ABOUT HOSTS

Joe Anderson
ABOUT Joseph

As President of Pure Financial Advisors, Joe Anderson has led the company to achieve over $2 billion in assets under management and has grown their client base to over 2,160 in just ten years of the firm opening. When Joe began working with Pure Financial in 2008, they had almost no clients, negative revenue and no [...]

Alan Clopine
ABOUT Alan

Alan Clopine is the CEO & CFO of Pure Financial Advisors. As CEO he currently leads Pure Financial Advisors along with our executive team. As CFO he is responsible for the financial operations of the company. Alan joined the firm about one year after it was established. At that time the company had less than [...]

Published On
October 5, 2021

Buying and selling real estate, whether investment property or your primary residence: how do you estimate net investment income tax when selling your house? Is the all-in-one mortgage a temporary solution when buying a new home before selling your current home? How do prop 13 and prop 19 factor into buying property in California with your kids? Should you pay down your mortgage or save for retirement? Plus, what’s the best way to pay credit card debt? Do corporations really pay no taxes? Can you contribute to both Roth IRA and Roth 401(k)?

Subscribe to the YMYW podcast Subscribe to the YMYW newsletter

Free Financial Assessment

Show Notes

  • (00:51) Can We Contribute to Roth IRA and Roth 401(k)? Pay the Mortgage or Save for Retirement? (Diane, AZ)
  • (09:21) Estimating Net Investment Income Tax When Selling House (Jim, Santa Cruz)
  • (14:52) All-In-One Mortgage Follow Up: A Temporary Solution to Buy/Sell Challenge? (Jim, San Diego)
  • (19:36) CA Prop 13 and Prop 19: Buying Property With My Kids (Lorraine, San Diego)
  • (26:08) How to Pay Credit Card Debt: Borrow or Balance Transfer? (Lorraine, San Diego)
  • (27:27) Do Corporations Really Pay No Taxes? (Clint, FL)

Free resources:

Cracking the Financial Code at Any Age

LISTEN | YMYW Podcast #325: Capital Gains Vs. Ordinary Income Tax ExplainedCapital Gains Tax Vs. Ordinary Income Tax Explained: How Are Long Term Capital Gains "Stacked On Top" of Ordinary Income? YMYW podcast #325

WATCH | YMYW TV: Get Real About Real Estate in Retirement

READ THE BLOG: Understanding Your Credit Report

Listen to today’s podcast episode on YouTube:

 

Transcription

Today on Your Money, Your Wealth® podcast 346, Joe and Big Al are talking about buying and selling real estate, investment property, and your primary residence. How do you estimate net investment income tax when selling your home? Is the all-in-one mortgage a good temporary solution when you’re buying a home before selling your current house? The ins and outs of buying property in California with your kids and how prop 13 and prop 19 factor into the process, and should you pay the mortgage or save for retirement? Plus, what’s the best way to pay credit card debt, and do corporations really pay no taxes? But first, so you don’t miss the Roth talk, can you contribute to both Roth IRA and Roth 401(k)? I’m producer Andi Last, and here are the hosts of Your Money, Your Wealth®, Joe Anderson, CFP® and Big Al Clopine, CPA.

Can We Contribute to Roth IRA and Roth 401(k)? Pay the Mortgage or Save for Retirement? (Diane, AZ) 

“Hello, Andi, and Joe (alphabetical so as not to hurt any feelings), I thoroughly enjoy your podcast, personally I think it is a nearly perfect balance between funny banter and valuable relevant information. I usually listen while walking my chihuahua, Odie. I drive a 2020 Subaru Crosstrek and Hubby drives a 2014 Toyota Camry or Can Am Spyder depending on the weather. Most importantly my drink of choice is 2 Towns Hard Cider made in Oregon. 

Quick overview of our financial picture. Hubby is a young retiree (just 53) after a 25-year career as a law enforcement officer. I make ~$105,000 per year, am aggressively paying down our ~$100,000 mortgage (value ~$450,000) which is our only debt and plan to continue working as long as I am enjoying the work as I am just 50 years old. 

Hubby receives a monthly pension that continues for the rest of both our lives. He also has ~$150,000 in a pretax 457b plan and a small balance Roth IRA. I have ~$750,000 in pre-tax 401k account that I currently contribute 20% to with 6% employer match and a small balance Roth IRA. We have other misc. accounts, including a small post tax brokerage account, that are not material to the questions I have for you. That’s all the blah blah blah to get to my questions. 

1. Am I allowed to contribute the max which I believe is currently $7000 annually including catch up contributions to BOTH the Roth IRA and the Roth 401k?

2. Can my hubby contribute $7000 to his Roth IRA as a spousal contribution since he does not have “earned income”? BTW … you may suggest not paying down the mortgage since rates are so low but we do not want a mortgage when we are both retired. Thank you and keep up the great podcast!”

Estimating Net Investment Income Tax When Selling House (Jim, Santa Cruz)

“Jim from Santa Cruz “calling” … after answering my question about Jack and Diane on Show #342, Joe asked if I am a Teacher and Al mentioned that he didn’t know what I drink.  My sincere apologies for these grievous oversights – I am a sales rep for a solar energy component manufacturer, and my preferred drink is Sierra Nevada Pale Ale.

