Joe Anderson
ABOUT Joseph

As CEO and President, Joe Anderson has created a unique, ambitious business model utilizing advanced service, training, sales, and marketing strategies to grow Pure Financial Advisors into the trustworthy, client-focused company it is today. Pure Financial, a Registered Investment Advisor (RIA), was ranked 15 out of 100 top ETF Power Users by RIA channel (2023), was [...]

Alan Clopine

Alan Clopine is the Executive Chairman of Pure Financial Advisors, LLC (Pure). He has been an executive leader of the Company for over a decade, including CFO, CEO, and Chairman. Alan joined the firm in 2008, about one year after it was established. In his tenure at Pure, the firm has grown from approximately $50 [...]

Andi Last

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

Published On
April 12, 2022

Will the Senate pass the SECURE Act 2.0, and will it require a Roth option for retirement savings? Plus, “pandemic unemployment” from the CARES Act and the earned income tax credit. Next, are you eligible to make Roth contributions, and should you contribute only to Roth for retirement? Then, the pros and cons of consolidating retirement accounts, and some early retirement spitball analyses. When you plan to retire early, should you invest in dividend-paying stocks or real estate? And finally, is the bucket investing strategy really that complicated? 

Subscribe to the YMYW podcast Subscribe to the YMYW newsletter

Free Financial Assessment

Show Notes

  • (00:45) SECURE Act 2.0: What If Employer Retirement Plan Doesn’t Have Roth Option? (Brian, Queens – voice)
  • (05:54) Pandemic Unemployment Assistance PUA and the Earned Income Tax Credit (Leeroy Browwn, San Diego)
  • (08:50) Toggling Tax Brackets: Should We Switch to All Roth Contributions for Retirement? (Jackson, Delaware)
  • (13:10) Am I Eligible to Make a Roth Contribution? (Terry, FL)
  • (16:35) Pros and Cons of Consolidating Retirement Accounts? (Marion, Fresno, CA)
  • (20:24) Early Retirement Spitball Analysis: Are We on Track for Retirement? (Marcus, Queens, NYC)
  • (29:59) Early Retirement: Invest in Dividend Stocks or Rental Real Estate? (Lance, Indiana)
  • (32:42) Is the Bucket Investing Strategy Really That Complicated? (Rich, Chicago)

Free financial resources:

WATCH Joe and Big Al answer questions from the YMYW podcast – on video! 

Download the Portfolio Tracker Guide free

SECURE Act Guide

The CARES Act Coronavirus Stimulus Guide

Listen to today’s podcast episode on YouTube:


Today on Your Money, Your Wealth® podcast 373, will the Senate pass the SECURE Act 2.0 and will it require a Roth option for retirement savings? Plus, “pandemic unemployment” from the CARES Act, and the earned income tax credit. Next, are you eligible to make Roth contributions, and should you contribute only to Roth for retirement? Then the fellas get into the pros and cons of consolidating retirement accounts, and a couple of early retirement spitball analyses. Should you invest in dividend paying stocks or real estate for your early retirement? And finally, is the bucket investing strategy really that complicated? I’m producer Andi Last, and here are the hosts of Your Money, Your Wealth®, Joe Anderson, CFP® and Big Al Clopine, CPA.

SECURE Act 2.0: What If Employer Retirement Plan Doesn’t Have Roth Option? (Brian, Queens – voice message)

Joe: We got Brian from Queens.

“Hey, it’s Brian from Queens. Super quick question. My 403(b) plan only offers pre-tax, although it seems most 401(k), 403(b) and 457s are now offering the Roth option. The SECURE Act 2.0 if it passes says that the age 50 and older catch-up contributions must be put into the Roth. That being said, must any of these retirement plans not currently offering the Roth option be forced to start offering it or do age 50 and older employees in those pre-tax only plans get cut off at the $20,500, unable to do the age 50 catch-up? Curious on your thoughts?”

Joe: Very good question, Brian.

Al: Excellent question.

Joe: So the SECURE Act 2.0 just passed the Senate-

Al: It passed the House.

Joe: House. It needs to go to the Senate.

Al: Correct. It passed 414 to 5. So I would say it’s likely that the Senate may pass it through.

Joe: It’s interesting because there’s a lot of Rothification. You like that word?

Andi: Rothification.

Al: That’s excellent.

