Show Notes

• 00:00 – Intro: This Week on the YMYW Podcast
• 00:44 – We’re Millennials. Have We Brunched and YOLO’d Away Our Retirement Dreams? (Pam & Jim, Phoenix, AZ)
• 12:10 – We’re 39 with $840K. Can We Retire at Age 57? (Matt, PA)
• 22:57 – Complete the 8th Annual YMYW Podcast Survey for your chance at a $100 Amazon e-gift card! (secret password: ymyw)
• 23:53 – Do Roth Conversions Make Sense Given Our High Income and Tax Bracket? What Pension Option is Best? (Will and Jane, NY – voice)
• 37:04 – LIMITED TIME OFFER: Download the Complete Money Makeover Guide before Friday, August 8, 2025, and Watch Complete Money Makeover on YMYW TV
• 37:46 – How Will Long-Term Capital Gains on the Installment Sale of My Company Be Taxed? (Juan’s Mother, FL)
• 47:50 – YMYW Podcast Outro

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Transcription

(NOTE: Transcriptions are an approximation and may not be entirely correct)

Intro: This Week on the YMYW Podcast

Andi: Pam and Jim in Phoenix are 38 and 41 and want to retire at 59 and 62. Matt and his wife in Pennsylvania are both 39 and want to retire at 57. Are these millennials on the right financial path, or have they brunched and YOLO’d away their retirement dreams? That’s today on Your Money, Your Wealth® podcast number 541. Plus, do Roth conversions make sense for Will and Jane in New York, given their high income and high tax bracket? Which pension option is best for their circumstances? Finally, the fellas spitball on how capital gains will be taxed for Juan’s mother in Florida. Who’s Juan? Who knows? I’m Executive Producer Andi Last, and here are the hosts of Your Money, Your Wealth®, Joe Anderson, CFP® and Big Al Clopine, CPA.

We’re Millennials. Have We Brunched and YOLO’d Away Our Retirement Dreams? (Pam & Jim, Phoenix, AZ)

Joe: We’ve got Pam and Jim in Phoenix, Arizona.

Andi: And again from The Office.

Joe: Oh, Pam and Jim. Oh yeah. From The Office. You’re right. It is. Yeah. Alright. As millennials, we have YOLO. You only live once. You only live once.

You only live once. Okay. So in other words,

Andi: spend the money now.

Joe: That’s

Al: what they’re implying.

Joe: YOLO.

Andi: I haven’t heard it as a verb before. An action verb. We YOLO’d.

Joe: I’ve heard of like, FOMO. What’s FOMO? Like fear of missing out? Fear of missing out. Yeah. Yeah, Never. Nope. I haven’t used the YOLO’d.

Al: Yeah, but you only live once.

Yeah. My, my, I have a friend, Wendy that says AMMO. She has, she doesn’t have, FOMO. She has AMMO. Afraid of missing out. Oh, afraid of Everyone else says FOMO, but she has ammo.

Joe: Got it. All right. And brunched away out of our retirement dreams.

Al: So they’re wondering if they’ve, done that.

Joe: Okay.

Al: Well we’ll find out.

Joe: a brunch. So what? They like to go Sunday brunch and they’re spending their money now live.

Al: They only live once and they’re having a lot of brunches. Got it.

Joe: All right. We’re 38, Pam and Jim is 41. Okay. We’re avid listeners of the podcast and excited to hear your spitball take on our situation.

Our biggest concern. We might be stuck working until we’re Fossil. Yeah. Fossilized. Oh, would you like to hang out with I would be so confused. Fossilized.

Al: Fossilized.

Joe: All right.

Al: I’ll pick up some. You’ll get some new words. I would love it.

Andi: Get some millennial language into ya.

Joe: Fossilized Philosophized. Since we’re only now deciding to get serious about saving for retirement, better late than ever. Let’s start with the fun stuff. Gym is a bourbon enthusiast. Okay, well, I’m all about the gym. Nothing like a gold rush in bees knees to wash down our existing dread.

Andi: Existential dread.

Joe: Existential. Different than existential, but I’m just killing it today. Jim rolls around in style with his 2024 Tesla while I cruise in my Trustee 2010 Ford, because nothing says living the dream like an older car that has seen some serious mileage. Yeah, that’s great. All right.

Our grand plan is to retire in 59 and 62 with an annual retirement spend of $144,000 net in today’s dollars, but. We’re well aware that one or both of us might be slinging side gigs until Jim hits 65. Jim’s career does offer some decent part-time or contract work, I think maybe 50 or a hundred thousand dollars a year.

The dream is to save enough cash to bail on our full-time jobs at 59 62 Particular if our work environments become as toxic as the leftover sushi. We ate last Friday,

Al: so they kept it in their fridge. It didn’t work out too well. Oh boy.

Joe: Seriously, who needs that drama? Not me. Now let’s talk pensions because Jim’s got a couple of golden geese ready to hatchet 65.

Small military pension National Guard, they’ll will net $2,500 a month co adjusted in a lump sum payout from his current gig that is conservatively estimated about $750,000 if he stays until 62. Here’s the current details. Household income is 260,000, tax bracket, 24%, 2.5%. State of Arizona annual spend is $120,000.

Annual savings. Retirement a hundred percent goes to Roth, is $70,000. We both max our employer plan of 23 5 and IRAs of $7,000. Plus, we max out our HSA at 8,550 retirement savings. Today we got 350,000 bucks, 4 0 3 B Roth 1 10, 4 0 1 K, Roth 1 0 5, Roth IRA 70 and 15 TSP Roth 50, right? So $350,000 total.

They got $30,000 in, HSA, they got some cash of $260,000, 60,000 emergency fund. A hundred thousand is for home renovations, and 30,000 is for a new vehicle for Pam. $70,000. Miscellaneous various buckets. Vacation annual premiums, annual employment expenses, holidays, birthdays. However, in all honesty, Pam likes her emergency fund to have an emergency fund to hoard cash.

