Show Notes

• 00:00 – Intro: This Week on the YMYW Podcast
• 01:04 – How Much Can a Single 68-Year-Old Retiree With $1.6M(?) Spend Without Running Out of Money? (Reuben Sailing Shoes, Wyoming)
• 08:38 – 72 and 76 With $1.4M. Should We Keep Doing Roth Conversions After RMDs Start? (Leslie and Ben, Ohio)
• 17:12 – 71 and 73 With $1.73M. How to Balance Roth Conversions, RMDs, Widow Taxes, and Inheritance Goals? (Mork and Mindy, Delaware)
• 28:28 – 49 and 48 with $2.2M. If I Get Fired, Quit, or Get Divorced Tomorrow, Will We Be Fine? (Juan & Mary, Brooklyn, NY)
• 39:20 – Outro: Next Week on YMYW Podcast

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Transcription

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

Intro: This Week on the YMYW Podcast

Andi: Juan and Mary in Brooklyn are 49 and 48 with $2.2 million saved. Can Juan afford to retire early, or just walk away if he gets fired? And if they get divorced, yikes – but does the math still work? That’s today on Your Money, Your Wealth® podcast number 573. But first, “Reuben Sailing Shoes” is 68, single, retired, and has $1.6 million saved, but he’s never had a budget in his life. How much can he actually spend? “Leslie and Ben” are federal retirees in their seventies with great pensions and a mix of pre-tax and Roth savings, and “Mork and Mindy” in Delaware are retired with an annuity, pension, Social Security, and $1.3 million. Joe and Big Al spitball on how Roth conversions and RMD timing can help both couples minimize taxes and make the most of what they’ve got. If you’re listening on Apple Podcasts, please follow the show and leave your honest rating and review. We really appreciate it! I’m Executive Producer Andi Last, and here are the hosts of Your Money, Your Wealth®, Joe Anderson, CFP®, and Big Al Clopine, CPA.

How Much Can a Single 68-Year-Old Retiree With $1.6M(?) Spend Without Running Out of Money? (Reuben Sailing Shoes, Wyoming)

Joe: We got Reuben Sailing Shoes.

Andi: I searched and searched. I cannot find a reference for that. I can’t even find sailing shoes that are called Ruben’s. So I think this is just what the guy has decided he’s calling himself.

Al: Okay.

Joe: He’s from Wyoming. Is there a lot of sailing in Wyoming?

Andi: I wouldn’t think so.

Al: Not much.

Joe: I would think More horseback riding.

Al: Yeah. Yeah, Maybe. Maybe they think of that as sailing. I don’t know. Okay. Yeah.

Joe: 68 male, single, never married, no heirs. Currently Wyoming resident, retired and moved from Oregon at age 60. Drive a paid for 2024. Subaru Outback, Onyx xt. Lifelong rent, but had a condo and then a house in the early 1980s and nineties. I got $1.6 million save no debt’s, approximately $985,000 taxable.

90, 90 bucks. I think that’s

Andi: money market slash cash. So I think it’s 90,000.

Joe: 90. Is that 90,000 or $90?

Al: 90,000.

Andi: I think it’s 90,000.

Joe: Got it. A hundred thousand dollars in a Roth. Pre 2020 inherited IRA 15,000 with required RMBS taxable. Almost all. Total index, mutual funds deferred in total index bond funds. God, this is tough to read.

Andi: It’s really hard to read.

Joe: This is, I’m sounding like I’m drunk,

Al: I’m glad, I’m glad you’re reading because

Joe: I’m like, this doesn’t make a bunch of sense here. I’m just reading what,

Al: reading the words,

Joe: but

Andi: that’s why my recap has a bunch of question marks.

Joe: Oh my goodness. I come from pension.

Okay. I come from pension.

Al: That’s a new one. I never heard that.

Joe: Where do you come from? I come from pension.

Al: I come from San Diego, but

Joe: I come from Minneapolis. I come from pension and Social Security 2300 before taxes in Medicare. And this started having taxable dividends, et cetera.

Al: Oh, you know what that means? Income. He forgot the “n”. Income from pension is stock.

Andi: Social Security. Oh, income. Not. I come from income From, okay. Thank you.

Al: Yeah, that makes sense. He missed, forgot the “n”.

Joe: Got it. You just missed the “n”. All right, so he is got income. Yeah, from pension and Social Security, $2,300 before taxes and Medicare. This started having taxable dividends, et cetera, sent to the money market rather than reinvesting. I’ve never had a budget, but always paid myself first. I dipped into savings a little until Social Security started 62, spending six plus years traveling full-time in a couple different RVs. It’s been mostly in Wyoming since, took a trip back east last year and then went to Thailand for four months and actually came back with more money than I started with. You just got back from Thailand?

Al: I did.

Joe: Did you come back with more money than you started with?

Al: I don’t think so.

Joe: All right, so Thailand, four months. because I didn’t maintain a residence during that time, how much could, should I spend? Roth conversions don’t appear to make much sense for me, anyway, at least to the 12% tax bracket.

