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
February 8, 2022

Covered calls, preferred stocks, interest on series I bonds, required minimum distributions (RMD) from your retirement accounts and when they must begin, using retirement savings at age 72 to buy a home, calculating the highest possible Social Security benefit, and how it may be taxed. Plus, listener comments about YMYW and Andi’s record collection!

Subscribe to the YMYW podcast Subscribe to the YMYW newsletter

Free Financial Assessment

Show Notes

  • (00:51) Are Covered Call Investing Strategies a Good Idea? (Michael – voice message)
  • (08:11) Required Beginning Date: When Do I Need to Start Taking My RMD? (Mike, Chicago)
  • (09:37) Preferred Stocks: When to Transfer RMD In-Kind Investments? (Gus, Philadelphia)
  • (14:56) I’m 72. Can I Use Retirement Savings to Buy a Home? (Chris)
  • (21:16) How is Interest Calculated on Treasury Series I Bonds? (Ed, Illinois)
  • (24:29) Should I Convert All of My Retirement Savings to Roth? How is Social Security Taxed? (Dr. Rosenrosen, Florida)
  • (29:48) How to Calculate the Highest Social Security Benefit? (Marc, Massachusetts)
  • (35:33) COMMENT: My Favorite Podcast, and I’m Disappointed With That (Cleveland Jake)
  • (36:24) COMMENT: Andi’s Record Collection (Stephan)

Free financial resources:

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

Download the Portfolio Tracker Guide free

Download the Social Security Handbook

Listen to today’s podcast episode on YouTube:


Today on Your Money, Your Wealth® podcast 364, Joe and Big Al talk covered call investing strategies, as well as preferred stocks, calculating interest on series I bonds, required minimum distributions (RMD) from your retirement accounts and when they must begin, using your retirement savings at age 72 to buy a home, calculating your highest possible Social Security benefit, and how it may be taxed. We’ll also hear some listener comments about YMYW and my record collection! Your money questions and comments are what make this show a show, so visit YourMoneyYourWealth.com and click Ask Joe and Al On Air to send them to the fellas as an email or a priority voice message. We take those first so Joe doesn’t have to read them. So we’ll kick things off today with one we got from Michael. I’m producer Andi Last, with the hosts of Your Money, Your Wealth®, Joe Anderson, CFP® and Big Al Clopine, CPA.

Are Covered Call Investing Strategies a Good Idea? (Michael – voice message)

Listener Michael: “Good morning, Joe and Al. I very much appreciate your efforts and time to make the podcast. I enjoy listening to it. I have an interesting question. Do you and your portfolio strategies ever think of using covered call strategies such as JEPI and QYLD? In a rising market, they obviously will not participate as much, but in a down market they do have large dividend payments on the options they write that will reduce the downside. Just curious in this environment where income is so hard to find, is it something that for a small percentage you might want to include in your portfolios? Thanks and keep up the good work.”

Joe: Good question Michael.

Al: Great question. It’s hard to find income right now with fixed income instruments, isn’t it?

Joe: Yes. It’s improving a little bit.

Al: Not much.

Joe: But not great. Let’s talk about what he’s referring to. There’s new ETFs that have either a covered call strategy or they’re writing or selling call options, more or less. What that means is for most everyone else that has no idea what that strategy is.

Al: You need to explain it to us CPA’s and laymen.

Andi: Start with what’s an ETF. Exchange traded fund?

Joe: An ETF is an exchange traded fund. Usually you would write a call strategy or an option strategy on individual securities. They are getting a little bit more robust and they’re doing them inside a wrapper of an ETF. You can almost have a hedge fund type experience inside a wrapper of an exchange traded fund at a very low cost. What a covered call is, or what he’s referring to, is that they’re selling call options. What that means is let’s say I have a stock worth $100. That stock produces a 2% dividend.I get $2 of dividends per year when the stock price is at $100. What they’re doing is that they’re selling calls. They’re saying, Hey, you have the right to purchase this stock. Let’s say at $105 and I’m going to charge you $2 for that option. You pay me $2, so I get a $2 dividend plus a $2 premium from the option. Right off the bat, I just doubled my dividend yield, if you will. If the market goes down, no big deal I still get the dividend and the call option premium. I still get my $4. The problem is that if it goes above $105, let’s say the stock goes to $130. I gave the right to you to buy it at $105, so I lost the total upside appreciation of that stock.

