Show Notes

• 00:00 – Intro: This Week on the YMYW Podcast
• 00:43 – $250K Saved, $67K Fixed Income, $65K Spending. Are We Cutting Retirement Too Close? (Rubble & Sky, MN)
• 05:20 – We Have a $700K Pension, $335K Retirement, Plus Social Security. Will We Be OK? (Atouk and Tala, NJ)
• 13:14 – Watch Financial Boot Camp on YMYW TV, Download the Investing Basics Guide
• 14:03 – Should I Use My Roth Money for a Home Purchase? (David, Redondo Beach, CA)
• 21:03 – Complete the 8th Annual YMYW Podcast Survey for your chance at a $100 Amazon e-gift card! (secret password: ymyw)
• 22:01 – HELOC vs. Pre-Tax Account for Retirement Spending (Charlie Pepper, CO)
• 34:23 – Next Week on YMYW Podcast: Guest Co-Host Marc Horner, CFP®
• 34:53 – YMYW Podcast Outro

(enter the secret password ymyw to access the survey)

Guides | Blogs | Educational Videos | YMYW Newsletter | Subscribe on YouTube

Watch today’s podcast episode on YouTube

Transcription

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

Intro: This Week on the YMYW Podcast

Andi: Rubble and Skye in Minnesota want to spend $65,000 a year in retirement, and they’ll have $67K in annual fixed income. Are they cutting it too close? Atouk and Tala in New Jersey will have retirement money, Social Security, and “Lumpy,” their lump sum pension – will they be okay? We’ll find out today on Your Money, Your Wealth® podcast number 542. Plus, should David in Redondo Beach California use his Roth money to buy a home? And what do the fellas think about Charlie Pepper in Colorado using a home equity line of credit for retirement spending, instead of living off of pre-tax money? I’m Executive Producer Andi Last, and here are the hosts of Your Money, Your Wealth®, Joe Anderson, CFP® and Big Al Clopine, CPA.

$250K Saved, $67K Fixed Income, $65K Spending. Are We Cutting Retirement Too Close? (Rubble & Skye, MN)

Joe: We got Rubble and Skye.

Andi: That’s from Paw Patrol. Not sure if you know that one. from being a parent now for the last few years.

Joe: Yes. Paw Patrol is on every morning.

Andi: So you know Rubble and Sky personally.

Joe: Oh yeah. Yep. Whenever you’re in trouble, Paw Patrol, Paw Patrol.

Al: Got it. I take it that’s a cartoon?

Joe: We’ll get there on the double take or something like that. Yeah, right there. There’s the Paw Patrol.

Al: Oh, there it is.

Joe: Okay. so there’s 65. When I’m 65, I’m gonna about that. I’m gonna be watching Paw Patrol for sure. Gonna pop out some more. My husband and I are 65. We enjoy a little Corona. He enjoys Corona and I enjoy, Pinot Grigio. we drive older paint out vehicles. My husband has worked in manual labor his whole life and is done working at the end of this year. His words. I’m not sure we’re ready. We need about $65,000 a year for our expenses, and that leaves a small amount monthly for extra spending.

Currently we spend a little bit more around $90,000 a year, but I think we can curb that down. We get about $46,000 a year in Social Security and $21,000 a year from my husband’s pension, so they get 70,000. So $67,000 total. Yeah. Yeah. We have almost $250,000 saved. 200 in our brokerage, 25 in a Roth.

25 in a 401(k). Are we kind of two close? How much extra padding should we have above? Our estimated budget is two 50. Enough. I feel like it’s too late to start retirement planning at our age, and maybe we messed up. I don’t think you messed up at all. I don’t either. And you know what? It’s 65 years old, manual labor your whole life and you’re done.

Al: I get it. And you got Minnesota, you got good fixed income and you saved 250 k. I mean, nothing wrong with that. $70,000 a year is pretty good. It’s fantastic.

Joe: And it’s more than the spending, right? So you have good fixed income. You got 250. Yep. My dad was manual labor. Yes. He dropped dead at 61. He didn’t get a chance to enjoy it.

No. Didn’t he? No. Yeah. So I would say yes, you’re done. Yeah. Enjoy, a little Corona in your Pinot Grigio.