And then QCDs perhaps down the road. Looking forward to hearing about your thoughts. Thanks. Currently drinking light beer. He’s currently drinking a lot of light beer right in this

Al: and

Joe: only enjoying most anything. That is not sweet.

Al: What’s, the light beer of Wyoming? What’d you say?

Joe: no idea. Never been to the good state of Wyoming.

Al: Is that’s, PBR or

Joe: Could be,

Al: yeah,

Joe: could be Coors like, could be Bill, like all sorts of things. Alright, so Reuben, I don’t, I don’t even know where to start here. He’s got $1.6 million saved. He wants to know how much money that he can spend. He’s got $2,300 before taxes. okay.

Al: Yeah, so I’ve got an answer.

Joe: Alright.

Al: 89,000.

Joe: Okay, so

Al: lemme explain. Alright, so he’s got, about 1.6 million and he’s got fixed income, about 27,500 Social Security. But that’s before, insurance. So I’m just gonna say he is got about 25,000,

Joe: 25 grand coming in cap.

Al: So I take, 68, I’m good with a 4% distribution rate. 1.6 million 4%, 64,000 plus 25,000 is 89,000.

Joe: Okay.

Al: I think that’s the number. Sounds good. And I think if, you spend that number, I wouldn’t be doing many QCDs because you, need it for yourself. But if you’re gonna do qds, then subtract that from the 89 and spend what the difference is. So that’s how I would look at that.

Joe: Yep. approximately $985,000 taxable.

So he is got $1.6 million saved. So when I read $985,000 taxable.

Al: Yeah.

Joe: Is that in a brokerage account or do you think he’s referring to an IRA?

Al: I’m gonna guess, that’s a good question. I don’t know. I, took it at face value in a brokerage account.

Joe: That’s what someone in the industry I think would.

Al: Right.

Joe: But he’s saying $985,000 that’s going to be taxable.

Al: Could be

Joe: the way he talks.

Al: it could be. So when you take his assets and he says he has 1.6 million and you subtract out the ones he told us, there’s a difference of 400.

Joe: 400 grand.

Al: Yeah. 425,000. So yeah, good point. Either that’s the deferred part or that’s the,

Joe: yeah,

Al: that’s the brokerage account.

Joe: Be fixed. Then he goes, all right, I got 985 taxable, $90,000 in cash and a hundred thousand dollars in Roth.

Al: Yeah.

Joe: Alright, so that is not one that doesn’t equal 1.6.

Al: No, that’s what I’m saying. There’s another 400,000, which is, you make a good point. That could be the brokerage account.

Joe: So,

Al: or, it could be flipped.

Joe: Yeah. I don’t know. I’m thinking does conversions make sense for the guy? at $1.6 million? I don’t think he spends. No. Anything. So, I don’t either spend 90,000, if he doesn’t spend 90,000.

Al: I mean, he made money by going to Thailand.

Joe: Yeah.

Al: From his Social Security.

Joe: I don’t, yeah, I think maybe you look at the top of the 12% tax bracket.

Al: Yeah. That’s what I think too. I think the only caution there is you gotta

Joe: Social Security.

Al: Yeah. Think about Social Security. Yeah.

Joe: But if he’s gonna live off of 89, he is going to fall into that threshold anyway.

Al: He’s gonna fall into it anyway. Correct.

Joe: but All right. But yeah, he’s sitting in really good shape,

Al: I think so,

Joe: yeah. Keep traveling. Keep joining life. Yeah. Reuben sailing shoes.

Al: Nice. Stumped on that one.

Joe: Okay.

Al: Yeah.

Andi: What does your golf game have in common with your retirement plan? More than you’d think. Whether you’re figuring out how much you can spend in retirement like Reuben, or navigating Roth conversions and RMD timing like Leslie and Ben, and Mork and Mindy coming up, you don’t need a hole-in-one, you need a strategy. This week on Your Money, Your Wealth TV, Joe and Big Al team up with PGA professional Chris Riley to walk you through the retirement course. Learn how to get off the tee, navigate hazards like longevity, healthcare costs, inflation, taxes, and sequence of return risk, and sink the putt for a successful retirement. Watch the episode, then use our free, self-guided Financial Blueprint tool. It’ll show you how much you’ll likely need to retire comfortably, and what you can do right now to get there. Click or tap the links in the episode description to watch YMYW TV and to calculate your free Financial Blueprint. Tell a friend.

72 and 76 With $1.4M. Should We Keep Doing Roth Conversions After RMDs Start? (Leslie and Ben, Ohio)

Joe: All right. We got Leslie and Ben from Ohio.

Andi: That’s in reference to Parks and Rec.

Joe: Okay.

Al: Got it. Okay.

Joe: So you named them or they named themselves?

Andi: No, they named themselves actually.

Joe: Leslie and Ben, is that, what’s

Al: And Parks and Rec.

Joe: That’s it. Yeah. But who’s the guy who was in that?

Andi: hold on.

Al: there was, it was, a girl that was the main character.

