio a little bit differently than someone else. And there are two different trains of thought, depending on your situation. Maybe you take less risk in your portfolio because you don’t need the money for as long, or maybe take more risk, because you don’t need the money. Depending on what your long-term goals are. Do you want to have the money around when you pass for your kids, or for charity, or for whatever you want? Or it’s like, “I’ve got enough money already. Let’s go really safe. I may not have to be very aggressive because I don’t need the money as long.” That’s the idea. And then finally, you might want to focus more on your estate plan and lifetime giving opportunities because you’re working longer, so maybe there’s a little bit more capital to be a little bit more generous.

JA: Yeah I think the older we get too, there’s a different type of planning that you look at, and I’ll wrap up with this quick story just to help someone identify maybe some planning opportunities that you want to do. There was an individual then had a pension and Social Security that covered 100% of her living expenses, she was a widow, and she had a couple of million dollars, and she’s like, “OK what do I do with these dollars? My husband took care of it. I really don’t know. I want to give a little bit to charity. I want to, of course, give to my family,” and so on, but her fixed income sources were covering most of it. She’s getting RMD’s now, she’s in her mid-70s. So some of the things that you look at to say if you forecast that out to life expectancy, this $3 million that you’ve accumulated, I don’t know, maybe over the next 15 years could double at a fairly conservative rate. So now you have $6 million. Do you want to give $6 million to your kids? Well, I don’t know, that seems like a lot. I want to give a little bit to charity. OK well, how much do you want to give to charity? Maybe 5%, 10%, 20%. What’s the number? Well, 20%. Well then you could take a present value of that, and then you could do some cool tax planning while you’re alive, and give while you’re alive. Most people love to do that, and knowing that their financial house is in order, they can give to the charities that they’re passionate about, and knowing that there’s going to be still a good sized dollar figure that will go to the family.

AC: Plus they get a tax deduction today. It’s all good.

JA: Exactly.  So it’s just a different way to look at things. Again, when you’re taking dollars out, when you’re in retirement or wealth transfer, it’s a different play, it’s a different strategy, it’s a different type of planning, then when you’re just trying to throw money at your 401(k) plan and try to get to a certain dollar figure as soon as you can.

Strategies for retirement account contributions and distributions, collecting Social Security, withdrawal rates,  estate planning and charitable giving – these are all highly personal, depending on the specifics of your situation. If you’re planning to put off retirement as long as possible, or if you want to retire as soon as possible, call 888-994-6257 or email to learn what strategies make the most sense for you in retirement – or non-retirement, as the case may be. Make sure you’re making the most of your situation – call 888-994-6257 or email That’s 888-994-7357, or

(30:26) Money Is Emotional, It Requires Discipline – Like Fitness

JA: Money is emotional.

AC: It is. We just found out about that, and I agree with that. Yeah, you have to get your mind right, I think before you start doing this and I and I think that’s probably a big miss of a lot of people. It’s almost like getting into shape you already kind of know the formula. Eat less and exercise more, get enough sleep.

JA: Yeah if you look at these workout videos, the magazines, that’s a billion, billion dollar business.

AC: It is. And it’s like, I know there’s there’s a lot to it.

JA: All you got to do is burpees. You know what I mean? You eat salads and do burpees. You don’t need to spend $50 a month.

AC: You can jog, you can get little weights for at home, you can do core exercises, planks.

JA: You don’t even need little weights.

AC: You don’t, necessarily. You can do planks, sit ups, push ups.

JA: Burpees.

AC: You do burpees?

JA: I do burpees, yeah, I do a lot of burpees. That’ll knock you out. (laughs)

AC:  I met a guy last night in our neighborhood, so he told me that he recommends this exercise routine where, the first day you do one push up, one sit up, one whatever, and then you just keep advancing, the next day you do two, and so on. But he said after each rep, so one sit up, then you do 500 jump ropes. That seems kind of extreme, you go from nothing. Maybe you tailor that up. But he said if you goof up and like at 300 your trip, you have to start over. So that’s what he does. And so he’s gotten to where like it’s like couple hours workout, and by the time he’s doing his whatever….

JA: Well yeah, you get you get a couple of months. Would you rather have a penny that compounds daily, and at the end of 30 days, or would you rather have a million dollars?

AC: Yeah. Well, I think it’s the penny.

JA: Yeah I don’t know what it is. It’s big. It’s a big number. (laughs)

AC: It’s a lot. (laughs) We came prepared today. (laughs) But you’re right, it’s incremental. It’s making changes. Because so many people fail in their diet and exercise, to kind of continue that metaphor, because they try to do too much, too quickly. It’s like, I’m not going to eat a dessert ever again. And then in three days, “well, I guess I can’t do this.” It’s like, no, plan some of that in there. It’s OK. Just make some changes.