Al: I would too. I think you got a little extra in your brokerage account and tax deferred, tax free. So I think you got a little cushion there. I think that the, only thing I would think is Social Security may not, increase the, rate of inflation.

So maybe 10, 15 years down the line, you gotta reduce the spending just. Tad, but yeah, I, no, I think this is fine. Joe. They’re spending 90,000 is what they’re comfortable with. They say they can curb it down to 65. That’s probably gonna be the hardest thing right there. Yeah. Trying, to figure out how to do that.

Joe: So what do they got that’s 25,000 bucks, roughly? I don’t know. They could probably take 12 to $15,000 outta their accounts.

Al: Yeah.

Joe: At least 10. So that’s 80,000. We’re getting there. Yeah, we’re getting there At 65. Maybe you could probably take on a little bit more, let’s say, over the next 10 years, 65 to 75.

Right. And spend a little bit less after, and then spend a little bit less after that. Yeah.

Al: So,

Joe: right.

Al: Yeah. No, I agree with you, Joe. I, yeah, it’s, life is too short. It’s time. Go for it. Yeah, it’s time.

Joe: Your body’s beat up. Tired. Yeah, I would pull it. Yep. So, but no, congratulations. I think you’re pretty close and I, think at, that time too, you can probably curb it because it’s like, all right, well here we’re on a fixed income now, and remember when my uncle retired, he is like, oh no, we’re on a fixed income.

Everything was on a fixed income. But I don’t know if that was his stress or if he just really liked to say that.

Al: He probably liked it. I think, you know what, when you’re on a fixed income, you learn how to live within that means

Joe: $70,000 is a very nice fixed income. So Yep. Paw Patrol, well, they got kids. They, have to have kids. Well, well, they kids are just like cartoons.

Al: Well, grandkids. Yeah. I would say grandkids. So what are you saying?

Joe: I’m saying you missed the. so you’re saying I’m not gonna be around for my grandkids?

Al: I’m not saying that. I mean, you gotta start being a vegetarian.

Joe: Oh my God. You gotta live till like 120. It could happen. Could happen. I’ll give you a c plus on that one. All right. Okay…

We Have a $700K Pension, $335K Retirement, Plus Social Security. Will We Be OK? (Atouk and Tala, NJ)

Andi: This is Atouk and Tala, who I found are actually characters from an old Ringo Starr movie called Caveman.

Al: How about that? Wow.

Andi: 1981 with yeah, Ringo Starr and Shelley Long.

Joe: Oh, Shelley Long.

Oh, how about that? Wow. Caveman. I think I remember seeing that at some point. I think I saw a preview.

Al: I never saw the movie.

Andi: I’m sure it was an Oscar winner.

Joe: Well, 1981. Yeah. Could have been right up there. Who won the Oscar in 1981? What’s

Andi: Ordinary People.

Joe: Ordinary People now?

Yeah. Okay. There you go. Yeah. It wasn’t Caveman. Noman. A close third. Okay. All right. Atouk Tala enjoys the rare daiquiri. And I’ll never turn down a root beer. Andi, that’s your favorite, right? Root beer?

Andi: One of, yeah. It’s among my favorites. Yeah.

Joe: What’s your brand? It’s like some naturale, right?

Andi: Virgil’s, yes.

Joe: Not A&W?

Andi: Nah.

Joe: Or Barq’s?

Andi: although, they don’t actually have root beer here. They have Sarsaparilla, made by Bundaberg Brewing. And so I used to live in Bundaberg when I was here before, so I’m back to my Bundy Brewing. It’s good stuff.

Joe: Okay. When do you think you’re gonna get an accent?

Andi: Oh, mate, I have, already, I just don’t use it very often.

Joe: oh, there it is. It came out. Oh, all right. I’m never turning down a root beer. I’m gone the spreadsheet route. Oh boy. Here we go. Unless I’m missing. So it seems like we might be okay, but I wanna run the numbers by Joe and Al to see if they can tell me what went wrong. All right, he’s 56. He has $160,000 in pre-tax and $165,000 in a Roth.

I did one Roth conversion last year and it went seamless. Perfect way to go. So I plan to do another one $30,000 in December of each year in save for the. the tax hit each January. I’m also contributing $30,000 a year to my employer’s Roth 401(k) with my employer match of about $5,400 a year. I’m invested a hundred percent in stocks and the plan is to stay a hundred percent through retirement.

