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Joe Anderson
ABOUT Joseph

As President of Pure Financial Advisors, Joe Anderson has led the company to achieve over $2 billion in assets under management and has grown their client base to over 2,160 in just ten years of the firm opening. When Joe began working with Pure Financial in 2008, they had almost no clients, negative revenue and no [...]

Alan Clopine
ABOUT Alan

Alan Clopine is the CEO & CFO of Pure Financial Advisors. As CEO he currently leads Pure Financial Advisors along with our executive team. As CFO he is responsible for the financial operations of the company. Alan joined the firm about one year after it was established. At that time the company had less than [...]

Published On
November 9, 2021

Is there a step up in basis on, and advantage to, a joint-tenants-with-rights-of-survivorship brokerage account? Is a charitable remainder trust a good way to liquidate property, and what would be the rate of return on it over 20 years? Is there a point to Roth conversions when leaving your entire estate to charity? Should you name your trust as the beneficiary on your retirement accounts? How do ex-spouse and survivor Social Security benefits work? When should you draw from the three-legged stool of Social Security, pension, and annuity in retirement? Plus, Roth conversions from a thrift savings plan (TSP).

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Show Notes

  • (01:00) Is There Any Advantage to a JTWROS Brokerage Account? Is There a Step Up in Basis? (Mike, Tucson, AZ)
  • (07:19) My Estate Will Go To Charity. Convert or Wait for RMDs? (Lauren, Traverse City, MI)
  • (12:34) Rate of Return on a Charitable Remainder Trust to Liquidate Property? (Rick)
  • (15:31) Should I Name My Wife or Trust as Roth 401(k) Beneficiary? (Candace)
  • (17:49) 3 Legged Stool of Social Security, Pension, and Annuity. When to Draw Each? (Mary)
  • (20:09) How Do Social Security Survivor Benefits Work (Jim, San Diego)
  • (22:59) Can I Claim Social Security Ex-Spousal Benefits? (Debbie)
  • (26:58) TSP, Pro-Rata Rule, and Backdoor Roth IRA Strategy (Allen, Woodbridge, VA)
  • (33:06) Federal Employee TSP to Roth Conversion Retirement Spitball (Michelle, DC/GA)
  • (42:09) Clarification: Roth Conversions Can’t Be Until 59.5? (Greg, Beautiful Wine Country, Temecula)

Free resources:

Download the Estate Plan Organizer

Download the Social Security Handbook

Listen to today’s podcast episode on YouTube:

Transcription

Today on Your Money, Your Wealth® podcast #351, is there a step up in basis on a joint tenants with rights of survivorship brokerage account, and is there any advantage to setting the account up that way? Is a charitable remainder trust a good idea to liquidate a property, and what would be the rate of return on that? If your entire estate is going to charity, is there any point in doing Roth conversions? Get ready for an answer you rarely hear on YMYW for that one. Also, should you name your spouse or your trust as the beneficiary of your retirement accounts? When should you draw from Social Security, a pension, and an annuity in retirement? How do Social Security survivor benefits work again? Plus, converting to Roth from a TSP, thrift savings plan. Click Ask Joe and Al On Air at YourMoneyYourWealth.com to send in your money questions as an email or as a voicemail, which gets first priority, like the one coming up from Mike. I’m producer Andi Last, with the hosts of Your Money, Your Wealth®, Joe Anderson, CFP® and Big Al Clopine, CPA, and here’s our first question of the day:

Is There Any Advantage to a JTWROS Brokerage Account? Is There a Step Up in Basis? (Mike, Tucson, AZ)

“Hello, Joe, Al, and Andi, this is Mike from Tucson, Arizona. I drove a 2011 Subaru Outback with a 100,000 on it, and currently I’m enjoying a 60 Minute IPA from Dogfish Head. My question is regarding a joint tenancy with rights of survivorship (JTWROS) brokerage account my mom set up after the passing of my grandmother in 2018. The owners are my mom, my sister, and myself. A few questions:

Besides avoiding probate, was there any advantage to setting up this account in this manner?

Two, after my mother passes, is there a step up in basis in this type of account?

And lastly, the account is currently worth around $100,000 with $20,000 of gain. My current plan was to have my mom sell off the funds annually to the top of the 0% capital gains tax bracket and repurchase in her TOD brokerage account, as I’m currently consolidating and simplifying her portfolio’s asset allocation as she prepares for retirement in a few years. From what I’ve read, it appears that the tax liability for my sister and I can be controlled in this manner, and only my mom will need to then pay tax on this money. Does this sound reasonable?

