Show Notes

• 00:00 – Intro: This Week on the YMYW Podcast
• 00:49 – Big Wallet Barbie and Ken’s Roth Conversion, Retirement, and Home Purchase Strategy (Barbie Mattel, Midwest)
• 08:58 – Roth 401(k) Contributions or Roth Conversions? Flying High in the 35% Tax Bracket (Dan, FL)
• 17:23 – High-Earners Planning FIRE and Wealth Transfer: Roth, Pre-Tax… Life Insurance? (FIRE’d Up, Chicago)
• 29:56 – Correction on Spousal Social Security Benefits After the Fairness Act (Cindy)
• 33:37 – Follow Up: The Kids Are Pretty Alright (Lucas, MN)
• 34:44 – Outro: Next Week on the YMYW Podcast

Free Financial Resources: 

The Emotionless Investing Guide – free download

The Truth About Your Love/Hate Relationship With Money – YMYW TV

Guides | Blogs | Educational Videos | YMYW Newsletter | Subscribe on YouTube

Watch today’s podcast episode on YouTube

Transcription

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

Intro: This Week on the YMYW Podcast

Andi: Joe and Big Al tackle the fears that mess with even the best-laid financial plans, today on Your Money, Your Wealth® podcast number 552. Big Wallet Barbie and Ken from the Midwest have saved millions, but Barbie’s still worried about retiring early, buying a new house, and converting to Roth. Is she second-guessing her plans? The fellas spitball for Dan from Florida, who’s flying high in the 35% tax bracket and trying to decide between Roth 401(k) contributions and future conversions. They also float a surprising idea – one that’s rare on YMYW – for a listener from Chicago who is FIRE’d Up about Roth vs. pre-tax and making a tax-smart wealth transfer. We’ll wrap up with a couple of your comments. I’m Executive Producer Andi Last, and here are the hosts of Your Money, Your Wealth®, Joe Anderson, CFP® and Big Al Clopine, CPA.

Big Wallet Barbie and Ken’s Roth Conversion, Retirement, and Home Purchase Strategy (Barbie Mattel, Midwest)

Joe: All right. let’s go to Barbie in the Midwest. Barbie Mattel. All right. Okay, Joe, Big Al, Andi, I love your show. I would appreciate a spitball on my scenario if you think I can retire at age 57. All right. I’m 56 and I’m still working. My husband Ken and I live in the Midwest. I’m, he drives A-B-M-W-X three and I drive a Volvo XC 40.

What’s the X three? Is that a SUV? Probably. Nice.

Andi: It’s a small crossover SUV.

Joe: Yes. Oh, smaller. Oh, okay. Okay. All right. Alright. He likes red wine. I like moss. Oh, he likes red wine and Moscow Mules.

Andi: What, together?

Joe: Maybe. I enjoy white wine and little gin martinis. Ken just retired at age 70 with $127,000 annual pension with a cola of 50%.

He also just started Social Security of 61,000 and is now on Medicare. Looks like Ken is roughing it. Yeah, He’s got about $200,000 of fixed income here. I Barbie in 56. I max up my 401(k) contributions and plan to take my pension at, $21,000, no coad, age 57 in retire. I’ll take my Social Security at 62 of about $28,000 and another smaller pension around $3,000 annually.

At that time in retirement, we’d like to spend 18,000 to $22,000 after tax annually. you buy that

18 to $22,000 after tax annual. So wait a minute. Fixed. That’s what they fixed. Income is, or monthly. That’s what I was wondering.

I was wondering if they intended monthly and I actually started putting it in as monthly. I was multiplying it by 12 and then I was like, wait a minute. No, it says 18 to 22 annually.

Al: Well, if it’s annually,

Joe: well, why even write in,

you’re fine.

Al: You just, let’s say it’s monthly.

Joe: Let’s say, yeah. Why would she even take Social Security at 62? Why don’t you push your pension out? I mean, retire tomorrow.

Al: You should have retired 10 years ago.

Joe: Yeah, 18,000 a year. Where in the Midwest do you live?

Barbie,

Al: anyway, let’s pretend it’s 20 grand a month, so that’d be two 40.

Joe: Okay. Yeah. And you’re still fine.

Al: Yeah, probably. Yeah, because what’s the fixed income? 188,000 right now. And gonna add another 55 later. Yeah, you’re good.

