ABOUT HOSTS

Joe Anderson
ABOUT Joseph

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

Alan Clopine
ABOUT Alan

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

ABOUT Andi

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

Published On
January 2, 2024

Can Clark Kent’s dad in Hutchinson, Kansas retire at age 50? Will Devin in South Carolina be fat and happy or cutting calories if he retires at 59 and a half? Can Scott Magic in Idaho retire to a good and simple life at age 60? Gina and her wife are 52 and 58. Can they retire in four years, and how much should they be putting in their Roth accounts? Plus, Frenchie in Maine needs a spitball on a Roth conversion strategy with Canadian retirement funds, and Andi shares what she knows about target date funds.

Follow the YMYW podcast Subscribe to the YMYW newsletter

Show Notes

  • (00:49) Can Superman’s Dad Retire at Age 50? (Martha Kent, Hutchinson, KS)
  • (07:23) Can We Retire to a Good Simple Life at Age 60? (Scott Magic, ID)
  • (14:12) Fat & Happy in Retirement or Cutting Calories at Age 59 and a Half? (Devin, SC)
  • (20:56) We’re 52 and 58. Can We Retire in 4 Years? How Much Should We Put in Roth? (Gina, WA)
  • (28:06) Canadian Retirement Roth Conversion Strategy? Target Date Funds? (Frenchie, Maine)
  • (37:06) The Derails

Free financial resources:

EASIRetirement.com: New FREE Retirement Calculator – try it out and send us your feedback!EASIRetirement free retirement calculator

Free Financial Assessment

Listen to today’s podcast episode on YouTube:

Transcription

Andi: Happy New Year, friends! Let’s kick it off with some spitballing. Can Clark Kent’s dad in Hutchinson, Kansas retire at age 50? Will Devin in South Carolina be fat and happy or cutting calories if he retires at 59 and a half? Can Scott Magic in Idaho retire to a good and simple life at age 60? Gina and her wife are 52 and 58. Can they retire in four years, and how much should they be putting in their Roth accounts? Joe and Big Al kick off 2024 with more early retirement spitballs, today on Your Money, Your Wealth® podcast 462. Plus, Frenchie in Maine needs a spitball on a Roth conversion strategy with Canadian retirement funds. And since Frenchie would like me to talk more, I’ll tell you what I know about target date funds. I’m producer Andi Last, and here are the hosts of Your Money, Your Wealth®, Joe Anderson, CFP® and Big Al Clopine, CPA.

Can Superman’s Dad Retire at Age 50? (Martha Kent, Hutchinson, KS)

Joe: We got Martha Kent from Hutchinson, Kansas. Martha Kent. That’s Clark Kent’s mother.

Al: Really?

Joe: Yeah.

Al: Wow. Good memory. When it comes to movies, you don’t miss anything.

Joe: Steel trap. “Hi guys. A long-time listener. Sometimes I skip new episodes because of the new format.” We have a new format.

Andi: I think she’s talking about the fact that there’s derails at the end of each episode. So that means that the episode itself is kind of shorter. She says there’s less meat, so she- we actually- we emailed her and asked her about it and said, what do you mean? And she said she just racks them up and then listens to- she binges them a bunch at a time. Yeah. So she can get more meat.

Al: Because we have more humor?

Joe: There’s less meat, Al.

Al: Yeah.

Joe: Where’s the beef? Where is the beef?

Al: We’re doing our best. We don’t have enough.

Joe: How many people do you think remember that commercial?

Al: Well, certainly I do.

Andi: All the people our ages. And mine.

Andi: Yeah, the 3 of us collectively.

Joe: “So I find myself feeling left out. But since it’s your show, here’s my info.” I still don’t get it. What the hell is she talking about?

Al: She wants more meat. She wants less derails and more questions answered.

Joe: Less of this, what we’re doing right now.

Al: Yeah, the BS part.

Joe: Got it.

Andi: Get on with it, will ya?

Joe: “I’m married, both 45. I’m self-employed. Husband has two part time jobs. Can’t get him to work full time with benefits because he doesn’t like the-“

Andi: – monotony.”

Joe: -monotony. I knew it.

Al: You were gonna say monotone?

Joe: Monotone. I hate that monotone. “We don’t really drink since, well, we’re trying to manage, then enjoying our retirement, right?”

Andi: Can’t do both, I guess.

Al: Do you agree with that?

Joe: No.

Al: Me neither. You got to enjoy the journey. Come on.