Started investing in the 401(k) very late due to unavoidable family needs to, is four years older than me, and it has a little less than $10,000 in a jobs 4 0 3 b. Lastly, I have a lump sum pension coming to me of about 700,000, which I plan to roll in my IRA. We plan to retire in four years. So Roth conversions are my focus to get ahead of lumpy as I affectionately call the lump sum before it drags me into RMDs.

Since I’m all in stock, everything’s growing fast and lumpy might take things more difficult in a good way. Lumpy. Lumpy, yeah, that’s what I call my lump sum pension. Lumpy. Do we have one? No, not yet. I’m gonna, I’m working on that with HR score. Our gross income is $140,000 and our net is 70,200. Our home is worth about $650,000.

We have a hundred thousand dollars left on the mortgage, but we plan it downsize five to six years. Our last kid will graduate college about two years, so we won’t have that $20,000 a year tuition or the $19,000 a year mortgage much longer. The plan is. When we both retire in four years, Tala will have $12,738 a year in her Social Security at 67.

I’ll start my benefit and have her trigger the spousal benefit for a combined 61,000 0 5 6. How old is Tah right now? 60. So she’s gonna take her Social Security at 64. Four. Four.

Al: Yeah,

Joe: so there’s a, there’s gonna be a little bit of a discount, little bit that Fossil benefit there. Bit of haircut. Yep. Auk.

And then we’ll explain Atouk. Alright. Since we expect to withdraw about $65,000 a year to cover both essential expenses and discretionary expend, that leaves us a shortfall of $52,000 a year for seven years.

All right. After I claim and we get the spousal benefit, the shortfall drops to just $4,000 a year. Meanwhile, the Roth continues to grow while we withdraw from pre-tax. We’ll use Cobra for 18 months, 25,600 a year, and the a CA for one year, $20,000 a year. And then we both get on Medicare 7,600 a year.

Note that she will not be on a CA because she will enter Medicare soon after Cobra. It’s hard to be long-winded, but I enjoy hearing Joe Triumph when he gets through each sentence. What hell does that mean? You’re pretty excited when you finish his sentence. No, because there’s so long. Gotta catch.

Andi: Thank you for catching yourself on that.

Joe: Right. Sweating right. is there anything you can see in the calculation incorrectly? I appreciate your. goo. Oh boy. That’s a word that I never thought I’d read on the podcast. Have you ever said that word goo? No, I don’t think so. Yeah, I don’t like words like, like moist. No. Delicious. No, I don’t like goo, like anything like it.

Yeah. Okay. Thank you for the, the three for a great program. All right. I don’t know. Let’s see. Caveman.

Al: How’s the numbers? Al? So here’s what happens when you, when you take your benefits at full retirement age, which will be 67 for them. Yeah. The spouse gets half of that. That’s right. But if your spouse took it early, then she’s not gonna get the full spousal benefit. And the earlier she takes it, the more the discount.

Right. If she took it right at 62, it’d be a lot of a discount at 60. Four, not quite as much, but just be aware that your numbers may not be quite correct. So, and when you think about that now you’re still saving, right? So I, and I think that’s great and you’re gonna work for another four years. how about you?

Joe: I’m just trying to follow the math here. So he’s 60, he’s 56, wants to retire in four years at 60.

Al: Yeah. Okay. So it’s, so there’s seven years before he gets the Social Security, right?

Joe: So let’s just say in four years. So what do they wanna spend in four years? Well, they’re 65,000, I assume, in current dollars.

So is that what they, so since we expect to withdraw about 65,000 To cover both essential expenses and discretionary spending. That leaves us a shortfall of 52,000 for seven years. What I don’t understand where that number’s coming from because

Al: her Social Security is 12 is 12,000, and then later when she, when he takes his benefit, plus spousal will be 61, but I think 61 will be slightly less.

Okay,

Joe: so, alright. From 50 60 to age 60, she’s gonna be claiming her Social Security benefit. So her benefit is gonna be $12,000 in four years. that’s when they retire. That’s right. So they want $65,000. So 65,000 minus 13 is 52.

Al: Yeah, so, so let’s just say they’re 50,000 short for seven years.

Joe: Got it. All right.