Al: It hits $105 and I have to sell it to you? Or you have to sell it to me or however?

Joe: Correct. You have the right to purchase that stock at $105, even though the stock shot up to $125 or $115 or $106 or whatever it is. I’m losing the forward appreciation of the overall stock. I’m locking in a price at a certain period of time, and I’m not going to receive anything more than that if the stock over performs. Whatever that option price is.

Al: I don’t really have any downside do I?

Joe: Sure if the stock plummets. You still own the stock.

Al: I still own the stock. That’s right, I forgot about that piece.

Joe: What I think Michael is saying is that, you can make up for some of the downside because of the large premiums that they’re receiving from these options. It’s an interesting strategy. It’s a way to create more income. Some of these products also use leverage. With leverage, you’re leveraging the upside as well. In this case, maybe I don’t receive 4% or $4, I could receive 8. Now on the downside, that leverage is going to cut like a knife either way. The downside, there is no downside protection. I’m locking in on the upside, but I’m receiving a premium for locking myself in the upside.

Al: You can do a put for the downside, right?

Joe: Let’s not; now you’re just throwing out terms. If someone’s looking for income and understands options. JEPI, what they do is they buy the S&P 500. What is interesting with QYLD is that they’re using the Nasdaq 1,000. These tech companies never issued dividends before.
Their growth stocks, they’re not necessarily the big staple stocks that produce pretty large dividends. I think it’s a viable strategy if you understand what you’re doing. Are we putting these in our portfolios to our clients? Not at this point. When markets are volatile or when interest rates are low, there’s always different mechanisms that Wall Street will put out. Like, you could get a lot higher yield or here’s a good way to get some income. There’s a risk of not giving the full appreciation. You have no downside protection again. You’re limiting the upside with the full downside.

Al: Just to get a little more income?

Joe: Correct. You just want to take a look at what you’re doing there. But it depends on the premiums. The premiums in Michael’s case are saying, Well, that’s going to protect you a little bit on the downside, because you’re getting additional yield by the option.

Al: Got it.

Andi: Is there a particular type of investor or a particular age of investor or something like that that this would be more appropriate for than others?

Joe: Someone that’s looking for income would want to utilize this strategy. If you’re younger, if you want the full growth of the market, you would never want to do this because you’re just capping your upside. It’s like if I have a stock at $100, it went to $200 a share, but I sold it at $105. I lost all that upward movement of the overall appreciation of the stock. If you’re going to hold the stock for a long period of time, if you’re really looking for growth, not necessarily income, you wouldn’t do this. If you’re for a little bit more income this will give you definitely more income than, let’s say a CD. But it’s a stock and it’s an option strategy, so there’s still a downside risk. There’s still a ton of risk in this.

Al: You could lose your principal.

Joe: You can lose everything. You can lose 100% of it to get a little added yield. A lot of these options strategies are writing options on a lot larger companies. This QYLD is a little bit more interesting just because it’s the Nasdaq, it’s the triple Qs.

Al: It’s not just one company, it’s a collection of lots of companies.

Joe: You’re diversified in that case. Now there’s different ways on how they wrapper the option. It’s a little bit more complex than that, but hopefully that helps.

Required Beginning Date: When Do I Need to Start Taking My RMD? (Mike, Chicago)

We got Mike from Chicago and he goes, “Dear Joe and Al. My birthday’s 1950. When do I need to start my RMD?”

Al: This is the year you turn 72. You’ve got to do it by April 1st of 2023. But if you wait all the way until then, you have to have two RMDs for 2023.

Joe: Oh, I thought that was like a follow up question from something else. My birthday is July 1950. How old is he in 2022?

Al: He’ll be 72 this year, in July.

Joe: In July. Got it. He’s got to take his RMB by the end of next year. If he does take it by the end of next year, he has to take two.

Al: I thought it was April 1st of the following year, his first one. Otherwise, he has to take two.

Joe: Your required beginning date is April 1st following the year you turn 72.