Joe: “We have one pet and one long paid Ford SUV and beater Benz. Not being born here, we are subject to numerous advice on savings, retirement, getting rich. Here’s our situation. We have about $100,000 in various bank accounts. We have various 401(k)s and some Roths, some 403(b), about $170,000, $23,000 in a 529 plan, a couple of brokerage accounts, $30,000, business account, $25,000, Valek that started 4.5%, now steady 3% that would get to $125,000 at retirement, $35,000 in precious metals, crypto at $90,000.” Wow. Crypto in new case. Brokerage accounts, 401(k), cash. I mean, you name it, it’s in there.

Al: It’s- we got it all.

Joe: Wow.

Al: I’ll take one of those. One of those.

Joe: Yes, and one of those. Oh, that came out? Yes, I would love one of those.

Al: Well, I heard good stuff about that. Let’s get some of that.

Joe: Yeah, I just talked to my neighbor. You have one of those? Okay, we’re getting one of those. “We got over a million in credit card points worth $12,000 in cash. Do you count your credit card points as cash on your balance sheet?”

Al: Well, you can cash out some of them, so I suppose. I don’t.

Joe: I want one of those, actually.

Al: Because I use them.

Joe: She’s like, yeah, I got $12,000 in credit card cash points. What do you got?

Al: So let’s add that up. Add it to the-

Joe: Add it to the list. Okay. “Or maybe 3 round trip, first class, New York to Dubai tickets, $60,000.”

Al: Yeah, they’ll take care of the credit card points, I guess.

Joe: Okay. “Return of premium and life insurance.” Oh my god, four savings, $30,000 in 15 years.” So she bought a life insurance policy. She’s projecting out what it’s going to be in 15 years.

Al: She has one of those too.

Joe: Yeah, one of those. That’s four savings. How many timeshares do you think she’s got?

Al: Probably a couple.

Joe: “Second house worth about $330,000 that has $30,000, 3% left to pay. Getting $1500 a month from long term renters, but can probably get $1800. A primary home worth $440,000 has $120,000 left. Originally planned to pay the second house in two years, and the other using the rent money in additional in 5 years. The way we grew up, and not having a full-time job with stable paychecks, it seems better to have no debt.” I agree with that.

Al: Yep.

Joe: “We make about $130,000 a year, maybe spend about $50,000 a year, and would at least put $12,000 in a Roth a year.
So are we good?” I got one of these. I got one of those.

Al: We got enough.

Joe: And we got a couple of these. What do you think? Are we good?

Al: I got 9 things. Do I need 12?

Joe: Hey, did I mention I got 12,000 points on the old credit card?

Al: Okay, you got 10 things.

Joe: “Can my hubby stop working at 50 if I can get $80,000 a year? I know we have a very low interest rate, so we might just pay the required minimum on our primary. Should we get a reverse mortgage?” You haven’t had one of those yet.

Al: Yeah, that’s 11.

Joe: Oh yeah, I think we need to get a new car. Let’s go, get one of those. Oh, it’s about $40,000. Thanks.”

Al: So I got some comments. If you truly are spending $50,000 And you’re making $80,000? You’re good.

Joe: You’re good.

Al: Yep. Now, I just did 5 years inflation on $50,000. That’s about $58,000. But here’s my comment. I think you’re spending more than $50,000. If you’re making $130,000. So just take a very careful look at what you’re spending before you decide that this is the path that you want to do. Because if I take your current assets at $500,000 ish for 5 years, 7%, we had $12,000 a year that gets you to $750,000. That’s a great number. But very difficult to turn that into a big retirement income. I have a feeling you’re spending more than $50,000. So that’s my number one advice to you is try to figure out what you’re spending more carefully instead of maybe spend like $50,000, like, like what is the real number?

Joe: We don’t give advice here, Big Al.

Al: Oh, did I say advice?

Joe: Yes, you did.

Al: Sorry.

Joe: You probably rephrase that.

Al: Yeah. I would.

Joe: Some ideas that you should consider. Maybe double check your budget.

Al: Here’s what I would think to do. How about that? I would figure out what I’m really spending and then come up with the plan.

Joe: All right. Sounds good. Good luck.

Can We Retire to a Good Simple Life at Age 60? (Scott Magic, ID)

Joe: “Hey, guys. Scott Magic here from the great state of Idaho. No potato jokes, please.”

Al: Do you even have any?

Joe: No.

Al: Not me either.

Joe: Nothing’s coming to mind.

