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 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
December 21, 2021

Does that 5-year Roth clock start with every Roth conversion? Plus, a Social Security, Medicare, IRMAA, Roth conversion retirement spitball, a self-employed retirement savings and tax planning spitball, and Delaware Statutory Trusts, security-based loans, charitable remainder trusts, and other charitable giving strategies explained. Also, will your portfolio grow faster with the help of a financial advisor? And if you’ve got a smokin’ hot wife 8 years your junior and you want to retire on the same day at ages 70 and 62, are there other financial considerations, or are you just bragging?

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Show Notes

  • (00:48) Social Security, Medicare, IRMAA, and Roth Conversions (Donna)
  • (06:40) Does the 5 Year Roth Clock Start With Each Roth Conversion? (Bill, Carmel Valley, CA)
  • (11:29) Delaware Statutory Trusts, Security Based Loans, and Charitable Remainder Trusts (Batman)
  • (23:51) Self-Employed Retirement Savings and Tax Planning Spitball (Rich)
  • (34:13) Can I Write Off My Company’s Matching Charitable Donation? (Evan)
  • (36:38) Will My Portfolio Grow Faster If I Hire a Financial Advisor? (Salvador, CA)
  • (38:44) Financial Considerations for a Couple Retiring at Ages 70 and 62? (Lucky in Rochester, MN)

Free financial resources:

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

5 Year Rules for Roth IRA Withdrawals

LISTEN | YMYW PODCAST #255: Breaking Down the Confusing 5-Year Roth Clock Rules

LISTEN | PODCAST #265: Bear Market Investing Strategies and Revisiting the 5-Year Roth IRA Withdrawal Rules

Download the Charitable Giving: Steps on Informed Donating Guide

Listen to today’s podcast episode on YouTube:


Today on Your Money, Your Wealth® podcast 357, the 5 year rules for Roth withdrawals: does that 5 year clock start with every Roth conversion? Plus, a Social Security Medicare IRMAA retirement spitball, a self-employed retirement savings and tax planning spitball, and Delaware Statutory Trusts, Security Based Loans, Charitable Remainder Trusts, and other charitable giving strategies explained. Also, will your portfolio grow faster with the help of a financial advisor? And if you’ve got a smokin’ hot wife 8 years your junior and you want to retire on the same day at ages 70 and 62, are there other financial considerations, or are you just bragging? I’m producer Andi Last, and here are the hosts of Your Money, Your Wealth®, Joe Anderson, CFP® and Big Al Clopine, CPA.

Social Security, Medicare, IRMAA, and Roth Conversions (Donna)

Joe: “HI Joe and Big Al, I just discovered your podcast and it’s very informative. I have a question for you about Roth conversions. I’m 66 and retired in 2021. I have about $2 million in tax deferred IRAs, 401(k)’s and $50,000 in a Roth IRA. Also have about 190 after tax cash reserves, and I’m planning to use it to supplement my Social Security benefits to cover my living expenses until age 72. Beginning 2022, I’ll start Roth conversions of about $100,000 each to keep within the Medicare IRMAA limit.”In the 24 percent tax bracket.”

Al: What does that stand for? I know it’s Medicare, but what does it stand for?

Andi: Income Related Monthly Adjustment Amount.


Joe: What happens when you have too much income? They’re going to increase your Medicare premium.

Al: Yeah, and it’s a two year look back., so if you have more income this year, in two years from now, your Medicare premiums are going to be higher.

