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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
ABOUT Alan

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 [...]

Andi Last
ABOUT Andi

Andi Last brings over 30 years of broadcasting, media, and marketing experience to Pure Financial Advisors. She is the producer of the Your Money, Your Wealth® podcast, radio show, and TV show and manages the firm's YouTube channels. Prior to joining Pure, Andi was Media Operations Manager for a San Diego-based financial services firm with [...]

Published On
April 18, 2023

How do you protect your nest egg when you’re really risk-averse and want safe, low-risk investments – should you invest in annuities, CDs? When choosing a money market fund, should you just invest in the one with the highest post-tax return? How do you go about replenishing cash, or rebalancing your portfolio, when the stock market is up? Plus, the widow’s penalty in relation to Roth conversions, and switching from survivor Social Security benefits to your own. Also – withdrawing from your portfolio before RMD age? One listener says nobody should ever need to do it!

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Show Notes

    • (00:51) How to Safely Invest and Protect $400K When You’re Risk Averse (Tyler, OH – voice)
    • (07:31) Rebalancing: How to “Replenish Cash” When Stocks Are Up? (Elisa, Fremont, CA)
    • (13:27) Money Market Funds: Don’t I Want the Highest Post-Tax Return? (Michael, CO)
    • (18:42) The Widow’s Penalty and Roth IRA Conversions (KBH, San Antonio)
    • (27:46) Can I Switch from Survivor Social Security Benefits to My Own at Age 70? (Sara, Tucson, AZ)
    • (30:43) COMMENT: Come On People, You’ve Had a Lifetime to Set Up Retirement (April, Tinley Park, IL)
    • (36:46) The Derails

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Transcription

How do you protect your nest egg when you’re really risk-averse – should you invest in annuities, CDs? When choosing a money market fund, should you just invest in the one with the highest post-tax return? How do you go about replenishing cash, or rebalancing your portfolio, when the stock market is up? Safe, low-risk investments, that’s today on Your Money, Your Wealth® podcast 425. Plus, Joe and Big Al discuss the widow’s penalty in relation to Roth conversions, switching from survivor Social Security benefits to your own, and – withdrawing from your portfolio before RMD age? One listener says nobody should ever need to do it! Visit YourMoneyYourWealth.com and click Ask Joe and Al On Air to send in your money questions and comments as an email or a voice message. I’m producer Andi Last, and here are the hosts of Your Money, Your Wealth®, Joe Anderson, CFP® and Big Al Clopine, CPA.

How to Safely Invest and Protect $400K When You’re Risk Averse (Tyler, OH – voice)

Joe: What have we got? We got a voicemail.

Tyler: “Hi, Joe, Alan and Andi. This is Tyler from Ohio. It’s been a couple years since I’ve called in, but I have a new situation that I was hoping to get your thoughts on. This involves my parents, who I would say are highly risk adverse people. In 2009, they took all of their retirement accounts out of the market, despite significant penalty and loss and turned to real estate, which my father’s been doing all his life. They are now in their late 70s and have just sold the last rental property that they have ‘cuz it’s time for them to get out. It’s just too much for them to handle anymore. So they are sitting on about $400,000, which I would consider cash because it is in a bank savings account, earning 0.1% interest. So just in our discussions with what they wanna do with the money, they are not sure, but they know they don’t wanna lose it. So I suggested they at least look at maybe an online savings account or perhaps some CDs so that they get a little yield versus 0.1%. And then they went to their bank, which of course they’ve been banking with for 30 years, to ask about other accounts that they have and came home with annuity brochures, which was very frustrating on my part. But in terms of their monthly income, their pensions and Social Security bring about $8000 a month, which completely cover their monthly expenses. So I don’t think they need an income stream of any sort. But I wanted to get your thoughts on what are kind of the appropriate investments they need to be considering if their goal is really just to protect this money and not necessarily to grow it. Love listening to the podcast. I do so in my Toyota minivan with my children. I usually have to turn the podcast up pretty loud to cover their complaints for mom listening to the podcast again. But I will say that my 17-year-old, who just got his first job this year, came home and asked me if I could help him set up a Roth IRA. So some of it’s sinking in despite them not wanting to hear it, but- Love it. Thank you for all the great advice and hope to hear from you.”