Al: Yeah. I got nothing- when I hear no potato jokes. It’s like, I, I wish I had one.

Joe: Yeah. Still nothing. ‘We drive a Chevy Tahoe, paid off, and have no debt other than our $200,000 mortgage. Our weekend drink of choice is a cold hazy IPA and some red wine.” I would pass on both of those.

Al: So that’s common drinks in my household, hazy IPA and Annie likes red wine. And I do too.

Joe: “We have two boys, age 15 and 13, that need to leave the nest soon.”

Al: That’s not going to be that soon.

Joe: “____ spitball our game retirement plan, the wifey wants to pull the plug at 60 and live the good simple life.” I don’t even know what that means, but it sounds pretty good. “My wife’s 45, I’m 48, making a combined income of $220,000 a year. We add $25,000 per year to 401(k)s, plus employer match. We recently opened up Roth accounts to plan to max them out as eligible over the next 15 years. Here’s our current breakdown.”
Alright, Scott Magic wants to retire at 60, so what do we got? We got 15 years Al, that’s kind of the time frame for wifey and 12 years for Scotty.

Al: Yep, so I ran a 13 year, just kind of split the difference.

Joe: Ooh, 13, okay. So they got “$450,000 into a 401(k) plan, they got $4000 in Roth, they got $30,000 in CDs, brokerage account is $5000, the goal is to add $5000 per year, savings is $60,000, no pensions, super lame.”

Al: So I’ll just tell you, I got $550,000.

Joe: And he’s going to add $50,000 a year?

Al: Yeah, more like $40,000 because of the Roth IRAs.

Joe; No, but plus he’s got a match too.

Al: Yeah, yeah. And I didn’t even add that, but anyway.

Joe: Okay, hold on, let me finish here. “So I’ll take Social Security at 65 and her at 70. When we retire, our house will be paid off, and we plan to keep our fixed expenses modest. That said, I plan to spend $100,000 a year, so it’ll probably be more like $120,000. I feel like we are on track with time, but curious what you guys think. Do you think we need to step up our game, or just stay the course? Love the show. Keep up the good work.”

Al: Okay. Now I’ll give my number. I’m thinking in 13 years, they’ll have about $2,000,000.

Joe: $2,000,000.

Al: And I do that starting at $550,000, adding about $40,000, 6% per year, 13 years, about $2,000,000. Then, if he wants to spend $100,000, I just took the lower figure, 13 years, 3% inflation, it’s about $150,000. Okay, so $150,000 into $2,000,000, that’s a 7.5% distribution rate. Now, I know we haven’t included Social Security, and we’re not even sure what that means, but in my way of thinking, that’s a little bit high for the stub period. I would probably say you’re not quite there, although you’re not that far off. If it were me, I would probably maybe work one extra year, perhaps, maybe two extra years, or at least have some part time income for 5 years to kind of take care of the stub period where you’re utilizing too much of your portfolio. That’s what I would do.

Joe: Yeah. So if you look at $85,000 is what the distribution would be at 4% when they turned 60. They could probably take, I’m going to say 5.5% because of the bridge, because they’re going to receive Social Security of roughly maybe $50,000. Maybe that’s too much. But let’s just say $85,000, that’s the future value, 13%. Let’s go 2% present value. Could they spend like $55,000. If they can live off of $55,000, then I would say they’re on track.

Al: Right. Because of inflation.

Joe: But they want to spend $100,000. So they’re-

Al: So here’s another way. I would say it. You’ve got $2,000,000. I agree with you about 5% is where I’m comfortable or more comfortable, right? So that’s $100,000. But you need to spend $150,000 given inflation. So, so you’re short about $50,000. So maybe you get a part time job or maybe you work an extra year or two.

Joe: Right. Well, what I did is I looked at If you look at the future value of their current savings of what they’re doing at 7%, it’s $2,100,000. I think you use 6%, maybe it’s $2,000,000. And then you look at 4% of the $2,000,000 or 4% of whatever number, I had $2,100,000, so it was like $85,000. That’s the distribution rate from that portfolio. Then I just took the present value back to today of what that would be given inflation. So the present value of that $85,000 is like $55,000. So if you’re comfortable living off of $55,000 a year until you bridge to the Social Security, then you could probably beef up your spending. Then, yeah, if that’s modest, but if you want to spend that $120,000, you got some work to do.

Al: Yeah, so we’re short around $50,000, which is what I got kind of the other direction. So short $40,000, $50,000, something like that.