Al: But if you don’t take your RMD this year, you’ve got to take two of them next year.

Joe: It gives you a little security blanket.

Al: Some people don’t realize they have to do an RMD. If you don’t take an RMD (required minimum distribution) when you’re supposed to, guess what the penalty is…50%!

Andi: Half.

Al: Half, right. So there you go.

Joe: You’re pretty close to that age.

Al: I am closer than you.

Preferred Stocks: When to Transfer RMD In-Kind Investments? (Gus, Philadelphia)

Joe: We got Gus who writes in from Philadelphia. “Hey Joe and Al, great show. I’ve been listening for about two years.” Very cool. “My dad is 92 years young and has been taking RMDs as required. He doesn’t need the money, so he transferred his investments in kind from his IRA to his brokerage account. One question is given that the transfers are in kind. When is the best time of year to make the transfer? His vehicle of choice over the years has been preferred stocks as he enjoys the dividends as well as the guarded type minimum 25 redemption value. He only invests in blue chip preferred with little risk of bankruptcy. Happy holidays. Thanks for the spitballs. Gus from Philly.” A required minimum distribution is that by law, from a retirement account, you are required to take money out of the account and pay the tax. Let’s assume that Gus’ father, who is 92 years young, has $1 million in his retirement account. His required distribution is $40,000. He needs to pull $40,000 out of his account that year to satisfy the required distributions.

Al: It could be from January 1st to December 31st. Doesn’t really matter when.

Joe: The reason why is that the IRS wants to get their tax money.

Al: In that next tax year. The reason why it’s the following year is they take your balance, your IRA on December 31st of the year before. They figure out how much required minimum distribution you need to make. You just have to take that out between January 1st, December 31st.

Joe: They want to deplete the overall account over time. At 92 his RMD is probably not 4% on $1 million it’s probably closer to

Al: 8 or 10%, maybe I don’t know.

Joe: I was thinking maybe higher than that. I’ve got the table, but I’m not going to look it up to do his RMD. Anyway, that $40,000 is 100% taxable. Let’s just assume

Al: It’s ordinary income.

Joe: Let’s say he owes $10,000 in tax. You could either withhold the tax from the distribution and pay the IRS right there. Or you could pay the tax out of outside money, whatever you want to do. That $40,000 of the RMD is going to be 100% ordinary income tax. Taxable. What Gus’s father’s doing is that he’s not taking the distribution in cash. He’s not saying hey sell x y z stock and give me $40,000 in cash, and I’ll just pay the tax or I’ll withhold the tax. He has blue chip stocks in preferred stocks. And he’s saying I want to transfer $40,000 of shares of x y z stock and just give me the stock and put it in the brokerage account.

Al: Which you can do.

Joe: Which is great. It’s a good strategy. He has to pay the tax. When he does his taxes or he does estimates or whatever the case may be, he pays the tax. He’s just taking the stock out of the retirement account in kind and now putting them into a brokerage account. So he’s wondering, what is the timing? What’s the best timing on this?

Al: The beginning, middle, end?

Joe: That’s a market timing question. Let’s say if the stock goes down, you could get a lot more shares out. If you wait until the stock is down and you probably want to do that. So you get as many shares out of the retirement account with the least amount of tax possible.

Al: That’s the best answer. If you’ve got a great crystal ball.

Joe: No one has a crystal ball.

Al: Maybe another way to think about it is if you do it earlier in the year, the dividends on those shares will be currently taxable. But at least they’ll probably be taxed at the capital gains rate because most of them would be qualified dividends, if not all. Whereas if you left it in the IRA, you just have dividends in an IRA, you’d have higher ordinary income later. Maybe that’s a way to think about it.

Joe: Then I guess to piggyback on that is, does he need the income? If he’s taking, let’s say, the $40,000 out. He takes that out in January, it’s going to pay the dividends over time, but it’s going to be taxed at capital gains. If he doesn’t need the income, he’s paying tax on income that he doesn’t need.

Al: That’s true, too. Then in that case, you wait till the end

Joe: You wait until December.

Al: Yeah. It depends, I guess.

Joe: Good question.