Yeah. So they need to pull $50,000 out for seven years. That’s 350 and that’s about what they have right now. So they got seven. The total liquid assets here is seven eight, 900,000. Yeah. Counting the lump sum. Call it. Call it a million. Yeah, call it a million bucks. They need $52,000 for seven years out of a million dollars.

Yeah, that’s 5%. Then the bridge is 7,000. Yeah. I think your goal, you do the conversions of 30,000. You pay the tax. I love the plan. Yeah. I think it works, Dan. Yep. Okay.

Watch Financial Boot Camp on YMYW TV, Download the Investing Basics Guide

Andi: How investment savvy are you? Less than half of Americans have a solid understanding of basic investing terms and concepts like stocks and bonds, 401(k)s and IRAs. Lack of financial literacy can lead to enormous, retirement-ruining mistakes. Let Joe and Big Al increase your investing IQ for free: click or tap the links in the episode description to watch Financial Boot Camp on Your Money, Your Wealth® TV, and to download the companion Investing Basics Guide. Get a firm grasp on asset allocation, the importance of diversification, the various types of investments, and much more. If you already know all this stuff, your kids or grand kids or your clueless neighbor in the cave next door will appreciate it if you tossed them one of the links to these free financial resources. Find them in the episode description.

Should I Use My Roth Money for a Home Purchase? (David, Redondo Beach, CA)

Joe: We got David. Writes in from Redondo Beach. I’m 69 due to take Social Security in a few months at $4,800 a month. I also have a pension of $2,200 a month.

I have $1.4 million in my IRA $1.3 million in my Roth. I wish to purchase home in the area for approximately $1.3 million. About a 1.4, 1.31 point. I think he likes that number. That’s it. It just works out. It’s my plan is to utilize $900,000 from my Roth. And take a mortgage of 400,000 and not take the tax hit of taking to my IRA.

Is this a prudent decision? Oh, David, this is a tough one. So $50,000 and he is got, or $4,800, so 5, 6, 7, 700 or $7,000 a month. In income. In fixed

Al: income. What is his, what does he need to live off? He didn’t say, but let’s, for the sake of this, let’s assume the pen, it’s covering the income.

Joe: Would you take $900,000 outta your Roth on your 1.3 month?

Al: No. What was a down payment?

Joe: No, of course not.

Al: But, what I might do, like, let’s just say, let’s, well, let’s say spending 8,000 a month, ’cause that’s a hundred grand a year of income. We’ll make the math easy. He lives in Redondo. I don’t know. He might spend a little bit more. He might. He might. He might.

Alright, I’m just gonna go with that. Okay. For easy math, and he’s single, right? So the top of the 24% bracket for a single person is, call it 200,000. Okay? So $200,000. then I would take, I would take a hundred thousand. I, would probably. Mortgage. Well, let’s see. Does he have, he doesn’t have non qual, does he?

Joe: Nope.

Al: Okay. He’s got

Joe: 1.4 in his IRA 1.3 in a Roth.

Al: I would take a hundred grand out of the IRA, pay the tax on it and try to stay in the 24% bracket. And that’s what I’d use for the down payment. And then each year I would just keep taking a hundred grand out and start trying to pay that thing down. Well, he

Joe: wants to buy a $1.3 million home.

You probably want to at least have 20% down.

Al: Okay. Well, maybe you bite the bullet and do a little bit more the first year, but,

Joe: $260,000. Maybe you go to the top of the 24,

Al: you know, maybe you take some outta the Roth. Yeah, just slit it a little bit. maybe you take 300,000 down. Yeah, three from the Roth, three from, maybe, three from the Roth, one from the, because I don’t want to go past the 24% bracket.

Yeah. So maybe you finance 900,000 and then after that you just. you start trying to pay it off more aggressively with the IRA money staying in the 24% bracket.

Joe: So you got, all right. Let’s say you got a $900,000 mortgage. 30 years. What’s, what, are mortgage rates right now?

Al: Well, 6, 7, 0 6, 5 and a half.

Six.

Joe: All right. So is payments gonna be 65,000 bucks a year?

Al: Yeah.

Joe: $5,500 a month. So on top of his, yeah. On top of now he’s got $165,000 of living expenses.

Al: Right.

Joe: you could still stay in the 24 to, yeah.