Andi: The woman is Amy Poehler. And,

Al: yeah, but

Joe: no, what’s the Avenger? The guys that is in,

Al: in that show?

Joe: Yeah. The Guardians of the Galaxy.

Andi: Oh,

Joe: Chris Pratt

Andi: name is Adam Scott.

Al: Chris. Oh, Chris Pratt. Okay.

Andi: This guy, Ben, I guess is, Adam Scott.So that’s him.

Joe: Not sure. Oh, those two. Okay.

Al: Yeah. Yeah. Okay. All right.

Joe: Is it Chris Pratt and Parks and Rec? Like he was like overweight.

Andi: Yes. This dude,

Joe: different guy. And then he got super jacked.

Al: Yeah. And then he, started having cool guys.

Andi: Oh, there we go.

Joe: Then he is again. Then he is an avenger. There

Andi: you go. There’s Chris Pratt super jacked.

Al: Yeah,

Joe: he’s definitely

Al: versus not. Yeah. Okay.

Joe: all right.

Al: Okay.

Joe: Let’s see. I drink an occasional Founder’s Session IPA or Manhattan, and my husband likes Bells Two Hearted, right? Never heard of Bells Two Hearted.

Al: Me neither.

Joe: Or Founder Sessions IPA,

Al: that’ll be some kind of IPA that. And you don’t really pay attention to IPAs?

Joe: No. Is that there’s no such thing as a founder. Is that a type of IPA

Andi: Founder’s Brewing Company All Day IPA is a 4.7 ABV session IPA.

Al: Oh, okay.

Andi: I’ve never heard of a session IPA.

Al: since he capitalized Founders, I’m guessing it was.That’s a company.

Joe: Got it.

Andi: Founders is the brewing company. Yeah.

Joe: All righty. I drive a 2013 Honda Civic.

Al: Wow.

Joe: Wow. How many miles do you think he’s got on that bad boy.

Al: he’s got 150

Joe: and Ben’s arrived in 2016 Honda Accord. Look at those.

Al: Yeah, that’s great.

Joe: I’m 72. Been married, oh. I have been retired for 17 years and Ben is 76 and has been retired for 22 years.

Al: Good for you guys.

Joe: We both have longevity in our family. He’s, Ben’s mom just turned 101 and his dad lived until his nineties, as did my parents and grandparents. We have no debt. We own our home, approximately $350,000. We have two amazing grown children whom we manage to get through college debt-free. We are both federal serves.

What is that? Civic service retirement system. CSRS.

Al: Wow. Look at you. Pull that in. Hold

Joe: on. Come on. I used to do workshops to federal employees.

Al: Okay.

Joe: back in the day. Though, so CSR is retirees, so you got serves and first serves is a badass pension. It’s a lot of money coming in.

Al: It’s a good one. Yeah.

Joe: Okay. Yeah, it’s a good one. with, pensions in small amount of Social Security that provide us with plenty live off of, approximately $120,000 per year.

Al: Oh, there you go. That’s pretty good.

Joe: It is. Ben has approximately $50,000 in a Roth. $150,000 pre-tax IRA and $550,000 in a brokerage account. I have approximately a hundred thousand dollars in a brokerage account.

$30,000 in, I icons 30,000 in gold and silver, which I am getting ready to sell $200,000 in my TSP pre-tax, 60,000 in the pre as, pre-tax IRA and $240,000 in a Roth. Ben has been taking RMDs for a while and donates most of that money. I’ve converted $50,000 to a Roth, both in 24 and 25, anticipate a tax change, but since it didn’t happen, should I continue to do Roth conversions in 2026?

It is possible to do conversions to the Roth component of the TSP. Should I do that or move my money out of the TSP into an IRA to do the conversion? We are in the 22% tax bracket, and I wanna keep it that way. I have to start taking RMDs in 2026. What do you recommend? I started listening about a year ago, but went back and listened to all the old shows.

Really enjoy it.

Andi: Wow.

Joe: Something

Andi: all the old shows. Imagine that.

Joe: I can’t imagine that all of it. It’s like imagining me being stuck in quicksand. It’s something you don’t imagine.

Al: No, you don’t.

Joe: Thanks so much. Wow. All right.

Al: Okay.

Joe: So they got some things going on here.

Al: Yeah. So to summarize, they got about 400,000 in tax-deferred.

They got about 700,000 in, taxable and about 300,000 in a, Roth.

Joe: So they don’t have a ton of money compared to their overall net worth. Like most people is in the tax deferred accounts, they have most in tax. like in a brokerage account, it’s 700 grand,

Al: right?

Joe: So 400,000. The RMDs are not gonna kill ’em. In the 22% tax bracket, they’re still fairly young. let’s see, Al

Al: they’re in the 22% bracket. And when RMDs kick in for him Or no? For her.

Joe: For her, yeah.

Al: It’ll still be in the 22% bracket, so I

Joe: might as well just take advantage of the full 22,

Al: wouldn’t I think so. Yeah, I think so.