All right?

Andi: Her emergency fund has an emergency fund. I like that.

Joe: Yeah, I like it. All right. We got a $210,000 mortgage on the home at 2.75%. Home is worth 425 grand. We have no other debt. We put down the avocado toast in our early thirties. Got serious about our finances and paid off $250,000 of student loans.

Okay, thanks. So here we are trying to figure it out. If we are trading our future for mimosas in Instagram likes, any advice or snarky comments you’ve got we can handle. All right. Okay.

Andi: So Pam and Jim are expecting you to Dave Ramsey this and tell ’em that they’ve screwed up.

Al: Well, first of all, I would say 600,000 saved at roughly age 40. That’s amazing. Good. They’re paying $70,000 a year. They wanna retire in 12 years. In 2020? 20. No, 20. 62 for Jim.

Joe: Okay.

Al: Yeah. Over 20 years. So at any rate, I think, the amount of savings is great. The amount they have, the, income’s 268, I can’t remember what the Fidelity table, I think it said you needed two times your income at 40, something like that. And they’re there. Plus they’re saving a ton.

Joe: I don’t know. Let’s go. Let’s say you got $600,000. Yeah. Start with that. Go. Let’s just say 20 years. 20 years, and you’re saving $70,000 a year. Yeah. Pick 7%. Well, 3% because half of that is in cash, so they got $3 million. Which allows, so

Al: 4% of that is 118,000, but I don’t think what they’re saving will be in cash. I think the cash stays the same.

Joe: Well, even at 3% is pretty conservative.

Al: Yeah. Very conservative.

Joe: So let’s say it’s anywhere from 118,000 on the low side, maybe to 160,000 on the high.

Al: Yeah. Or even a couple hundred thousand. Sure. With more rate of return. I, think that, yeah. Will you have to work a little bit? Maybe at this spending level. But the thing is, it’s way too early to predict what you want your retirement to, to look. I mean, what we say is if you’ve got a certain amount of savings at certain age, which you do, and you’re saving at least 20% of your income, which you are actually saving more than that, you should be fine. Can you retire early? Probably. Do you have to work a little part-time at this spending rate? Maybe, but it’s, I think Joe, I think they’re on a really good track here. What would you change given their situation?

Joe: What would I change? They got $260,000 of household income. Yeah, I don’t know. And they’re, doing a hundred percent Roth in, in most cases, I would say. That’s great. But I think they could get some tax savings if they put a little bit into a pre-tax account, because they’re gonna give up the standard deduction and, maybe the 10% tax bracket in retirement, which are really low rates. So having some dollars pre-tax while they’re in a high tax bracket today, they’re gonna be in a very low tax bracket in the future because there’s. There’ll be very little income tax. Yeah. Because everything is gonna come out tax free. Yeah, no, I agree.

Al: But, yet they, you gotta account for, they have $30,000 a pension. So that’s, then the Social Security will sit on top of that. I guess if you, the RMDs, I mean based, probably you’re guessing just a little bit. You don’t, you wouldn’t put a lot, maybe 25% in pre-tax, something like that.

Joe: I mean, you could save a couple of bucks and leverage the tax rates today at 260 and then,

Al: they’re gonna be in a lot lower tax bracket in retirement. So, yeah, I agreed and, then. The way you think about it, assuming the tax laws are similar, then at retirement, 21 years from now, then you’re in lower bracket, you start converting in a lower bracket what you have in pre-tax.

So that Yeah, that, that, does make a lot of sense. Yeah.

Joe: You could, save 22% in tax today. And you could convert it out in the 10 Yeah. If tax rates were exactly the same.

Al: Yeah. But yeah, I like the, I don’t know how the retirement savings is invested, but that should be probably more stock based than bonds and safety. Cash is fine. You got a lot of cash. but there, there’s nothing wrong with a lot of cash, but I would, the extra savings I would put into, you know, your retirement accounts and, get that invested.

Joe: So I  agree. A lot of advisors, you know, and some of our advisors too. It’s like they see 260,000 in cash and they’re like, oh my God, that’s a lot of cash. Yeah. They’re like, well, have you ever had cash before? You feel comfortable with a little bit of cash, you know? Yeah. You have some flexibility, and they have plenty of dollars that are invested, and they’re saving 70,000 as long as it’s 70,000 is going into long term growth

Al: investments. Plus they’ve got, some designations, house remodel, and a Well, I like the cash reserve on the cash reserve. Yeah. That is nice, huh?

Joe: Yeah.

Al: Yeah, so, so you’re saying you’ve got some cash, so it feels good, huh? Yeah, I got 50 bucks.

So wait a minute. Are we getting a big wallet on Joe?

Joe: No. No. Not even close. But yeah, it’s gonna take quite some time for that.

Al: yeah, I, honestly, I think they’re doing great. I don’t, I wouldn’t change too much here.

Joe: Yeah. Except for some of the verbiage that you’re using, the bees, knees, ified, whatever.

Al: Yeah. I mean, the only, I’m not a fan of bourbon origin, but that’s just me. I like beer.

Joe: Oh, I love, I don’t love, I like bourbon.

Al: You like bourbon?

Joe: Yeah.

Al: Yep.

Joe: gin. I’m not,

Al: I can’t tell you the last time I even saw Gin. I will, I actually, I don’t drink straight alcohol anymore, but I do like, margaritas. So I guess I like tequila a little bit. You mean just like I don’t do vodka on the rock, or I don’t on the rock? No, I don’t. Yeah. Shots. No, I’m not. that’s snapper.

Joe: Just line up the shots with Big Al.

Al: Just line ’em up and you’ll watch him sit there.

Joe: Oh. When is the last time you’ve done a shot?

Al: Oh, probably on vacation like a, I mean, probably Ouzo shot probably two weeks.