Joe: Wow.

Al: That’s great. Great question. And Tyler, we enjoyed listening to your voice and hearing your questions.

Joe: Yeah. 17-year-old, open up a little Roth IRA, the kid’s gonna be a billionaire. Thanks to us.

Al: You know it. I’m trying to think, what was I doing with my kids at 17? I don’t think they had earned income yet.

Andi: You weren’t forcing them to listen to a podcast, that’s for sure.

Al: No, but they both have Roths now.

Joe: No. All right. What do you think Al? So they went to the bank, bank was like, you want zero risk, so you should go into an annuity.

Al: Yeah. Which I’m not surprised ‘cuz that’s the same thing has happened to me at two different banks.

Joe: You could get a deferred annuity that’s gonna give you probably the same rates, maybe a little bit higher than a CD. The income grows tax-deferred. When you pull the income out, it’s gonna be ordinary income, so you don’t necessarily have to annuitize it. So if they want absolute guarantees, that’s an option. I don’t know if it’s my favorite option, but that’s definitely an option. There’s all sorts of different flavors of annuities. We kind of bash annuities on this show. But you know, if I’m looking at just the straight fixed deferred annuity or multi-year guaranteed annuity, that might not be a bad choice for someone that wants zero risk. Because you already know what they did before. When they saw their accounts go down, they said, screw this, I’m gonna cash out, pay taxes, pay penalties, and I’m gonna go into real estate. So that’s gonna hurt them more than probably a guaranteed product.

Al: Yeah. Well, you bring up a good point and that- and we probably don’t talk about it enough. So annuities get a bad name because a lot of them are somewhat misrepresented in terms of what you’re getting, what the benefits are, what the potential rates or returns are. The fact that it’s hard to get your money out without penalty. But- and the commissions, people say, well, there’s no costs in here, but there are costs, whether you know it or not. So not all annuities are bad. But I still wouldn’t go that route. I would go personally, I would go back to the bank and just open up a CD that- and I’ve checked recently because I just open up a CD myself last week at a large bank-

Joe: You had a little extra cash?

Al: Little extra cash. That wallet was getting so fat. I just had to take it over.

Joe: You could barely sit down. You had to go to the bank, open a little CD.

Al: I had to rent a little pickup truck to get it there. So anyway-

Joe: – armored car.

Al: Yeah. Yeah, armored car.

Joe: Got it.

Al: So, but the rate at a big, too big to fail bank was over 4% for a 13-month CD. That’s what I would do right now. That doesn’t mean it’s gonna be that rate forever, but at least for the next year, to me, that’s a great rate. That’s what I would do because you can always get at your money. And if you do take your money out early on something like that-

Joe: Lose the interest?

Al: You lose the interest. So it’s not necessarily the end of the world, particularly when you’re used to getting 0.1% or in some cases 0.01% interest on a money market.

Joe: Yeah. I think it really depends on Tyler’s parents and they’re in their mid to late 70s, it sounds like they got a ton of cash flow, $8000 a month.

Al: It sounds like plenty for their living expenses.

Joe: Right. And so, if they wanna lock the money up for a little bit longer, they might be able to get a little bit higher yield, that’s guaranteed. You know, and I think they really like the guaranteed aspect of it.

Al: They want safety. And I think that to me, that’s the one instance where you might, I might be okay with that annuity if it’s one of the products that you just talked about and it’s for someone that wants zero risk, it can work.

Joe: So, yeah, I hope that helps. But, CD’s a good route. You know, there, there’s all sorts- you could even go money market today, you know-

Al: In some banks. The bank I checked, it was paying 0.03%, the money market there. So it wasn’t very good.

Joe: All right. Thanks Tyler and good luck to your 17-year-old, way to go.

Rebalancing: How to “Replenish Cash” When Stocks Are Up? (Elisa, Fremont, CA)

Joe: All right. We got Elisa. From Fremont, California. “Hi, Joe and Big Al, return listener.” Alright. Return listener. Is that like, that one guy was like, you know, I’ve tried you guys 4 times and I keep on unsubscribing?