Speaking of Jack and Diane … they plan to sell their home in retirement, roughly around the year 2035.  Diane projects the taxable gain, after escrow/realtor fees and the $500k primary residence exemption, to be $375,000. Fortunately, Diane is a longtime YMYW listener, with a comprehensive Retirement Plan spreadsheet.  Unfortunately, Diane is married to Jack, who is a Real Nice Guy but doesn’t know diddly-squat about finances.  If she had married Big Al, her Spreadsheet would have included the Net Investment Income Tax for the capital gain on the sale of their home; instead, she gave that tax no consideration until another Show 342 caller asked about it.

Believing they will have no other investment income for that year, Diane calculates her Net Investment Tax as follows:  ($375,000 taxable gain) – ($250,000 exemption) = $125,000 x 3.8% = $4,750.   Before Diane enters this on the Spreadsheet, and tells Jack that he now has to work an extra month, can you confirm this is the right way to estimate the tax? Thanks, as always, for the Great Show.  You Guys really are the Best. Jim from Santa Cruz”

That was YMYW podcast episode #325, by the way, entitled Capital Gains Vs. Ordinary Income Tax Explained, and you can find it in the podcast show notes at YourMoneyYourWealth.com. Chances are that you would get even more value from a free financial assessment with an advisor on Joe and Big Al’s team at Pure Financial Advisors – and you can book that right from the podcast show notes, too. Pure Financial is a fee-only fiduciary, which means they will not sell you any investment products, and they’re required by law to act in the best interest of their clients. All of Pure’s advisors are all CERTIFIED FINANCIAL PLANNER professionals. They’ll look at your entire financial situation and your retirement needs, how much risk you can tolerate, and your goals, to help you develop a comprehensive financial plan tailored expressly for you. Click the link in the description of today’s episode in your podcast app, then click Get An Assessment to schedule that video meeting.  

All-In-One Mortgage Follow Up: A Temporary Solution to Buying and Selling Challenge? (Jim, San Diego) 

“This is a follow up to all in one mortgage inquiry. I listened to podcast and realized I didn’t provide enough context. We are thinking about moving out of state to another state with no state tax. The real estate markets there are red hot. Properties get sold soon after being listed. We have a current mortgage. If we happen to find a home we want in this other state, we have to commit to buying on the spot but haven’t sold our current home yet. We wouldn’t qualify for another mortgage on top of our current one. An all in one mortgage could be a temporary solution in that we could get enough of a loan to buy the new place and then pay down the all in one loan when we then sell our current home and access our equity. If interest rates appear to be rising we could convert to a traditional loan. We realize we would have additional closing costs from going through two lending transactions but it solves the problem of selling our current home and having to rent locally while continuing a long distance house hunting. Is this strategy unadvisable?”

CA Prop 13 and Prop 19: Buying Property With My Kids (Lorraine, San Diego)

“Hi, please do not use my name on tv. Here is my question: I am in my 70’s and have lived in my property for 30 years. I have not bought another property because I’ve wanted to retain my very low tax basis; under Prop. 13 I had to buy equal or less to take my taxes with me. It has been almost impossible to buy equal or less. I, and one of my children (who is 55), want to buy a property together (taking my tax basis with me). I need to know if the two of us going on a mortgage together would trigger an exemption to occur? The same child would be the one inheriting the property as a personal residence so the inheritance of taxes would not be an issue. Thank you! I enjoy watching your show every Sunday!”

How to Pay Credit Card Debt: Borrow or Balance Transfer? (Lorraine, San Diego)

“Another question for the show? If a person owes $5,000 in Credit Card debt, is it better to borrow the $5,000 at 7.99% (to be paid over a 24 month period) & pay it off? OR do a balance transfer of that card to a 0% card (for 18 months) card? Thank you?”

Paying off credit card debt is an important way to take control of your finances. Whether you’re in your 60s, 50s, 40s or younger, decisions you make today will affect your financial security for years to come. In the podcast show notes at YourMoneyYourWealth.com you’ll find two relevant free financial resources on this topic: Read the blog on Understanding Your Credit Report, and download “Cracking the Financial Code at Any Age,” a free guide that will walk you through financial strategies and actions to take in your 20’s, 30’s, 40’s, 50’s and beyond to overcome previous missteps and set yourself up for a more successful retirement. Just click the link in the description of today’ episode in your podcast app to get there. Spread the knowledge! Share the links and the podcast with your friends, family and colleagues!

Do Corporations Really Pay No Taxes? (Clint, FL)

“Hello Andi, I’ve heard all throughout my adult life that big bad corporations don’t pay ANY taxes. The claim is usually from a politician or someone with a gripe. Earlier this year I asked Bob at the office if he had to pay the IRS taxes. He said no, in fact he is getting a refund this year.  We all know Bob had overpaid his income taxes. Can I assume that these big corporations use every tool available in our tax codes to pay as little tax possible, or are these corporations exempt from paying taxes? Clint – Florida – 2015 F-150″

_______

Subscribe to the YMYW podcast Subscribe to the YMYW newsletter

ASK JOE & AL ON AIR

Your Money, Your Wealth® is presented by Pure Financial Advisors. Sign up for your free financial assessment.

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