The,

note

Al: to keep the note going. I don’t know if this is a, this is really tough because, and we also, we probably don’t have enough information here to really,

Joe: yeah.

We don’t know what he’s funding and if there’s any other assets, but if this is his assets and he doesn’t, and he’s spending a hundred percent of the fixed income. Taking that much. I mean, that’s why we put money in Roth. So for cases like this, you put $900,000, you have no note, you still have some Roth left, and if the pension and Social Security is enough to, cover your living expenses.

You’re 69 years old. You still have, I don’t know, 20 some odd years of Of life expectancy. Yeah.

Al: Give or take. I think I, I’d really like to know what that spending is to be able to. Come up with more definitive answer here, but

Joe: yeah, I’m on the fence. if I’m David in Redondo. Yeah. do I blow out 900 grand?

How much you love this house? Good point. Is this your dream home? Yeah. Right. And then, yeah. Who cares? Go for it. Because there’s still plenty of capital. He still has $1.3 million, 1.4 in the IRA. He’s got really good fixed income.

Al: I, guess if you think about it in the, from the standpoint that the Roth is for my retirement and this is what I wanna do with it, right?

maybe that is a way to think about it. I still wouldn’t take that much out there. Yeah. I mean, I would take me personally if I was, if, I didn’t have any other purposes for the Roth and I had plenty of fixed income to cover my expenses and I’m not too worried about the RMDs ’cause I’ll stay in the 22 or 24% bracket, maybe I might take so three, four, 500,000 outta the Roth.

I don’t think take any more than that ’cause I really like having that Roth cushion.

Joe: So here’s the question I think that I would ask David. Is that what, makes you sleep better at night? Looking at. Your liquid balance of Two, two and a half million dollars. Or close to $3 million. Yeah.

Right. And you have that as a cushion. You can always pay up the mortgage at any time that you want. Sure. You can always cut a check from that account. Or not having a mortgage and you have a lot lower liquid balance if, not having a mortgage or a lot smaller mortgage payment that you feel that you know you can pay and that doesn’t stress you out.

I think this is all about the emotion and the stress aspect of it. Some people feel a lot more comfortable with, Hey, I like to look at this, balance in my retirement account. And others is like, I hate debt. Yeah. I don’t wanna pay off. Yeah. I mean, I wanna pay off point. Every ounce of debt like the, Dan, Dan, Ramsey.

What’s his name? David Dave Ramsey Uhhuh.

Al: No, no debt.

Joe: Yep. Yeah. Dan’s his brother, I believe. Okay, we’ll go with that. Dan likes, a little, Dan likes debt. Yeah. Dan likes a little bit of mortgage. David doesn’t, so, so just gonna go on the Dan, Ramsey.

Al: I guess, I don’t know if we helped you very much David, but I think I would be careful on taking that much outta the Roth.

All in one fell swoop. it, it cost a lot of money for you to get it in and I’d hate for you to use that much of the Roth for this. This helmet just, I think what is what we’re saying. So just think about it.

Joe: I think there’s a lot of different ways that you look at this, but again, what he feels comfortable with, what’s gonna make him sleep at night.

You know, he’s retired, he’s enjoying, you know, his no-go years with it. Now he is still the go-go here. is it Gogo or slow? Well, maybe it’s gonna be slow go, because that’s why I Gogo’s coming down. So now that way he wants to buy the nice house in Nando, maybe. Yeah. All right. okay. This is the last one because last two we just, the grades are, dropping.

I guess we’re, yeah, we’re, not doing so well. Are we

Complete the 8th Annual YMYW Podcast Survey for your chance at a $100 Amazon e-gift card! (secret password: ymyw)

Andi: Y’know, some of the YMYW audience tell us they love the banter and funny stuff on the podcast, others say they like the common sense spitballs with no funny stuff. Some say the show is too short, some say it’s too long! What do you think? Your chance at a $100 Amazon e-gift card awaits, and all you have to do is share your experiences and opinions. What are your favorite things about Your Money, Your Wealth, and what would make it better for you? Complete the 8h annual YMYW Podcast Survey by 5pm Pacific on August 31st to help us make Your Money, Your Wealth your top, best personal finance and retirement podcast – and for your chance to win that $100 Amazon e-gift card! Click or tap the link in the episode description and use the secret password ymyw to share your thoughts. We welcome everyone’s opinions, but only US residents are eligible to participate in the giveaway. No purchase necessary, survey and giveaway close and winner chosen at 12pm Pacific time on August 31st, 2025.