JA: It’s so difficult. There are some people that can do it, that goes cold turkey. And all of a sudden, this is my diet, this is my regiment, and this is my exercise routine, and I’m going to stick with it. Because the first day you go to the gym? Guess what happens the next five days, you are sore as hell. You don’t want to even think about moving. And so, I’ve got to go to the gym again today? When I did it – because you’re all motivated. That first day, you’re so motivated, you’re in there, I’m going to run 10 miles, I’m going to bench press, I’m going to squat, I’m going to do my abs, I’m going to do everything. And then you blow yourself up. And then you’re done for two months. You’re like, I’m never doing this again. So you sit on the couch and eat McDonald’s.

AC: And the other thing that happens (laughs) with your diet is, yeah you’re eating McDonald’s and burritos and all this stuff, and you go OK I’m going to eat right. And next day salad, carrots, radishes.

JA: Right. You see it in the office. You see it – I’m not going to call anyone out, but I see it in the office every day of my life. One day it’s like, wow I’m on an all-kale diet. And then the next day, it’s like all of a sudden, Jack in the Box. What about the kale, there, Bubba? Yeah, kale sucks. (laughs)

AC: (laughs) Yeah, I guess the point is gradual is good. You actually can sustain it.

JA: Right. It’s all about habits, right? You’ve got to get in a good habit. And it takes time to develop that habit.

AC: Yeah. Now sometimes some life event happens, like a heart attack, and that that will motivate you.

JA: Right. You go to the doctor and all of a sudden they’re like, “hey, you’re going to get a mild case of whatever.” You’re like, “oh boy.”

AC: Right. You need to change tomorrow. Today. Right now. And so then you get the list, you go to the store, and you buy the food. And then you’re down for about a week, but then you get used to it. And that does happen.

JA: Yes sometimes, when you get some news, yes that can definitely – those are life changers. But unfortunately, we don’t have that in our finances. You go to a financial advisor, it’s not like the doctor saying what, here, you’re going to die. I might tell someone, “you know what, you will run out of money.” And then they won’t believe me.

AC: Yeah, “in 8 years.” And they go, “well…’ (laughs)

JA: “Oh, no way. Well, we can fix this.” (laughs)

AC: “But Joe, you don’t understand, we can spend less.”

JA: “Yeah, we’re not lavish.” (laughs)  It’s like, “OK, do you have three months of your expenses in cash?” “No.” OK. That’s an issue. That’s a red flag. You need to work on this. How old are you? Let’s say you’re 60. What times of your salary do you have saved in your 401(k) plan? You make $100,000, you’re 60, you have $100,000 saved. That’s one time, you should have 8 times. You’re way behind. “Well, I could catch up.” (laughs)

AC: When are you retiring?” “Next year.” (laughs)

JA: But like with our finances – for some individuals anyway, I’m not trying to cast a spell on everyone, but I’ve been doing this almost 20 years, and we’ve seen thousands. So I have a little bit of experience in this field.

AC: Well, it could happen, you could have a house in a hurricane zone and lose everything, and that would force you to save. So it can have it can happen.

JA: Of course. People who are just dying a slow financial death, is really what’s going on. Because of procrastination. “Well,  there’s next year, there’s next year. Well, I had this expense,” and I understand. You got kids that you had to put through school, you have a mortgage that you have to pay for, you had a health event, you had this, you had that. I understand.

AC: You lost your job, or any number of things can happen, and these are real things, and that’s why you save beforehand, so you can you can weather the storm, and then you still have retirement savings and other things like that, and you get another job, or whatever the situation was.

JA: Right, now you’re fully employed. How much of your income are you saving? Are you saving 5%? You should be probably saving 15 to 20%, depending on what you have saved and if you’re on track.

AC: I think 15%, that’s a reasonable goal, probably what you should get to. So few people are there though.

JA: Right. I was going through, basically, how much money that you need to retire on whatever lifestyle. So if you’re spending $20,000 a year, $40,000, $50,000 $100,000, so on, I was going through the arithmetic. Here’s what you’re spending, here’s what your Social Security benefits are, here’s what you’re short, so then you multiply that shortfall by 25, and then that’s going to tell you how much money that you need. Or another way to say it is that you don’t want to pull out any more than 4% out of your portfolio. And guess what? The whole classroom just looked at me dumbfounded. What? That’s it? Only 4%? Yes. And, “oh my god. We’re currently retired and we’re pulling out way more than that.” Well, you people need to get educated here, you need to take a look at what is going on in your situation. How much money do you have? How serious are you about your overall retirement, and making sure that you’ve got a game plan in place to pay off your debt if you have debt. To take a look, do you keep a mortgage or refinance and push that thing out. Do you pay it off? Do you have student loan debt? Still from yourself or from the kids. Just understand what you got. Write it down. I know sometimes it gets stressful. A lot of times I don’t want to go to the doctor. It’s like, I understand that maybe I’m out of shape or whatever. But you’ve got to face the music at some point. The sooner you do it, I think the better off you’re gonna be.