Joe: Rothification of the retirement plans.

Al: Yeah, exactly. So tell me what that means to you, that word.

Joe: Well, most of the things that are coming out is they want more Roth versus pre-tax because-

Al: They don’t want people to take tax exemptions.

Joe: Yeah. They don’t want the tax exemptions.

Al: We need money.

Joe: Yes. They’ll deal with the issue-

Al: We won’t worry about what happens in 20 years.

Joe: When everyone has tax-free money. They’ll be like, oops.

Al: Yeah, it was a bad idea.

Joe: And so good question. So with his 403(b)- so 403(b) and 401(k) plans, it’s all about the plan administrator. So, yeah, 401(k) plans have the Roth option. Some of them have the mega backdoor Roth you can put after-tax contributions in it. 403(b) plans have Roth provisions in them, but it’s up to his employer. So I’m not sure where Brian works. And so people think, hey, I have a 401(k) plan. So aren’t all 401(k) plans created equal? And the answer is no.

Al: Yeah. And I would stop short of saying that this SECURE Act 2.0 is going to force plans to get Roths. I mean, we’ve seen this kind of thing before where it was strongly suggested and a lot of firms, a lot of 401(k) plans and others didn’t do anything for years. So the catch-up is not going to necessarily change, at least for a while. And even in a case where if a 403(b) does not make the change, you’re going to be going back to the plan itself. So I wouldn’t worry too much about that.

Joe: Yeah, good point. A couple of other notes on the SECURE Act 2.0 is the match contributions from employers is always pre-tax, but the match now could go Roth as well.

Al: Yeah, exactly. And the catch-up could go up to $10,000. So that’s another thing that could change.

Joe: Yeah. There’s different variations of the catch-up, too, depending on the age as well.

Al: Yeah. Not for everybody, but when you’re a little bit older. Exactly. Right. And RMD age may change, too.

Joe: Yes, 75.

Al: Yeah. But that’s not going to be till 2032.

Joe: Yeah. And then they ratchet that up. They’re making this so difficult.

Al: They love to do that.

Joe: It is so stupid. That’s not going to move the dial- a little bit. There are some provisions in here that are pretty good. But it’s like, why are you making this so complicated?

Al: And then in a lot of things, there are exceptions for plans that are already existing where you don’t have to do it. So stay tuned. We don’t really know what’s going to pass. The Senate actually has their own version of this bill.

Joe: Of course they do.

Al: And so it’s not going to be what passed in the House. So we’ll have to see.

Joe: So you turn 72, and then it’s like, well, I’m going to take my RMD and then the SECURE 2.0 passes, and then it’s like, well, I’ve already taken it. Can I push it to 73? When does that start? In 2030. Now it’s 75. So interesting. All of these retirement plans in the SECURE Act, in the CARES Act, in- what’s that other stupid act that blew up the stretch?

Andi: That was the SECURE Act 1.0. Yes. Setting every community up for retirement enhancement.

Joe: Setting every community up for-

Andi: – retirement enhancement.

Joe: Yes. Thank you.

Al: And that was just called the SECURE Act because we didn’t know there’d be a second one.

Joe: That was one of the worst bills of all time.

Andi: You’re saying it wasn’t retirement enhancement?

Joe: No, it didn’t enhance anything.

Al: It didn’t really change much.

Joe: It didn’t changed much of anything except it moved the RMD age from- the biggest thing was, okay, 70½ to 72, and then let’s just blow up the stretch. And the stretch IRA was one of the best tax tools that a lot of people have because it would be able to stretch the tax liability out over a young beneficiary’s lifetime versus yanking all those dollars out within 10 years. Stay tuned. I guess we will figure out a little bit more on- when is the Senate supposed to-?

Al: I think it’s slated pretty soon. I don’t know exactly.

Joe: You’re not on Capitol Hill?

Al: I have a 24 hour feed on my TV.

Joe: Got it.

Pandemic Unemployment Assistance PUA and the Earned Income Tax Credit (Leeroy Browwn, San Diego)

Joe: I got another question here from Leroy Brown. I think that’s probably a fake name.

Andi: Ya think? And notice it’s spelled Leeroy Browwn.

Joe: Browwn. Baddest man in the whole damn town.

Andi: You got it.