Joe: Super smart people. “Then I’ll take the minimum required distributions from the tax deferred assets.” OK, I get your plan. So she’s going to defer her retirement account. She’s going to live off of cash, she’s going to do Roth conversions and then she’s going to take RMD’s at 72.
“I start Medicare Part B and Social Security benefits in May. I’m single and I am on widows spousal benefits until age 70, when I’ll take my larger benefits. I was planning on converting the annual $100,000 from my traditional IRAs and putting in $75,000 to the Roth IRA. So the brokerage house can remit my estimated taxes of $25,000 to the IRS. The rationale is that I don’t want to spend my cash reserves when I’ll need it to live off until age 72. It’s my understanding that the five year rule still applies for each Roth conversion. Is that correct? I know you don’t advise people to contribute net of tax to Roth, but if I paid taxes on my living expenses fund, I’ll need to withdraw money from my Roth and then pay taxes on the earnings. What’s wrong with my thinking? Thanks. You guys are great, Donna.” All right, Donna. Very, very good job. She gets her facts straight and what she’s doing. She’s got a really well-thought out strategy and plan. Is there anything wrong with her thinking?

Al: There’s nothing wrong, but I would do it a little differently. Here’s what I would do, Donna. I would actually put the whole $100,000 into the Roth and then pay the tax out of your $190,000 cash. Eventually, when that runs out, then do less conversion then. But if you front load it, you’re going to get more in the Roth sooner and have that much more tax free growth.

Joe: Don’t take the money out of the Roth when you have to do extra distributions. So Convert, I agree with you 1000% do the full $100,000 or, you know, up to your IRMAA limit that you feel comfortable with. I would also suggest, because she’s single. She’s got $2 million. I’m not sure what her Social Security is going to be, but she’s switching to a larger benefit at age 70 than age 72 if she’s not going to get married. You know, the top of the 22%, let’s see tax bracket is, what, $40,000 you’re in the 22 as a single taxpayer $86,000.

Al: Go to the top of the 24.

Joe: 24 is 164. Her RMD and Social Security could be 164. You might want to convert to the top of the 24% tax bracket and get all of that money out and put it into a Roth. And then you’re going to spend down the cash reserves anyway, right? It’s not like you’re running out of money. You got plenty of cash. But it’s just going to be taxable. Instead of converting to the top of the 24% tax bracket, or whatever number that you figure out or whatever, IRMAA limit that you want to go to. You’re just going to convert less and take more out of the retirement account and live off.

Al: When you’re done with your other cash. Another way to say this is that if you go over the IRMAA limit, yes, you’re going to pay more in Medicare expenses for Medicare insurance. However, just consider that an extra tax and if it still makes sense, then go ahead and do it.

Joe: You just add in the added cost to

Al: what the taxes and see if it still makes sense.

Joe: I believe it probably would work for her,

Al: Probably given that she’s got so much money in the regular that the $2 million in tax deferred

Joe: She’s got a good problem to have here. I like her way of thinking. But if she would fine tune this just a little bit, she might be tripping, and no offense to Donna here. I think people do this sometimes, they might, what’s that saying, trip over dollars to pick up quarters

Al: Other way around

Andi: I think it’s, trip over dollars to pick up pennies.

Joe: I know, it’s pennies, and I said quarters because I don’t want to be that rude. I already get enough hate mail.

Al: You’ve never got any of you.

Joe: Yeah, the ninja Joe said I should retire. With this whole IRMAA thing I’m going to pay a little bit extra in Medicare premiums, so I want to be very careful of that. But then they’re going to end up paying a lot more in tax on the distribution set.
Al: Said another way, they pay a little bit more Medicare premiums to save a lot more tax later, potentially.

Joe: You just have to run the numbers and I think she’s looking at it, right? But fine tune this thing and then she might make different decisions.

Al: Yes I agree with that point too.

Does the 5 Year Roth Clock Start With Each Roth Conversion? (Bill, Carmel Valley, CA)

Joe: “I have owned a Roth IRA for many years. Therefore, I’m able to withdraw tax free. Now that I’m retired I want to do Roth conversions. Does the five year clock start with each conversion I do after the year I convert it? Bill from Carmel Valley:

Al: I’m going to do the simple answer. Bill if you’re 59½ or older, it does not apply. It’s much more complicated if you’re under 59½.