Yeah, it was an Ouzo shot. It was terrible unless you like liquorice.

Joe: Oh, no.

Al: I mean, I can’t say I don’t, I mean, I did, I probably had two or three shots on our five week vacation, so I will do it. It’s just not my preferred drink. Three shots in five weeks. that’s a lot. That’s pretty aggressive.

Joe: That’s, pretty.

Al: You know, you get to my age, that’s a day,

Joe: you had a five week vacation.

Al: One shot might be the end of you.

Joe: Oh, all so yeah, very good. Thanks Pam and Jim.

We’re 39 with $840K. Can We Retire at Age 57? (Matt, PA)

Joe: We’ll move on here. We’re cruising on to Matt in PA. Hey, Andi, Joe, Big Al, looking for a little retirement spitball. My wife and I are both 39. We would like to retire around 57. Here’s our current situation. We’ve got $600,000 in retirement accounts, 30,000 in Roth, one 30 in a brokerage, 80,000 in savings, in 50 K in 5 29. Plans for our three daughters, ages 12, 10, and eight. I max up my 4 0 3 B each year, and my wife owns her own dental practice and contributes $65,000 to her 401k.

We set aside $1,500 a month into 5 29 plans, 5,000 into our brokerage account, and then we max out the backdoor Roths every year. So what possible question could he have? Well, keep going. Mean like the wife got a dental practice, they’re saving

Al: a obscene amount of money. They already got 800,000. They got, they’re not even 40

Joe: million bucks and he’s 39

Al: and they’re saving a fortune.

Joe: I don’t know if what, how can I help you? We like to spend $160,000 in today’s dollars. When we retire, are we on track? Other details? I drive a 2017 Toyota Highlander and I enjoy a good bourbon. Oh, two bourbons in a row here. You’re right. Double it up. Or a craft beer.

Al: Now that’s for me. Oh, can’t stand. I know, You don’t like craft? Don’t way.

Joe: Nope.

Al: I think I’d rather have an Ouzo.

Joe: That’s saying something. Craft beer. Just. Have you had, one lately that long before?

Al: I have  an IPA actually, Ann and Ryan and I got one in, Anos at lunch, and Ryan went like that and Ann took a sip and put it down and I drank it.

But Little what? Put a little sip of it. That stuff’s nasty.

Joe: all So what is Y drive? Little Subaru. Okay. They from Seattle? No, PA. All right. Impressive. And she likes a little rose. Okay. Things in advance for your spitball. Well, first of all, Matty doing a phenomenal job. Yeah. are they on track?

Yeah. I don’t even have to get the calculator out. I don’t think so. What? They wanna retire at what age?

Andi: 57.

Joe: 57. 57. I wanna spend $160,000 a year.

Al: Let’s call it 18 years.

Joe: So they need 5 million bucks.

Al: Yep. So they got eight 40 and they’re saving, let’s call it, 90 grand. Eight 40.

Joe: All right. So what did I do, first of all, is that here’s, the little trick you guys can do at home, right?

He wants to spend $160,000 a year. So you put $160,000 in the all calculator. And then at 57, you probably don’t wanna take more than 3% out of the portfolio if you’re just kind of thinking a ballpark of how much money that nest egg should be. To be sustainable for the rest of their lives.

So at $160,000, I divide that by 3% and I get 5.3 million. So that’s my target. So a lot of times people wanna know what’s the number, right? Hey, I wanna strive for something, I want to get to a certain number, and then I feel that, alright then I can work towards that goal where Matt is gonna work for this goal for the next 18, 20 years, let’s say.

Al: Yeah, but the one 60 is in today’s dollars, so you gotta inflate that.

Joe: Okay, well, we’re in the same ballpark. This is minor. Minor. This is a spitball. Now, minor details not all right. Fine, but we’ll, okay, let’s do what? Let’s just say this in the house, once they get super technical. Alright, so let’s use 3.5% inflation.

Over 18 years, you’re

Al: gonna get probably two, two hundred and ten, two twenty.

Joe: Yeah. One 60. Alright, we got 3.5 is then we got 18 years. Future value of that is, let’s call it two ninety seven. That seems high. no, that’s not right. I know this calculator is

Al: not good.

Joe: Where’s yours? Let me use yours.

Al: Yeah, I’ll do it.

So, so 1, 1 60 at 3% for 18 years is, 2 72. It’s higher than we thought.

Joe: Yeah, so I was pretty close then.

Al: You’re pretty close. All right.

Joe: So $840,000, they’re saving $90,000 a year. Assuming, all right.

Al: Yeah. So I’m gonna say three and a half percent distribution rate. So they need, let’s see, 2 72, it’s gonna give ’em three.

So they need about 7 million.

Joe: Yeah. But, then you have to calculate Social Security. You got a bridge. I know. I would say they need around five. Five and a half is, yeah, I

Al: get 7.7. But I agree that’s not including Social Security

Joe: and that’s not including increased savings as they are increased,

Al: you know,

Joe: income and things like that.

That’s correct. A spitball 5 million is what they need. Yeah. If they keep saving what they’re saving, they’re gonna get close. Yep. So they need to save a little bit more if they wanna spend $160,000 a year.

Al: But that’s the toggle. But here’s the funny thing is, you can probably work two more years and do what you’re doing and be fine.

So sometimes just adding a year or two or three, or working part-time for a couple years. to maintain and preserve the portfolio can make all the difference. So we’re just giving you a quick spitball, I think. I think I would basically say, you’re on track. You’re on track. Could you make a few little changes?

Maybe can you retire at 50? Seven with the numbers you said it might be just a tad tight, but there’s so many variables and that’s such a long period of time. But

Joe: alright, so what there’s, she owns her dental practice, there’s gotta be equity within the e, the dental would think you could sell it. Yeah, that’s Right? That’s right. so there’s other assets here that we’re probably not including.