Joe: “Hi. I love your show. You guys are awesome.” Thank you, Leroy. “Question, I got about $16,000 last year from the Pandemic Unemployment Program.” The Pandemic Unemployment Program. That’s exactly what they called it.

Al: Right. Well, that’s- I guess that’s what it was for. We’ve had the unemployment program for years, but a lot of people have applied for it because of the pandemic.

Joe: That was under the CARES Act.

Al: They extended it.

Joe: They extended the unemployment. And then you could claim unemployment if you were self-employed. So they kind of enhanced the overall unemployment.

Al: They sure did.

Joe: “Recently went to a DIY tax site, Tax Slayer-“ Went to Tax Slayer. DIY. So a do-it-yourselfer. So, Leroy’s there playing around-

Al: Checking it out.

Joe: – checking it out. Okay. “ -to file my tax return. And in the calculate mode, it says I should get a refund. However, when I filed the actual return, it now says I owe around $500. I’m bummed, to say the least.”

Al: Bummed.

Joe: “Aren’t I eligible for the earned income credit?” EIC. “I have no other income besides the PUC.”

Al: Pandemic kind of boy. Something-

Joe: The PUC. “Besides the PUC. Help. Thanks.” Can you help him out? Can you help Leroy Brown out there, Big Al.

Al: Leroy, your tax return is correct. Unemployment, if that’s all you have, that does not count as earned income. You need earned income-

Al/Joe: – to get earned income credit.

Al: So just by having earned income, you could still qualify if you had other earned income besides the unemployed compensation. But it doesn’t sound like you do, so you’re out of luck, bud. Sorry.

I hear the Senate Finance Committee may hold a hearing and vote on SECURE Act 2.0 after their two week Easter recess, so stay tuned. In the meantime, if you’d like a refresher on the retirement and tax law changes from the first SECURE Act and the CARES Act, you can download our guides to both in the podcast show notes at YourMoneyYourWealth.com, where you can also read the transcript of today’s episode, Ask Joe and Big Al your money questions to be answered here on YMYW, and share the show to spread the love and financial knowledge. Just click the link in the description of today’s episode in your podcast app to go to the show notes and get started.

Toggling Tax Brackets: Should We Switch to All Roth Contributions for Retirement? (Jackson, Delaware)

Joe: Let’s go to Jackson from Delaware. “The wife and I are 34 and 32, have two kids, no pets, drive a 2013 Tesla, and my wife drives a Mini Countryman.” Is that like a Mini Cooper?

Al: That’s a Mini Cooper.

Andi: Yes.

Joe: “We currently have our traditional Roth retirement assets split around 70/30, with the traditional assets around $450,000. We are currently near the top of the 22% income tax bracket. In the next few years anticipate getting closer to or into the next income bracket. Depending on how much traditional 401(k) contributions we make, we are currently splitting our retirement contributions about 50/50 between Roth and traditional, which helps us easily stay under the Roth contribution income limit. In retirement, the projected pension income is about $40,000 in today’s dollars. My question is if we should switch to all Roth contributions in the 401(k) and 457 aside from the company match from here on out, even if it takes us into the next tax bracket over the next few years? Or would you continue to split the contributions 50/50 and plan for as many Roth conversions as possible to the top of the 22%, especially when the markets are down? Or is it all the same in the end? Our goal is to be financially independent and we’ll be able to retire if we want in about 20 years spending about $100,000 a year. My wife does have access to a 457, so if we become financially independent before then, we would plan a withdrawal from that first without penalty and try to stay in the lowest tax bracket. Thanks for the awesome informative show. Keep up the great work.” Cool. Thanks, Jackson. Cool. He’s kind of toggling tax brackets here, and he’s like, we have these two plans and we’re just going to go 50/50.

Al: I’m not sure which is right. Let’s do some of each.

Joe: But he’s in the 22% tax bracket and he feels like he’s going to be in a higher tax bracket later. So I would go 100% Roth if it keeps you in the 22% tax bracket. That’s my answer.

Al: And even the next bracket is 24%, which isn’t all that bad. And the 22% will become 25% and the 24% will become 28% in 2026. So we’ve got lower brackets right now. And so if you can afford it, then yeah, maybe even max it out all the way. I mean, I guess I don’t know enough about your overall situation, but I think when you’re younger and as long as you’re in a reasonable tax bracket, why not max out that Roth, get years and years of tax-free growth.