Joe: Yeah. The numbers work out here with

Al: another 3.3 million. Would they hardly need.

Joe: Now own a home. No mortgage. Okay, it’s worth 640,000. We have $1.6 million in Ken, 401(k) million dollars in mine, 156,000 in another 401(k), 450,000 in company stock. $235,000 in a brokerage. $106,000 in a Roth, $200,000 in CDs in cash. Have some e stocks and mutual funds worth 48,000 in HSA Worth 20,000. We both have long-term care insurance.

Ken has a life policy of 500,000. I mean, yeah, good check. Can I retire 57. Enjoy life with Ken. Yes. And if so, can we spend what we would like to spend in retirement while also doing Roth conversions? If it’s 20,000 a year? Yeah, we do. What the hell you want? Thank you for spit balling my Barbie Dream. I guarantee Barbie spends more than 20,000 on the bar Barbie.

Corvette at the Barbie Beach House. At the Barbie. I think so.

Al: What else does Barbie have? I’m, thinking she meant monthly, but even monthly. This looks just fine.

Joe: Isn’t Barbie right from Malibu?

Andi: Yes.

Al: Yeah. Yeah.

Joe: They pay $20,000 in house insurance a month in Malibu.

Andi: Well, she’s planning to move to the Midwest for retirement.

So is this another one of those situations where we’ve got a couple with a big wallet who is having financial anxiety even though they are fine for it because they’re not used to the idea of spending without earning?

Joe: Well, they’ve done a hell of a job saving.

Al: They have, yeah. And I think, you’re right Andi.

And that’s not all that uncommon really, which is, a couple has a lot of money, but they’re used to a paycheck and once they turn that off, they freak out. Even though they got plenty. That could be what’s ex exactly. What’s going on. Well,

Joe: I mean, there’s RSUs, so there someone had to been, some sort of an executive of some sort or, yeah.

Or higher, level management than a company. She’s top level management at Mattel.

Andi: Yep.

Al: Maybe at Mattel or maybe she’s thinking she’s only 56 and she thought she was gonna work till 65. And so now it, something feels wrong. Maybe I, don’t know. But yeah, no, this looks based upon what you said, whether it’s annual or monthly, 20 grand.

Joe: You’re fine either way. Yeah. what other tidbits here? Yeah, I, mean, I think you map it out though. I think that relieves some of the anxiety. A lot of people that have done really good savings have a hard time spending, and I get it there. There’s anxiety around it, there’s guilt around it. There’s all sorts of different things that, that, people have with their relationship with money.

You know, we’re just kind of spit balling at the back of the napkin with math, but there’s a lot more, you know, I guess the softer side of money and how you think about it and what you want to, you know, what money can, actually do. So, you know, we can go deeper, but we don’t know anything about money.

Al: No, we don’t. Yeah. So sometimes, Joe, what we’ve seen people that have a lot of money, we will run cash flow. Forecast out to age 90, 95, whatever. And it shows how much they end up with based upon kind of a reasonable rate of return and their spending even add money for spending. And they, in some cases, they end up with a lot of money.

They’re charitably inclined, but they don’t want to give any money till they pass away because they might need it. Well, I, get that feeling, but if you can see you’ve got millions when you pass away. And you’re charitable. And if you wanna start giving while you’re living, which feels better and you get a tax break, that can be a great way to do.

But having cashflow forecasts in a case where you’ve got money and you’re just having anxiety is a good way to show you that you’re probably okay.

Joe: How much would you, convert? I think you convert to the top of the 22% tax bracket.

Al: I’d go 24. Yeah. 24. He’s got $127,000 pension, I forget. Yeah. And he’s got Social Security and she’ll have pensions.

So I, I think, and then, given how much they have in a, tax deferred of about 2.8 million.

Joe: Yeah. Not to be more, but that there’s gonna be a widow tax.

Al: Well, yeah. Yeah, that’s true too.

Joe: She’s 56. He’s 70. So men usually die before women. Yeah. He’s a little bit older than her. And so there’s still a ton of money in that retirement account.

If he were to pass prematurely. She still has several years to live and she’s gonna be at a single tax bracket. Yeah. Unless she finds another Ken True. Which could, isn’t there another, Ken?

Andi: I was just thinking that, I can’t remember what there, there was another character, but I can’t remember his name.

Joe: Aaron, you probably know you played with-  Biff. Biff, was it Biff? Okay, here you go. She’ll find Biff. There you go.