Joe: All right, good luck, Scotty Magic. Love the name, too.

Al: Wish I had that name.

Joe: Yeah, I’m changing my name to Joe Magic.

Al: No, that’s not as good as Scott.

Joe: I know, Scott Magic.

Joe: I’m actually changing- just rhymes.

Al: I’m actually going to change the whole name to Scott and Magic. That’s really good stuff.

Andi: For the same price of a Retirement Spitball Analysis – that is, free – you can fiddle with the numbers yourself using our retirement calculator at EASIretirement.com – that’s EASIretirement.com. E-A-S-I stands for education, assessment, strategy, implementation, the four building blocks of a sound retirement plan. Go to EASIretirement.com and create a login, then enter your income, savings, and expenses, and see your chance of a successful retirement in about two minutes if you take the quick path, or maybe 8 minutes if you go the more comprehensive route. If your odds of a successful retirement aren’t as high as you’d like, you can change the numbers and see in an instant how much increasing your savings or working longer changes your retirement projections. You’ll get more charts and graphs than a retirement spitball analysis, but no funny – sorry about that. If the EASI retirement calculator says you’re good, why not schedule a one-on-one with an experienced professional to consider even more sophisticated financial strategies – you can do that right from the EASIretirement.com calculator as well. Start calculating your retirement wellness now for free at EASIretirement.com – that’s EASIretirement.com.

Fat & Happy in Retirement or Cutting Calories at Age 59 and a Half? (Devin, SC)

Joe: We got Devin from South Carolina. “Hey guys, I’m a new listener, but love the great content and thoughtful approach.” We have a thoughtful approach, Andi?

Andi: Somebody does. I don’t think it’s here.

Al: According to Devin, we do.

Joe: I think this is like a release approach.

Al: Not much thought goes into it.

Joe: It’s not at all. It’s like, hey, let’s-

Al: Let’s throw it up there and see what happens.

Joe: Yeah. You know, well, thanks Devin. “I drive a 2022 Subaru Outback-“ South Carolina. I was thinking Seattle. They have Outbacks in South Carolina too. I guess.

Al: Sure they do. 4-wheel drive. Need it.

Joe: All right. “Wife drives an ‘18 Acura MDX.” So that sounds sexy.

Al: That’s a big car.

Joe: “When sitting on the porch, contemplating retirement, my wife enjoys a little red wine. When I don’t care about the caloric intake, it’s a hazy IPA for me. When I do care, it’s a nice little vodka tonic.”

Al: Ah, okay.

Joe: “I’m 57 and my wife is 59. We are preparing for retirement when I turn 59 and a half in 2026. And our target income in year one is $140,000 after tax. Our situation is a bit different because of a variety of expected income streams.” Not different at all. I think it’s very common. You know when your nose itches, does that mean someone’s thinking about you? Have you heard that wives tale?

Al: No, I have not heard that.

Joe: You’ve never heard that? Andi?

Andi: No, I haven’t.

Joe: What?

Al: It usually means you have an allergy, as far as I know.

Joe: I think it means that someone’s thinking about you. Anyway, I might have an allergy or someone’s really thinking about me.

Andi: Someone’s talking about you.

Joe: Or someone’s talking about me.

Andi: Yeah.

Al: Yeah, that could be.

Joe: That could be. Probably not positive either.

Andi: It also means allergies, infections, respiratory irritants.

Joe: Well, I got it all. All right. “Our situation is a bit different because of a variety of expected income streams. I’ll be eligible for a small pension of approximately $18,000 a year. An annuity income of $38,000 a year. I’ll also have deferred comp of around $482,000 total future value, 5% growth that pays out approximately $34,000 for 15 years, estimates ranged between $25,000 and $48,000. Will be eligible for Social Security of $17,000 a year. When my wife turned 67 and $65,000, when I reached my full retirement age. I will wait until 70 if the expected cash flows in drawdown rates cooperate. I’ll also have a bonus the first 3 years of retirement that will provide an additional $200,000 in income. I’ll be debt free, including mortgages and my pre-tax total investments will be about $2,600,000 when I retire, which will include $300,000 of cash to help protect against sequence of return risk.”

Al: Wow, Devin, you’re on top of it.

Joe: Killing it. “I plan to use the cash to help take the pressure off the withdrawal rate the first 7 years to meet my target 3%. Once Social Security kicks in, I think I’m in good shape. We both plan on working part-time for a while. But aren’t taking that into consideration. Thoughts?” Absolutely killing the game.