Joe: The only thing I would be looking out for is your adjusted gross income. So if your adjusted gross income, if you can stay in the 22% and still qualify, which you would be able to because the top of the 22% is-

Al: I think it’s like $180,000? Let’s see here- yeah, $180,000, $178,000.

Joe: Yeah. And then the Roth contribution limits- you can stay in the 22% and you still be able to contribute to Roth.

Al: Okay. I like that idea. If you need to have some deductible 401(k) to get yourself below the Roth contribution, which is what, $204,000? And then you could do as many Roth conversions as you want to because those are not counted for the income limitation rule for Roth contribution.

Joe: So go to Roth as much as you can to stay under the Roth threshold and then do Roth contributions as well. If your income gets too high and it pushes the adjusted gross income where you’re unable to make Roth contributions, then that’s when you go back to the 401(k) and then you would do pre-tax to get you under the limit. Then you can make your Roth contributions. And as Al just said, you could do conversions all day long. You could convert to the top of the 24% if you wanted to. And that does not affect the modified adjusted gross income for Roth contributions.

Al: Exactly. And I think a lot of people don’t realize that, that the Roth contributions do not affect the modified adjusted gross income for Roth contributions.

Joe: Roth conversions. You said contributions.

Al: I know. I screwed it up as I was halfway through.

Joe: Yeah, it’s okay, bud.

Al: That’s why you’re here.

Am I Eligible to Make a Roth Contribution? (Terry, FL)

Joe: Next question is Terry from Florida. Goes “Greetings, Andi, Joe and Al, I hope you all are doing well.” Thank you, Terry, for the nice little introduction. “I have a question about Roth contributions you had discussed in the previous show, but I wasn’t sure if my situation would allow the contributions. We have been contributing to our brokerage accounts, but we’re wondering if we could still contribute to a Roth. Last year I earned income of $6200, but converted about $325,000 to a Roth. Is there a situation where I could have contributed to a Roth if I would have made a contribution to a Roth before I made the conversion? Now this year I have earned income of $7000, but will convert about $325,000 to a Roth. Is there a situation where I could contribute to a Roth if I make the contribution before I make the conversion? It has to do with MAGI. If your ability to contribute to a Roth IRA is affected by your modified adjusted gross income, contributions to a Roth IRA will be phased out if your modified adjusted gross income is between $204,000 and $214,000 for a married couple, filing joint return for the 2022 tax year. If so, then I can contribute $7000 to a Roth. My wife also contributes $7000 this year. Regards, Terry.” So Terry is a little confused on the rule that we talked about a little bit earlier.

Al: Yes. Let’s repeat it.

Joe: The Roth conversion does not affect your ability to do a Roth contribution.

Al: It’s not included in the modified adjusted gross income for a Roth contribution.

Joe: That’s why it’s modified adjusted gross income. It’s not adjusted gross income. It’s modified to the adjusted gross where they take certain things out of the adjusted gross, such as a conversion to a Roth.

Al: Right. So, Terry, so your income for purposes of doing a Roth contribution is $7000, right? So, yeah, you have no problem. Go ahead and do contributions. But you can only do a contribution up to your earned income. Which is $6200 in I presume last year and $7000 in the current year. So that’s the total you can do between you and your spouse. You can’t double up on it.

Joe: Right. And he can still make that Roth contribution until April 15 of the following year.

Al: Yeah, exactly. Depending on when this podcast airs.

Joe: Who knows?

Andi: It’ll be in the next couple of weeks.

Al: Well, it needs to be next week.

Andi: Right.

Joe: It’ll probably air in January next year.

Al: Well, it’ll be relevant for the following year.

Joe: Yes. So Terry can still make a contribution for last year, even though he made a $325,000 Roth conversion. He’s got $6200, but he can only contribute up to that $6200 limit. So he’s also asked a question about him and his wife. He’s like, well, here, can I contribute $7000 to a Roth? Can my wife also contribute $7,000? Well, if there’s $7000 on the tax return of a married filing joint couple, then $7000- She could put $3500 into hers and you could put $3500 in yours.

Al: Yeah. You’re always limited to the earned income as a couple. So to put the maximum amount, you would have to have $14,000 of earned income.