Additional info is my mom will be in the 10 to 12% tax bracket in her retirement, whereas my sister and I are currently in the 24 percent marginal tax bracket. Thank you for your outstanding podcast.”

My Estate Will Go To Charity. Convert or Wait for RMDs? (Lauren, Traverse City, MI)

“***Take a question from a GIRL!***

HI Andi, Joe and Mr. Al!! I download every podcast you post and enjoy listening while I ride my bike and run around the neighborhood. I drive a 2008 Saab 9-5 and I don’t drink. I have a special needs dog named Jasper (and a cat too).

My question is of course the dreaded ROTH conversion — but with a twist. I have about $5 million in investable assets (all self-made): $1.9 million in after tax investments and $3 million in retirement. In retirement accounts, I have $950K in Roth money already and the rest is pretax. I know the conventional wisdom is to slowly convert the 401K to a Roth between the time I retire and the time I take RMDs, but ALL of my estate goes to charity upon my death. I don’t want to “prepay” taxes on the 401K when the charities are tax exempt. Should I take my chances and just take the RMDs when required? Or, convert some each year to stay in the 12% or part way into the 22% bracket? Or?? I am 60 and will retire next year. I’m expecting I’ll only need about $80K a year to maintain my standard of living. Any suggestions? – Lauren, Traverse City, Michigan (the “tip of the mitt!)”

Rate of Return on a Charitable Remainder Trust to Liquidate Property? (Rick)

“I have A+ rentals remaining in my portfolio Dave; I was considering doing a charitable remainder trust to liquidate 1 property; due to the capital gains tax involved; I have a low basis and have depreciated the property for many years that would need to be recaptured. The net value is about 3 mil; gross income 7,300 per month. I am 75 years old; therefore, this is the right time to make this move. The one unknown question that I’m really interested in knowing would be the rate of return for the 20 years?”

Should I Name My Wife or Trust as Roth 401(k) Beneficiary? (Candace)

“When naming a beneficiary for a Roth 401k, is it better to name my wife as an individual, or to name the living trust? She is the only person that I want to receive the Roth 401k. Thank You”

I think we just got a bit of that trust-as-a-beneficiary rant! To make this stuff a lot easier later, get your estate in order now and present your loved ones with your completed Estate Plan Organizer. It’s got everything they need in the event of your passing. It includes a list for you of documents to provide to your family, and a convenient place to record all of the important information they’ll need. Download the blank Estate Plan Organizer from the podcast show notes at YorMoneyYourWealth.com, fill out everything from your financial account details and insurance policies to your contacts and your final wishes, then put it in a safe place and give a copy to your family. Don’t forget to update it regularly. To get your free Estate Plan Organizer, just click the link in the description of today’s episode in your podcast app and you’ll see it right there under “Free Resources”.

3 Legged Stool of Social Security, Pension and Annuity. When to Draw Each? (Mary)

“I’m a single person at FRA, still working, whose 3 legged stool includes SS, a small pension and a small annuity. All 3 increase the longer I wait. I had planned to retire at 70 (3.5 more years) but am having second thoughts. I’d like to start drawing on just one and wait on the others. How do I figure out which one would make the most financial sense to draw on first?”

How Do Social Security Survivor Benefits Work (Jim, San Diego)

“Hi Joe, Big Al, and Andi, I drive an F150 pickup, enjoy Stone Brewery IPA, and our adopted dog is a German Shorthaired Pointer. I have a question regarding Social Security survivor benefits. As a hypothetical example if my wife and I both start taking SS retirement benefits this year. I’m 70 years of age and receive $3000 per month in retirement benefits, my wife who is 62 years of age receives her own reduced benefits of $1000 per month. If I were to pass away shortly thereafter, would my 62-year-old wife receive the $3000 (higher of our two benefits) as a survivor benefit or would it be reduced due to age. Thanks for your time, I enjoy your Podcast every week.”

Can I Claim Social Security Ex-Spousal Benefits? (Debbie)

“My ex and I were married 35 years. He is retired, retired at 65. I am still working. I am currently 65 and hope to retire at 66 ½. Can I receive spousal benefits on his and then when I retire, I claim my own benefits? We have been divorced 2 years.”