Unless they wanna do QCDs. but yeah, I, think I, I would consider doing up to the top of the 22% bracket. it’s personal choice, it’s 400,000 to tax deferred RMDs, or 4% of that in to, you know, maybe 16 to 20,000. So it’s not gonna be that big a deal, but, how much you should do pension? One 20 dividends.

I got 14,000 at 2% of 700,000 as a guess. his RMD is about six. so that’s about 140,000 of income, minus 30,000 standard deduction. I’m rounding.

Joe: Mm-hmm.

Al: which means they could convert about a hundred thousand and stay in that 22% bracket, which happens to be at 211,000. And by the way, the lowest Medicare rate is 218,000, so they’re staying below that as well.

So, so I, would say up to the first I up to

Joe: Medicare to you?

Al: no, I would go to 22% ’cause that’s lower than the first Medicare. Got it. Yeah. So I, would say, but I think one of the more important things I would say is if you keep converting, then make sure you do your RMD first. Conversion second.

If you do it the other way around it, it’s not a good thing.

Joe: yeah. ’cause that would be an over contribution.

Al: Yep.

Joe: So what, she’s got $200,000 in a, $260,000 in hers.

Al: Yeah.

you think she should do go to an IRA or and

Joe: Convert? Yeah, it should be. Yeah. I don’t know. I don’t think it matters all that much as long as you.

I mean, people love the TSP. I get it. You get four or five choices, they’re dirt cheap and

Al: yeah.

Joe: You know, they’re like, they’re index funds. you can get the same exposure to the market in an IRA, probably. Are you gonna pay a little bit more? I don’t know, maybe a, Smid GP, but some of these ETFs today are almost free.

Al: True? Yeah.

Joe: There are some that are right free. I would, I like consolidation. I would have everything at one custodian to make it easy for me. the spouse, the beneficiaries.

Al: Sure.

Joe: I don’t like to have a couple of different accounts. When you have to take the RMD, she’s gonna have to take two RMDs from the IRA and one, one from the TSP. If you move it into the IRA, then it’s just one RMD.

Al: Simpler. Yeah.

Joe: Simpler,

Al: yeah.

Joe: easier to track. I think it’s easier to manage. I think it’s easier to rebalance.

Al: Yep.

Joe: if I want to do a conversion from an IRA to a Roth IRA, I can. I don’t have to sell anything.

Al: Mm-hmm.

Joe: I can just journal my shares. Yeah. Over X, Y, Z stock because they don’t need the money. They got plenty of money in pensions and Social Security.

Al: Yeah.

Joe: So I think there’s more reasons to put it into an IRA if I were, If I was Leslie or Ben. but if you keep it in the tsp that’s fine too. You can convert into the TSP component.

But I don’t know, I just like simple, especially as you get older. Yeah. Yeah. You can have one statement, you can yeah. Take a look at everything in one, one spot.

Al: So I, would agree with you. That’s what I would do, but in the same breath, I would say it doesn’t really matter. If, you wanna stay in the TSP, go for it.

But that, I think Joe and I are in agreement, we would both go to the IRA just ’cause it makes it simpler.

71 and 73 With $1.73M. How to Balance Roth Conversions, RMDs, Widow Taxes, and Inheritance Goals? (Mork and Mindy, Delaware)

Joe: Alright, moving on. We got Mork and Mindy Nanu, nanu.

Andi: Shazbat.

Joe: Joe and Al, thank you for all your financial knowledge and entertainment you continually share. I’ve been an online listener for seven years and yes, Al. This is my all time favorite podcast.

Al: Wow. Okay.

Andi: Yay.

Joe: All time.

Al: Oh, that’s saying something.

Joe: I’ve been doing quite a bit of research lately on Roth conversions and would greatly appreciate your professional perspective. My goal is to determine the most effective strategy for my wife and me moving forward.

Our main objective is to obviously minimize our overall federal and state tax exposure over time. I’m also concerned about reducing the potential widows tax. as well as minimizing the future tax impact of our adult children when they inherit our accounts. At the same time, I wanna make sure we maintain sufficient liquid assets to cover on any unexpected health or long-term care expenses that may arise.

Could you please share your thoughts on strategies or timing that might best balance these priorities? Here are some of the facts. Okay, we’re both retired in Delaware and live a conservative lifestyle living off our Social Security pensions and annuity. We got traditional IRA balance of 1.3. Current Roth IRA balance of 330,000.

We got non-retirement investment account of a hundred thousand. Our joint Social Security is $7,000 a month. Pension yearly is 15,000. Deferred income annuity yearly is 45,000. filing status, married, I’m 71, my wife is 73. End of year. What type of conversion approach should you suggest? Lump sum, laddered, et cetera.

Regards, Morgan and Mindy. PS I stopped drinking many, years ago. I heard that alcohol consumption increases a person risk to developing dementia. I thought you should know that.

Al: Did you know that?

Joe: No. Now I, no. Okay. I had ChatGPT help me prepare my question.

Al: Okay, very good.

Joe: More convenient.

Andi: Thank you for your honesty, Mork.

Joe: Yeah. let’s see.