Pros and Cons of Consolidating Retirement Accounts? (Marion, Fresno, CA)

Joe: All right, we got Mari0n from Fresno, California, writes in. “In 2021, I left my W2 job with a 401(k) for a 1099 contracting job. I opened a SEP IRA for the federal income tax deduction for 2021. In 2022, my 1099 job was converted to a W2 job with another 401(k). My question is, what are the pros and cons of combining my 401(k) with my SEP IRA or my old 401(k) and SEP IRA into my new 401(k)? My old 401(k) has both Roth and traditional contributions. Been listening for years to your podcast after binge watching your videos.” Who binge watches these videos?

Andi: Marion does obviously.

Al: Well, and she’s not the first.

Joe: “Still have that 2019 red Silverado and drink Kirin Beer to excess when it’s available.”

Al: When available.

Joe: Marion, hang out. Have some Kirin Beer. Okay. So first of all, Marion, you cannot contribute to a dormant 401(k) plan. So if you have an old 401(k) plan from an old employer, you cannot contribute to that plan anymore. You have to be an active participant within that plan. So even though you have the 401(k) with an old employer, it has to come from payroll, it has to come from your paycheck. So if you do not receive a paycheck from that company, they will not put it into an old 401(k). They’re only going to put it into their 401(k) that they drafted with their own plan documents. SEP IRA, you need that 1099 income to contribute to the SEP IRA. So if you do not have 1099 income, all you’re doing is creating more clutter. I would just consolidate all of the accounts into the new 401(k) plan and make life a little bit simpler.

Al: Yeah, I agree, too. There’s really not much disadvantage in doing that. But let me ask you a question, Joe. When you have an old 401(k), do you have to first roll it to an IRA and then roll it up to your new 401(k), or can you go straight from 401(k) to 401(k)?

Joe: It depends on the receiving company, but I don’t think it matters. I would imagine that the 401(k) would take it from another 401(k), depending on the plan document.

Al: Yeah, probably so.

Joe: Or you just put it into an IRA and then you do a rollover IRA, and then the rollover IRA, you throw it into the 401(k).

Al: The reason you do this, Marion, is because of simplicity. You just have one account instead of 3. So that’s the main reason. Unless your new 401(k) has very poor investment options, then maybe you want to roll everything into an IRA and just have an IRA and a 401(k).

Joe: Yeah, but you have a little bit more protection, I guess, in a 401(k).

Al: You do and you can do the backdoor Roth.

Joe: Yes. Avoids pro-rata rules.

Al: True.

Joe: So, yeah, Marion, I would put everything into the new 401(k) and call it good.

Should you consolidate your retirement accounts? Are they invested in such a way that you sleep soundly at night, even if the stock market looks like a wild rollercoaster ride? Go to the podcast show notes at YourMoneyYourWealth.com and click “get an Assessment” to schedule a free financial assessment with one of the experienced financial professionals on Joe and Big Al’s team at Pure financial Advisors, a fee only fiduciary financial planning firm. Pure is not going to sell you investments but they will help you make decisions and put a financial plan in place that fits with your goals, needs, and circumstances. Click the link in the description of today’s episode in your podcast app, then click “Get an Assessment” to schedule your one-on-one video meeting at a date and time that works for you. 

Early Retirement Spitball Analysis: Are We on Track for Retirement? (Marcus, Queens, NYC)

Joe: “Hello, YMYW family. Marcus from Queens, New York City.” Is this our buddy Marcus?

Andi: Nope. Totally different Marcus.

Al: Different Marcus.

Joe: Well, welcome to the family, Marcus. “Long time listener, first time emailer.” Oh, I should have just continued to read. “First, I love the show. I listen to it daily, driving my Mini Cooper.” What the hell is up with these mini- ?

Andi: And it’s a Countryman.

Joe: “Married couple 27, 28, asking for some spitball on how to maximize our financial situation. We have a 3 year old mini Poodle and wifey drives a Tesla Model Y. I just got her a YMYW- I just got her on the YMYW podcast and she loves it.” Killing it. Way to go, Big Al.

Al: And Mr. Joe.

Joe: “Here’s our situation.” All right, let’s go. Marcus, what have we got going on today? “W2 income, $300,000 evenly split. I have a 1099 job that brings in about $60,000. Currently, we are both maxing out our 403(b) contributions plan to the max. We both don’t have the you-know-what, and I always felt like it would be too much of a hassle given the fact that we needed to do the back door traditional to Roth. After listening to your podcast, now I feel like such an idiot for never opening up a Roth IRA and doing the yearly backdoor.” Got to do the yearly backdoor, Big Al.