Al: Well, return listener’s one that came back for a second time. So it’s like, that’s less than a frequent listener.

Joe: Yeah. I’m returning. I left you. I thought I’d give you another- I thought I’d give you another shot. “Still enjoying the show.” Okay. Well, she’s enjoying it. Very good. “I heard that when your stocks are up, you should replenish your cash. Can you share how this is done? Do I move money out of my stock mutual funds to buy bond mutual funds? Do I sell some of my stock mutual funds and put it into a high yield savings account to use as needed? My husband and I are both retired at age 63 and 69. We would like to preserve some of the earnings, but most likely would all be going to our son since we don’t need the funds to live off of. Keep up the good work.” Okay. Couple things we gotta-

Al: Yeah. First of all, I’m not sure who would’ve said to sell your stocks when they’re up and go into cash. But nevertheless, what really, this is a question about how to rebalance, I believe.

Joe: Sure. Or if you don’t need the cash, if you don’t need to live off of it, it’s all going to your son, why are you putting it in cash? Do you have a cash reserve or are you looking to build a cash reserve?

Al: So, here’s maybe a way to think about this is, it’s a good idea once you figure out what your risk profile should be. Which is 60% stocks, 80% stocks, 20% stocks, I don’t care. And the rest is safe. And usually we consider safe to be bonds. It could be cash nowadays ‘cuz cash is paying well. But typically bonds pay greater than cash. And so that’s why we kind of favor them. Plus they tend to go up a little bit when stocks decline. Not always, but they tend to. So rebalancing is simply this. If you want 60% stocks and now all of a sudden your stocks are 70% because the stock market’s done so well, we would recommend to rebalance periodically depending upon when you look at it, some people like to do that quarterly, some monthly. Some people look at it all the time. It’s whatever is comfortable for you. Rebalance, and so you sell 10% of your stocks to get back to 60%. What do you buy? You buy the stuff that’s lower, like your bonds. Your bonds were 40%, now they’re 30%. That’s what rebalancing is. So you’re taking some profits off the table in a disciplined manner, taking emotions out of it, taking some gains off the table and then putting it in safety. On the other hand, when stocks go down, you do just the opposite. Stocks are now 50% ‘cuz they decline. So now you buy- you sell 10% of your bonds and you buy 10% stocks to get back to 60/40. So what are you doing? You’re buying low and you’re selling high constantly on a disciplined manner. That’s really how you want to think about this.

Joe: Yeah. And that’s in a perfect world, right? Last year you had, bonds are down, stocks are down.

Al: Yeah. True. So you didn’t have to rebalance theoretically, if they stay down.

Joe: If you can say- how often you wanna look at it. You know, our firm looks at it via bands. So let’s say if you don’t want to have any variance over a certain percentage, and as soon as that triggers- but sometimes you could be selling stocks and buying other types of stocks.

Al: You can, if you have more than one kind of stock category. For example, international stocks might be up relative to US or vice versa. Small company might do better than large company or vice versa. So there’s other, it’s more than just stocks and bonds. I oversimplified it. But I would say the average person, I mean firms like ours do, it’s much more sophisticated. We look at bands and we actually check daily for our clients. But for the average person, maybe looking at it once a quarter, wouldn’t you say?

Joe: How often do- do we manage your money? Is that why we have $5,000,000,000 of assets?

Al: Yeah. We manage- we manage my money. That’s correct.

Andi: $4,200,000,000 of that is Al’s.

Joe: Wow. We got Big Al’s money here at Pure.

Al: That’s why I had to take a wheel barrow to the bank.

Andi: To get your CD?

Joe:  Oh. No, I think they keep it really simple. But sometimes you hear this, is that if there’s dividends paying from the mutual fund or the stock, you wanna just have those dividends going to cash and then that cash can get reinvested into other asset classes.

Al: You can.

Joe: Look at your portfolio. You don’t need income from the portfolio, so you need to have your cash reserves, whatever that is, and then make sure that you’re managing the portfolio to whatever goals that you’re trying to accomplish. And it sounds like the goal is really to make sure that they’re safe and secure, but really that it’s a transfer play. It’s for the kids.

Al: It’s for your son, which means you can probably take a little bit more risk than you might otherwise take for yourself ‘cuz it’s longer term.