AC: Well Joe, I think procrastination is the big problem, and this is kind of interesting. I saw this last week. This is how to build a million dollars. You’re 40 years old, you got nothing, and you want to retire at 67. And I’m not saying a million dollars is the right number. It actually should be different for everybody, but just to go with this illustration, you want to build a million dollars, you’re 40, you going to work 27 more years. So if you make $40,000 a year, you have to save 37% of your income. If it’s $60,000, you gotta save 25% of your income. $100,000, it’s 15% of your income. And if you’re making $120,000, that’s 13% of your income. Starting at age 40 and retiring at 67. You can get there. But then the question is, the million dollars, is that the right answer? Because for some people, $300,000 is plenty, and other people, it’s $3, $4, $5 million.

JA: All right so 40, I’m 40, I want to retire at 67. A million dollars is not going to be a million dollars today.

AC: That’s right. And a million dollars will generate about $40,000 of spendable money.

JA: So that is going to feel like probably $20,000. All right, so you save your tail off, you get that million dollars, but now you still feel like your poverty. It’s a tough game, it’s a tough game. It’s time to get serious. If you’re looking at, “hey, am I on track, not on track, what do I need to do?” I would start today.

If you have a burning money question, just call 888-994-6257 for your chance to talk to Joe and Big Al and have your question answered live during Your Money Your Wealth. That number again is 888-994-6257. 888-994-6257. Of course, Joe and Big Al are always willing to answer your email questions –, or send them directly to, or 

40:42 – Listener Email: Roth IRA 5 Year Clock

JA: We got an email question this week, and it was based on the five-year clock on a Roth IRA. Did you see that one?

AC: Yes I think so.

JA: So here was the question, in regards to, let’s say you’re married. So hey, I’m going to get married. My wife has had a Roth IRA for seven years. I’m thinking about starting a Roth now. Does my five-year clock happen because I’m going to marry her because she’s got a Roth and she’s had it for over five years? Something to that effect. So I think he was looking to get married because of the five-year clock.

AC: Yeah I think that’s right. And I’m not finding it in three seconds. But yeah, that was the question.

JA: He’s like, hey, what do you think. Is this a good idea to get married? She’s got a Roth IRA. Could I use her five-year clock? (laughs)

AC: We get that question all the time. Should I get married, and usually we’ll say that’s none of our business. (laughs)

JA: Yeah, what are you asking me for?!

AC: And then on the off chance that I’ll say, “well that’s up to you, however from a tax standpoint…” and then someone acts on that, and that I hear about it for the next 10 years.

JA: Because if you ask Alan, and you ask me if you should get married, you’re going to probably get two totally different types of answers.

AC: That’s true.

JA: How long have you been married?

AC: 29 years.

JA: 30 years, 30 years of wedding bliss, just about. Now I’ve never been married. (laughs)

AC: Yes. So don’t ask Joe, should I get married. (laughs)

JA: The longest relationship I’ve had is about six weeks. (laughs)

AC: No, you’ve had what, a couple of years?

JA: Sure. I dunno, whatever. Yeah, let’s bring up the bad memories, Al. I’m in a good mood. Next thing you know…. (laughs)

AC: Well anyway, I think the question was, one, should I get married. And the other question is, can I use my wife’s five-year clock.

JA: The answer is, it’s an individual retirement account. So that means it’s yours. There are no joint accounts. So if you have a Roth IRA, your wife has a Roth IRA, or future wife has a Roth IRA, no, it’s based on your own contributions or conversions. Let me explain the five-year clock again because it is a little confusing. Roth IRA, in general, will grow 100% tax-free, but they have to be a qualified distribution. And what qualifies a distribution to be tax-free, in the most general sense, is that it has to season in the Roth IRA for five years, or until you turned 59 and a half, whichever’s longer. And so, if you make contributions into the Roth, so let’s say, five years ago you made one contribution to the Roth, a Roth IRA at TD Ameritrade. And then this year, you make another Roth IRA contribution at Fidelity. So you’ve had a Roth IRA open for a total of five years. You opened the first one up at TD Ameritrade. So that second contribution, even though it was five years later, into the Roth IRA, that five-year clock is satisfied with the first dollar that went into the first Roth at TD Ameritrade. Each Roth IRA contribution does not have a five-year clock. What that means is that the money needs to season inside the Roth IRA for five years or 59 and a half to have a qualified distribution for it to be tax-free. So if you’re 45 years old, well you can’t touch the money until you’re 59 and a half. But let’s say if you’re 65 years old and you put money into a Roth IRA, you have to wait until age 70 to get any of the growth out, tax-free, if you’ve never established a Roth IRA before. Is that pretty succinct?