Andi: Do you ever feel like you’re on an emotional roller coaster with your investments? You’re not alone. MagnifyMoney says sixty-six percent of investors admit they’ve made impulsive financial decisions they later regret. Fear and excitement can wreck even the smartest financial plan – and that’s why you need the Emotionless Investing Guide. This free guide shows you how to spot the emotional traps that make us buy high and sell low, how to stay invested when markets swing, and how a disciplined, diversified strategy can help you sleep better at night. Stop letting headlines and herd mentality drive your money moves. Download the Emotionless Investing Guide right now at the link in the episode description. Take the emotion out of investing, make smarter decisions, and keep your plan on track for the long run.

Roth 401(k) Contributions or Roth Conversions? Flying High in the 35% Tax Bracket (Dan, FL)

Joe: We got Dan from West Palm Beach writes in. He is like, Hey, I’m looking for a little quick spitball. Cool. Roth 401(k) contributions. Should I do Roth 401(k) contributions or not? We should I start converting IRAs or 401(k)s money?

These seem like pretty basic questions.

Al: Yep, I think we should be able to handle, yep.

Joe: So he’s married, wonderful wife, 32 years. Okay. So the wife is 32 years old, or they’ve been married for 32 years. I’m gonna say married 32 years. Got it.

Andi: That’s my guess too.

Joe: With an annual income of $680,000, 35% tax bracket, effective rate 2024 is 27 in. Oh, he’s got effective rate now. Effective, yeah. Big Dan, Look at the big brain on Dan income. All me. All right. 550,000 or five 50 or so. W2 income 120,000, 10 99. Income side hustle. This is an estimate, could be a little higher. 50,000, plus or minus $50,000. I’m 58. She’s 54. Two adult kids launch mostly with jobs.

Okay. Finances, $1.8 million in retirement accounts, $1.3 million in Roths joint brokerage account of 1.1. So they got what, four? Four? Yeah, about 4.2. Okay. No brokerage account is $350,000 inherited IRA taken. Alright, so the brokerage account in an inherited IRA are two totally separate things. Maybe the inherited IRA is in a brokerage account, is what he’s trying to say.

I think that’s what he’s trying to say. Got it. So. Brokerage account has $350,000 inherited IRA, taking around $70,000 a year, trying to stay in the 35% tax bracket, received in 2022. Able to put around $200,000 annually into brokerage account, just extra income. Making maximum 401(k) contributions IRA, 401(k)IRA contributions annually for me, 77,000.

My employer puts in eight per 18% of my annual income into the 401(k). Regardless of what I put in $31,000 into the Roth 401(k), and my employer puts the maximum 46 5 into my 401(k). It just pays me the money once I’ve reached the limit. They may offer a deferred option next year. Oh, that’s a hell of an employer.

Yeah, it is. Let’s look legit. That’s, I’ve never had that. I put around $15,000 annually into a Sep IRA. From 10 99 income. Wow. This guy is overfunding it. It’s loaded, Steve. Okay. All money is invested in ETFs. Military retirement income starts in 20 27, 30 6,000 annually. Both eligible for Social Security starting at age 70 or whatever.

The maximum limit is around $55,000 annually is projected. We got no debt health savings account of 15,000 kids have graduated college with remaining upon 29 balances transferred to him. to do what they wish. Enjoyed the podcast. You would like your thoughts. You can email me if you want more information.

Damn. We got two other pieces of information here. Okay. I currently have mandatory retirement at age 65. Well, must be a little pilot 60, doctor, maybe? No, this, no. Mandatory retirement in doctors. Is there?

Al: Some of them? Yeah. Brain surgeon. Would you want a 75-year-old?

Joe: Absolutely. I, would’ve you, come on, let’s crack this brain open.

I’ll have you, you might not want me to. Your brain. You have a knife in there. All right. We’ll at least start some side hustle. 120,000, $60,000 or so annually after 2032. We currently spend about 12 to $15,000 a month, or a hundred thousand 8 180 annually. Retirement. Let’s plan on 15 to 20,000 or two 50 in case we want to travel.

I also have an excellent airline travel package. Oh, ding, ding, Got it. And we have travel extens. I knew Dan was a pilot.