Joe: The reason why the five year clock exists on each conversion that is done is that people used to convert money from IRAs to Roth IRAs. Then the next year they would pull the money out and avoid the 10% penalty. They paid their tax. It’s in a Roth. It’s after tax dollars. You always have access to the after tax dollars in a Roth IRA. It’s FIFO tax treatment. It was a workaround that people could say, All right I converted this; I paid the tax, now I’m going to take the money and avoid the 10% early withdrawal penalty.

Al: I betcha some did it that same day,

Joe: I’m sure they did.

Al: Look at that, I avoided the penalty.

Joe: Same transaction. Convert, then let’s withdraw and send me the money and then spend.
Any type of issue like this they catch on after a few years. And they were like, You know what? No more. So if you do a conversion and if you’re under the age of 59½, because the 10% penalty only applies to those that are under 59½. If you do a conversion under 59½, you have to wait five years or 59½ , basically, whichever is sooner. To get access to the principal of those dollars tax free.

Joe: If you’re doing a conversion after 59½, the five year clock doesn’t apply. Unless you don’t have any other Roth IRAs, because the other part five year clock will come into play. Because there’s a five year clock to get access to the tax free money. There’s rules that need to apply for it to be a qualified distribution tax free. One of those rules is that there’s a seasoning. The money needs to be in a Roth IRA for five years for that money to come out tax free. And you have to be over the age of 59½. However, you can take money from a Roth IRA under the age of 59½ tax free if you take your principle out and skip the earnings. You’re saying I’m not taking the earnings, I’m going to just take my principal because it’s four tiered in the damn Roth IRA on how the money comes out and how it’s taxed

Al: As long as it’s five years after the conversion. Or you can do a contribution the next day

Joe: Here’s how it works. It’s four tiers. The first thing that comes out is contributions and then conversions and then earnings on contributions and then earnings on conversions. But then it depends on your age, right? So then they look, I mean, it’s I mean, is this complicated or what?

Al: Let me simplify it. So Bill, if you’re 59½, you don’t have to worry about the five year clock on each conversion. You do have to still wait five years from your first Roth to pull out the earnings.

Joe: If you don’t have a Roth IRA, you just started doing a conversion, then you have to wait. But Bill, he says, I’ve been having Roths for years.

Al: I think you’re good as long as you’re over 59½.

Joe: Yeah. So that’s a key factor. I just wanted to share my knowledge just to show off my five year clock knowledge.

Andi: I should mention the fact that we actually do have a white paper on the topic so that you can actually have a physical copy of the rules in front of you so that you don’t have to try and make sense of everything that Joe and Al just said.

Al: It still doesn’t make any sense. It’s way too complicated.

Download that guide and sharpen your knowledge on the rules for withdrawing from your Roth in the podcast show notes at YourMoneyYourWealth.com. Listen to YMYW episodes 255 and 265, both on the 5 year Roth clock, and download our free guide dedicated to the 5 Year Rules for Roth IRA withdrawals. It’s an in-depth breakdown on how and when you can pull money out of your Roth IRA, based on whether you’re under or over age 59 and a half. Click the link in the description of today’s episode in your podcast app to go to the show notes and download the 5 Year Rules for Roth Withdrawals. For more in depth personalized help, click the big green Get an Assessment button at the top of the page to schedule a free financial assessment. Stress test your retirement portfolio, find out where you might be able to save more on taxes, and get a plan tailored to your specific risk tolerance, goals and circumstances.

Delaware Statutory Trusts, Security-Based Loans, and Charitable Remainder Trusts (Batman)

Joe: Our good buddy Batman. He writes in. “Hello to Andi the Angel, Big Al and Mighty Joe Young. I hope all is well with each of you and your families. I must begin by thanking each of you for consistently presenting such an entertaining, intelligent and extremely informative podcast. I have no pets as my schedule does not permit it. I have no Limerick for you, though I would refer you to Jack Napier and/or Edward Nygma for that. I still drive the 67 Batman bill and of course, subjects that I would like information on. I hope you’re able to go over them at some length, as I believe many of your listeners will benefit from the information. The first is Delaware statutory trusts.Do you like them as a solid option in which to do a 10-31 exchange? If so, any particular company(s)you would recommend? Also, if someone puts a 1031 exchange into a DST, which are, in multiple states, does the owner have to file a tax return in each of those respective states? Naturally, I’m omitting the states with no income tax.” Okay, so let’s unravel this.