AC: Yes that makes sense.

JA: All right. So that’s on contributions. However, with contributions, it’s FIFO tax treatment, first in first out. So you can always have access to the money that you put into the Roth IRA. So if you put in $5,000 today, and then next week you need the $5,000, you pull out no big deal, no taxes, no harm, no foul. At any age.

AC: Yeah. And a lot of people don’t realize that – they did a Roth contribution, now they know that they have to wait five years, or 59 and a half, whichever’s longer to get the earnings out, the growth out. But that original contribution of $5,000, you can take that out at any time, at any age. It doesn’t matter whether it’s one week or 20 years, you can take it out and there’s no tax, and there’s no penalty. So many people don’t understand that, and a lot of accountants don’t understand that too. They think that, no, you can’t touch it till you’re 59 and a half.

JA: I think that’s why a lot of times when we have older individuals, let’s say in their 70s, that are doing Roth conversions to try to reduce some of the required distributions and things like that, then they might hear, oh, this five year clock, if I need access to the money, I need that wait five years?

AC: I can’t wait five years, right.

JA: No. You always have access to the money that you pay tax on. Just think of it like that. Unless you’re under 59 and a half. And that’s a totally separate five-year clock, that’s on conversions. So if you do a Roth IRA conversion, if you’re under 59 and a half, each conversion has its own five-year clock. So you do a conversion at 45, 46, 47, 48, whatever. Each year I do those conversions, I have to wait five years to be able to get access to that conversion money.

AC: Yeah. Not the growth, the conversion money. Right.

JA: Once I’m over 59 and a half, then it’s just the five years on the growth. I can have access to the money that I convert at any time. If I’ve already established a Roth IRA that satisfies the five-year clock, and I do a conversion, if I’m over 59 and a half, my five-year clock is already satisfied.

AC: You don’t have to do it again, you never have to do it again at that point.

JA: Right. Because what they’re trying to do on the conversion side to have these all sorts of different crazy five year clocks, is that they’re trying to avoid people to avoid the 10% early distribution penalty if you’re under 59 and a half.

AC: Yeah. Because if you take money out, you pay a 10% penalty, and if they say, well, you can do a conversion, you pay the tax on the conversion. But then if you could pull it out the next day, now all of a sudden you avoided the penalty. So we’re going to say every time you do a conversion, when you’re younger than 59 and a half, you gotta wait five years before you can actually get those dollars without penalty. And so I guess they figure in five years your financial situation might have changed.

JA: Right. That impulse buy is gone. (laughs) And again, if you’re under 59 and a half, you could take money from a retirement account, an IRA, 401(k), 403(b), and convert that to a Roth IRA, you do have to pay tax, but there is no penalty. There is no penalty unless you pay the tax out of the IRA, then the money that you pull out of the IRA to pay the tax, well then that is not a qualified conversion. So just be careful there. But you could do a Roth IRA conversion, that’s taking money from a retirement account, converting it to a Roth. Why do you want to do that? Then all future growth of those dollars is going to grow 100% tax-free. You’re going to get tax diversification when you start creating income. You’re going to have different pools of money that you can pull from. So there’s a lot of different value-add, depending on your situation.

Hey, hopefully, this helped. We had a great time doing the show. For Big Al Clopine, I’m Joe Anderson, we’ll be back again next week. Show’s called Your Money, Your Wealth.


So, to recap today’s show: Money is emotional, and most people don’t have enough of it for retirement, so start treating it like a fitness plan: start gradually and build up discipline. If you don’t plan to retire, some of your financial strategies may change for the better. Call 888-994-6257 for a free financial assessment to help you make the most of your situation. And if your spouse to be has a 7-year-old Roth IRA, you shouldn’t marry them to take advantage of their 5 year Roth clock because it doesn’t work that way. And you shouldn’t be asking Joe and Big Al for marriage advice anyway!

Subscribe to the podcast at, through your favorite podcatcher or on iTunes, where you can also check out our ratings and reviews. And remember, if you have a burning money question for Joe and Big Al to answer on Your Money, Your Wealth, just email, or call 888-994-6257! Listen next week for more Your Money, Your Wealth, presented by Pure Financial Advisors. For your free financial assessment, visit

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.

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