Al: Yeah, I’m not worried about this at all.

Joe: Yeah, and I’m gonna have another $700,000,000 that will come in from an inheritance. I don’t know, what do you think?

Al: Thoughts?

Joe: Thoughts?

Al: Well, here’s the quick numbers. If you add up fixed income before Social Security, it’s $90,000. He wants to spend $140,000.

Joe: He’s already got $2,600,000.

Al: $50,000 shortfall. That’s a 2% distribution rate on $2,600,000.

Joe: And then you got Social Security that’s going to cover probably the remaining of the shortfall.

Al: And you got the extra $200,000 of income.

Joe: And he’s got another $300,000 in cushions. And if I look under my mattress, I got another about $400,000 there.

Al: So yeah, Devin, you’re good.

Joe: All right. Thoughts. No, that’s our thoughts. “Fat and happy with my IPA, or cutting calories with my vodka and soda. Thanks a bunch.” I think he’s pretty fat and happy.

Al: I think he’s all set.

Joe: Congrats. I think congratulations on everything that you’ve done. Right. “Part two. Sorry, should’ve mentioned, of the $2,600,000-“, he just wants to mention $2,600,000 again.

Al: Just get it out there.

Joe: Just throw it out there. Just in case, just so you didn’t hear it.

Al: And he’s gonna play it for his neighbors. Oh, listen to this. Devin From South Carolina.

Joe: Hey guys, you gotta listen to this podcast. It’s the best. Oh, Devin, is that you?

Al: Did I mention $2,600,000? Another $200,000 coming in 3 years?

Joe: Oh boy, Devin.

Al: My Social Security is going to be $65,000.

Joe: “I should have mentioned, of the $2,600,000 in retirement funds, only $300,000 is in an after-tax brokerage. So with this, and my cash, I do have some opportunity for Roth conversions before Social Security kicks in. I have less than $20,000 currently in Roth and have been limited with income restrictions.” Oh, so he’s just telling us how much money he makes without telling us how much money he makes.

Al: Yeah. We have a sense.

Joe: “Now my company only recently introduced the Roth option in the 401(k). I’m still anticipating a lower marginal tax rate in retirement, so I’m still currently contributing pre-tax. I will have a window for tax planning, but I will have a challenge of my deferred comp, pension, and annuity flows that will all drive my taxable income up. After and before someone suggests the annuity was a mistake, I made that call 15 years ago and I moved on and embraced the benefits of a lifetime guaranteed income. It is what it is.” Yeah. Just accept it. Yeah. Just looks in the mirror and says, you know what? People like you.

Al: I’m good with that.

Joe: People like you.

Al: You know what?

Joe: That’s what he does. Hey, Devin, just remember, you got $2,600,000.

Al: That’s right. And did I mention?

Joe: Goldarn it. People like you.

Al: And did I mention $2,600,000?

Joe: As he’s brushing his teeth, $2,600,000. So good. You know what? You bought that annuity, Devin, but it’s okay.

Al: And honey, you got $2,600,000.

Joe: It is what it is. He’s fat and happy. Congratulations, Devin.

Al: This is awesome.

Joe: Very good job. It’s okay. People make mistakes, but it sounds like you’ve made up quite well for whatever mistake of the annuity purchase. But, hey, guaranteed income. It is what it is.

Al: Yes, I agree with that.

Joe: Go for it.

We’re 52 and 58. Can We Retire in 4 Years? How Much Should We Put in Roth? (Gina, WA)

Joe: We got Gina from Washington. She goes, “Hey, I’m a state employee with a Roth 457 just became available to us. I am 52 and have been maxing out my 457 with $30,000 a year. However, I was told I can start contributing $30,000 to Roth. I don’t know how much they should contribute of the $30,000.
We have $400,000 in a brokerage account, $200,000 in IRA, $100,000 in a Roth IRA, $250,000 in our 457 plan. Debt on the house is about $200,000. We each make around $120,000 a year.” Okay. Good start here. “I drive a 2019 Mazda CRS-”

Andi: I think that’s CR5.

Joe: Oh, that is a CR Mazda CR5. That must be like kind of a SUV type.

Al: That’d be my guess. Andi will check for us.

Andi: Yep.

Joe: “-picked for the Consumer Report Safety Rating.”

Andi: Yeah, it’s an SUV.

Joe: Yeah. “Wifey drives a 2022 Toyota Tacoma pickup.” Okay.

Al: Wow. All right. That’s impressive.