Al: So we’ve got, we got about 1.7 million in assets. Once 0.1. Point three is in the tax deferred.

Joe: I’m guessing the deferred income annuity was.

I don’t know if there’s basis in that, so I, I’m not sure what the taxable amount or if

Al: I’m thinking that’s in the IRA, I don’t think there’s any basis.

Joe: You think so?

Al: Yeah, because there’s only a hundred thousand in the tax account.

Joe: No, the $45,000 of income.

Al: I know that wouldn’t come from a 45,000 taxable.

Joe: Let’s say if he had money that put into it in income annuity that was not qualified. There would be a pro rat on the taxes is

Al: what I understand. I guess if he didn’t include it in his assets, I guess that’s what you’re saying.

Joe: Yeah.

Al: If he included it in his assets, it has to be in tax deferred.

There’s not enough money in taxable. But if he didn’t include it because he thinks of it more as an income. No,

Joe: I’m saying he’s already done it.

Al: I know. I know he is done it.

Joe: I still don’t understand. I don’t follow. What do you mean? So he got 1.3 hundred in an ira.

Al: Well, an annuity has a surrender value and some people

Joe: No, not if it’s a, it’s an income annuity.

So he already took a lump sum and bought the income.

Al: Oh, okay.

Joe: Is what I’m thinking.

Al: Okay.

Joe: So I don’t know if that $45,000 is his annual income. I’m not sure how much of that is taxed.

Al: Got it, Okay. I’m with you now.

Joe: So he’s got 45, 55, 60 what? Almost a hundred thousand dollars of income.

Al: Yeah,

Joe: and so he’s good living off of that.

He’s got non-retirement of a hundred and then 1.3 million.

Al: Right,

Joe: so he doesn’t need any of the 1.3 million. How much did he convert?

Al: once they get to, once they both get to RM D age, their RMD will probably be about 50 grand,

Joe: but hold on a second. Joint Social Security gross. Yearly benefits, 7,000.

Al: Yeah, that does seem.

Joe: Pretty low, isn’t it? But did you see, you see the K that’s like kind of far away from the seven Did.

Al: Maybe it’s 70.

Joe: Was it 70? Is this another typo?

Andi: Like you come, I come.

Al: that’s a good point. Oh, you’re catching all kinds of things.

Joe: I know. look at the 15 Ks. The, K’s right next to the five 40 5K.

Al: The K. Every other K is right next to it.

Joe: Yeah, the seven we, got a little gap.

Al: Could be 70.

Joe: It could be, I dunno how old are they’re?

Andi: They are 70…

Al: 71 or 73.

Andi: 71 and 73.

Joe: So maybe if they collect it at age 70 or unless there’s 45,000 deferred income annuity, is this a pension from, something that they put in?

Where it took from their Social Security. But Social Security laws changed. I don’t know.

Al: Yeah.

Andi: 7,000 and I just double checked and made sure that, yes, in the email it says Seven space K, so

Al: seven space K. Okay.

Joe: All right. So,

Al: so if it’s 7,000, what? What’s your answer?

Joe: yeah. then their income is $67,000.

Al: Yeah. Plus if they’ll be, then when they get to RMD it, you add another 50 grand.

Joe: Yeah. So at $70,000 of income plus 30, I mean, you, they’re in the 12

Al: Yeah. Near the top of the 12.

Joe: So you’re gonna convert to the top of the 12 for sure.

Al: Yeah. Which might be just a little bit.

Joe: I don’t know if their, income is 67 today.

When does RMDs happen? A couple years.

Al: Yeah. 73. So for Mindy now or this year? And for Mork in two years.

Joe: Okay. 67 minus 30. So their taxable income is gonna be $37,000

Al: with Without RMD.

Joe: Without RMD, correct?

Al: Correct.

Joe: You take the RMD, which is gonna be. What? 40? I don’t know. They didn’t screw out.

Al: I don’t know. How much is hers?

Joe: I don’t know. Yeah,

Al: I’m just going joint. And joint is about 50 grand. 4% of 1.3 million.

Joe: Okay.

Al: So that’s what it’s going to be. So if you take 30 grand plus 50, 80, so maybe they can convert, top of the 12 of, 12 is 101,000. So maybe. Yeah. What, did I say? For 30, maybe 20 grand.

Joe: Yeah. I don’t know. You do you just stay in the 12

Al: maybe, because that’s even with the RMD, that’s where they’re at.

Joe: I know the, RM D’s not gonna push ’em into the 22. It will, unless the account balance.

Al: It will eventually, but not right away.

Joe: So if they convert to the 12, it’s gonna be slowly kinda getting that money out.

Al: But yeah, they could,

Joe: they, from 12 to 22 is. It’s not that big of a jump.

Al: I know. So if they do that, they can do another 110,000. ’cause the top of it,

Joe: yeah,

Al: 22 is about 211. So it’s something to consider. Their taxable is only a hundred, so they, have limitations on how much tax they can pay, so that’s another thing.

Joe: Yeah. If they only have a hundred thousand dollars non-retirement to pay the tax,

Al: I think

Joe: 30.