Al: If you qualify. Yes. And you’re in your 20s, it’s not too late.

Joe: “We own our home in NYC with about $800,000 in equity and $400,000 mortgage, 3.65% fixed, 25 years, no other debt. We plan to live here for the next 5 to 10 years. After all, mortgage, cars, living expenses, we all are saving on an average of $10,000 and are basically funding it into our Vanguard brokerage account. Current brokerage account is $300,000; 403(b) has around $100,000 together. The 403(b) plan at doesn’t have great options- The 403(b) plans that they have do not have great options. So ours are in a simple tax deferred 2060.” So that’s a-

Andi: Target date fund.

Joe: -target date. Thanks Andi. “We plan on continuing to max our 403(b) and beginning to realize account will have some serious taxes upon withdrawals, RMD age.” He’s worried about RMD age-

Al: In his 20s. Yeah, well, you got to think ahead.

Joe: He’s a planner.

Al: Because by age 75 they’re going to be high.

Joe: “For my 1099 job, I’ve been contributing to the SEP IRA to around 25% of my net. Wife would like to retire at around age 45.” Wifey’s a little FIRE girl. “We expect our yearly expenses at retirement to be about $150,000 to $200,000. Both jobs will have a pension that will likely add at least $40,000 of fixed income at retirement each. I plan to work on to 55 and hopefully retire on the sunny island of Maui.”

Al: Wow, you were just there.

Joe: I was just there. I was on the sunny island of Maui. “I understand we are in a very privileged situation and would like to take the most of our finances. Is there anything we are missing? And do you have friendly conversations on what else we should be doing? Thank you guys for amazing podcasts and Andi’s random comments. It’s hilarious. I have learned so much and will continue to listen for as long as you guys are hosting. Thanks again with love from NYC.”

Andi: Awww.

Al: Wow. That’s very sweet.

Joe: It’s just made my heart go pitter pat.

Andi: Thanks, Marcus. A new Marcus fan.

Joe: Okay, where do we start here? He’s got $300,000 of W2 income. So they’re making $360,000 a year. They’re maxing out the 403(b) plans. They got $100,000 in 403(b) plans together, $300,000 in the brokerage account. So they got $400,000 all day. Does that make sense?

Al: That makes sense, yes.

Joe: Okay. And then they’re 27, 28, and she wants to retire at 44, and he’s going to retire at 55. So he’s got about 30 years and she’s got around-

Al: Got about 20-

Joe: – ish-

Al: Something like that.

Joe: But they want to live off $150,000 to $200,000 a year. They’re going to have some pensions at $40,000 but I don’t think a pension is going to pay out at $40,000- ____________.

Al: I don’t think so either. So I think what their plan- So she’s going to retire before him, so he’s going to work that extra 10 years, which presumably would cover their living expenses, but perhaps they wouldn’t be saving as much. So basically, they have little less than 20 years to save a bunch.

Joe: So, Marcus, you’re leaving out a couple of things that we need here to have a little friendly conversation or a little spitball. We need to know how much you’re spending, bud. Because that kind of drives how you back in the numbers. For instance, if you’re spending $60,000 a year and you want to retire at- she wants to retire at 44, but you’re making $150,000 W2 and $60,000, the only thing that’s really going to be adjusted is probably how much money that you’re saving in your brokerage account. So whatever dollar that you’re saving or spending, you just index that with inflation. So at age 44, okay, you’re still good, but your savings rate is going to go down. Or you go to age 55, that $60,000 in 20 years from now is like more or less $100,000. But you want to spend $150,000 to $200,000 in retirement. So does that mean at your retirement or does that mean her retirement? Because then that’s going to dictate how much that you can actually save. Because-

Al: Right. And is that in current dollars or is that in 20 years from now or 30 years from now?

Joe: Because let’s just say he wants to spend $150,000 and they want that $150,000 at his retirement. So that’s what 30 years from now?

Al: Yeah, almost.

Joe: So if I’m looking at that, 30 years, and let’s just assume 3.5% inflation. So that’s $421,000 and he’s at 55 and you don’t want to take on any more than 3% out of the portfolio-

Al: – at that age.