HELOC vs. Pre-Tax Account for Retirement Spending (Charlie Pepper, CO)

Joe: All right. We got Charlie Pepper. Is this a reference of anything? Little Charlie Pepper’s Lonely Heart Club Band?

Andi: Well that was Sergeant Pepper, but I don’t know if Sergeant Pepper’s first name was Charlie. Maybe it was.

Joe: Alright. Charlie Pepper, like could be, is Dr. Pepper’s first name? Chuck? Chuck Pepper, maybe. Charlie Pepper. Oh, maybe. Hi Andi, Joe and Big Al. In a recent episode, you raised the idea of drawing from a HELOC versus a pre-tax account for income in retirement. this is an interesting concept. Do you remember talking about drawing from a he HELOC versus a

Al: I think over the last couple years we probably brought it up once and we’ve then said immediately this hardly ever works and is a good strategy for 99.9% of the people. But we’ll check this one.

Joe: All right. Let’s see if Charlie Pepper is in that zone. Okay. This is an interesting concept I’ve never thought of.

I would appreciate your script. Spitball, about my scenario. I apologize for the math problem, but I didn’t know how else to lay it out. Background, I’m 60 single, just retired. Woo hoo. I paid, I’m paid through 2025, so to keep it simple, let’s say I need a hundred thousand dollars and we will be in the 30% tax bracket fed in state next year.

I will either draw from my pre-tax retirement accounts or my heloc. I have $1.5 million in pre-tax accounts, and I can draw up to $378,000 from my heloc, which is currently at a 7% interest rate. Here’s where I need some math, as I don’t know if I’m thinking about this correctly, if I draw a hundred thousand dollars from the HELOC at 7%.

I would get $2,100 tax deduction, pay $4,900 in interest, and have taxable income of 97,900. now you would have zero taxable income because it’s a loan. Loans are not taxed.

Al: Well, assuming he’s got other income,

Joe: well he says a hundred thousand minus 21, paid 49. That’s 9 7 9. I think is that alright if I use my pre-tax IRAs, I need to withdraw $130,000 to net a hundred thousand.

The additional 30% tax on 130,000 versus 97 900 is almost $1,000. 963.

Okay, you following this Bubba? I’m trying. All right. Additionally, I could miss out on any growth of the $130,000. If I model 7% compound growth on 130,000 at a potential loss of $9,400. The difference between the $4,900 interest paid on the HELOC in the potential $9,400 loss in growth in the IRA is 4,500 bucks net.

Net by drying on the heloc, I would save $963 in taxes and potentially an additional $4,500 by leaving the $130,000 in the IRA to grow. Is this how you would think about it? I know the growth is not guaranteed, but it would seem the lower interest rates go in, the higher the stock market goes, the more this makes sense.

Additionally, info that may be helpful, I have $200,000 mortgage at two and a half percent on my $2 million home. I plan to wait until 67 to draw my Social Security, which will be approximately $45,000 a year. I have a $60,000 brokerage account and a 10,000 HSAI plan to convert to the top, Roth to the top of my bracket over the next several years.

Additional info that surely not as helpful. I drive a 2018 Volvo XC 90. My drink of choice is a rile fashion in the winter. A little gin and tonic in the summer. I have learned so much from your show, and I look forward to it each week. You are, you three are superstars. Thank you for all you do for us retirement, for us in the retirement.

Weeds. All right. Superstars.

Al: Yeah. Well, thank you. Okay. Let’s see if we can, unpack this.

Joe: So here’s another problem about financial planning software. Yeah, it’s how you model things. So yeah, if you take out a loan at 7% and then you. We have growth of 7% or 8% in the market that will work out all day long, every day.

That’s fantastic. Yeah. Now it’s called arbitrage, right? And you look at some of these, salespeople, they like to sell products would be like. Alright, well no, you gotta take money outta your house and this is what you pay here and that’s all tax free. And then you utilize the home and then you put this into an insurance product.