Al: A Delaware statutory trust. So that’s kind of like the old tenants in common under a new wrapper. So the old tenants in common, this was 2004, 5, 6, 7, 8, 9, 10. It was a decent concept which was instead of buying one property, you buy a small interest in an entity that owns lots of properties, so you spread your risk. The problem with the tenants in commons and I think with some of the Delaware statutory trusts is that costs, the internal cost. Basically what you’re doing is you’re no longer managing the property yourselves.

Joe: Let’s back up a little bit here, a 1031 exchange. I mean, most people don’t even know what that is. So let’s say you have a property that is appreciated quite a bit. You don’t want to sell it to pay the tax. So there’s multiple ways that you can avoid the tax or reduce the tax. One of them is to defer the gain of that property, to do a like kind exchange.

Al: You can buy another property, similar property. You can buy two or three properties or you could buy into an entity that has several properties.

Joe: A DST or Delaware Statutory Trust was something easy that instead of finding a property, getting a real estate or going out there and saying, Hey, I have this commercial building or apartment building or even a rental house that I have to find a like property that I can exchange into. You have to identify the property in so many days and you’ve got to close in so many days. So there’s time limits for people that do this 10-31 exchange rate, and they can identify a few different properties and if it blows up then they have to pay the tax or they could do a reverse exchange. It gets fairly complicated. They could go and do a tenants in common, which you were just referencing, which is now you are investing in a pool with a lot of other investors. A Delaware statutory trust came about, a DST, that made it a little bit more convenient. You couldn’t find a like property, you wanted more cash flow, you didn’t want to manage the property. You would exchange into this Delaware statutory trust that was more of a diversified basket of real hard assets.

Al: Just to fine point the differences, a tenants in common was actually one, generally one, property that you own a small piece of interest in. Delaware Statutory Trust would be a trust that owns several properties. You get more diversification. I’m fine with the concept.
Here’s what I’m not as excited about; you give up management responsibilities. You have no way to improve the cash flow or the value of the property. You also have no say in when it gets sold and all these types of things. You lose control. To me, maybe even the most important thing is they tend to have pretty high internal fees. So in other words, you’re not getting 100% of the cash flow that you would otherwise get. You have to give them their cut. And it makes sense because they’re managing, they’re finding the properties, they’re fixing them up, all that sort of stuff. What happened in the Great Recession? I’m not saying it’s going to happen again, but it sure did back then. The properties went down in value so much and the debt was greater than could be serviced by the tenants, and a lot of these were lost in foreclosure. And so people that put money into tenants in commons, some not all, some lost everything.

Because they got nothing back from it because it went back to the bank and it paid off the mortgage on that property. When you look at these kinds of things, I think one of your questions, a couple of big questions, do you like the investments in there? Number one, would you rather have apartments, residential, which tend to be a little bit safer? Would you rather do commercial, which can be a little bit greater return, but maybe not as safe. That’s number one. Number two is what’s the cost structure? What are the general partners? What are they getting out of this? And I had a third one. I totally forgot, I’ll think of it in a second.

Joe: I think we’re not going to give you any recommendations. You know what, Delaware StatutoryTrusts? It’s like a mutual fund, in a sense. I mean, in real simple forms, it’s not a buy this mutual fund. If you have a hard asset that you’re trying to avoid taxes and you want to do a 10-31 exchange and you want to lose control and you want to have free cash flow and not necessarily deal with the hassles, I think they’re great investments. It’s not appropriate for everyone. You just have to do your due diligence just like with any other investment that you choose.