How much money do you need in retirement, and how does your retirement account balance stack up right now? What’s your contribution rate? How much of your portfolio should be in cash? Are your assets properly allocated? Learn how to answer these questions and how to manage your assets at any age with our new Portfolio Tracker guide, available for free download from the podcast show notes at YourMoneyYourWealth.com. Click the link in the description of today’s episode in your favorite podcast app to go to the show notes, read the transcript of today’s episode, Ask Joe and Al your money questions, and download the Portfolio Tracker guide for free, then click share and spread the word about YMYW.

I’m 72. Can I Use Retirement Savings to Buy a Home? (Chris)

Al: Do we have a question?

Joe: We got one from Chris, he writes. “I want to take money out of my IRA 401(k) to buy a home. I’m retired and 72 ½. What would I have to pay based on if my income is only Social Security and about $300,000 in the 401(k).” I’m really glad that Chris wrote in because he wants to purchase a house and he’s like I got $300,000 in the 401(k).

Al: How much can I get out? What’s it going to cost?

Joe: I’m 72 ½, I don’t know why he’s sharing the half.

Al: That happens to be the RMD age, which is not irrelevant.

Joe: Is it 72½ or 72?

Andi: It’s probably a combination. It used to be 70½, so he’s thinking of both?

Al: It even threw me off.

Joe: The whole IRS is stupid. 59 ½, 70 ½.

Al: Then they come up with these numbers. 19, 974. It’s like why not just make it 20,000.

Joe: Chris, because you’re over, he’s eligible for required minimum distributions. I don’t know if he’s asking us if he gets special treatment because he’s 72 ½ from a tax perspective. The answer’s no. Also, people say my only income is Social Security. I pay very little in tax. Why don’t I pull the money out of the retirement account because I’ll pay very little tax.

Al: The tricky thing is, when you have extra income, then your Social Security income suddenly becomes taxable. That’s what makes this tricky.

Joe: What he doesn’t realize is that 100% of the money that he pulls out of the retirement account is going to be taxed as ordinary income. It doesn’t matter what tax bracket he’s in. If he pulls $300,000 out, he’s going to put himself in a high tax bracket.He’s going to take that money, Alan, and he’s going to purchase a home. He’s going to get a tax bill next April of $100,000.

Al: Yes, I agree with that.

Joe: What’s Chris going to have to do to come up with $100,000?

Al: He’s got to go back to the IRA 401(k), if there’s anything. But if there’s nothing, he’s going to have to borrow.

Joe: We’ve seen this multiple times. I’m not poking the bear here. I just want to educate Chris that this could be one of the biggest mistakes that he ever makes in his life in regards to finance. Let’s assume he takes $300,000 out and purchases a home. He’s like, I’m retired, I have my Social Security income. I don’t necessarily need this $300,000. I’m renting. I want a place to call my own. So he takes the $300,000 and buys a home. Pays all cash and feels pretty good.

Al: No mortgage.

Joe: No mortgage. He’s got a nice little place. Next April, he’s going to get a tax bill because that $300,000 is all taxed at ordinary income. I don’t know if Chris is single or married, but let’s assume he’s single and with $300,000 of income. He’s at the 35% tax bracket. You could take 30% roughly of $300,000 is $90,000. Depending on what state he lives in, he’s going to have the state tax. Let’s assume he pays $100,000 in tax. That’s the tax bill that he has next year. Where’s Chris going to come up with the cash to pay the $100,000?

Al: Unless he has other resources.

Joe: Let’s say he blew his load. He is like; What do I do now?

Al: Well, then you have to borrow.

Joe: Then you’ve got to go and take a loan. Then your whole purpose of doing this was to be debt free and have a nice house and everything else. Now you’re going to have to get a loan of $100,000 to pay the IRS. But guess what? You don’t have income. You have Social Security income. Are you going to qualify for the loan? You don’t have any other assets because you took the assets out to purchase the house.