Al: yeah, and Jim will hit 50 at some point. if you have to save more-

Joe: It’s Matt, it’s Matt. His name is Matt.

Al: Oh, Matt.

Andi: Jim was the previous one.

Al: Oh, I’m looking at the wrong one. Okay. Sorry, Matt, which I know isn’t your name anyway, so it doesn’t really matter.

Joe: Yeah, 39. I mean, you’re doing everything want, I mean, what would you change? Would you change anything here? no. I, like it. I, so they’re fully funding 4 0 1 4 oh k and 4 0 3 B plans. They’re doing backdoor Roths and

Al: then they’re saving into a brokerage account. I don’t know what the income is.

I might wanna get some little bit more into tax free. Maybe. Maybe I might do that. Yeah.

Joe: I don’t know what the income is either. I don’t know what percentage of income that they’re saving, but they’re saving a ton of money. I know, but I guess, but they’re

Al: spending one 60, if they’re in the 24% bracket, I would get some into the end, into the Roth.

Joe: The Roth. The Roth? Well they’re doing backdoor Roths.

Al: I know they’re doing some, it just depends on their bracket.

Joe: Yeah but

Al: yeah, I can’t think of too much.

Joe: I dunno what, is, we could get really nitpicky, what’s the debt? Wait. Yeah. Do you have a disability policy umbrella?

Joe: I do. You have an estate plan?

they’re probably gonna, I don’t know, with their house and everything else, they probably got a couple million dollars of assets probably. I would imagine their house close to it. PA million dollars. Yeah. He’s a

Al: dentist and yeah, with the dental practice. With the dental practice, yeah. Could be

Joe: alright.

but yeah, I think you’re doing great. But spending $160,000, you need a lot more liquid capital than you think.

Al: Yeah. I think that’s probably the key. And but once, but you’ve add in Social Security, so you’re talking about a bridge period. So maybe that works out just fine.

Joe: Yeah. What they gotta figure out is that they’re retiring at 57, so the bridge from 57 to like 57, 10 years or more, 50 that’s gonna come.

Yeah. They probably are both high income earners, so their Social Security’s gonna be pretty healthy, right? So their distribution rate, you know, could be a little bit lower from there. So it’s that bridge period is the real planning is how he’s going to bridge. Save as much as you can right now and make sure that you’re prudent in your investment strategy.

rebalance, tax manage, you know, just constantly kind of look at little things that you can tweak each year, but where. I think the real planning is gonna come into you is that alright, now you have to spend the money and you have a big bridge period from 57 to 67 or 57 to 70 or whenever that they decide to take Social Security.

and that’s a long time from now. And so You know, there’s a lot of talk being, oh, Social Security’s not gonna be there.

Al: Well, there is talk. We’ll see. I, don’t, I would imagine there’s gonna be talk, I don’t think it’s going away. I don’t know. You know, that

Andi: brings up an interesting point ’cause we have a lot of people that say, you know, why don’t you do spitballs for normal people? Why is it always people that have 7 million or $10 million that are, you know, asking whether or not they can afford to retire? And I think what this points out is the fact that everybody has anxiety about retirement and whether or not they can get there. And you have to be able to know if you know what your spending is going to be in retirement, how you save to get there, and whether or not you have enough to get there.

Joe: Yeah. I, you know, and it’s funny. You need to have targets, right? And it doesn’t have to, like a spitball is just in the back of the envelope. All right? Well, here we need to get to a certain dollar figure in the next 20 years. If that’s 5 million or if that’s 500,000, or if it’s a hundred grand, it doesn’t necessarily matter. I think the first step that people need to figure out, it’s just like, okay, well what do we need to do? And then do we have the resources to get there? And if we don’t have the resources to get there, then that’s where you have to pivot. It’s like, all right, now I have to work a little bit longer. I’m gonna have to spend a little bit less, or we’re gonna have to do part-time work or downsize, or, rent out a room that’s, you got, how many

Al: rooms do you have? You gotta imagine.

Joe: No, not even. Not even close. Well, yeah, bedrooms.

Al: I mean, I, think that your point is well taken, Andi. I mean, the principles work at any income level, any savings level, any spending target. Honestly, I think some of the most successful retirees that I have seen in my entire career are teachers that have saved a couple hundred thousand dollars. And they’re spending 40,000 and their pension is 60. They’re doing great. So it just, the, but the principles are the same and I think that’s the important thing.

Joe: You think money buys happiness Al?

Al: I don’t think it buys happiness, but it does make life more comfortable and you can do more fun things. So I think you have to be happy to start with.

Joe: Well, you would know.

Al: I would know.

Joe: Yeah. Big money, Al big wallet. Yeah.

Al: I dirty my wallet. It’s very tiny. So it’s like George Costanza.

It’s been, a while since you’ve seen it. Yeah. It’s, well, is here it is. Oh, wow. That, I mean, it’s like, it’s a pretty small wallet. got it.

Joe: That’s the wallet within the wallet.

Complete the 8th Annual YMYW Podcast Survey for your chance at a $100 Amazon e-gift card!

Andi: I’ve always said Your Money, Your Wealth® is your podcast.  So which financial topics are the most important to you today, what are your favorite things about YMYW, and what would make it even better for you? You’ve got until August 31st to answer these and 15 other questions for your chance to win a $100 Amazon e-gift card. See all those links to free financial resources in the description of today’s episode? Click or tap the one for the 8th annual YMYW Podcast Survey. Use the secret password ymyw, and weigh in with your thoughts. Help us make Your Money, Your Wealth® your favorite retirement and personal finance podcast. US residents only, no purchase necessary, survey and giveaway close and winner chosen at 5pm Pacific time on August 31st, 2025. Now, if you’ve got money questions or you want to get a Retirement Spitball Analysis of your own, click or tap Ask Joe and Big Al in the episode description, and send us an email or a voice message, like this one:

Do Roth Conversions Make Sense Given Our High Income and Tax Bracket? What Pension Option is Best? (Will and Jane, NY – voice)

Will: Hello, Al, Joe, and Andi,   a friend of mine turned me on to the show about two years ago, and I’ve listened ever since. I even get my wife to listen on those long road trips, although somewhat of a captive audience. I’m 57, my wife is 58. We plan on retiring in two years when our third and last child graduates from college. Our combined income is about $315K. My wife drives a 2016 GMC SUV. I finally caved in and retired my 2009 Honda Odyssey with a quarter million miles on it, squeaking out every mile for that third kid’s college. Our drink of choice is a margarita for me, and maybe an occasional glass of white wine for my wife with our 7-year-old Cavapoo dog.