And I mean, that’s where things get super, super dicey. So I would be very careful of thinking about a strategy this way, given what they have in assets. Given what their income is, but the math is right. Right. But you, pull out a hundred thousand dollars from a heloc, there’s no tax on that. It’s a loan.

Correct. So it’s 7% is what you’re paying. So if you think of it this way, and I don’t want you to think of it, but if you’re really getting in the weeds here, it’s like what is the interest paid versus the tax that I’m paying? If you’d never wanna pay that thing off because you have a $2 million home and you have $400,000 of credit, that’s gonna continue to build into the house that you may or may not, you know, have to pay depending on, you know, the growth of the home, right?

I mean, those numbers would work on a spreadsheet.

Al: Agreed. Yeah. So here’s a couple thoughts. I’m assuming that there, he would have enough to itemize Joe, so he’s getting the full benefit of the tax deduction. But that’s the first thing you gotta look at. Am I using the standard deduction or am I itemizing this extra interest that I’m paying?

Am I getting a full tax deduction for that? Assuming the answer is yes. So, so far, so good. I see one, I see a couple. one flaw and one thought, the flaw is the money you have in an IRA is not all yours. You gotta pay tax when you pull it out.

Joe: So you really have to think about that as well. That’s what he’s doing.

He’s like, I need a hundred thousand. I need to pull one 30 to net 100,

Al: given a 30% package. I understand, but he’s getting, he’s talking about the growth that he’s getting, the additional growth he’s getting. Oh, got it. Without paying taxes on the growth. So I think he’s missing that. I think to me, the most important thing is.

HELOC interest rates are variable and I would be really nervous doing this. I mean, in my career, HELOC rates have been 16%, 18%, so just it can happen, right? So just be careful. I would never do this. No way. I would, I, like the idea of converting Joe and I think I even, this is one of the few cases where I might even use some pre-tax dollars to pay the tax, but I wouldn’t pick a, even amount, like a hundred thousand.

I would look at my tax break brackets and figure out what’s the right tax bracket to be in, let’s say it is a hundred thousand right, of extra income just to throw out a number and if that’s the right number, then. 80,000, 75,000 goes into the Roth conversion and the other you keep out to pay taxes.

Right. that’s how I wouldn’t wanna take on a HELOC loan at this point for this reason.

Joe: Well, okay. Well let’s do some math here. Okay. Right. Single. Just retired. what did, do we know Social Security, at age. What Social Security going to be at? let’s 50.

Andi: It says 45,000 a year. Social Security.

Joe: 45 grand. 45,000. All right. So 55,000. give your inflation so that, let’s say that He’ll or Charlie Pepper will need $60,000. Call it from the portfolio.

Al: Yeah.

Joe: At Social Security Age.

Al: Yeah.

Joe: A little more with inflation, but yeah, you’re on the right track. Okay. So. Call it 70,000. Okay. Are we good there?

Yeah. So it’s $70,000 at age 67. Right. The portfolio needs to be one and a half million dollars. 1.7. Right. He’s got Charlie Pepper’s got one and a half million dollars. Today. Yeah. So. That’s close.

Al: It’s close.

Joe: That’s tight because from now until six I, I could see why they might be getting a little, but there’s a ton of equity in the home.

True. If they wanna die in the home, I don’t know, maybe you think of a reverse mortgage or There’s the hecu, right? Yeah. The home equity conversion mortgage, which,

Al: some stops have your mortgage. Well, you don’t have to have your mortgage paid off, but you wouldn’t get a ton of. Extra.

Joe: Right? I mean, if, you wanna maximize.

A hundred percent of your assets. I mean, there’s something that’s called a ho Home Equity conversion mortgage, which is another word for a reverse mortgage, where basically you’re taking out that line of credit from the house, so you’ll have that line of credit that you don’t have to pay back.

Al: that’s the difference there, right?

Joe: That the interest accrues inside the house.

Al: You don’t even have to pay interest payments. And that would be like if you didn’t have any children or didn’t have any, Kids or, anyone that you wanted the house to go to That I’m single. Yeah, single. He didn’t, doesn’t talk about kids.

Joe: So, yeah. and wants to maximize everything.

Al: It you gotta wait.

Joe: The biggest asset Charlie has is the home.