Joe: All right. Thanks for the question and thanks for returning.

What impacts are financial market volatility, bank failures and inflation having on your portfolio? What’s next for stocks and bonds? Will the Fed finally tame inflation? Register now for our free market update webinar, next Wednesday April 26th at noon Pacific, 3pm Eastern with Pure Financial Advisors’ Executive Vice President and Chief Investment Officer Brian Perry, CFP®, CFA. Brian will recap Q1 of 2023, and the outlook for the financial markets in Q2 and beyond. Click the link in the description of today’s episode in your favorite podcast app to go to the show notes, then click on the webinar banner there in the free resources section to register now.

Money Market Funds: Don’t I Want the Highest Post-Tax Return? (Michael, CO)

Joe: “Joe and Big Al, I’m a consistent listener.”

Al: That’s better than a repeat. That’s way better.

Joe: What is a consistent listener?

Andi: I think that means every Tuesday he’s listening.

Joe: “I’m very consistent with my listening habits.”

Al: Well, we actually- if you read it literally, “I’m a consistent listener”, but we don’t know of what.

Joe: “You previously answered my question and surprisingly commented positively on my speaking voice.”

Al: Oh. I kind of remember having a guy with a great voice. I think we asked him to be a partner on the radio.

Joe: I don’t remember that.

Al: I do.

Joe: Did he say I’m a consistent listener?

Al: No that’s new to this one.

Joe: You’ve got it.

Al: After we told me he had a great voice, he listens every week.

Joe: No, he’s consistent. Before he was not consistent at all.

Al: It was very occasional.

Joe: But we were like, Michael, wow. You got such a radio voice. Wow. I am, I’m totally consistent.

Al: I’m sold.

Joe: “No one else has ever said anything like that.” Well, you gotta hang out with the right people, Michael. “I’m writing now as I want to ask a review of Vanguard comparison to money market funds. I’m shopping for money market fund and confused on how to compare the differences between the 4 funds and the following link. I don’t wanna purchase the fund paying- don’t I just wanna purchase the fund paying the highest after-tax returns? for the tax-exempt funds? Do I just add my tax bracket to determine the return of the tax-exempt fund? I very much appreciate your comments as previously. I thank you for your spitball review, Michael.”

Andi: So his link didn’t work, but I’ve brought up on screen here where you guys can see, but the audience can’t, that Vanguard has 6 different money market funds to choose from and you can actually click to compare which ones you want. He said he’s wants to compare 4 of them, but he didn’t say which 4 they are.

Joe: Got it. Okay. So you got a California Municipal Money Market Fund. You got the Cash Reserves Federal Money Market Admiral Shares, Federal Money Market Fund, Municipal Money Market Fund, and then you got a New York one. Okay. Well, the only difference between the Admiral Shares and the Federal money market is that it’s just a lower expense ratio because you needed more money with Vanguard to get the Admiral Shares.

Al: Yeah, that’s right. There’s a minimum on average-

Joe: But I like federal money market funds. Basically what they’re gonna invest in is treasuries. And so, there’s prime money market funds. Sometimes they might go like short term bonds, they might use commercial paper, things like that. So you’re going to get maybe a little bit extra rate of return, but I really don’t think the risk is worth it. I mean, there’s all sorts of different places to take risk in an overall portfolio, and I don’t think a money market fund is where you wanna juice. So, I like federal money market funds. If you’re in a really high tax bracket, I’m not sure if Michael from Colorado is or not. So I would say, if your tax bracket has a 3 in front of it, then you might wanna look at a tax exempt money market fund.

Al: And when you say 3, you mean like 30%, 32%-

Joe: 30%, 32%, 35%, 37%. Yep. Yep. Because then I think that’s what it make- because the spread-

Al: Yeah, I agree.

Joe: -is probably- if I- we see people in tax-exempt funds and they’re in the 12% tax bracket. You’re not getting any benefit there.

Al: Correct.

Joe: And even with 22% tax bracket, your benefit is still pretty limited. Once the rates go back to 25%, 28%, then I think you’re going to see those spreads change a little bit, but I don’t know. Again, this is cash. It’s a cash reserve. Your federal money market fund here at Vanguard. Not saying I’m recommending any of this.