Al: I’m going to answer the question a little bit differently. I’m going to pretend he asked, and maybe he did ask, for the down payment. How much can you take out for a down payment? What would that be taxed at? The answer to that question, because you only have Social Security and assuming you’re married, you could pull out $25,000 and pay no tax whatsoever because that’s roughly the amount of the standard deduction. If you’re single, it’s half of that. If you pull out any more than that, you’re going to start running into where Social Security becomes partially taxable. It’s a little bit tricky. You could pull out, if you’re married, roughly $100,000 and keep in the lowest bracket. Not quite because your Social Security would be taxable. You got to do that calculation. If you’re asking it that way for a down payment, then we need a little bit more information. Your Social Security, whether you’re married, whether you’re single to tell you how much tax that would be.

Joe: It’s going to be more than you think.

Al: That’s true. Even if we’re talking about the down payment, it’s going to be more than you think because by pulling money out adds income, which will make your Social Security, which was previously tax free, will become 50 or 85% of that amount, taxable.

Joe: I can’t tell you how many times people make this mistake. They have a lot of money in a retirement account. They look at the balance, they find their dream home or they’re looking at a retirement home, a second home or whatever and they’re taking retirement dollars and buying homes without having a clue of the tax impact. Or they’re paying off a large mortgage. You know, let’s say,instead of buying a home, he’s got a $300,000 mortgage. He’s going to pull the $300,000 out of the retirement account to pay off the $300,000 mortgage. OK, that’s great
you’re debt free but for how long? Not that long, because now next April, you’re going to owe $90 – $100,000 in tax. And guess what? You’re going back to refinance the house that you just paid off to pay the tax. That’s why we’re such big components of tax diversification. Understanding the taxation of each of the different accounts. That’s why I’m a huge proponent of Roth IRAs because you take the uncertainty of taxes and stupid mistakes that we all make with our money out of the out the window. Take it out of the Roth. You’re going to blow up your overall retirement, but you’re not going to blow it up that bad because there would be no tax.

How is Interest Calculated on Treasury Series I Bonds? (Ed, Illinois)

Joe: Ed writes in from Illinois. He goes, “I drive a 2010 Honda Accord.” Very nice. Don’t really see a lot of Honda Accords on the streets.

Al: Not as many as there used to be. It used to be the main car for a long time.

Joe: Like every third car was a Honda Accord. I had a Honda Accord in college.

Al: Did you? They last forever. They don’t break down that much.

Joe: “thou I am thinking of”

Andi: I think it’s “though”.

Joe: Thou, where art thou. “I’m thinking of buying a Highlander hybrid. I listen to the podcast while exercising. Love the show! I’m 70 plus and retired. I bought Treasury I Bonds for my wife and I.” Good idea. Of course you did Ed. “How is the interest rate calculated and when does it change?” So, I Bonds, a couple of things. You can only buy about $15,000 per year on I Bonds.

Al: I think it’s $25,000 per couple.

Joe: It’s not like you’re putting a ton, I don’t want to say $15,000 is not a ton of money, but hopefully it’s not Ed’s entire portfolio.

Al: It may not be a life changer. Let’s put it that way. But maybe for some people.

Joe: Interest rates are calculated roughly every six months, I believe, and it’s based on the CPI index. Why do you think Ed bought I bonds?

Al: Because the interest rate right now is about 7%.

Joe: Because of the CPI. Inflation; we’re feeling it. It’s like well let’s purchase these things.

Al: But it’s not fixed. It changes about every six months.

Joe: It’s zero coupon, I believe. What that means is you buy it at a certain price and then that interest rate is embedded within it. It’s tax free, I believe if you use it for education purposes.

Al: I thought they made the payments, but I could be wrong.

Joe: I don’t know. I’ve never bought an I Bond. I’m just making this up as we go. Laughing. Double E bonds back in the day and the H bonds and all that stuff. We would have clients come in and then they would have a suitcase full of these things. It was like what the hell do you want me to do with this? Then you go on Treasury direct and then you gotta put in the serial numbers.

Al: I know because some had payment coupons and some were zero coupon bonds.

Joe: They had millions of them.

Al: The zero coupon bonds. They were reflecting the interest payments on their return, even though they didn’t receive them. Some people had no idea they were supposed to do that. Yeah, it’s complicated.

Joe: Then they would have the physical coupons. The physical bonds. What do we do with these? I don’t know, just go to another advisor.

Al: I think also, Joe, with I bonds. I was reading.

Joe: Oh, you were?