Al: I think if they go to the top of the 22, which maybe is a good answer ’cause the RMD will be lower. In fact, maybe she does. two RMDs next year. Because she turned 73 this year.

Joe: Yeah.

Al: Yeah.

Joe: So what, Al is referring to is that you can push your RMD the next year, but you just have to take two. So, She could do the conversion a lot larger conversion this year. Push the RMD the next year and. You could get a lot more out. You could still stay in the 12% tax bracket or the 22.

Maybe you do one big one to the 22 1 year.

Al: I think you do one big one and then you’re done.

Joe: And then you’re done. Yeah. Yeah. Or then you’d look at the 12%.

Al: Yeah. Yeah. I, think, that’s what I might do.

Joe: I like that. I like that a lot.

Al: Yeah.

Joe: Yeah. Push the RMD to next year, do the conversion to the top of the 22, and then.

Each year after that,

Al: you can do up to 12 or

Joe: up to 12, right? You take your RMD and then if there’s room in the 12, you convert the right into the top to 12.

Al: Now, if the Social Security is 70,000,

Joe: 70,000,

Al: that makes a difference.

Joe: Yeah. You gotta write back in.

Al: then you go to the top of the 2222, and maybe that’s what you do.

Joe: Yeah,

Al: but you gotta be careful because you gotta afford the taxes.

Joe: But I think they can’t afford the taxes if they have that much fixed income.

Al: that’s good point. Yeah. With the RMDs they can.

Good point.

Joe: the RMD would be available to pay the tax.

Al: Yeah, that, yeah, you’re right about that.

Joe: cool. I bet chatGPT didn’t come up with that answer. Oh, chatGPT. You use ChatGPT?

Al: I do. Do you?

Joe: No.

Al: I will tell you this, once you use it, you can’t.

Joe: You’re addicted.

Al: You are addicted. It is, so much more advanced than Google. It is. Try it.

Joe: Alright.

Al: it’s like having a personal assistant, right?

Joe: Which just right in your pocket

Al: that knows everything.

Joe: Everything, perfect.

Andi: Have you found that it hallucinates or lies to you though? Is it telling you stuff that’s completely not true and you don’t even know it?

Al: maybe, but I, I would say from things that I do know that I can verify, I’d say over 90% is correct.

Joe: Got it.

Al: But yeah, it’s not gospel. It’s not like, you know, the Bible.

Andi: Kiplinger calls investing in a Roth “one of the smartest money moves a young person can make,” but only if you know the rules. Miss them, and you could be handing the IRS money you didn’t have to. That’s why we put together the Complete Roth Papers Package. This free bundle of guides covers everything: how Roth contributions and conversions work, the Backdoor Roth strategy for high earners who can’t contribute directly, the 5-year withdrawal rules, and how a Roth IRA stacks up against a traditional IRA and Roth 401(k). It’s the roadmap you need to unlock decades of tax-free growth, without the costly surprises. Click or tap the link in the episode description and download it free. Now, if all of this feels like a lot to manage on your own, that’s ‘cause it is. And you don’t have to. Schedule a financial assessment with Joe and Al’s team at Pure Financial Advisors. Meet in person at one of our offices nationwide, or online from anywhere. They’ll review your financial picture from soup to nuts and tell you straight up whether Roth conversions are right for your circumstances. No cost, no obligation. Just an experienced financial professional providing a second opinion on your DIY retirement strategy. If they can help you save money in taxes, isn’t it worth it to give it a shot? Click or tap the free assessment link in the episode description, or call 888-994-6257 to get started. And do a friend a favor and share this with them.

49 and 48 with $2.2M. If I Get Fired, Quit, or Get Divorced Tomorrow, Will We Be Fine? (Juan & Mary, Brooklyn, NY)

Joe: Hi Joe, Big Al, Andi, this is Juan and Mary writing you from Brooklyn, New York. I’ve been thinking about retirement for a while. Been listening to every episode of your podcast for a few years now. Thanks for keeping it fresco.

Al: fresco.

Joe: Love that.

Al: Yeah, me too.

Joe: Oh, we keeping it fresco.

Al: It’s not fresh. It’s Fresco.

Joe: we are married couple 49 and 48 years old with kids that are living in Brooklyn, New York.

She drinks white wine. I have a few beers in the summer in Sheridans in the winter. Okay. Sheridan’s

Andi: never had you look it up. No.

Al: Dunno what that

Joe: No idea. Never had a Sheridan. we have $2.2 million saved. A hundred thousand dollars in-

Andi: It’s a coffee-layered liqueur.

Joe: the funky layer?

Al: Coffee.

Andi: Coffee layered liqueur.

Joe: Oh. It probably tastes fresco

Al: good.

Joe: We have $2.2 million saved a hundred thousand dollars in a Roth 1.3 in tax deferred accounts, $800,000 in a brokerage account, plus a paid off house. Fixed income would be rental income, which is currently producing $50,000 a year and then a retirement in retirement.