Al: True.

Joe: I’m just saying here’s my thoughts on the different types of investments and Jerry or Michael can pick what suits him best.

Al: Yeah. And of course there’s FDIC rates and there’s other kind of benefits or coverage you get at brokerage. So look into all that. Make sure you’ve got safety. The basic rule is $250,000 per person or at a particular bank. It’s a little bit different when you’re at a brokerage firm like this.

Joe: Well, yeah, FDIC insurance.

Al: Yeah. Yeah.

Joe: So, but yeah. I don’t know. I don’t know if that helped, but money markets is kind of the big thing right now. Everyone wants to get into some money markets.

Al: Well, because some of ’em are paying, they’re paying 3% to maybe 4%.

Joe: Yeah. It’s a lot better than it was.

Al: Although I just checked my bank. The money market is still 0.03%, so they haven’t- they’re not part of that trend yet.

Joe: Got it. All right. Hopefully that helps. Michael, thank you for being such a consistent listener and you do have a very wonderful voice.

The Widow’s Penalty and Roth IRA Conversions (KBH, San Antonio)

Joe: We got what KBH. Okay. San Antonio, Texas. “Hello, Andi, Joe, Big Al. Enjoy your program very much. I have listened to almost every episode posted in your podcast library.”

Al: Wow. How many do we have, Andi?

Andi: 423.

Al: Oh, wow. And what’s the average length?

Andi: About 45 minutes.

Al: 45 minutes? That’s a big commitment.

Andi: Yeah. Thank you KBH.

Joe: That’s craziness.

Al: No, it’s- I thank you for your support. How about that?

Joe: All right. “I’m trying to catch up on the last few months’ episodes. You have informed and educated me as well as made me laugh out loud often. I appreciate all you do. Okay, here’s the question. Can you cover the widow penalty? I only recently became aware of how death of a spouse can negatively impact or affect not only your Social Security income in federal taxes, but how it becomes more difficult to manage taxes or conversions to Roth IRAs due to the change in tax brackets, standard deductions amounts, IRMAA limits and RMDs, etc. My particular question is about IRA conversions. Due to my husband’s health condition I know I’ll be facing this situation within the next 10 years. We have about $1,200,000 in tax-deferred accounts. We both have Roth accounts as well, and we are both over- the Roths are both over 5 years old.” Alright. “Both of us are retired.” There it is, “69 and 67 years old. We have been doing conversions for the last 3 or 4 years to converting rollover IRA dollars to Roth. We have been topping out at the 22% tax bracket. However, with this life-limiting diagnosis for my husband and the new info I read yesterday about the widow penalty, I’m wondering if I should accelerate the Roth conversion to take the tax hit in the next two to 3 years at the top of the 24% tax bracket and try to convert almost all of the tax-deferred balances. I was thinking about leaving about $300,000 in tax-deferred accounts to be used for future medical expenses. I would have to pull the tax payments from the rollover IRA as well. Do not have enough outside cash to pay the required taxes. I’m thinking it would still make sense for me to do this over the next few years instead of having a huge IRA balance later as I expect taxes to revert to the 2017 tax in 2026 as well. I will also have the advantage of still being in the married filing jointly category. I hope this question makes sense. I’m sorry if all this seems a bit dark. I spent most of last night reading, researching widow penalty online and would love to hear your thoughts about the scenario.” Okay. So she’s listened to all of our archives. And she spent the entire night reading about the-

Al: – the widow penalty. We probably haven’t talked about it in a while.

Joe: Yeah, it’s- this is a little dark.

Al: But you know, it’s real life too.

Joe: It is real life. “I’m sure there’s others in a similar position. With thanks and gratitude. No pets. No time to drink. LOL. Pretty boring cars, Lincoln MKZ Hybrid and a Subaru Legacy. And hello to Andi as well. Love the podcast.” Okay, cool. Thank you very much. Well, I’m sorry to hear about your husband’s illness. So widow’s penalty is, well, if someone dies you go from a joint filing- joint return to single, and your tax brackets basically get cut in half, but usually the RMD doesn’t really change.