Al: Yeah,just educating myself. If you cash out of them within a year, you lose all the interest for the year. If you cash out within 5 years, you just lose the last quarter interest. I think that’s how that works.

Joe: Thanks for the question Ed.

Should I Convert All of My Retirement Savings to Roth? And How is Social Security Taxed? (Dr. Rosenrosen, Florida)

Joe: Ahhhh… Just warming up my throat here, Big Al.

Andi: I like the way you sing into it.

Joe: I’m just getting warmed up. What do we have here; Dr. Rosenrosen.

Al: Rosenrosen.

Joe: Oh, I know Dr. Rosenrosen.

Al: Is it from Fletch?

Andi: Yup.

Joe: Rosenrosen.

Andi: Yes.

Joe: Yes, who lives in Florida. How about the movie? Dr? Dr. Dr? Dr.

Al: What film was that?

Joe: Spies Like Us. That’s Chevy Chase as well.

Al: I remember that.

Joe: “Hi, Joe Al and Andi. I am 4 years from retirement and 12 years from Social Security. During the 8 years in between, I plan on filling up the 15% tax bracket with Roth conversions as I’ll have no income. Most of my retirement is all in Roth. My goal is to 100% of my retirement in Roth by the time I start taking Social Security. Two questions please. Is there any reason it’d be unwise to convert 100%? I have heard about medical deductions being a reason to keep the pre-tax. Then the second one is once I start taking Social Security, the SSA indicates that income up 32 to 44 requires a tax of 50% of Social Security benefits and more than 44 creates an 85% tax on Social Security benefits. My wife and I will be receiving about $44,000 Social Security benefits. Is that included in the calculation? In other words, right out the gate is my Social Security to be taxed 85% if I have no other earned income than the $44,000 in Social Security? I assume the Social Security income doesn’t count towards that calculation, but cannot find the answer. I understand pre-tax distributions do count and post tax distributions do not count for the calculations. Thanks for your time. All the best. Dr. Rosenrosen.” Love the Fletch references.

Al: That’s good. You got pretty loud in that segment. You got animated.

Joe: It’s because Dr. Rosenrosen got me all fired up about Fletch. A few things here. You’re thinking of provisional income. Provisional income will use half of your Social Security benefits and then your adjusted gross income on top of that, to come up with your provisional income to determine how much of your Social Security benefits are going to be subject to tax. It’s not a 50% tax or an 85% tax. Just 50% of the benefits would then be subject to income tax or 85% of those benefits are going to be subject to income tax. Say it another way is that 50% of the benefits would be tax free, or 15% of the benefits would be tax free. Half empty; half full.

Al: Provisional income; It’s all your income sources without regard to Social Security. Then you add back half of your Social Security. In your case, if you only have Social Security, half of the $44,000 is $22,000. You’re below the limit, you’re not taxed on Social Security.

Joe: Then if all of your money’s in Roth IRA, then your Social Security is not taxed. Everything’s tax free. You live a tax free life.

Al: For me, I’d say, do it if you can, if you do in the low bracket. Now, if you’re trying to get an accountant’s answer, since I’m a CPA, I will tell you this since you get a standard deduction rate of about $25,000. You don’t necessarily have to convert everything, even if you have a small required minimum distribution, because it’s probably going to be tax free anyway. Even if a little bit of your Social Security is considered taxable. Once you subtract out the standard deduction, you’re probably at zero tax anyway. If you want the real technical answer, you don’t necessarily have to convert everything. But I’m not opposed to it because that gives you the most flexibility as long as you can do it in low brackets.

Joe: You might be paying more tax if you convert everything into a Roth. That’s the downfall.

Al: That’s the downfall.

Joe: The pro is we get the uncertainty of tax and you’ll never pay taxes again.

Al: You’re done right. You’re all set. It’s like not having a mortgage. I’ve got no more taxes.

Joe: Dr. Rosenrosen, I think I’m going to watch Fletch this weekend.

Andi: I think that’s the implication, is that you need to.

Al: I think I will too.