Expected Social Security to be $60,000 total at 62, and I have a pension that provides $40,000 if I stop working now and collect at age 60. No COLA. Currently save $200,000 a year from my salary. Wow. My wife’s income is sporadic low and we spend around a hundred thousand dollars, which is what I would expect to spend in retirement as well. I’m hoping for a two for one retirement spitball.

Al: Okay.

Joe: My And is the retire 55, but if I am fired, I don’t plan on finding another job. So if I was fired tomorrow or changed my mind and wanna retire tomorrow, I’d be fine. All right. Okay. So if we tell him the answer, do you think he’s like gonna just walk into the work of like, I don’t give a shit anymore.

Al: he might

Joe: hire me.

Al: The answer to the first question is yes, and I’ll explain in a minute.

Joe: Same scenario is the previous one, whether I’m fired or retired tomorrow. Now, can we afford to divorce? What the? Juan.

Al: Like a take a little turn here.

Joe: Wow, man. This is going all over the place. This is fired divorce?

Al: Yeah. This is the two for one spitball.

Joe: Little two for one. Hey, can I get fired and divorce?

Al: Does that still work?

Joe: It still be good.

Andi: Can I get fired or if I quit or if I get divorced, are we gonna be okay?

Al: Oh.

Joe: And moved to Florida on the beach with my girlfriend.

Al: Right.

Andi: And drink my coffee liqueur?

Joe: Yeah. With my Sheridans. I estimate that our joint expenses would grow from a hundred to one 40. I don’t think divorce has talked about much in retirement planning, but just like life is too short to keep working forever, it’s also too short to be with someone if the spark is not there anymore.

And if we spend too much time fighting. Sorry to end on a sour note. Would prefer to not have you go back to work just to afford a divorce. If things just don’t work out for us. Wanna marry. They’re fighting.

Al: They are.

Joe: It’s like wife’s too short, man.

Al: So let me,

Joe: I just don’t wanna sit there and just fight with my wife.

I want to get a divorce. I hate my job,

Al: so can I get divorced and quit? Am I good?

Joe: All right.

Al: Okay.

Joe: Let’s see you

Al: let me, let me give this a stab. so currently they spend, a hundred thousand, fixed income is, would be about 50 currently. that’s the rental income.

Aaron: Mm-hmm.

Al: Assuming that continues.

Yep. So shortfalls, 50 grand, they got 2.2 million. Distribution rate is about 2.3%. even at 49, I’m, okay with a 2.3% distribution. I think that probably works well.

Joe: 49, they would blow out their brokerage account.

Al: Yeah, they probably,

Joe: think of where the money’s gonna come from.

Al: Yeah. I think he might do a 72(t).

Joe: I don’t know if I like that.

Al: I do because the, I mean, the average 72(t) is about. 4% so that kind of almost about takes care of it, or not quite, but almost. Anyway, just something to think about. So I, think that works. you’re right, you have to figure out where it comes from, but I think 72(t) has would be perfect. So you mull over that while I talk about the divorce?

Joe: 72(t) tax election is a, separate, equal periodic payment. So Juan would have to take, or Mary would have to take the same amount of money onto the account for five years or, until they turned 50. Nine and a half, whoever’s longer.

Al: Yeah. So it’d be like 10 years.

Joe: So 49, 10 years pulling money from the retirement account.

Al: But I think that’s what they need, about 4% of that. So I think that works

Joe: 4% of that.

Al: Of 1.3,

Joe: did you say? Yeah, 1.3.

Al: Yeah, they need 50 grand.

Joe: Yeah. 4% at one point. Yeah. It’s about

Al: 50 grand.

Joe: 1.25. Sure.

Al: I think that’s pretty good.

Joe: Yeah.

Al: You start starting to agree that,

Joe: no, I don’t like the 72(t) at 49.

old. You start drawing money from that. I don’t know.

Al: the, problem with that is I see it, and maybe you’re already going there is then if he does decide to get a job later, he is got too much income and he’s paying more tax.

Joe: You’re blowing. Yeah. You can’t convert to 72(t). The money has to come out.

You’re gonna put into your brokerage account.

Al: Yep.

Joe: The guy’s making a mint.

Al: Yeah.

Joe: He’s saving $200,000 a year.

Al: I know, right?

Joe: And he’s assuming he’s spending a hundred thousand dollars.

Al: Yeah.

Joe: I’m guessing there’s probably a little bit more being spent. I don’t know what Sheridans run. but I don’t know. Brooklyn, New York is not cheap to live.

Al: No, it’s not.

Joe: I think he’s probably underestimating the living expenses. I think he’s underestimating how much the divorce is gonna cost him.

Al: I haven’t got to the divorce,

Joe: so, Okay. The divorce doesn’t work.

Al: The, yeah, divorce definitely doesn’t work. So, so one thing I would say is New York is not a community property state.

like California. So community property state, the way that works is assets are split 50 50. New York is called, is an equitable distribution system. Which means it’s fair, but it’s not necessarily split 50 50. So I have no idea how these assets would be split, but let’s assume 50 50. Okay. Because I don’t know any different and I just used his a hundred thousand expenses and now I’m seeing, he said it would go up to one 40,

Joe: what?