We always drove used cars, and from our early twenties, we just kept contributing money to 403(b). 30 years later, it’s now $1.8M pre-tax. $40,000 in Roth, $40,000 of inherited IRA, an after-tax brokerage account of about $700K. Social Security will be around $45,000 each at full retirement. My wife and I are each entitled to a $100K pension, so a little over $200K combined, no COLA, but no state tax if we reside in our current state, New York.

Do Roth conversions make sense given our high income and tax bracket? And what’s a reasonable joint survivor pension option? Estimating our current expenses of around $10 to 12,000, for living expenses in retirement it could be a little more with travel and a possible snowbird home. We plan on treating our pension as the bond portion of our portfolio, still remaining about 85 to 95% in equities, even in retirement, with plans of waiting out those down-market years. I know it sounds easier said than done.  Although we will not need to withdraw from the 403(b) living expenses, should we withdraw with tax implications for the second home purchase, or just take out a mortgage?

Interestingly, our employer reimburses for IRMAA costs. I always hear you speak of IRMAA penalties, but the fact that we get it reimbursed, does that tip the scale for doing Roth conversions earlier? Some conversion software model that I’ve looked at suggests converting the $1.8M early in retirement, in the first five, six years, or should we limit it to the 24% tax bracket, or just rip the Band-Aid off? Those models suggest that should someone be lucky enough to live into their nineties, that could be a tax savings of about $600,000. Do we use our after-tax brokerage to pay the Roth tax on that, or can we use that for our snowbird down payment, or should we just rent somewhere for those years that we want to go?

Also, could you give us an idea of your spitball on some pension options? We don’t have any significant known health issues. I know the conventional thinking is maybe we each take our single life max pension because the surviving spouse will have their own. However, the more I think about it, the option of maximizing overall family income for the last man standing and the kids’ inheritance, could the cost of a lower pension survivor option be worth it? Thanks for taking the time to answer these questions. All the best, Will and Jane from New York.

Andi: And then he included his pension options, helpfully. So those are below there for you.

Joe: Very cool. All right. well, thank you. will and Jane. So a couple things. He’s got a hell of a pension there.

Al: Yeah, he does. I mean, couple hundred thousand before Social Security and the spending is 144,000. So right off the bat, check looks good.

Joe: There’s a lot of Roth calculators out there today. And so he’s like, you know, he’s running it through the calculator, right? And he is like, well, if I do this, it looks like I’m gonna have, you know, $600,000 extra if I live until nineties, right?

Al: Yeah. That is based on assumptions. A lot of assumptions.

Joe: A lot of assumptions. So you gotta be careful with that because the net benefit to you could be several million dollars, or it could be negative 600,000. You know, really depending on what you’re using as assumptions and tax rates, what you’re using as assumptions, you know, for the rate of return on the overall Roth dollars as well.

Al: The market has a lot to do with it.

Joe: Yeah. So. Does it make sense to do conversions in high tax rates? I believe the answer’s yes, but I would not wanna rip the mandate off here. I think I go to the top of the 24% tax bracket and I call it good there.

Al: A hundred percent agree. So income is three 15, Joe, the standard deductions about 30,000.

and the top of the 24% bracket is like 3 95, so it’s around a hundred thousand Roth conversion, give or take. So, you know, something in that range. And so a hundred thousand dollars Roth conversion ish, even right now keeps you in the 24% bracket. I would just keep doing that year in, year out, and I wouldn’t probably go over the 24% bracket.

I think, Roth conversions are very important, don’t get me wrong. And the reason is because you have such high. Pensions, fixed income, you’re gonna have high ordinary income your entire life, so you wanna get as much converted as possible. But I don’t think I go past the 24% bracket. so

Joe: he’s 57, 58.

When did he wanna retire and how much money is he putting into the plan?

Al: Well, he wants to retire in two years. Okay. And as far as going into the plan, okay, well,

Joe: so two years, let’s say he maxes. Yeah. Yeah. So he is got one, 1.8. Let’s say it’s worth a couple million bucks, $2 million at 58 or 60, right when he retires.

By the time he’s 75, that 2 million, let’s call it, let’s say doubles. Yeah. Depending on how it’s invested. But he wants to go a hundred percent or 85% stocks because he’s using, he does his, pension as a bond allocation, for his overall portfolio, which I want to talk about in a second here too. But that could be $4 million, maybe more.

By the time RMDs hit, so you know you’re looking at $160,000 in an RMD at a minimum, right? Because there’s no need for those dollars. $160,000 RMD, plus he’s got $200,000 of fixed income from the pensions, and then he has Social Security

Al: on top of that. Now when he retires, then his income goes from three 15 to call it two oh five, so 2 0 5.

Yeah. So he could add another a hundred thousand. We would do a couple hundred thousand of Roth conversions and still stay in the 24% bracket and get a lot, a whole lot converted by the time you get to 75.

Joe: Yeah. you’re trying to equalize the bracket instead of spiking it. Yeah. I’m glad he is thinking about it because most people wouldn’t think about it.