Paging Dr. Rosenrosen. When to take Social Security is one of the biggest retirement decisions you will make. How to wring every possible cent out of the benefits you’re entitled to receive, and how your Social Security will be taxed are important things to know before you claim. Download the Social Security Handbook from the podcast show notes at YourMoneyYourWealth.com for free to continue your Social Security education. Now, you also need to coordinate when and how you claim your benefits with all the other aspects of your finances. If you do it wrong, it can be an expensive and long-term mistake. Click the link in the description of today’s episode in your podcast app to go to the show notes, download the Handbook, and then, click “Get an Assessment” to schedule a comprehensive analysis of your entire financial plan. One of the experienced financial professionals on Joe and Big Al’s team at Pure Financial Advisors will help you make the right choices before you claim your benefits.

How to Calculate the Highest Social Security Benefit? (Marc, Massachusetts)

Joe: We got Mark from Massachusetts. “Hi Big Al and the other guy. I’m just phoning in to let you know that I have $1 billion in Roth IRA, a Jaguar and a purebred miniature dachshund. I’m phoning in for a pretty general question. I’m hoping you can help me out. I’m trying to figure out the breakeven best solution formula for whether or not my widowed father should be withdrawing from his, my mother passed away at 55, assuming equal income throughout the life as my father’s $70,000 Social Security benefits. My father makes about $70,000 a year and he’s 63. A couple of health concerns not expecting to live beyond 75. He’s got a good nest egg, but may like to keep working till 65 so he can add to his Roth IRA till and pass on some funds. We’re a little worried because his lower life expectancy means that he will lose out on a lot of Social Security benefits given his total income and life expectancy, mathematically speaking, is in a kind of a vacuum. Would he make out, better off?” Are you following this, brother?

Al: I think so. I’ll answer it as I understand it.

Joe: “I understand that Social Security will allow you to keep at least 15% of your benefits, even if you exceed taxable income thresholds. The grace income of $25,000 and 50% tax rate on income beyond this. How might this play out if he retires now and takes spousal benefits, then 65 takes his own or tax his own benefits? This might be a perfect example of someone with enough knowledge to screw something up, but not enough to do it right.”

Andi: I think in that last sentence he meant “or take his own benefits”?

Joe: He’s kind of blowing me up.

Al: I think the question is, Dad is working, making $70,000 a year. He’s 63, but his life expectancy is shortened.

Joe: He wants to work until 65.

Al: And should he retire now? Start Social Security now and maybe he makes out better, even though he loses some Social Security benefits, which are tax-favored down the road.

Joe: Mark is all over the place. Mark is saying, should he take the spousal benefit?

Al: You can’t do that.

Joe: First of all, the spouse died, his mother passed. There’s no spousal benefit. There’s a survivor benefit. So Mark’s dad could take a survivor benefit as early as age 60. But if he’s making $70,000 a year, they’re going to reduce that benefit because he’s taken it early. He has to wait until full retirement age. Then he can take the Social Security amount, which his own or the survivor benefits, and the benefit will not be reduced. There’s no 50% tax. 50% of the benefit is subject to income tax. Then when you breach another threshold, then an additional 25% is subject to income tax. It’s not a 50 or 75% tax on the money. It’s just stating that 75% or 50% of the benefit is going to be subject to income tax, depending on what Mark’s income tax or Mark’s father’s income tax bracket is. Should he take the survivor benefit now at 63, if he’s going to continue to work till 65, with him making $70,000 a year? There’s two things here I would say no, because he’s making $70000 a year. Because every $2 that he earns, they’re going to take $1 back. That’s not a tax. That’s basically saying you’re taking your benefit early and you’re still working. There’s an income threshold for them, for people if they make more than. I forget what that is right now, I don’t have that number in front of me, like $30,000.

Al: Which number are you talking about?

Joe: It’s probably not in this. Because he’s looking at the tax threshold.I’m looking at the Social Security clawback, which wouldn’t be on this.

Al: Are you talking about the 19,560?

Joe: Oh, yeah, 19,560. There you go, the estimated earnings exempt amounts.

Al: That means if you make more than $20,000

Joe: Every $2 over that, they’re going to take $1 back of Social Security benefits.

Al: You’re $50,000 over in this example so they take half, $25,000 back. You don’t lose it, it’s just like you never got it.