Al: Yeah. So to give some numbers to that – the top of the 12% bracket right now, which is a low bracket, so when you’re single, and I’m just gonna round the numbers, when you’re single, that goes up to $45,000. When you’re married, it’s 90,000. So in other words, If you’re in the 12% bracket, your tax full income’s under $90,000 married couple, you’re all in that 12% bracket and somewhat even the 10% bracket.

But then if your spouse passes, now you’re in the single brackets. Now, once your income goes- taxable income goes over $45,000, you’ve switched from the 12% bracket to the 24% bracket. And all the brackets work that way. And the reason is because the idea is with a married couple, often you have two incomes, so they figure you should have higher dollar amounts before you hit that next bracket. So that’s what happens when you lose a spouse. And it’s real. It really does happen.

Joe: But the issue with the widows penalty when it comes to IRA money is that the RMD usually doesn’t change. Because let’s say that she’s got a $500,000 in her retirement account and he’s got $500,000 in his retirement account. So it’s $1,000,000 total, and the RMD is roughly $40,000 a year. And let’s say they’re both taking RMDs. They’re very similar in age, what, 69 and 68 or something like that?

Al: Yeah, 69 and 67.

Joe: Okay, so let’s say he passes. So she’s got a couple of options of what she can do with his IRA, but the RMD still has to come out. She can either roll it into her own account or she could keep it in his account, but she would have to pull the RMD based on his life expectancy on his age. So the money still comes out. The $40,000 of RMD still comes out. It doesn’t get cut in half. So what happens to her is that her tax bracket gets cut in half, but the income stays the same.

Al: Yeah. Except maybe you lose some Social Security.

Joe: So yes, she’ll lose half of- or she’ll lose- Someone’s Social Security, either hers or his.

Al: Yeah, whichever’s lower. The other thing that can happen is one or both spouses have a pension. And if you don’t have a full survivor benefit, in some cases you might have 75% benefit, 50% benefit, no benefit, right? That can change your income too.

Joe: But she needs the- it’s not cut and dry because there’s so many different triggering effects that’s gonna happen when he passes. So I think she’s on the right track of looking at it, Hey, do I convert to the top of the 24% tax bracket? The 24% is a giant bracket.

Al: Which right now is taxable income of $360,000.

Joe: So you probably don’t wanna blow out of everything.

Al: No, no, no. Yeah, exactly. Because we don’t know your income, so we can’t really advise you. But here’s the concept. Which is 24% bracket is what you would be in if you do conversions. Now maybe some 22%, but mostly 24% bracket, which isn’t a bad bracket. Sometimes we hear the extreme. I’m gonna convert everything. So that by the time I get to RMD age, I won’t have any RMDs ‘cuz it’s in the Roth IRA and my Social Security won’t be taxed. So I’ll pay no tax. And it’s like, if you’re gonna pay tax at a 24% bracket and miss out on a-

Joe: – 10% or 12%-

Al: – 0%, 10% or 12% bracket, that seems silly to me. So you have to do some analysis to figure out what’s your tax bracket really gonna be when your husband passes. Or if, let’s say if your husband passes. I know he got a bad diagnosis, but you know, sometimes people live for decades after bad diagnosis. So just if he passes, what’s your taxable income going to be? The best you can figure. And that will help you decide if you’re gonna be in the 22% bracket anyway with the single tax laws. Yeah, go ahead and convert  22% bracket 24%. Because we know the 22% bracket’s gonna go to 25% if the tax rates revert to as scheduled in 2026.

Joe: The only thing I don’t like here is that she doesn’t have any cash to pay the tax.

Al: Yeah, that’s a problem.

Joe: So you’re gonna pull- convert to the top of 24%. I’d be careful with that. There’s probably a number that makes sense. Because you’re gonna have to pull the money out to pay the tax, but it’s probably not to the top of the 24%.

Al: Well, I think- yeah, well said. Because really, like I say, you have to figure out what your tax bracket’s going to be if he passes, and that’ll help you decide how much to convert.