And then that retirement account will continue to grow and once. RMDs hit, right? It’s gonna spike ’em into a higher tax bracket. But if you do conversions to the top of the 24% tax bracket from now until RMDs, I don’t think the RMDs gonna kick ’em into a higher bracket

Al: pr. I would agree with that.

Yep. Yep. It doesn’t have to be the whole thing.

Joe: What do you think did, do you agree with using the pensions as a bond allocation and just continued the retirement accounts? A hundred percent equities. And so, a lot of people think this way, and there’s no right or wrong answer here because he has fixed income of 200,000.

He doesn’t necessarily need any dollars from the portfolio, right? And a lot of advisors look at what is the distribution strategy of taking dollars from a retirement account? And it’s usually what is the demand for the portfolio Sure. Is going to determine how much money that you have in fixed income or safe money such as treasuries, CDs, cash bonds.

He, there, there’s no need for the portfolio. So it, it makes sense to just say, all right, let’s, maximize this for growth a hundred percent equities. I’m, totally on board on that.

Al: And I would agree. I don’t have any problem with that because, the fixed, when the fixed income is so much greater than the expenses, then you kind of have a choice, right?

You could take the, from the standpoint that I don’t really need to take a lot of risks, so I can go pretty safe in my retirement, portfolio. You, certainly, there’s nothing wrong with that, but in this case, it sounds like the retirement dollars, Joe will probably eventually be for the kids, right?

And if it’s for the kids, then you’ve got. 30 plus year timeframe. Yeah, go all in. Why not? and especially when you have Social Security on top of that, right? It’s, it’s gonna be a, lot of income and, why not? why not invest it for the kids or, you know, another thing that happens is maybe you wanna supplement your income.

Substantially in retirement by travel or whatever else. And you have the resources to do that. So I’m happy either way, but I’m certainly happy with almost all equities based upon your circumstances. ’cause you have so much fixed income.

Joe: Yeah. And you can always pivot.

Al: Yeah. Anytime you want to. He’s,

Joe: young, 57.

He’s gonna retire 58, you know, let’s say at 68. You know, it’s like, I got enough. Let’s stop the risk. Yeah, let’s stop the risk. And, you know. I, don’t like seeing the balance of my accounts, you know, jump all over the place. You know,

Al: it’s, it is easy to say, I’m going all equities when we’ve had a 15 year bull market.

Exactly. Bull run. But

Joe: let’s say that grows to $4 million, that 4 million drops to two, he’s not gonna be

Al: super happy. He may not be. Yeah. So.

Joe: I, think mathematically and if you put this into a retirement scenario or a retirement plan, yeah. You know, it’s, that’s the recommendation. Do a conversion.

Sure. Get rip the bandaid off. And if it’s all inequities and if you live to age 90, your net return is gonna be a lot higher because all of those dollars are gonna come to you tax free or to the kids or the heirs tax free. So, but. Like I said, I could guarantee one thing. That’s the only thing that we can guarantee is that those things are wrong, right?

they’re wrong when they are, the day they are printed, because you’re assuming a flat line rate of return of 6%, 8%, 3%, whatever that you’re doing, the market just doesn’t work that way unless you’re going into a 30 year cd That’s guaranteed an honor. I, don’t know, in my 30 years doing this, I don’t think I’d

Al: beat

Joe: that either.

Al: That’s pretty hard to find. What, about the. Pensions. We’ve got different options. I’ll summarize, so the pension, is 105,000. if then that’s, with a single life. And then, they could do, 25% survivors and then it’s 103050% survivors, or a hundred thousand, I’ll just say a hundred percent is 97,000.

To me, that’s super easy. I do the a hundred percent. A hundred percent. 97 thou, that’s not much of a penalty for a peace of mind that my spouse will be covered when I’m gone. Yeah. What you get a hundred thousand versus how much, what, was the single life? Yeah. It’s, in 97 versus 1 0 5.

Joe: Yeah.

Al: Yeah. I, would take that every day.

You’re talking a few

Joe: thousand dollars, a couple, a hundred

Al: bucks a month. You know, when I’m, Joe, I don’t know about you, but I’m on my deathbed thinking I’m kind of glad I did the a hundred percent.

Joe: Yeah. If, there was a larger spread, I think the answer would be a little bit different.

Yeah. That bread is pretty small. Pretty small. $5,000 you’d take all in, or if you die, your wife still gets. 97,000, almost a hundred thousand. Yeah. I

Al: would, yeah. I like that.

Joe: Yep, for sure. With the amount of fixed income that will and Jean have in regards to their beach home or cottage or where, wherever they wanna go to.

Snowbird home. What? Summer? Summer home. Summer home. They wanna do a snowbird home. Well, I guess they live in New York, so they have a, why would they have a summer? Wouldn’t it be a winter home?

Andi: They call it a snowbird home. So yes, they wanna leave in the winter if they’re, doing a snowbird thing, they wanna go like Arizona or Florida

Joe: or someplace,

Al: Arizona, or Florida’s

Joe: typical spots.

Got it. It depends on how rich they want to go with. The second home.

Al: yeah. It also depends upon how much they wanna do in Roth conversions. ’cause you that’s a lot of what the brokerage account would be for to pay those taxes. I

Joe: like liquidity. yeah, me too. So I would take a mortgage depending on where rates are, for you, you know, maybe you put 50% down, but maybe you hold a little bit of a note because they got plenty of fixed income To cover the note. Yeah. And the RMDs are gonna kick out and they’re gonna have extra income that they’re either gonna reinvest or. But if they’re taking dollars out of retirement accounts and paying the tax, you know, the tax is gonna be a lot more expensive, I think, than the interest payments.

Al: Yeah.

And I certainly, yeah, I would tend to agree with that. yeah, I would do the loan too, and I don’t know how much, it depends upon what, how much you wanna borrow. ’cause if it’s, 500,000, then. Yeah. I mean, you could go either way, but I still would probably take the loan, maybe put a couple hundred thousand down, something like that, just to preserve your liquidity for whatever you wanna spend money on, and not pull money outta retirement accounts and or for money to pay taxes on Roth conversions.

if it’s more expensive than it’s even doubly more. So I want to, I wanna save my liquidity.