Andi: So interestingly, other professions, military has mandatory retirement at the age of 62, with the exception of general and flag officers at age 64 and air traffic controllers have a mandatory retirement age of 56 with exceptions up to 61. Okay. So they don’t want you controlling planes either.

Joe: Yeah. My uncle was an aircraft controller. He was 60. I thought it was 60, but it was probably younger than that.

Al: Oh boy, that’s a, that’d be a tough job, wouldn’t it?

Joe: Yeah. Remember when they went on strike or something?

Al: Yeah. Yeah. I remember. Well, you were, I mean, they probably have bef, I mean, I remember under Reagan you weren’t even hardly born.

Joe: I wasn’t. I just heard war stories about it.

Al: But they, yeah, they went on strike and Reagan said, heck with that, you’re fired. And that was it for them. Wow. Well, maybe he was part of it. Maybe that was like some, maybe some whiskey talk around the family get together.

Joe: Could be. Yep. alright, cool. So he’s got a lot of things going on here.

So first of all, congratulations. Thank you for your service and thank you for flying the friendly skies. Secondly, he’s thinking Roth or not, he’s got a lot of money. what’s, the actual question?

Andi: Should I do Roth 401(k) contributions or not? And when should I start converting IRAs and 401(k) money?

Al: But before we even answer that, I just did a little bit of math and inflating assets. With savings, I get a 2.6% distribution rate. So looking great.

Joe: Yeah,

Al: looking great. Yeah.

Joe: $250,000 of savings or spending

Al: even a 250,000 of savings, I think. I think they’re just fine. So, so let’s get that outta the way.

Okay.

Joe: When is he re when is he 65?

Al: So he is got, he’s got seven years, he’s got mandatory retirement.

Joe: 65 is 58? Yeah. Yeah. Alright. So he, they make a ton of money. Five 50 W2 income. Yeah. 1 20 10 99 income. So he’s putting money into a SEP in the 401(k). The company matches a bunch of money.

Al: He’s already got 1.3 million in tax free. That’s amazing.

Joe: I know, I don’t know how he got that much money into the tax free already.

Al: Maybe he’s already, he’s been making that, maybe he’s already doing 401(k) contributions in the Roth. I don’t know.

Joe: He’s got $2 million. He’s gonna be in a lower tax bracket when he retires. Yeah. Yeah. because he doesn’t have that giant 401(k), it’s on the Roth.

It, so if I was Dan. I would definitely go Roth, but, well, I know you would. I would. Would you do Roth conversions? I would not do conversions today. Absolute. No. I would do the contributions to the Roth. Maybe my sep, I would do a SEP Roth. Because I’m just cutting a check anyway into the sap. Yeah. And then I just wouldn’t take the tax deduction on my, return.

So I, mean this is all psych, you know a psych play now?

Al: Yeah, Yeah. Yeah.

Joe: Because I’m not gonna miss the taxes in 10 years. He’s gonna have a lot of money. And when I go on my, cruises in, when I. I would much rather not pay a bunch of tax. Then I understand. I think I, because I feel the pinch, right? I’m on a fixed income.

Al: Yeah. It’s a pretty low fixed income, huh. Anyway, I think I, certainly agree with you on the Roth conversions. I would not do that till he retires. That’s at age 65. Then there’s 10 years to. Get as much converted as possible in lower brackets. I think that makes a lot of sense.

Whether you do the current contributions, I think, I think I’m, even though it goes against my accounting and tax rates, I might agree with you only because. There’s a lot of other money getting put into the regular,

Joe: I mean, there’s almost a hundred thousand dollars going into deferred

Al: I know. Over the next 10 years.

Yeah. It’s, it just makes this problem worse. So I, think I’m gonna agree with you.

Joe: Alright.

Al: Yeah.

Joe: Yeah. There’s a lot of money still going into deferred. The, math, I don’t know. You would have to run the numbers. You’re, you we’re making hypotheticals of all, well, where are tax rates gonna be? What is the app rate on the accounts and everything else?

Al: So, but I,

will say as an accountant, it pains me to not do regular Roth contributions when regular 401(k) contributions. Yeah, sorry. 401(k) contributions when you’re in the 35% bracket. So you could argue what I just said.

Joe: For sure. You could. Yeah. Someone would write in and like, oh, what you guys do is talk about Roth and Roth Brothers. Whatever.