A: It’s kind of like, even with tenants in commons or anything like that. Look at the properties carefully, are these properties that you want to own? Maybe they are. Maybe they’re not. Treat it as if it were your own investment. As far as taxes. Yes. If they have properties in several states, you’re going to be filing tax returns in several different states. So just be aware of that.

Joe: Second question, he’s got security-based loans. “I wonder if you wouldn’t mind expanding on exactly what they are, how they work. Potential negatives and some positives.

Al: I think a security-based loan is similar, but maybe not the exact same as a margin loan. I actually did take a look at that and I’m not an expert at it. It’s another way to get cash from your brokerage to use for other purposes. Besides, like buying more stock and things like

Joe: You’re just pledging your assets for a loan at a pretty lower rate.

Al: I believe, don’t quote me on this, I believe it’s got the same risk that a margin loan has, which is that the stock market goes down low enough. You get a call on the loan, you have to pay the loan and you don’t have enough value in your stocks. So just be careful.

Joe: The third is charitable remainder trust. “AGAIN PLEASE, expand what they are, how they work, the pros and cons of this product. Also, do you like them better or worse than a 10-31 into a Delaware statutory trust?(all caps). I understand each circumstance is unique. Perhaps you could explain where one would be more beneficial than the other. All right. A charitable remainder trust is not a product. It is a trust.

Al: It’s a trust that you hire an attorney to set up. You’re in control.

Joe: What do you do with the pros and cons of a charitable remainder trust or what we call them as a tax-exempt trust as well? You have this property; hypothetically Batman is selling the Batcave. He bought it for $100,000. It’s worth $1 million and he’s got $900,000 of gain. He doesn’t want to pay the tax.

Al: He wants to sell it, but he doesn’t want to pay the tax.

Joe: He doesn’t want to pay the tax because he’s cheap

Al: He doesn’t want to do a 10-31 exchange because he doesn’t want any more property.

Joe: He’s like, I could do this Delaware statutory trusts, and then I could get some cash flow from that. That’s fine. I avoid the tax. All $1 million goes into the DST. So you avoid the tax and you defer the tax to a later date once you sell the DST. Or he could put the money into a charitable remainder trust. So basically, the trust then sells the property because it’s a charitable remainder trust. It’s a tax exempt entity and there’s no tax due on the sale of the property.

Al: The whole $1 million is there and available sitting in trust.

Joe: Then you can diversify. You can buy stocks, bonds, mutual funds, then that’s when you get into the product. The trust itself is not a product, it’s an entity. And then you put the property in, you sell the property, then you purchase product. You could buy CDs, cash, mutual funds, ETFs, individual stocks, anything that you want in. You can have a globally diversified portfolio. From there you can take income from the trust, but you have to set up what their income looks like prior to setting up the trust. You could say, Hey, I want a certain percentage that comes out or I want to have a remainder that goes to a qualifying charity at my passing or on my wife’s passing or at a certain time frame. Charitable remainder trust means that the remainder balance of that trust will go to a qualifying charity at your passing. You can utilize the trust as you’re alive, you can create cash flow. You avoid the capital gains tax on that asset. You get higher cash flow, you’re taking principal back. That is going to be taxed basically on how the investment is taxed. It could be capital gains, it could be ordinary income. You’re also going to pay the capital gains tax throughout the distribution. There’s pros and cons to each.

Al: Here’s typically what we see from clients that we talk to. They want to do an optimizing charitable remainder trust, which means they want maximum cash flow to them and minimum to charity. Minimum to charity means 10%. So, 10% of $1 million would be $100,000 and it would go to charity at your passing plus inflation. It’s a little different number, but you get the idea. So $900,000 of value comes out to you over your lifetime, and charity gets $100,000. That’s what makes this tax-exempt. Generally it’s through your lifetime. If you have a spouse, it’s second joint life. If you guys are single or married, if you live a long life, you’ll win.
If you die a week later from a car accident, well, you lost because whatever’s in the trust when you die goes to charity. Where we see this being effective is, first of all, people that have highly appreciated real estate or highly appreciated stock, they want to sell, but they don’t want to pay the tax. They’d like to get a cash flow. Maybe they don’t have beneficiaries, they don’t really care. We have some clients that don’t have kids and so they don’t care that much. If you do have beneficiaries, we still see some clients, if they really want the kids to get some of the assets, they buy a term life insurance policy to help cover that in the event they pass away early.