When you shift from saving for retirement to spending in retirement, your financial strategies need to change… but your plan for retirement withdrawals could be full of trap doors! Joe and Big Al help you identify and avoid those trap doors when it comes to withdrawing money from your portfolio in retirement in the latest episode of the YMYW TV show – watch it and download the free companion guide from the podcast show notes – just click the link in the description of today’s episode in your favorite podcast app to get there, and don’t forget to share YMYW too!

Can I Switch from Survivor Social Security Benefits to My Own at Age 70? (Sara, Tucson, AZ)

Joe: All right. Let’s switch to Sara from Tucson, Arizona. “I’ve been collecting Social Security benefits for 5 years. When I signed up at age 60, I did not know to ask for a restricted application. However, I do wish to draw my own record at age 70. Will I be able to do so?” Ah, man, if she would’ve asked me a few years ago, I would’ve been super dialed on this.

Al: Well, there’s not much point. There’s not any point on a restricted application for a survivor benefit?

Joe: No, that’s a spousal benefit.

Al: Spousal, only.

Joe: So she’s taking- so her husband dies. She turned 60, she starts claiming the survivor benefit. She got a reduced benefit because she claimed it at age 60. So her benefit is going to continue to grow. And she could switch to her own record, but it’s going to be a reduced amount.

Al: Correct.

Joe: Because she’s already claimed a benefit at a younger age.

Al: Yeah. And I wanna say if she’d started claiming at 62, she would’ve got about a 25% haircut. In other words, it would’ve been 75% of her normal benefit. At age 60, it’s even less.

Joe: But the rules changed.

Al: I know they did.

Joe: And I’m not super tight on it right now.

Al: Right. So we’re just giving feedback, but by the time you get to any age, you can switch to your benefit, but it’s not gonna be your full benefit. It’s a reduced benefit because you claim survivor benefits starting at age 62.

Joe: But she would still get the 8% delayed retirement credits on her own record.

Al: No, I understand, but it’s not gonna be the same. To get your full benefit, you have to claim it at full retirement age, which right now is between 66 and 67.

Joe: But a survivor benefit in your own benefit are two totally different benefits. And the survivor benefit-

Al: I’m pretty sure it’s- if she waits till 70 to switch over to hers, there’ll be a haircut because she claimed survivor early.

Joe: I guess the question is, can she? And the answer’s yes.

Al: Yes.

Joe: But I don’t know what the calculation would be. Is that fair enough?

Al: Yeah, that’s fair enough. And I’m just spit balling here. I think it’s- you’ll get roughly 70%, maybe a little less of your age 70 benefit. You’re shaking your head.

Joe: Yeah. I just don’t think- I don’t know the answer and that’s bugging me right now. Because I usually know the answer.

Al: And used to be so tight on Social Security.

Joe: On Social Security? Oh my God, I memorized it. But then they changed the law.

Al: I know. It made it tricky.

Joe: Yeah. A couple times. Well, they tried to make it easier because you had the restricted application and you had to claim and file and suspend and all that stuff.

Al: Yeah. And that’s done there.

Joe: And then now you get deemed.

Al: Yeah, it’s a lot- it’s a lot more complicated, I think.

Joe: I still get confused what deemed means. So anyway. Is that good? I gotta refresh my brain after that one.

COMMENT: Come On People, You’ve Had a Lifetime to Set Up Your Retirement (April, Tinley Park, IL)

Joe: Bring in your money questions, folks, go to YourMoneyYourWealth.com, click on that button Ask Joe and Al. Sometimes it works, sometimes it doesn’t. It’s all good. Then they can… it’s been working though right?

Andi: It has, yeah. We just haven’t actually answered all the questions.

Joe: Got it. We got, “dear Joe, Big Al, Andi, still love the show and I’m always disappointed when there isn’t a new one each week.” When isn’t there?

Andi: There is, April. What do you mean?

Al: Yeah, I don’t know when, we haven’t had one.

Joe: Yeah, Andi.

Andi: We always have.

Joe: Every week we have a new show. Even when Al was in…

Al: Well, sometimes there’s repeats on our radio show. Maybe that’s what she’s talking about.

Andi: Well, she’s in Tinley Park, Illinois, so I think she’s talking about the podcast. Maybe it’s – sometimes I have to do a recap episode.

Al: Yeah. Okay. Maybe that’s it.