High-Earners Planning FIRE and Wealth Transfer: Roth, Pre-Tax… Life Insurance? (FIRE’d Up, Chicago)

Joe: All right. let’s, we got FIRE’d Up in Chicago. Hey, Joe, Al and Andi, really enjoy your podcast, which I discovered while researching my question. Alright, tax-efficient withdrawal transfer. Should we contribute to pre-tax or raw 401(k) now given a high tax bracket? Wonder if he went a little chatGPT?

Al: Could be.

Joe: We hold $3.3 million in 401(k)s, $500,000 in a Roth, and two and a half million dollars in brokerage accounts, or combined income is 800 $800,000 for the next four to five years. Then we’ll choose to slow down to $300,000 for another five. That’s slowing down now.

Al: That’s, you know, that’s, like low gear. That’s more than half making 300,000. That’s almost no go.

Joe: I’m barely working. But making 300, we consider ourselves financial independent. Yeah. I, consider you financially independent too, choosing recreational employment for its meaning and enjoyment. Oh, that sounds wonderful. Yeah. We have no pension and expect a combined nine to $10,000 in Social Security monthly, which we planned for till age 70. Okay. As a debt-free couple in our early fifties with grown college paid for children. Our question is about funding our $15,000 a month retirement.

Andi: Isn’t about funding our $15K a month retirement.

Joe: Oh, it isn’t? It isn’t. Okay. They, feel like they’re good for retire. No, he’s just checking the boxes. Well, my question is not about this, and it’s not about that.

We’ll get there. It’s not the things you’re usually answering. Just wait for it. Yep. Wait for it. I’m pretty fired up here. Instead, we’re seeking advice on tax efficient wealth transfer to our high earner children, specifically minimizing pre-tax 401(k) inheritance under the 10 year rule. Okay. Okay. So he’s 50.

And he’s thinking about wealth transfer?

Al: Yes. Okay. That’s what he seems to be wanting to know about.

Joe: All right. We’re currently maximizing both pre-tax 401(k)s and Mega Door back Roth IRA in plan conversion contributions. So our main dilemma is whether to ship pre-tax 401(k) contributions to Roth 401(k).

In other words how to balance our 35 30 7% tax bracket against $3.3 million pre-tax 401(k), which could complicate future Roth conversions. We plan to defer Roth conversions for 10 years completing them. In the eight years after we retire, before we claim Social Security Yosemite, this seemed reasonable.

Alright? Okay. We don’t know how much fired up spends. yeah, he spends about 1 0 9 to $10,000 one. Yeah, Or no, $15,000 a month. That’s what he wants to spend. But he doesn’t need any information on that. No, we’re not going there. But I think you need to.

Al: All right. So, well, he’s got, between all his assets, got about 6.3 million in liquid assets currently.

He’ll be saving a full bore for another five years, and maybe even a little bit less for another five, for another three years. Sorry.

Joe: All right. So he’s gonna make $300,000 for five years he’s spending.

Al: Oh, he is. He’s making 800,000 for another four or five years.

Joe: Four or five years. He is gonna max out the 401(k).

Yeah, And then from there he’s gonna make 300,000 as he slows way down. Alright. so. The question, does he do conversions in this 35, 30 7% tax bracket or does he switch to Roth contributions? I know what I would do. Yeah,

Al: I know what you, but go ahead and say it.

Joe: I would definitely switch to Roth for sure.

Al: Would you do current conversions or just do the, for the 401(k) do a Roth option?

Joe: I would, yeah. I would just do all Roth. Do the mega backdoor. So what’s the mega backdoor? So a lot of people have now after tax ability in their 401(k) plans, and still they just don’t know that they have that option.

So if you’re listing double check, triple check to see if you have the ability to put after tax dollars in your 401(k), so you can max out the 401(k) pre-tax or after-tax Roth. And put additional dollars into the plan and do an in-plan conversion. So you’re taking the after tax dollars that you put in the plan, and you’re moving them directly into a Roth with no tax effects.

It’s an awesome, strategy that people still kind of lead that on the table.

Al: Yeah, and I guess to, to put some numbers of this, so if you’re over 50, you can put about $30,000 into 401(k), but you can then on certain plans, many plans. Now you can put after tax dollars, you don’t get a tax deduction after tax dollars to Joe, somewhere around 65,000.

So another 35,000 is well up to 70. Up to 70, whatever the number is. So you put extra money in after tax and you’re allowed to convert those dollars into the Roth and, depending upon the plan, you can often do that every single year.