Joe: Pros and cons to each, another quick thing, you may have mentioned this, but I wasn’t listening. If Batman puts the million-dollar property in, sells it and optimizes it. He gets a $100,000 tax deduction in the year that it goes into the trust.

Al: I did not mention that. Good point. If you had a higher tax deduction, then you don’t optimize, you get a lower payout. That payout is calculated before the trust is set up based upon your age of actuarial calculation. The design is that if you lived a normal life expectancy, you will get 90% back. That’s the idea or whatever percentage you decide to give to charity.

Joe: I think that’s pretty good detail for that.

Self-Employed Retirement Savings and Tax Planning Spitball (Rich)

Joe: OK. How about Rich. “First off, you guys are great. Love the banter in your show is very informative. I have a SD, self-directed account. I have an SD Roth 401(k) that I max with additional ND (non-deductible) mega backdoor Roth. This last year, I added a defined benefit plan B C, my side hustle made a lot of money. I expect to make 3 or 4X this amount for the next two years. I read about adding a non-qualified deferred compensation plan to mitigate taxes. Can I do this? If so, what steps do I need to take to do this? Do I need a custodian to handle this? I read that I could do a SERP as I am the CEO and have no employees.

Also, I plan on selling this business and looking for ways to shield capital gains. Besides investing the capital gains into an opportunity zone fund. Are there any ways to mitigate the taxes? IRS rules say I cannot put the company’s shares into my Roth. Can Delaware statutory trust be utilized? Thank you for your replies, and I drive a 2015 Jeep and I have no debt.” He’s throwing out a lot of stuff. He’s got Delaware statutory trusts. He’s got SERP. These are a little bit older plans. He’s got a solo 401(k). He’s doing after tax contributions as the employer and the employee. He’s maxing that out to $54,000 some odd and he’s converting the nondeductible contributions into the Roth. Then he is making the 401(k) contribution as well as Roth. He’s got this side hustle and he’s thinking about, Hey, can I do something else? Is there anything else that I can do? He can set up a DB plan. So that’s a defined benefit plan that he could shelter more dollars in pre-tax. And if he sells the business, he’s going to opportunity zones. He’s already maxing out a 401(k) plan. He’s doing after tax contributions with the Mega Door, Mega Backdoor or Megatron Roth. And now, because he’s got this little side hustle, he’s going to make three or four times this money in the next couple of years. He’s thinking about, where can I shelter some of this money?

Al: I don’t want to pay all the tax.

Joe: The only question, I mean, there’s a few questions that I have is that he already has a solo 401(k) plan. Does he have two side hustles? Does he have one company that’s doing X and then he’s got another company that’s doing Y?

Al: I’m not clear on that either. Whether he has one or two maybe doesn’t matter because they’re probably solo, I guess.

Joe: He can’t necessarily if, let’s say, I have three different companies. I can’t set up three. I mean, I guess I can set up three 401(k)’s, but I can’t max all three of them out.

Al: Correct. When it’s similar ownership, it’s treated as one company. So you kind of have to look at it as one company.If there’s in fact more than one company. You can do a 401(k), a Sep IRA, a defined benefit plan. Those are the types of things that are available. Defined benefit plan you can actually put a lot away, but you have to commit to making a similar contribution for at least five years, probably longer. A deferred compensation plan does not work in the solo business. What they are is where an employee says to the employer, I want you to withhold some of my salary so I don’t pay taxes on it. So then the company doesn’t have to pay that salary. The company has higher profits. It pays taxes on those higher profits, but you don’t. Now, if it’s your own company, you’re going to pay taxes on those profits. So I’ve never seen, and I can’t think of any reason why you’d have a deferred compensation plan in a solo owned business.