Joe: – at that age. So you need $14,000,000. That’s a big, big number.

Al: Right. Because you’re probably not going to- well, maybe they will be getting some pensions by then, but still, it’s minimal compared to what the need is.

Joe: Right. Because $200,000, given inflation in 30 years is $400,000. And you take 3%, you divide that into $400,000. It’s a huge number.

Al: Now that’s if this is in current day dollars. If it’s in future dollars, then it’s not quite as big.

Joe: Yes. So if you want $150,000 in future dollars, so now you need $5,000,000. You already have $400,000 saved. And then you have 30 years and let’s say you get 7% on your money and you save $50,000 a year. Now that’s $8 million. You could run the numbers any way that you want. You’re very fortunate because you have huge resources in regards to how much money that they make. So I don’t even know what the hell the question is.

Andi: He just wants to know if he’s on track, if there’s anything that they’re missing, anything else they should be doing.

Al: I think the answer is you’re saving a ton, which is going to allow you flexibility in the future. And in terms of- it’s just a matter of really kind of dialing this in. Because we don’t know if the $150,000 or $200,000 is in today’s dollars or future dollars, because that makes a huge difference. Because as Joe just said, $200,000 in 30 years from now is going to be like $425,000 or whatever number you came up with going to be double.

Joe: It’s a big number. So then the amount of money that you have to save to get there is going to change significantly. Unless you’re like, hey, I want $150,000 future dollars is fine, too.

Al: Now they are saving 403(b) as well as about $120,000- they’re saving about $10,000 a month. Or is that $10,000 a year, in their brokerage account? Must be $10,000 a month because they already have $300,000 in it.

Joe: Yeah. So if they’re saving $200,000 a year. Sounds right?

Al: I’d say $150,000. Good number.

Joe: All right. So they’re saving $150,000 a year. They already have $400,000 saved. Let’s say you got 20 years for wifey to retire. So that’s $8 million in 20 years. You take 3% of that. It’s $250,000 of income that can be produced if he’s still going to work for another 10 years. You don’t take the income from that.

Al: You let it grow.

Joe: That’s going to continue for another 10 years and you don’t save anymore. Maybe you don’t even have to save anymore. Because you got $8,000,000 growing. That’s going to turn into $16,000,000 in 10 years. Potentially it could double, right? So yeah. I think, Marcus, you’re on track.

Early Retirement: Invest in Dividend Stocks or Rental Real Estate? (Lance, Indiana)

Joe: We got Lance writes in from Indiana. He goes “Hey y’all, my name is Lance-” Do people proofread before they send stuff to us?

Al: I don’t think so.

Joe: “Hey, y’all, my name is Lance and I’m 22. I’m working on building my wealth. I’m an assistant store manager at an AutoZone and saving for a down payment for my second house.” Second house, Lance.

Al: Pretty good.

Joe: Killing it. “I want to be able to retire as early as possible, such as 45. Should I invest into dividend stocks or put some in Roth for later on? Or should I keep most of my investment portfolio in real estate and live off the rent once everything’s paid down? Plsn-

Andi: I think that’s supposed to be ‘plan’.

Al: P L S N

Joe: “Plsn is to own around 3 to 4 investment- once investment properties. I drive a 96 Nissan Skyline I imported from Japan and my drink of choice is Rum and Coke. Thank you all. Love the podcast.” Love you, Lance. Thank you for the colorful email.

Al: Yeah, all good.

Joe: So he’s 22, saving. He’s going to buy second house.

Al: Yeah, I guess maybe he’s got one he lives in. And this will be a rental, maybe.

Joe: First of all, some of the questions here, should I put it in dividend paying stocks? Go into a globally diversified portfolio first of all, of stocks. Go index fund. Think that, go ETF, very low cost, such as the Vanguard Total US Stock Market Index Fund. You’re totally diversified in the US, and then you go total US or total non-US index funds. So you can get emerging market in international exposure. That’s where I would go versus kind of focusing on a dividend strategy, especially at 22. Should you open a Roth? Yes, absolutely. Open up a Roth IRA and buy the second house. But I wouldn’t want to be real estate rich and not have any liquidity. So you want a little bit of balance in my opinion.