70,000 each or what?

Al: I guess I, don’t know. But anyway, so let’s say 100 I, that’s what I used. And fixed income goes, I’m splitting that in half, but the rounds 25 grand eats 75 grand. Half of the assets is 1.1 million. That’s a 6.8% distribution rate. at 49. No, that doesn’t, not even close to working.

Joe: Yeah.

Al: Now I think, if he works till. 55 and saves half of the 200 a year. So 106% rate of return. I think he ends up with, about 2.3 million. And then I think it, then it probably does work. ’cause he needs

Joe: to, I don’t know. I mean, I’m, looking at this. 49 is young.

Al: Yeah.

Joe: And do you think he wants to just get fired or leave his job because he’s so unhappy at home?

Al: you,

Joe: and so everything kind of turns into like, think everything kind of sucks.

Al: Think way back when you were 49.

Joe: Yeah, I’m, that was yesterday.

Al: Didn’t you wanna say, you know, maybe I should just kind of stop doing this.

Joe: I, think about that every day, Alan.

Al: See that’s what I’m saying.

Joe: I When did you, sell your CPA practice?

Al: 48.

Joe: 48.

Al: Yeah, because I, was done. But now I’m still here. How about then, huh?

Joe: Yeah,

Al: but I’m here ’cause I want to, I don’t have to.

Joe: Yeah, I’m with you and, but looking, but you’re a very happily married man.

Al: I am. Yeah. So I don’t, have to worry about this,

Joe: but I’m, guessing if I came home every day like it, it makes everything kind of miserable, I would imagine.

I’m very happily married as well.

Al: I know you’re, yeah.

Joe: And so it’s like, you know, if you have a bad day at work, you’d love to come home because then it’s like, okay, you know, yeah. This is why I do this. You got family. It’s everything’s nice. Bottom boom. But if I came home and it was like, oh my God, it was horrible.

Always be this lady. Yeah.

Al: Yeah.

Joe: Just go pound down a couple Sheridans in the basement.

Al: Alone.

Joe: Alone watching Parks and Rec

Al: in, the, yeah, in the winter.

Joe: Freezing the winter of Brooklyn. yeah. I could see why. He’s like, man, I gotta, fix this.

Al: Yeah,

Joe: I think you get the divorce. If you’re not happy, I would get the divorce.

Yeah. So let’s start there.

Al: I agree. I agree with you.

Joe: Okay. Let’s figure out what the finances are and then come up with the overall strategy on, how you can become financially independent.

Al: So I am a,

Joe: because you don’t wanna, hold on. It’s like I’m not gonna get a divorce because I want, yes. I can’t afford it because I can’t afford it.

You’re just gonna have more resent, I think, towards the partner than

Al: Yeah. ’cause now you’re with ‘em all the time.

Joe: It’s like, I’m stuck. I can’t, you know.

Al: Oh yeah. A hundred percent Joe. I think happiness first. Finance is second. always. I mean, you always, you gotta be happy. So me personally, if I was in the situation, I would, if it, was that bad, I would go for a divorce and then work longer to, to where I then I could retire successfully.

That’s what I would do.

Joe: I would do exactly the same.

Al: Fortunately, I’ve never had to think about that.

Joe: So that’s, I would punt from Mary and kind of figure out my own strategy.

Al: I hope Mary’s not listening to the podcast.

Joe: Well, Mary can punt from Juan. It’s same, I don’t know. Do you think Mary loves Juan as much as Juan loves Mary?

Al: That’s a good point.

Joe: I don’t know.

Andi: They probably love each other. They just don’t necessarily like each other anymore.

Joe: Oh, okay.

Al: Oh, that’s, now we’re going deep.

Joe: Oh, God. Sounds like my parents.

Al: It was love, but they didn’t wanna be with each other.

Joe: All right. Aaron’s gotta get on a flight. Where are you going, Aaron? Croatia, New Zealand. A little bike.

Andi: He’ll be right down the street from me.

Joe: Oh yeah. I suppose you’re gonna be down undah.

Al: Yeah.

Joe: Okay. Alright. Everyone’s just a world traveler.

Yeah.

Al: how about you? Minnesota?

Joe: Yeah, I’m going, no, I’m probably gonna go to Minnesota. It’ll probably be Arkansas.

Al: are two great places.

Joe: Yes, they are very beautiful. That my family. All right. That’s it for us. We’ll see you guys next time. Show’s called Your Money, Your Wealth®.

Outro: Next Week on YMYW Podcast

Andi: Next week on YMYW Joe and Big Al spitball Social Security and retirement strategy questions for Bijou Plutus in Massachusetts, Dr Jekyll & Mrs Hyde in the Twin Cities, Diggler and Rollergirl in Tennessee, and Lloyd and Diane in Maryland. Join us then, won’t you? Subscribe to the podcast so you don’t miss a thing. Watch us on Spotify or YouTube, where you can also join me in the conversation in the comments.

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

_______

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