Joe: Yeah. you put that in a model, it’s gonna depend on what your interest rate is on the note. Yeah.

Al: And what you’re gonna assume. As a rate of return on the investments, I think I would probably get just being conservative, accountant, I’d probably get a fixed rate and then look to refinance later, hopefully if the rates go down.

Joe: Yeah. I think he’s sitting in a really good spot. A lot of really good questions here. Yep. Yeah. Congratulations, Will and Jane,

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How Will Long-Term Capital Gains on the Installment Sale of My Company Be Taxed? (Juan’s Mother, FL)

Joe: Let’s move on to Juan’s mother.

Al: Okay.

Andi: And we have no reference of who Juan is, so,

Al: well, we must have had, he must have asked a question at one point.

Andi: Well, we did have a, Juan that used to write in quite frequently, but I think he was in a completely different part of the country.

So I’m not sure if there’s a relationship here or not.

Joe: Didn’t Juan like write in kind of goofy stuff as well? Like-

Andi: Yes. Yes. That particular Juan, but there may be others.

Al: that could be him. And she lives in Florida. He lives somewhere else.

Joe: Maybe not that Juan?

Andi: Yeah.

Joe: But a different Juan?

Andi: Exactly.

Al: Look at that. Wow.

Joe: Wow. Oh gosh. All right. All right, here we go. Juan’s mother in Florida. Hi Andi. Joan Big Love the show. Listen to the show. During my morning Luxe, or while I’m driving in my LR Defender Land. Land Rover Defender.

Al: I think so. Yeah. That’d be a big car, right?

Joe: Yeah.

Andi: For Juan’s mother. Yeah.

Al: Gotta be safe, right? That’s right.

so you know what happened to me? No.

Joe: So I had a Land Rover, I do know that. And, had past tense. Yeah, so what happened was some rats got into my car, into the car. Not inside the car, but like underneath the,

Al: in the engine. Like in the engine. Oh. That happened to Anne one time. And they, and all the wires and they died and it stung.

Did you have that too? No, I didn’t. I didn’t look. You just, straighted it in? I

Joe: drove and then I was like maybe a half a mile from my house and Uhhuh the, car just stalled. Oh. And I was like, well, it almost felt like I ran outta gas. Okay. You know, it was like, and I was like, God, I haven’t ran outta gas since like high school.

Yeah. So like, this is weird. And I looked okay, the gas gauge looks fine. I’m like, what is going on with this car? So luckily I just, I was able to walk home. And then there’s a guy I know, that has a little kind of shop and then he sells different cars just on the street from where I live. So I call him up and he picked up the car and he’s like, yeah, you got a rat problem and you gotta fix all this stuff and blah, blah, blah.

Got it. And I was like, okay, we’ll just fix it. that, that car’s been paid off for years and I was gonna just drive it like, you know, some of our listeners here to 400,000 miles, right? Sure. And, he goes, well, I really, I’ll, fix it, but I really wanna buy your car. Really? And I said, okay. And he’s like, well, you know, if you’re ever thinking about selling it, let me know.

It’d be a really good price. And of course, you know the it, my mind starts thinking, I was like, well, what the hell? Okay, maybe it’s time for a new car, right? Gimme me a good price for it. But I didn’t have the title for it.

Al: How come?

Joe: I don’t know.

Al: I don’t know.

Joe: Like

Al: you couldn’t find it paid off for years,

Joe: but you didn’t have the title.

And then so he is like, yeah, I need the title. So I,

Al: and it was a lease at first and then I bought out the lease. Oh yeah, maybe you never got it or lost it or whatever.

Joe: I don’t know. You

Al: could do it without the pink slip these days.

Joe: Well, that’s what I did. He sold it, gave me cash and yeah, and on my merry way.

And then, so this was a couple months ago and he is like, Hey, I need the title. And I was like, yeah, alright, well here. Then I called JP Morgan that I had the lease with and I said, Hey, can you resend me the title? They were like, no problem. But it take me 50 days. So he sold my, Range Rover, land Rover.

And then to someone

Al: else. To someone else. Oh. So he made a profit and

Joe: he goes, Hey, I need your title. And I was like, I told you, I don’t have the title, but I called JP Morgan and said, it’s gonna be here in 40 some days. He goes, well, I sold the vehicle, I need the title. I’m like, I’m not a car guy.

I don’t know what the hell to do here. I go, I’m, doing everything that I can. So then I get a message from him. And he’s got an accent. He’s like Joseph, he goes. I need the title ASAP or I’m gonna drive that Land Rover into your driveway. Haven’t just leave it there. I was like, that’s fine.

Just leave the check in the, yeah. And then I’ll sell it to someone else when the, Yeah. But God, he was aggressive. What? Yeah. Wow. And so what, so you mean, do you keep your titles like in a safe or something? I don’t know. I, guess I’m irresponsible on titles. I do. I literally

Andi: have the title for my vehicle in a filing cabinet right next to where I’m sitting right now.

Al: Yes, I

Andi: have the title

Al: to my car right here. I have it in my file cabinet. It’s not in a safe, but no one would know where it is, so

Joe: yeah. I didn’t even think twice. It was like, all right, well here, do you have to? I was like, oh my gosh.

Al: But honestly, I mean we just sold Ryan’s car and we had the title and they said, yeah, you don’t really need it.

We can do it through DMV. I mean, it makes it easier and quicker, but it wasn’t 40 days. It might’ve been a few extra hours. Yeah. So

Joe: that’s just top of mind. Anyway, sorry. I digress. yeah. Alright, so now I wonder if

Andi: you have to worry about whether or not somebody, you know, you get another car and the rats eat the wires on that one.