Joe: Yeah, you could do it every single contribution paycheck.

Yeah. I would be paycheck if you wanted to. okay. Yeah, I would do. It’s not gonna hurt you. I get it. You’re in the 35 or 37% tax bracket. You’re making $800,000 a year, but you have so much money already in your early fifties, three and a half million dollars in a tax report account. He’s gonna be in that bracket.

Yeah. So, and who knows what I mean? Here’s the bet. Here’s the gamble. The gamble is that you believe that tax rates will go down. And I don’t know if that’s a, if that’s the right bet, right? Because that three and a half million, that early fifties, by the time he reaches RMD age, what do you think that thing could be?

At 10 at least. You know, so then that’s 400 plus whatever interest. I mean, he’s gonna be in the 35 or 37% tax bracket, I think in RMD age. But that’s 20 years from now, 25 years from now, I have no idea what tax rates are gonna be in 25 years from now. We could have a flat tax, we could have a consumption tax, we could have no tax.

you know, who knows? Yeah. But. If it were me, I would want to continue to build up the tax free account. You’ll only have 500,000 there. You’re doing the after tax, the 35% that you’re going to pay in tax to put the money into the Roth. You’re gonna forget that. Yeah. That savings 20 years. Yeah. The next day.

And you’re gonna be happy that you have this big chunk of change sitting. You’re Roth.

Al: Yeah. So, so I, I will say this, that the accountant answer would be go ahead and get the tax deduction now while you’re in the highest bracket. But continue the after tax, monies going into the 401(k) and, continue converting those to Roth as often as you can.

But there’s a certain amount of just. Psychological benefit of just getting it done. Not even worrying about it. Not even thinking about it, because what you already have in the deferred is just gonna keep growing. Now, I would not do any Roth conversions right now ’cause your income’s too high. But when you go down to $300,000, you can convert in the 24% bracket.

Which is right now over $400,000. So I’d be converting then. And then when you retire fully, I would do even bigger conversions. ’cause you don’t have the 300,000. So you, there’s a huge Roth conversion strategies over time right now. you. At least I wouldn’t do any conversions currently. ’cause you’re in the bracket.

But whether you want to go pre-tax.

Joe: But if he goes after tax, it’s the same as a conversion. But he just doesn’t have to write the check to pay the tax. I, know. it’s easy. It’s easy. It’s a lot easier just to switch the button and say Roth contribution, and then you don’t think about it. Yeah. Then you convert, April comes around, then you gotta write a check to the IRS.

That’s a pain in the, there, there’s a, there’s some logic in that. There’s psychological issues there. Yeah. It’s the same tax. It’s the Yeah, no, I get it. So if we’re saying, Hey, you’re too high tax bracket to convert, but you’re in a perfect, you’re in a perfect bracket to do Roth. Got your,

Al: I know it’s, I’m, it’s more of a, I’m just going on yours, which is kind of more of a psychological play.

Yeah. It’s not, the CPA textbook answer. Agree. I agree.

Joe: let’s see. Would you consider, so this, his main goal is that he wants to leverage the estate for the kids, What, and he’s got 6 million. This thing is, I don’t know. I’m almost thinking if he really wants to leverage wealth for the kids, why don’t he buy a life insurance contract.

Al: Yeah. Set up an irrevocable life insurance. Something, yeah.

Joe: I don’t think he’s, he might have an estate issue at some point at 50, depending on his life expectancy. Yeah. Maybe he doesn’t spend a ton and he still has another 10, 12 years before he spends and someone that makes 800,000 and says, we’re gonna slow down and make 300,000.

I mean, I bet his slowdown or their slowdown, his or her, I don’t know who, who’s writing this is probably like full speed for a lot of people. I would think so too, right? Yep. And, so for them to fully stop working in, having zero income coming in taking the assets and spending their hell of a, you know, they save a ton.

I don’t know that, that would be interesting because at age 50 or. The, cost of insurance is gonna be a lot cheaper. then that’s really leveraging, you put an irrevocable trust and have the kids buy. Several million dollars on both you and the spouse’s life.

yeah. I’m not a life insurance agent.

We don’t sell insurance, but if, that was my true goal and I had this situation, I would consider that.

Al: Yeah. I, think the way I might think about it is, not so much a wealth transfer yet in your early fifties, although that’s in the back of your mind, I would think about. The Roth conversions and getting money to the Roth actually is gonna help you.