Joe: Unless it’s one of those, remember those plans back in the day, 412(i). Funded with life insurance.

Al: Did they get outlawed?

Joe: Well I’m sure someones out there selling them. There are some of these plans that come about that people target, you know, self-employed individuals that make high income to shelter taxes. I would be very, very careful with those types of plans. Some of them work, some of them don’t. Some of them are pretty gray with the letter of the law. Some of them are right on. So I would be careful. You know, we like to keep things somewhat simple. We’re pretty conservative in regards to our tax strategies. There are some other types of plans that we have seen come across our desks in the several years that we’ve been doing this, but we would not necessarily recommend those. When you’re thinking about selling your business? What do you think should go in an opportunity zone?

Al: No, unless you want that as an investment. I mean, basically the opportunity zone defers taxes for a few years. Then you’ve got to pay all these taxes even though you still have the asset. It’s not like a 10-31 exchange where it defers it till you sell. Now you do get any future increase in that opportunity zone asset, which is potentially tax free as long as you own it for long enough. No, I’m not a big fan of those. I think that was an interesting idea that came out. I think people did well that got into it early. Now, many opportunity zones are so overpriced because of this tax benefit that I’m not sure the investments are that great. That’s my perception. I can be totally wrong. But no, I would not do that.

Joe: An opportunity zone is that you’re investing in an area that has an opportunity for growth. You’re trying to make an area better. You’re putting an investment into an area of a city or something that can grow it and make it better. A lot of money is into these investment,

Al: Personally I heard, three or four years ago, that it may be too late because these areas are much higher priced now. I wouldn’t do that. A couple thoughts is if you do sell a business, capital gains are not that bad. And if you really want to save money, move your business to Nevada or Texas or a state that doesn’t have any income tax and then sell it. You only pay federal tax.

Joe: That’s pretty aggressive.

Al: As long as you move, don’t fake it. I mean, you really gotta want it. This is not, move for six months, sell it and come back.

Joe: Oh, really. You know, anyone that’s done that,

Al: Yes, generally it doesn’t work. This is a 5 or 10 year plan. Five years, at least. But that’s one way to go. If it’s an S corporation or an LLC, well, not an S corporation it doesn’t work, but if it’s an LLC, you could potentially put that into a charitable remainder trust.An S-Corporation Charitable Trust is a prohibited owner, so you cannot do that. An LLC you can. So that would be another way to set up a charitable remainder trust. You sell the business, pay no tax and get a cash flow for life. So that could be something.

Joe: Rich. Congratulations. It sounds like you’re doing a hell of a job. You’re side hustles killing it. You’re making a lot of money. So very good there, and you’re looking at other ways to save money, which is great. Just probably talk to a really good tax accountant in your area to look at things that are aboveboard. I wouldn’t necessarily go to an insurance agent. If someone’s giving you what the tax strategy should be.

Al: I would say, unfortunately, a lot of CPAs aren’t really even aware of these strategies that we’ve just brought up.

‘Tis the season to give and get back! Learn more about charitable remainder trusts and many other ways to maximize the deduction you get for your charitable donations. Download our Charitable Giving Guide from the podcast show notes at YourMoneyYourWealth.com to learn when to give, how to bunch your donations, and for more details on Gifting Appreciated Property, Qualified Charitable Distributions, Charitable Gift Annuities, and the limitations on charitable deductions. Click the link in the description of today’s episode in your podcast app to go to the show notes and download these steps on informed donating for free.

Can I Write Off My Company’s Matching Charitable Donation? (Evan)

Joe: Evan writes in to ask “Hey, my company has a match for donating. I’d like to take the standard deduction of $12,500. If I donate $150 and my company matches $150. Can I donate $150 and write off $300? That’s just the $150 of my donation, as well as the $150 of my company match.” He wants to take a little credit for the company’s donation.