Yeah. I didn’t even realize that was a problem.

Al: So our rat story not near as entertaining as yours. No. It just didn’t chew anything. It just crawled in there and died. And died and the car stunk and we couldn’t figure out where the smell was coming from. And she finally drove it to our mechanic and he said, oh yeah, you got a dead animal in there somewhere.

And he just started pulling out stuff. Oh, there it is.

Joe: Oh

Al: yeah.

Joe: I, don’t think it was the animal, like had lunch Yeah. With my wires.

Al: is what happened. And I would’ve thought Ben would’ve died on Yeah. Probably.

Andi: But

Al: probably drank some gasoline or whatever. Yeah. Siphon

Andi: some gas. Bad ass rad.

Oh.

Joe: but. Anyway. Okay, so I’m still waiting for you. Yeah. Talk

Andi: about a derail.

Joe: Yeah, if

Al: anyone can help me with this. I mean, what’s a quick way to do this? I think you go to DMV and just get, try to get the title. Have, when’s the last time you’ve

Joe: been to the dmv?

Al: Well, it actually to get my real id. Yeah. Real id.

It wasn’t as bad as I had remembered, actually. I mean, it still took two hours. Yeah. Anyway.

Joe: Alright. Okay, so, drink of choice. Here is Deep Eddie Cranberry. Deep Eddie. Okay. All right. Never heard of that. What’s deep? Eddie Cranberry? Is that like a, I don’t know.

Andi: I’ll look it up. Shelter or something?

Joe: that sounds like it.

Although it’s hard to find in some places. Yeah, I don’t think anyone’s heard it. It’s vodka. That’s why, it’s hard. Oh, it’s vodka, it’s deep.

Andi: Eddie Cranberry vodka.

Joe: All. Alright. I recently asked my son Juan a tax question. He couldn’t find the answer anywhere. I was hoping Big Al could help. I’m married in 2025.

I should have ordinary income of about $350,000. In addition. I should also have $300,000 in long-term capital gains from an installment sale. My company understand that $350,000 of income will be tiered after the standard deduction. Next 24,000 will be taxed at 10% and on up my capital gains then will sit on top.

Here’s my question. Will the 300,000 in long-term capital gains be taxed at 18.8% where I start, or 23.8 where I end up? Or are they also layered like the ordinary income tax rates? In other words, will the first 250 in the cap gains be at 18.8 in the last 50,000 will be taxed at 23.8? Appreciate the help Juan’s mother.

Okay. A couple things that I digest there. She’s got capital gains of 300,000, $350,000 of ordinary income and she’s, she’s married. Correct. So what she’s asking is that right? $350,000 of ordinary income you take minus the standard deduction. Yeah.

Al: So let’s just round it to 600,000 of income. Make it easy.

Joe: So total of $600,000 of income, it’s like, all right, well if that’s my total income, how much money am I gonna pay in tax? Well, there’s two taxes that she has to pay. One is ordinary income tax and the other is a capital gains tax. So what’s taxed first is the ordinary income. So you look at the tax brackets and you minus the standard deduction, and some of it’s gonna be taxed at 10%.

Some of it’s gonna be taxed at 12, 22 and 24. Yeah. And it’ll stop at 24. Yep. It stop at 24, and then the other $300,000 sits on top of that $300,000 or three 50 of. Ordinary income. Correct. So there’s tiers when it comes to capital gains rates? Yeah. There’s a 0% rate. There’s a 15% rate and there’s a 20% rate.

And then there’s also a net investment income tax that sits on top of that. Correct. That’s another 3.8% that will sit on top of the capital gains rates. That’s right. So she’s asking is everything, because she’s now in that 20% cap gains rate, plus she has to pay net investment income tax, is everything gonna be taxed at that 20% capital gains rate plus another 3.8 of net income tax?

Al: Yeah, net investment income. And the answer is. That was a great summary. The answer is, it’s, tiered. Tiered. So, very quickly, like so, and interestingly enough, the, and it depends upon your taxable income. So your taxable income. Actually if I do the actual numbers, 30 thou, so your tax income, 620,000 and so 600,000 is the cutoff for married filing joint for that.

For that 15% bracket. So, let me make sure as I say that’s right. That is not right. That is right. Married filing joint, yeah. If it falls below 600,000 is 15 50%. Oh. Then the 20% rate goes at 600. Above 600,000. So most of it will be taxed at 15% plus the net investment income tax at 3.8%. If you’re, if I have your numbers right, you got 20,000 extra capital gain, that’ll be taxed at 20% plus 3.8, so 23.8 as you’ve mentioned.

So it’s tiered. Most of it sounds like we’ll be taxed in that lower rate, so you don’t have to worry too much about it. All right, Juan’s mother.

YMYW Podcast Outro

Andi: Remember when we used to do huge derails, like that one we just heard, at the end of the show, back when we were audio only? Do you prefer that, or do you like hearing the Derails as the show happens? Let us know your thoughts on this and every other aspect of the show in the 8th Annual YMYW podcast survey, for your chance at that $100 Amazon e-gift card. Link in the episode description.

Your Money, Your Wealth® is presented by Pure Financial Advisors. If you’re like Pam and Jim and Matt and Will and Jane, wondering if your money will last throughout your entire retirement, don’t base your entire financial wellbeing on just getting a few minute spitball from Joe and Big Al.

Sit down face to face, either in person or online, with one of the experienced professionals on Joe and Big Al’s team at Pure. We have offices all over the US, and we’re growing every day – but you can also take that meeting right from the comfort of your own home via Zoom. It’s free, just like a spitball, but when you let the Pure team take a personalized deep dive into where you are now and where you want to be in the future, they’ll help you find smart ways to get you there, and work with you craft the retirement plan that fits your specific needs, goals, and dreams. Click or tap the free financial assessment link in the episode description to book yours or call 888-994-6257.

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

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