Joe: “We roll around in a 2011 Winnebago as time permits prior to retirement. Wifey is a longtime friend of Bill W.”

Andi: That means she’s a recovering alcoholic.

Al: Oh, okay. I didn’t know that.

Joe: Wow. So.

Al: So doesn’t drink apparently.

Joe: Okay. Bill W.

Al: Used to perhaps.

Joe: “I learned I enjoy Guinness after a trip to Ireland last month. I’m 52, wife is 58. Two questions. Can we retire in 4 years? How much of the $30,000 allowable should be put in Roth? We both work for the state, so this would apply to both of us. The state we live in is the home of Starbucks, Microsoft and Amazon. Not sure this guess could be any easier, but the town is where beer was made. The slogan was ‘It’s The Water’.”

Al: You remember that slogan?

Joe: No.

Al: I do. Olympia beer.

Joe: Olympia.

Andi: Wow. A beer slogan that Joe doesn’t know?

Al: Well, he was just a kid. Actually-

Andi: Oh, got it.

Al: Just a very- you weren’t even born probably.

Joe: I’ve had Olympia beer.

Al: Have you?

Joe: I have, when I was in Portland.

Al: Got it. And I’ve spent time in Olympia. I used to have a client. I used to have a, back in my CPA days, I used to have a corporate client that I would go up once a year and spend some time in Olympia, the capital of Washington.

Joe: She wants to retire.

Al: Yeah. Well, they.

Joe: Oh, Gina. Sorry.

Al: Yep. So want to retire in 4 years. So they’ve got about $1,100,000 right now. And if I just take $1,100,000, 4 years, 6%, adding $30,000 per year, then they’ll end up with about $1,500,000. Let’s start with that. That’s kind of liquid assets available. So can we retire in 4 years? Let’s see, we make around $120,000. How much do they spend? Does it say? I don’t think so. Also, we don’t know, they both work as state employees. We don’t know what the pension is. So I need to know what they’re spending. I need to know what the pension is. But let’s pretend you have no pension whatsoever. Let’s say you got $1,500,000 and you’re retiring around 62 and 56, what would you say? 3% conservative, so 3% so $60,000 you could live off of, maybe $70,000, something like that.

Joe: So they’re saving $30,000, are both spouses saving $30,000?

Al: Well, it doesn’t say it, that’s why I don’t know. I just took one $30,000. I did it conservatively.

Joe: They both work for the state, so it would apply to both of them.

Al: It would, but whether they’re both contributing, I don’t know. But really, the two main things we’re missing is what they’re spending and what the pension looks like. Then we could actually answer the question sensibly.

Joe: Okay. Let’s just say 6 years from now. Well, I’m sorry, 4 years from now, they’re gonna have a-

Al: They have $1,500,000.

Joe: $1,500,000 to $2,000,000. Depending on if they’re saving $30,000 or $60,000. If they work for the state, I would, I’m assuming that they’ll have a pension.

Al: I’m assuming that too. And so at $2,000,000, let’s call it 3%, they can spend anywhere from $60,000 to $80,000 until they bridge the gap to Social Security or the pensions. So it depends on what they’re spending. If they can live within $60,000 to $80,000 a year, I think they’re pretty close. If not, they’ll probably have to work a few more years. But the whole Roth question is really going to be based on their tax bracket in retirement.

Al: Correct.

Joe: And so what we need to understand more is the pension amount if they have one, because that’s going to be taxed at ordinary income. And so if it’s a large pension, then we would probably say, well, I would defer to Roth. If it’s no pension, then it’s like, well, it’s going to be maybe a, how do you file? Are you filing a joint return? What is your taxable income? And then it might toggle a little bit, depending on how much do you want to put in Roth versus non-Roth, but it, they have more deferred monies than Roth monies. So maybe write us back and give us more details and start next year with 100% Roth, and then we’ll tell you either to toggle back or not.

Al: We may fine tune it later.

Joe: Yes.

Al: Yeah, I do, I sort of agree with that, Joe, because it would appear that everything they have is deferred, including the pension, right? So this would give them more tax diversification. Gina didn’t tell us anything about monies outside of retirement, so we don’t know if they have any.

Joe: Well yeah, they have $400,000 in brokerage.

Al: Oh, missed it. Sorry. You’re right.

Joe: That’s it. We’re done. That was awful. That was nuts. That was a complete, utter disaster. So I apologize well in advance for that.