Joe: TV show. There’s a lot of, kind of, lot of reruns.

Al: We have, I don’t know, how many episodes do we have?

Joe: On the TV?

Al: Yeah, a couple hundred?

Joe: Yeah, several hundred. “Still a Diet Pepsi person. And now, to rile everybody up.”

Al: Ooh, it just got interesting.

Joe: “My financial podcast shows…”

Andi: Many.

Joe: Many. Thank you Andi. “Many financial podcasts, shows, and articles focus on sustainable IRA withdrawals. The IRS has RMDs as of the year you turn 72/73. I know that this will not be a popular/PC opinion, but if one has positioned themselves carefully, pre-retirement, come on people. You’ve had a lifetime to set this up. No mortgage, car, et cetera. No debts. Three plus months of emergency savings. Hold off on your social security until age 70. There should be no need to withdraw any money out of your IRA other than the RMD at or after age 73. I know sometimes things happen throughout life, but by the time you are 70, everything should have smoothed out to enable this theory.”

Al: Okay, so we have time to figure this out. Why don’t we do it?

Joe: I don’t understand. What – is this a question? Is this a rant?

Andi: No, this is a comment. This is a rant. She’s saying, “Come on, you’ve had a lifetime to set up your retirement. Why would you need to take any money out of your IRA?”

Joe: Who’s she talking to?

Al: She’s talking to listeners in general.

Andi: Financial shows, podcasts and articles focus on sustainable IRA withdrawals. Why does there need to be any?

Al: Well, April, if you follow a lot of the podcasts and/or suggestions, yeah, you’ll be fine. But here’s what happens. So first of all, you get outta college, you’re so stoked that you can actually buy a car on a tv. You do all that.

Joe: This is the life of Alan.

Al: Oh boy, here we go. And then you get married, and then you got all that stuff going on. Oh, you gotta buy a wedding ring. Oh, okay. All that stuff. And then you have kids. Oh, okay, you got all that stuff. And then, oh, they need to go to college. Okay. All right. And then you have a little market downturn and you’re self-employed. All right. This is my lifestyle. So then you know what? Life happens and many people do get it figured out and they end up in a great spot. Others don’t. Health – I haven’t had any health issues, knock on wood, right, to this point. But that’s not true of everybody. Some people have significant health issues by thirties, forties, fifties, sixties, so a lot can happen so that people don’t make it.

Andi: And I’ll also say you can’t account for family members. You never know what family members are gonna do that’s gonna impact your finances as well.

Al: That’s true. And maybe your parents need money, right? And you’re gonna say, no, Mom, I gotta save for my retirement? That’s a hard conversation to have. It’s not one that I would probably wanna do. I’d wanna take care of my Mom. She raised me.

Joe: This is so depressing. It’s just terrible. This is just not really good content.

Al: I’m just saying why you can’t always make it.

Joe: All right. Kind of done. That’s just kind blew me up a little bit there. Thank you, Al for that nice little walk down, little memory lane.

Al: Yeah, you’re very welcome. We’re walking down as to what can happen. Anything else?

Nope. That’s it. All right. Let’s get outta here. Thanks all for your questions. Listening. We really appreciate your listenership. Go to YourMoneyYourWealth.com, you know the drill, get us some questions. We’ll answer ’em right here. Anything else going on?

Andi: We’ve got a Market Update Webinar on the 26th of April. If people wanna sign up for that’s in the podcast show notes, you can link to that. New TV show this coming Sunday.

Joe: Awesome.

Al: How about that?

Joe: That’s gonna be great. Okay. That’s enough plugging for us. We’ll see you next week. The show’s called Your Money, Your Wealth®.

Andi: To continue with the dark theme, we’ve got 5-year-olds preparing for widowhood in the Derails, along with soft drinks of choice, so stick around.

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Your Money, Your Wealth® is presented by Pure Financial Advisors. Click the “Get An Assessment” button in the podcast show notes at YourMoneyYourWealth.com or call 888-994-6257 to schedule your free financial assessment, in person at one of our seven offices around the country or online, a time and date convenient for you, no matter where you are. Chances are, one of the experienced financial professionals at Pure will be able to identify strategies to help you create a more successful retirement.

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The Derails

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