Al: Yeah. Gotta wait till 62. But, very possible. You know what, what doesn’t really show here? Let’s see. If you’re spending a hundred thousand a year, how do you. How do you convert a hundred?

Joe: I think there, there wasn’t a dollar figure on conversions. It was like they wanna do conversions. So

Al: maybe it’s just pulling out the a hundred to pay for living expenses. Huh.

Joe: Yes.

Al: Okay.

Joe: Got it. I dunno, there’s a lot of different ways that you can slice and dice this. ’cause the, there’s such a large balance in the home.

it, you wanna sell the home, you wanna die in the home. I mean, what’s the goal there? You could do a home equity, or let’s say you did a line of credit, or you do. And you sell the home in a couple of years? Yeah, you could.

Al: So you get some, I think that the tax free dollars there, knowing that you’re gonna sell it, let’s say in three to five years.

Yeah. Okay. But you bring up a good point. If I was gonna sell the home in the next three or four years, I, might do this ’cause I knew I was gonna pay it off.

Joe: Right. You’re gonna pay it off when you spend, and I got

Al: buyers really nice million dollar condo and I pay off the loans and I’ve got a bunch. Yeah.

Joe: Then you’re debt free. Right? You still got the 1.5. Right. That’s growing in the markets. Then you have your Social Security that’s coming up. I don’t know it, I wouldn’t wanna leverage my home, for living expenses. Right. unless there’s only very small circumstances where you wanna do that.

Al: Yeah. I tend to agree with you.

Joe: Yep. All right. that’s it for us. Thank you, Andi. Andi Down Undah.

Al: Yeah. And I always say “Good day.”

Joe: Good day mate.

Andi: G’day. Thanks very much.

Joe: Alright. And then, Aaron, do you wanna say anything? Yeah, it is hot in here. We’re doing some construction here in the Yeah, there’s no ac.

Al: yeah, We played.

are, is it hot where you’re at? No, it’s winter there, not Australia.

Andi: It’s winter here, so Yeah, it’s actually quite cold.

Joe: Okay. Okay. So you’re fine then. Yep. That’s a temperature in Australia right now.

Andi: I think it’s about 10 degrees Celsius,

Joe: which is what I drink Celsius, which is, help me out.

Al: 50.

Andi: Yes. It’s 50 degrees Fahrenheit here.

Joe: Okay.

Al: Okay.See, I have that right there.

Joe: Yeah. Perfect.

Al: Because I’m a world traveler.

Joe: You are a world traveler. All right. we’ll see you guys next week. Show’s called Your Money, Your Wealth®.

Next Week on YMYW Podcast: Guest Co-Host Marc Horner, CFP®

Andi: Big Al is off gallivanting again, so over the next two weeks, Joe and I will be joined by Marc Horner, CFP® to spitball on retirement for Beavis and Daria, Tony Soprano, Elwood Blues, Clark Kent, and Rae and Roy. Hey I didn’t come up with those names, you did!

Marc is one of the newest principals here at Pure Financial Advisors. He’s the founder of Fairhaven Wealth Management, which has just joined the Pure family to become our newest Chicagoland office in Wheaton, Illinois. Watch Marc’s bio video in the episode description to learn more about him, and click or tap the link to schedule a free financial assessment with one of the experienced professionals at Pure.

YMYW Podcast Outro

Andi: No matter whether you’re in Chicago, Denver, Seattle, Nashville, Phoenix, Salt Lake City, Southern California, or in your jammies on your couch, the Pure team will work with you either in person or online to craft a comprehensive financial plan to help reduce your taxes in retirement, align your plan with your risk tolerance, and to meet your needs and goals in retirement. Click or tap the free assessment link or call 888-994-6257 to get started.

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.

_______

Listen to the YMYW podcast:

Amazon Music

AntennaPod

Anytime Player

Apple Podcasts

Audible

Castbox

Castro

Curiocaster

Fountain

Goodpods

iHeartRadio

iVoox

Luminary

Overcast

Player FM

Pocket Casts

Podbean

Podcast Addict

Podcast Index

Podcast Guru

Podcast Republic

Podchaser

Podfriend

PodHero

podStation

Podverse

Podvine

Radio Public

Rephonic

Sonnet

Spotify

Subscribe on Android

Subscribe by Email

RSS feed

YouTube Music

See All Platforms