Download the 48 page Social Security Handbook for free from the podcast show notes at YourMoneyYourWealth.com for more on ex-spousal, spousal, survivor benefits, how benefits are calculated, when to collect your Social Security, working while taking Social Security, taxation on your benefits, the works. Make sure you get as much Social Security as you’re legally entitled to receive. For a personalized, in depth analysis of your entire financial plan, and how to maximize Social Security, sign up for an assessment from a CERTIFIED FINANCIAL PLANNER professional on Joe and Big Al’s team at Pure Financial Advisors – it’s free too. Download the Social Security Handbook and sign up for a free assessment in the podcast show notes. Click the link in the description of today’s episode in your favorite podcast app to get there.

TSP, Pro-Rata Rule, and Backdoor Roth IRA Strategy (Allen, Woodbridge, VA)

“Hi Andi, Big Al, and Mr. Derails. Thanks for a great podcast that is always informative and occasionally humorous. I’ve never composed a limerick, my favorite drink is frozen Mug Root Beer, and I listen to you in my red 2010 Toyota Corolla every week during my tortuous commute through Northern Virginia gridlock traffic. Joe, I don’t think you are toooo arrogant, so don’t let a rare one-star review throw you off-stride.

I have a question on your least favorite subject that you have successfully avoided until now. I’m a federal government worker and will be retiring the end of 2021. My wife and I have traditional IRAs that we keep at zero balances so we can use them to do back door Roths each year. 2022 will be different since in retirement I plan to move funds from my TSP to my traditional IRA. If I do a backdoor Roth in early 2022 and later in the year move funds from my TSP to my traditional IRA, will the pro-rata rule apply to my 2022 back door Roth? In other words, does the sequencing matter or only what happens in the year as a whole?”

Federal Employee TSP to Roth Conversion Retirement Spitball (Michelle, DC/GA)

“Hi Big Al, Joe, and Andi! Love the show and podcast! Thank you so much for all of the great information that you and your team provide your viewers and listeners.

I am a 50-year-old, single female federal government employee, who is seven years away from retirement. I just transferred from Atlanta to Washington, DC, but, upon retirement, I plan to return to Georgia. I am renting an apartment in DC, and I also own a condo in Downtown Decatur, GA, currently worth $265k, that will be paid off in three years. I have no other debts.

My retirement income will consist of a pension (approx. $30k/year), Social Security (approx. $24k/year if taken at age 62), and both a traditional and Roth TSP (currently about $265k and $200k, respectively). I also have a Roth IRA (currently about $140k), but those funds are earmarked for future long-term care expenses. I have no other investments or retirement accounts. While I am currently maxing out my Roth TSP, I earn too much to continue to contribute to my Roth IRA. Once I start taking Social Security at age 62, my pension and Social Security will cover most of my estimated $70k/year retirement income need. Between age 57 (when I plan to retire) and age 62 (when I plan to take Social Security), I will supplement my pension with savings that I will begin to accumulate after my condo is paid off in three years.

To bridge the gap between my estimated retirement income need and my pension/savings or pension/Social Security, I will draw from my TSP. My question is this: once I retire and I am finally able to convert my traditional TSP to a Roth IRA (as I am sure you are aware, the Federal Retirement Thrift Investment Board does not allow in-plan conversions), will I be able to perform the following steps completely tax-free?
1. Open a traditional IRA
2. Perform a trustee-to-trustee transfer of my entire traditional TSP balance into my traditional IRA
3. Fund a donor-advised fund with one half of my traditional IRA balance, and
4. Convert the other half to a Roth IRA.

Thank you. Sincerely, Michelle”

Clarification: Roth Conversions Can’t Be Until 59.5? (Greg, Beautiful Wine Country, Temecula)

“Hi Big Al and Little Joe, on podcast #349 did I hear you say you can’t covert traditional 401K to Roth until 59½ to avoid the 10% penalty? I’m 50 and was going to wait until 60 but now the Build Back Better Plan looks like they are removing conversions in 10 years. So now I was going to start converting next year but not if there is a penalty? Thx, Greg – Beautiful Wine Country Temecula”

_______

Dogfish Head IPA, Saab and a wig in the Derails coming up at the very end of the episode, so stick around if that’s your thing. 

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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.