Al: The answer, Lance, is both. You want to do both and so don’t get- your real estate is an asset class and it goes up and it goes down and it can go down dramatically. So just be aware of that. Yes, I love real estate. But make sure you don’t avoid contributing to the Roth IRA because that’s an important part of your retirement.

Is the Bucket Investing Strategy Really That Complicated? (Rich, Chicago)

Joe: Let’s see. Okay, we got Rich coming in from Chi-town. “Hey, Joe, Al and Andi, love the show. Retired police officer.” All right. Thank you very much for your service, Rich. “Drive a Highlander. Love a good bourbon.” Yeah, I like bourbon, too. Not while driving. “Have a question about the popular bucket strategy? Have read and listened to planners explain the strategy and how it works. Being able to live off bucket one when the market is down, building up the same bucket when the market returns, among several other bucket rules and decision points. Why is this any different than withdrawing your money from any asset, even stocks, when they are down, but then turning around and making any needed adjustment to keep your whole portfolio at your allocation, say, 60/40. This would be done keeping an eye on the wash rule. If the same, this would be much simpler method to explain and follow. It sounds like planners are making this much more complicated than it should be. Am I wrong? Thanks for the show.” All right, Rich. Yes, you’re absolutely right.

Al: I agree with that.

Joe: 100%. Bucket strategy is 100% marketing, in my opinion. You got bucket number one, it’s going to be cash equivalent, and then bucket number two, it’s going to be moderate and you’re going to have some bonds in here. Andi’s old boss would probably sell a lot of annuities and non-traded REITs in that bucket and then you have bucket 3, which is stocks.
Yeah, but you put that all together and you just kind of look at the overall mix. It’s probably a 60/40 split anyway.

Al: Yeah. And when you’re taking money out, you keep your 60/40 split. So if stocks go up, you take it from there. If stocks go down, you take it from very simple, right. It doesn’t have to be complicated.

Joe: Then you have some cash. But what makes more sense is looking at what is the demand for the portfolio? What needs to come from the portfolio is going to determine what the mix is. Is it 70/30? Is it 60/40? Is it 50/50? Whatever, because there’s risk tolerance and risk capacity and we can get- bore you and make it more complicated than it is. But, Rich, I think you’re right on. The bucket strategy is more of a marketing strategy to make it more confusing for people that says, oh, I need the bucket strategy. You know, the bucket strategy? I gotta get myself some buckets. I need some buckets. All right. Thanks, Rich. Thank you so much, Big Al. Andi, it’s good to be back and we’ll see you again next week. The show’s called Your Money, Your Wealth®.


Investing strategies and bosses – they matter a lot! Anyway, Marion, how Joe remembers emailers vs how Big Al remembers emailers, and the Mini Cooper fan club in the Derails at the end of the episode, so stick around.

Subscribe to the YMYW podcast Subscribe to the YMYW newsletter

Listen on Apple Podcasts | Google Podcasts | Stitcher | Player FM


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.

• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC, a Registered Investment Advisor.

• Pure Financial Advisors LLC does not offer tax or legal advice. Consult with your tax advisor or attorney regarding specific situations.

• Opinions expressed are not intended as investment advice or to predict future performance.

• Past performance does not guarantee future results.

• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.

CFP® – The CERTIFIED FINANCIAL PLANNER™ certification is by the Certified Financial Planner Board of Standards, Inc. To attain the right to use the CFP® designation, an individual must satisfactorily fulfill education, experience and ethics requirements as well as pass a comprehensive exam. Thirty hours of continuing education is required every two years to maintain the designation.

AIF® – Accredited Investment Fiduciary designation is administered by the Center for Fiduciary Studies fi360. To receive the AIF Designation, an individual must meet prerequisite criteria, complete a training program, and pass a comprehensive examination. Six hours of continuing education is required annually to maintain the designation.

CPA – Certified Public Accountant is a license set by the American Institute of Certified Public Accountants and administered by the National Association of State Boards of Accountancy. Eligibility to sit for the Uniform CPA Exam is determined by individual State Boards of Accountancy. Typically, the requirement is a U.S. bachelor’s degree which includes a minimum number of qualifying credit hours in accounting and business administration with an additional one-year study. All CPA candidates must pass the Uniform CPA Examination to qualify for a CPA certificate and license (i.e., permit to practice) to practice public accounting. CPAs are required to take continuing education courses to renew their license, and most states require CPAs to complete an ethics course during every renewal period.