Because what we’re trying to suggest to you is you’re gonna be in a super high tax bracket when the required minimum distributions come in, which is at age 75 currently. So when that hap. You’re gonna be in this giant tax bracket, so you’re gonna have periods of time maybe when you work a little bit less and have less income.

And then after that, you wanna get as much converted as you can. And that’s gonna benefit you because it’ll keep you outta higher brackets later. Yes, it will benefit your kids, but I, don’t know. I think in your early fifties, that’s how I would think about it.

Joe: Yeah.

Al: No, and I think he’s probably run the numbers.

Joe: And they’re like, all right, well we’re spending $15,000 a month and we fined. Yeah, we have six and a half million dollars now and I’m in my fifties. We’re still gonna work another 10 years or maybe a little bit more. We’re not including Social Security here fully funding these plans that easily could be.

Double that. Or you know, maybe even more. It could be $20 million in 10 years. Could It Could be, Yeah. Depending on how much he saves, right? They got a lot of non-qualified dollars, so I’m guessing he probably has, I don’t know, maybe some other type of stock plan or Non-qualified options, ISOs, maybe company stock, who knows.

So, yeah. But yeah, great position. It’s a, tough problem to have. Woe is me.

Andi: Financial anxiety can hit any of us, no matter the size of our wallets. We love having money, but we hate talking about it – and a lot of the time, our emotions can totally wreck our finances. Learn the truth about your love/hate relationship with money on this week’s brand-new episode of Your Money, Your Wealth® TV. Joe and Big Al will dig into why our feelings about money often hold us back, and how we can fix our money mindset once and for all. They’ll unpack the hidden biases that trip us up, the four money personalities that could be controlling our investing choices, and they’ll show us how to turn our toxic money habits into healthy wealth behavior. Click or tap the links in the episode description to watch YMYW TV and to download that companion Emotionless Investing Guide. It’s all free, all yours, courtesy of Your Money, Your Wealth® and Pure Financial Advisors. And hey, don’t hoard this good stuff all for yourself, tell a friend.

Correction on Spousal Social Security Benefits After the Fairness Act (Cindy)

Joe: Okay. we got,

Andi: the next two are just comments.

Joe: Okay.

Andi: One of ’em is about Social Security.

Joe: Yep. Oh, great.

Andi: That was the episode you weren’t there for.

Joe: Okay, let’s go to Cindy then. Hi. Regarding the response to the second question from Sheri.

Al: She remember that well, that was the episode that, I did with Susan. I got

Joe: the

second, response. No, I don’t remember that. What would we ever know?

Andi: This was in response to the actual email newsletter that had that episode in it. So that was months ago. So she respond immediately.

Joe: Nobody who listens to this is never gonna understand.

Yes. So what is, so why do we wanna read? Let’s, well, I guess I’ll keep reading. You already started. Well, most of AL’S response was correct. Most of it that the husband would be able to get spousal benefit based on the wife’s Social Security benefit. I believe he made a mistake near the end. He made an assumption that the husband’s revised benefit already included the spousal benefit.

Is it possible that the Revi revised benefit was only based on the husband’s personal work history? He probably needs to apply for his spousal benefits. When people were told years ago that they weren’t eligible for a benefit, they often didn’t apply. The Social Security Administration won’t do the spousal automatically.

My husband and sister were both affected by WEP and GPO, so I’m pretty sure I know about this stuff. I hope this makes sense. Maybe you can con, can, contact Sherilyn and let her know her husband should submit his application. Look at Cindy. Yeah. She’s good for you. Cindy. She’s checking up Watchdog.

Andi: So she, apparently Sherilyn had emailed us and said, my husband got this retroactive check.

You know, do we need to do anything? And so that’s, what she’s responding to. Got

Joe: it. Well, the spousal benefit is two benefits. It’s not one. Yeah,

Al: and I, don’t really remember the question. It was a while ago. Do you remember

Joe: what you had to have for lunch yesterday?

Al: No. It’s probably a salad, but I couldn’t tell you for sure.

but I do think that, I mean, there are retroactive checks that were given. I think that’s, I, think if you’re getting a retroactive check, it seems like maybe you’re already been enrolled in this, but it’s, a good point. I mean, don’t trust it.