Andi: For a good retirement spitball, the fellas need to know four things about your finances: number one, how much do you, and your spouse, if you have one, have saved for retirement in tax-deferred, tax-free, and taxable accounts? How much fixed income will you have in retirement, that’s number 2 – for example, from Social Security and pensions? Number 3, when do you want to retire? And finally number 4, how much you expect to spend annually in retirement, preferably adjusted for inflation? Don’t forget to give us whatever name you’d like us to call you, and your real location, in case state taxes factor into your spitball. Then, we want to know where or when you listen, how you found us, and of course, what you drink so Joe and Big Al can really get into your situation. Click the link in the description of today’s episode in your podcast app, go to the show notes, click Ask Joe and Big Al On Air, and send in your retirement spitball.

Canadian Retirement Roth Conversion Strategy? Target Date Funds? (Frenchie, Maine)

Joe: Got “Hi Fellers. Please call me Frenchie or some other name. There are a lot of Franco-Americans up here in Maine.” Mainers. All right. So up in the beautiful state of Maine.

Al: Maine. Yep. Love it. “I just started listening to the show about two months ago. Really enjoy your podcast. I think Andi should talk more.”

Andi: Okay. I’ll work on that Frenchie. Thank you. And by the way, this email is from October. So now they’ve been listening for 4 months.

Joe: No, they can’t-

Al: Yeah, they’re not sticking around.

Joe: Totally done.

Al: She’s never going to hear this answer.

Joe: Totally done. Frenchie. Sorry. “Give the woman some space, boys.”

Andi: Thank you, Frenchie.

Joe: Some space. Okay. We’re crowding your space?

Al: Well, let’s just read the question and have Andi answer.

Joe: All right. Sounds good. I don’t know if that would be compliant.

Al: It might not.

Joe: It might be the end of us.

Andi: I can give the laywoman’s answer and then you guys can correct me and laugh.

Joe: All right. “I think Andi should talk more.” All right. Well, you got it. “Give the woman some space. I drive an inherited 2000 Toyota Avalon with the sunroof.”

Al: Well, you can’t get rid of it, it’s got a sunroof.

Joe: I don’t drink much, but when I do, I like a plain gin and vodka- gin or gin or vodka.

Al: Gin. Yeah.

Joe: It’s like I don’t drink a lot-

Al: I have both together.

Joe: – but when I do, I want half gin, half vodka and some ice. Little 6 ounce pour -please. Okay. “I am one of your few impoverished listeners. I’m 53 with a net worth of a mere $370,000 or so.”

Al: That sounds pretty good to me.

Joe: That’s significant. “Basically, I just started working regular after many years of starting and stopping due to frolicking and moving.”

Al: Frolic?

Joe: Yeah, everyone needs to frolic around a little bit.

Al: That’s enjoying the journey. Nothing wrong with that.

Joe: And then you just got to buckle down and like, all right, here, listen to some-

Al: It’s like you wake up one morning.

Joe: There’s no finance podcast.

Al: I frolic. You lie. I found YMYW. Let’s get to work.

Joe: Yeah. Okay. “I lived in Canada for 9 years and I have about $120,000 Canadian dollars in a retirement fund. I can take that out without penalty and would have to pay about 25% flat rate tax. I was thinking of doing this over the next 3 years or so, including this year- including this year.” In Canada, the fund is basically in our traditional IRA equivalent, which charges a 1% management fee along with the fund expense ratio.” For someone that’s been frolicking around, he’s fairly pretty tight on expense ratios.

Al: Yes.

Joe: The equivalent of an IRA flat tax there in Canada. Come on, Frenchie.

Al: It’s because she’s been listening to YMYW. She looked into all this.

Joe: For a few months. Yeah.

Andi: She probably listens because she’s into finance, even though she has been frolicking.

Al: Okay. So she’s pretty tight on what she’s got.

Joe: Yeah. “I could transfer it here in the US and put it in my company Roth 401(k), paycheck to paycheck since as one of your impoverished listeners, I don’t contribute enough to meet the maximum contributions anyway each paycheck. To fund, I can put it in here as an expense ratio of about 0.5% and no management fees. So basically for each of the next 3 years, I could take out a chunk, convert it to American dollars, let it sit in my money market fund and each paycheck, max out my Roth 401(k) until the year’s chunk is gone. What do you think?” So here’s what she wants to do. She’s got this money in Canada.
She wants to pull the money out of Canada, pay the tax, let it sit in her checking account. She wants to contribute to the Roth 401(k) through her employer. Her paycheck is still needed to cover monthly living expenses. So if she’s going to max out the plan or contribute more to the plan, she needs a little cushion in the checking account that she’s going to live off of from the Canadian retirement fund.