Joe: He’s going to claim at age 63 but he made too much money. He’s going to receive that benefit this year. But next year, he’s not going to receive a benefit. Because they said, you made too much money. Your Social Security benefit was $25,000, you’re over the threshold by that amount. We’re going to take that back. He now retired, he doesn’t have $70,000. He’s waiting on that Social Security income and it’s not showing up. That’s an issue. I would tell your dad to retire.

Al: If he’s got impaired life expectancy and he wants to retire and he can, go ahead. I wouldn’t worry about break even Social Security and all this stuff.

Joe: Just enjoy life.

Al: Take the survivor’s benefit now. He’ll have a reduced benefit later, but maybe it’s less important if he’s got a reduced life expectancy.

COMMENT: My Favorite Podcast, and I’m Disappointed With That (Cleveland Jake)

Joe: We got a couple of comments. Cleveland Jake. “It was like my favorite podcast.” Which was his favorite podcast, I wonder. I need some recommendations here. I’m kind of running low. “I am just as disappointed as Joe with that. I disagree with the ninja and the Joe haters.” What the hell do I have, Joe haters?

Al: Well, Ninja didn’t like it.

Joe: Oh he can go proud sand.

Al: Did you ever hear from him again?

Joe: No.

Al: Just that one time?

Joe: Yeah. He’s a big fan. He goes by Cleveland Jake now.

Al: He’s starting to make amends. He meant to challenge another show.

Joe: “I love the playful banter inside of 5 years from retirement. I have learned a lot from this podcast. Love it!” I love you, Cleveland Jake. Appreciate the nice words.

COMMENT: Andi’s Record Collection (Stephan)

Joe: Steven or Stephan?

Al: It could be, either. But Steven’s how we usually pronounce it in the US.

Joe: If I have that spelling, it would definitely be Stephan. “I love seeing your record collection in your background on the show.”

Andi: This one was sent directly to me. It does say don’t tell Joe and Al something, but I am contractually obligated to tell them everything that I’m emailed. So sorry, Stephan.

Joe: So what is he talking smack here. I feel like I’m reading like a private email that Stephan here sends to Andi. It’s like, I’m like reading her diary or something. I’m feeling very uncomfortable about this.

Al: Continue because our listeners want to know it.

Joe: She puts it on the sheet, so I just read.

Al: I understand.

Joe: I feel like Charles Barkley reading a teleprompter. Have you seen that one?

Al: No, but I’ve seen him play golf and I know what that’s like.

Joe: He was reading the teleprompter and they played a joke on him and it said, I’m a jackass. And he read it, I am a jackass. And then he’s like, Oh my god, I just read that.
All right so Stephan “loved seeing your record collection” when I came over last night.

Andi: That’s not what it said.

Joe: “in the background on the show, I think you should select an album displayed in the background for each show or segment. Don’t tell Joe and Al, but I think the show has really improved since you’ve joined.” This guy has been a long time listener. “I know it’s part of the commercial relief of the show,

Andi: Comical

Joe: Whatever. Comical. It looked like commercial to me. “I know it’s part of the comical relief of the show to have Joe read the questions, but since he reads at about a third grade level, I sometimes wish they would just let you read the questions. Keep up the good work.

Andi: Thank you Stephan.

Al: That’s why that was sent directly to Andi.

Joe: You know what I agree with you. I don’t get paid to read. I’m pretty good at math.

Al: It does make it more fun, though.

Joe: I don’t know why I’m the one that’s reading these. I don’t know how that started.

Al: I don’t remember either, but I enjoy it. It’s super easy for me to just sit back and listen.
Joe: Before I wouldn’t have to read anything aloud. OK, Stephen, why don’t you come on the show? I’m going to give you some emails.

Al: See how you do

Joe: I bet he’ll kill it.

Al: Then we will end up hiring him.

Joe: Yes. He’ll take over for me. Please we’re taking applications. Send in your applications. Thank you all for the nice emails. Thank you all for making this show great by sending in your questions. Keep it up and we’ll keep reading them. The show is called Your Money, Your Wealth®.


Energy drinks, dachschunds, Glenlivet, and phoning in the Derails at the end of the episode, so stay tuned.

Subscribe to the YMYW podcast Subscribe to the YMYW newsletter


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.