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 [...]

Published On
April 9, 2016

Joe and Big Al tackle some of the biggest questions about investing, including “Should I wait to buy a home until after the election?” and “If I’m a first time investor, should I invest with cash or margin?” Plus, Joe and Al look at the seven successful habits to help you reach financial independence, according to U.S. News & World Report.

02:46 – “With our firm, we act as a fiduciary 100% of the time”

07:08 – “April 18th is tax day this year”

13:01 – “California real estate is appreciated quite a bit more than the United States given the last 30, 40, 50 years”

19:51 – “Can I deduct my IRA contribution if I don’t have an employer plan?”

27:49 – “The truth is you can save more in taxes than you think, but you must use a forward-looking tax-efficient strategy”

34:57 – “Paying yourself first means paying yourself before paying your bills…as our paycheck grows we tend to spend more”

Investing Questions & Answers

1. I am almost 40 years old. How do I start investing for the long term?  I am a truck driver. I want to start small by investing $1,000  to $1,500. I don’t know where to start.


Open up a Roth IRA if you want to look for a long-term investment, however with a Roth there are characteristics where if you need that money prior to 59 ½, you can always have access to the principal. At 40 years old, you can contribute $5,500 to a Roth IRA as long as you have earned income (whether it’s salary or self-employment income). You don’t get a tax deduction but all future growth, income and principal are tax-free as long as you wait until 59 1/2.  All principal can be pulled out any time you want and it will be tax-free. If you deposit $1,500 a year that comes out to$40,000 for the next 25 years. Using a7% growth rate, at age 65 you could potentially grow those savings to $100,000. You’ll probably need to save a little more, but this could give you roughly $4,000 a year on top of your Social Security in retirement. If you saved $3,000 annually, instead of the $1,500 with the 7% growth rate you could potentially reach $190,000 at age 65. Think of it as saving $250 a month.

2. When is the best time to purchase my first home, before or after the 2016 election? I am in a market for my first home here in California. Would there be a major difference in real estate price whether a Republican or a Democrat takes the White House?


It makes no difference at all. There’s no correlation between politics and what real estate is going to do. Rule of thumb with real estate in California: California real estate is appreciated quite a bit more than the United States. The average home in California is typically about $480k/$490k so buy when you can afford it and you feel the timing is right. You probably won’t time it perfectly, but remember that whenever you buy property, you need to look at it as a long-term purchase.

3. It’s my first time investing and I would like to know whether to choose margin or cash? 


If it’s your first time investing, the answer is cash. Put cash into your brokerage account and buy mutual funds. Stay far away from margin. At some brokerage houses, depending on the strength of the investor, they’ll actually loan you money to invest. You can take your money and end up with some of the brokerage house’s money and then invest even more. It’s called leverage. Leverage is great when the market goes up because you magnify your return, but when the market goes down you can actually lose more than your original principal. It’s called a margin call. Margin loans are not a good idea at all because they are very risky.

4. Should I use IRA money to pay off my mortgage to save on the interest? I have a paid off my home which is worth $112,000. I have a home equity loan on it @ 7% interest for a balance of $89,000. I’m 63 and have $300,000 in IRAs. I’m not making 7% return on my IRAs.


Answer is no. If you take the money out to pay for the home equity loan, you have to pay tax on that. Depending on what your other income is, that could be a pretty high tax bracket. Right now, interest rates are closer to 4%. Try to refinance – you can pull out some from your IRA temporarily for a month or two to get more income so you can get a loan and then you can get a much better rate. You need to look at the allocation of the IRA and the interest rate. It would be around $140,000 to pull out your $90,000 balance. The taxes that will come out will be detrimental. Take a look at refinancing to get a lower rate.

5. How does the IRS want me to report the RMDs I receive from a small non-spousal inherited traditional IRA? Aside from my own 1040, do I need to file tax returns for the stretch IRA in the name of the decedent’s trust for my benefit as well? It earns less than $70/year interest.


It depends. If there’s a decedent’s trust that’s still around and the only thing in it is an IRA, then there’s no trust filing requirement because it’s an IRA and the RMD comes to you. However, it is true if there are other assets in a decedent’s trust that’s kept alive. Sometimes trusts don’t terminate; it’s called a form 1041 – or a trust return. If that’s your case, then yes you have to file an annual return. You should be getting a form 1099R that will show you the amount that was withdrawn from the IRA, and that goes on line 15A on your tax return. It goes on the IRA line so generally it shows up as fully taxable unless the inherited IRA that you inherited had some tax basis in it. You’d have to go back to the person you inherited it from and look at their final tax returns to see if there was a form 8606. Chances are all that money is taxable and it goes on line 15A and 15B.

6. Can I deduct my IRA contribution if I don’t have an employer plan, I’m single and my income is over $70,000? You say no, but I’m wondering if it’s a typo. Here is what you say:”If you or your spouse do not participate in a retirement plan at work, your traditional IRA contribution is fully deductible up to your contribution limit, which is based on your income. If you are single, the maximum tax deductible contribution phases out once your modified adjust gross income (MAGI), (we’ll just call it “income” for simplicity’s sake) exceeds $60,000 and you become ineligible for a tax deduction when your income reaches $70,00″


Yes. If you have an employer plan, you fall under the IRA income limitation rules. If you are covered by a plan, the deductible IRA phases out at $61,000 – $71,000. But if you don’t have a retirement plan, there are no limits. You can deduct that. You just have to be younger than 70 ½.

7. How much money would you put in a Roth IRA? I am almost 24 years old with around 70k in savings. I want to transfer that money into a retirement account. What do you suggest I should do in terms of amount, type of investment, etc?


Assuming you have earned income, you could put $5,500 into a Roth account by April 18th 2016 (that’s for 2015) and then you can put another $5,500 in at the same time (that’s for 2016). So you could get $11,000 into a Roth IRA where all future growth will be tax-free for the rest of your life. If you’re looking at purchasing a home in the next couple of years, keep it in cash – don’t invest it. Go with the rule of thumb for savings first: contribute to your 401(k) to the match, then after that put $5,500 to a Roth IRA. Then go back to the 401(k) and max it out to $18,000.



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. Investors are advised not to rely on any information contained in the podcast 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. As rules and regulations change, content may become outdated.

• 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.

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