Al: Yes, I think that’s super clever.

Joe: Very much so.

Al: It’s kind of like a Roth conversion in a roundabout way.

Joe: She’s taking the money out, paying taxes on it, but she’s getting money into the Roth. But the money to go into the 401(k) has to come from her paycheck.

Al: Yeah, because you can’t do a Roth conversion with a Canadian pension.

Joe: Yeah, and you can’t write a check from the chunk that she took out and say, hey, this $20,000 I want to put it in, it has to come paycheck to paycheck from her employer.

Al: So the net impact is the same as a Roth conversion, which is brilliant.

Joe: Love it.

Andi: I would have said the exact same thing.

Joe: Yeah.

Al: I know you would have. We should have let you talk.

Joe: Okay, Andi, what do you think of target date funds?

Andi: Good, bad or other? Well, so if you don’t want to pay any attention to what you’re doing, then it might work out well, just so long as by the time that you actually are getting close to retirement, you spend a little bit more time looking at it and making sure that you are invested properly for your risk tolerance.

Joe: Look at that.

Al: Pretty, pretty clever. Okay, we’re going to shut up now.

Joe: She wants to go on a little 2040 target date fund. So if you don’t know what you’re doing, this is what you do? Is that what you said, Andi?

Al: That’s what she said.

Andi: Or if you’re not interested, if you’re not interested in actually managing it, you know, if you just want to invest and set it and forget it.

Joe: So what you know about Frenchie, do you think she’s interested?

Andi: It seems like she’s pretty darn interested.

Joe: I know, right?

Al: But she also wants to frolic and not think about it.

Andi: No, she’s been doing that. Now she’s buckling down.

Joe: She’s geared up, bro.

Al: Oh, I guarantee you in 6 months she’ll be out there frolicking on some level.

Joe: You think it’s just too much?

Al: No, I think it’s like, you know what, when-

Joe: It’s a calling?

Al: It’s you want to enjoy the journey. Clearly Frenchie enjoys the journey. She will continue it out- continue at some shape or form.

Joe: You like to frolic around.

Al: I do.

Joe: I know you do.

Al: Yeah. That’s why I have Pure Financial manage my $10.

Joe: “When I reach retirement in about two decades, because I’m improvished- “ am I saying that right?

Andi: Impoverished.

Joe: “-impoverished, remember? If the distribution of the target date fund is 50% stocks/50% bonds, when I go to withdraw each month, can I choose whether if I’m taking money from the stocks or the bonds? Or is it going to be one big stock/bond bucket that is all mixed together? Thanks for spitballing, boys. Thanks for creating the content, Andi. That allows the boys to spitball in all their glory. I know who the credit goes to. Frenchie.”

Andi: Thanks, Frenchie.

Joe: No, you want to get, I mean, I agree with Andi. I think as Frenchie gets closer to retirement, you probably want to have a little bit more sophisticated strategy than a target date fund. Because if you’re taking distributions from the overall account, it’s going to be pro rata, depending- if you take $100 out and it’s 50% stocks and bonds and target date fund, they’re going to sell that.

Al: So, yeah, the target date fund. So you picked 2040 because that’s when you’re planning to retire and the fund itself has a glide path, which just means that earlier it is, the more equities. And then as you get closer to retirement, it becomes more bonds, more safe money. But that’s the problem, right? The problem is, is that the right investment strategy for you? Maybe not. That’s number one. Number two is when you take money out, you can’t decide to take it out of stocks and bonds. It’s just pro rata out of the same account. So at the very least, probably as you’re getting close to retirement, you may sell out of that account and have some stocks and some bonds, you know, mutual funds, index funds, whatever they may be. So you can decide which side you want to take the money out of. And which side you do, if stocks have gone up, you pull some profits off and have your distributions that way. If stocks have gone down, let them recover, take some money out of the bond or the safe money side.

Joe: All right. That’s it. We’re outta here. Thank you. The show’s called Your Money, Your Wealth®.

Andi: Drinking by calories, friends of Bill, and Franco-Americans in the Derails, so stick around. Help new listeners find YMYW by telling your friends about the show, and by leaving your honest reviews and ratings for Your Money, Your Wealth in Apple Podcasts, and all the other podcast apps that accept them.

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

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.

The Derails

_______

IMPORTANT DISCLOSURES:

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.