Joe: Check with Social Security Administration to, make sure you’re getting all the benefits that you’re entitled to.

Al: Absolutely. If you’re, applying for a spousal benefit. And what a spousal benefit is. Half of your spouse’s benefit or yours whichever’s higher, right? So in this case, the husband’s benefit was lower than half of the wife’s benefit. So let’s say the wife’s benefit is 40,000. The husband’s benefit on his own record could have been 10,000.

The spousal benefit would’ve paid him 20,000, which is half of. the wives, but he’s getting this check of $10,000 fill the application in, then it’s gonna shore up that benefit to add another $10,000 to get to that $20,000 mark. So the spousal benefit apply, and I agree with Cindy a hundred percent because.

Sometimes there’s errors, sometimes you assume, I mean, I just saw a case this week, one spouse had a $48,000 benefit, the other one was 6,000. I was like, this doesn’t make sense. So,

yeah, no, I think it’s a great comment, especially with the change in the, the web and the GPO, if you’re, a part of that, yeah.

Contact Social Security Administration, make sure you’re getting as much benefit as you can. And yeah, I, we, I don’t really know whether. On spousal or not, but it’s worth checking. There you go.

Joe: Yeah. So I agree with that.

Follow Up: The Kids Are Pretty Alright (Lucas, MN)

Joe: All right. We got, Lucas, he writes it. He goes, Hey there. It’s the guy from Minnesota with pretty All right kids.

I wanted to follow up and let y’all know we do indeed love our kids.

Andi: You busted his chops about him saying that his kids were pretty all right.

Joe: Yeah, they’re pretty All right.

Al: Yeah. Well, that’s, you’re just reading it.

Joe: Yeah. Yeah. They’re pretty great chaotic little creatures. I. We bring them with us everywhere we go.

Very much enjoy showing them the world. Wow. Anyways, thanks for the spitball. Gave me a lot of confidence in contin, continuing exactly what we are doing. Sounds like we just need to have a taxable sense withdrawal strategy when the time comes. Great show with great spitballs. Very much enjoy listening to it.

Also, big shout out to the real hero, Andi. There you go. Okay. Oh, Andi.

Andi: Thank you. Lucas.

Joe: What about Aaron?

Al: No. Aaron, shout out. No, Shout out to,

Andi: well, Lucas says that he listens so he doesn’t even realize what Aaron does.

Joe: All right. he’s gonna go have an old fashioned now.

Al: Yeah. Okay.

Outro: Next Week on the YMYW Podcast

Andi: By the way, Aaron Townsend is the technical director for the video version of the YMYW podcast, and he runs the YMYW TV show.

Next week on YMYW James in Texas asks whether to invest in his high-fee 457 or in his brokerage account. “Lois and Clark Kent” in Florida want to balance Roth conversions, growth, and a home purchase. “Ray Charles” in Chicago wonders if he can quit corporate life at 55, and “Gun and Rose” in Louisiana ask if borrowing from a 403(b) again for home repairs is a good idea.

If you love YMYW, please don’t keep it to yourself! Share us with a friend, a coworker, or that guy who keeps asking you for investing tips. The more the merrier. Subscribe on YouTube, join the fun in the comments, and leave your honest reviews and ratings for Your Money, Your Wealth® in Apple Podcasts or any other app that accepts them.

And if you’re ready to stop letting money anxiety run your life, go beyond the spitball and get a real plan. Schedule a no-cost, no-obligation, comprehensive financial assessment with Joe and Big Al’s team of experienced professionals at Pure Financial Advisors. Click or tap the Free Financial Assessment link in the episode description, or call 888-994-6257 to meet in person at any of our nationwide offices, or online from the comfort of your own home. They’ll help you map out a detailed plan tailored to your goals, your taxes, and your peace of mind in retirement.

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.

_______

Listen to the YMYW podcast:

Amazon Music

AntennaPod

Anytime Player

Apple Podcasts

Audible

Castbox

Castro

Curiocaster

Fountain

Goodpods

iHeartRadio

iVoox

Luminary

Overcast

Player FM

Pocket Casts

Podbean

Podcast Addict

Podcast Index

Podcast Guru

Podcast Republic

Podchaser

Podfriend

PodHero

podStation

Podverse

Podvine

Radio Public

Rephonic

Sonnet

Spotify

Subscribe on Android

Subscribe by Email

RSS feed

YouTube Music

See All Platforms