Al: It was because of him that they got the donation.

Andi: Doesn’t the company get to write that off?

Al: Of course, Evan, sorry, it doesn’t work that way. And this is true of all taxation, which is whatever you spend that’s your write off. You don’t get like a phantom write-off. That’s the way tax basis rules, and I’m not going to go into any of that because who cares? The easy rule to think of is if you spend $150 in a donation. That’s your deduction. The company actually gets a $150 deduction.

Joe: For giving it to the charity as well.

Al: That’s right, because that was their money.

Joe: The company is not right writing a $150 check to Evan. The only way you would get to write off the whole $300 is if the company paid you an extra $150 personally that went through your salary. That then gives you a tax basis to write off the $300.

Joe: The companies give the money directly to the charity and they are writing it off.

Al: I like the idea, but no, that doesn’t work at all.

Joe: A couple of other things charity wise. People think, Hey, I gave my kid $10,000. Can I write that off?

A: That’s good for you, but not for the IRS.

Joe: It is the season for gifting. The ol’ Christmas gifts…you can’t itemize your Christmas gifts to the kids.

Al: You can give away $15,000 a year to each kid. And if you’re married, you and your spouse can do $15,000. So that’s $30,00.

Joe: There’s no tax write off. You just avoid the gift tax.

Al: Yeah, that’s right. If your child is married, then you can each give to the couple $30,000 each. So $60,000 would be your max in that example? There’s no tax write off. What that does is that it doesn’t count as gift taxes, so it doesn’t reduce your estate tax exemption when you pass away. That’s the only reason we have that $15,000 rule, but it’s not a tax deduction.

Joe: Good try Evan. I like the question, but unfortunately you cannot write it off.

Will My Portfolio Grow Faster If I Hire a Financial Advisor? (Salvador, CA)

“I have a $870,000 stock portfolio. Should I hire a financial advisor to help; help make it grow faster?”
No. I mean, you’re not going to do that. Do not hire a financial adviser to make your money grow faster. If someone is selling you that Hey I’m a really good financial adviser and I’m going to make your money grow faster. No, you’re not doing that. You need a financial advisor to map out your overall financial line to take a look at what are my goals? When do I want to retire? What is my tax situation? What is my other income sources? Do I have kids, is there college, is there debt, is there whatever.

Al: They will help you not get too anxious when the market goes down. They will kind of try to put on the brakes if the market goes up too fast because we want to buy when it’s high and sell low, which is not a good recipe.

Joe: It’s not faster. It’s slower, it should be boring. Investments should be boring. So no. Congratulations for having $870,000. That’s pretty impressive.

Financial Considerations for a Couple Retiring at Ages 70 and 62? (Lucky in Rochester, MN)

“Dear Big Al and Joe, I am married to a smoking hot woman, eight years younger than me.
She’s smart, kind of talented. Did I mention she’s smoking hot. I would like us to retire on the same day. When I’m 70 and she’s 62, she plans to take her pension at 65 and Social Security at 67. Other than planning for three years of health care until Medicare is available. Are there any other financial issues I should consider? Sincerely Lucky in Rochester.”

He wants to retire on the same day to a smoking hot wife that’s 62 and he’s 70. She’s going to take a pension at 65 and Social Security at 67. I’m not sure what any other, I mean, there’s hundreds of other plans.

Al: We just don’t have any other details.

Joe: The details we have is you’ve got a smoking hot wife.

Al: And when you’re going to retire.

Joe: I need a financial plan. All right. Give me some information.

Al: I do have one thing, which is this: If she doesn’t need the money at age 67 for Social Security, wait till 70 because it’s an 8% increase each year. But that’s all we have to work with. That’s it.


Batman, Joe’s attitude reform, and judgement about drinking choices in the Derails at the end of the episode, so stick around.

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