Show Notes

• 00:00 – Intro: This Week on the YMYW Podcast
• 01:10 – The American College of Financial Services and The Horizons Conference with George Nichols
• 03:59 – What is the Future of Your Social Security Under the New Administration?
• 13:11 – Watch Are You Ready to Retire? on YMYW TV and Download the Retirement Readiness Guide for free
• 14:05 – Should We Bother Saving for Retirement? We’re Inheriting $20M. (Lucy & Ricky, WI)
• 19:05 – When to Claim Social Security? Should I Do Roth Conversions? Medicare vs. Advantage? (Tybob, AZ)
• 23:28 – I’m 50 With $2.4M Saved. Should I do 72(t) Tax Elections and Retire Right Now? (Speedy Racer, North GA)
• 33:12 – Download the Key Financial Data Guide for free
• 34:30 – Comment: Your Podcast Is Impactful for the “Gilligans” (Gilligan, NY)
• 40:48 – Next Week on the YMYW Podcast

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Transcription

Intro: This Week on the YMYW Podcast

Andi: What does the future hold for your Social Security under the new administration? Big Al Clopine, CPA and I recently attended the American College of Financial Services’ first-ever Horizons conference, an event by retirement professionals for retirement professionals. Over the next several episodes of YMYW, we’ll share the research, wisdom, and forecasts of this country’s foremost financial thought leaders on issues that matter most to you as you plan for retirement. Today on Your Money, Your Wealth podcast number 521, we’ll hear from a number of those experts on the topic of Social Security. Plus should Ricky and Lucy in Wisconsin even bother saving for retirement? They’re expecting to inherit about 20 million dollars. When should Tybob in Arizona collect Social Security, and are Roth conversions right for him? Speedy Racer in Georgia needs a retirement spitball and Gilligan in New York shares insight for other Gilligans trying to avoid a retirement shipwreck. I’m executive producer Andi Last with the hosts of Your Money Your Wealth, Joe Anderson CFP and Big Al Clopine CPA. We’ll kick things off with George Nichols III, CAP®, president of the American College of Financial Services, giving Big Al an overview of the College and the Horizons conference.

The American College of Financial Services and The Horizons Conference with George Nichols III, CAP®

Al: Well, I’ve got George Nichols here. You are the President of the American College of Financial Services, and it’s so nice to have you on our show.

George: Well, it’s an honor to be here, so thank you for having me.

Al: Thank you. So, I’m fascinated by the college, what you guys do, what’s the mission?

George: The college was founded on applied financial knowledge, ethics, and benefiting society.

Al: I like that.

George: We believe that people’s financial security and well-being is helped and influenced by a really good financial advisor.

Al: Yes.

George: So, our ability to benefit society is by educating, making advisors more competent and more confident in their business and their practice in order to serve their clients. That’s what we do. And the beauty of it is we are the only independent, private, accredited educational institution-

Al: Right.

George: – that’s clearly focused on financial services.

Al: Right, right. That’s lovely. That’s great to hear. So, so we’re at the Horizons Conference in San Diego. You guys put this on. So tell me about why that was important for the college to do.

George: So our 3 strategic focus areas are one, specialization, two is that even though retirement is in that specialization-

Al: Yeah.

George: – it is so important to America.

Al: Right.

George: And we said, you know what? We’re gonna pull it out. We’re gonna double down and we’re really going to dig in and we want to be the premier place that you think about when you think of retirement education. And so that was part of that. And in the third one is representation, how do we actually grow the profession? So then we said what if someone like us, which is probably the only group that could, if we could bring in all these practitioners, all these PhDs that specialize in retirement and put them in one place over a few days.

Al: Right.

George: And have this event that was designed for retirement specialists by retirement specialists.

Al: I like that.

George: Then we think we could do something really unique. And so this is our inaugural event. How is the best way to educate that new advisor coming in, in order for them to be successful?

Al: Right.

George: Keep this business going.

Al: Right.

George: If you come here, I expect when you leave, you’ve already got a list of things that you’re going to carry out to do.

Al: Right, right.

George: Because you learned something. And I can’t tell you the last time I went to a conference where I learned anything.

Al: I love that, George. Thank you so much for your time.

George: I appreciate it.

Al: When I grow up, I want to be like you.

George: Oh my God! Ha! You’re in trouble, man. You’re in trouble.  Thank you for having me. And thank you for being here at the conference. I mean, you’re making it, you’re elevating our game.

George: Oh, it’s been my pleasure. Thank you. Awesome.

Andi: Now from the American College of Financial Services’ Horizons conference, let’s hear from thought leaders Eric Ludwig, Steve Parrish, Jeff Levine and Jamie Hopkins.

What is the Future of Your Social Security Under the New Administration?

With Guests:

Eric T. Ludwig, PhD, CFP®
Steve Parrish, JD, RICP®, CLU®, ChFC®, AEP®
Jeffrey Levine, CFP®, CPA/PFS, ChFC®, RICP®, CWS, AIF, BFA™, MSA
Jamie Hopkins Esq., LLM, CFP®, ChFC®, CLU®, RICP®

Al: How should people be planning or thinking about Social Security these days?

Eric Ludwig: Yeah, man, that’s the trillion-dollar question.

Al: I know, right?

Steve Parrish: None of us have the answer, that’s obvious. And when we’re talking right now, a lot is going on.

Eric Ludwig: Yeah, it’s obviously been in the news a lot lately, right? And we have The DOGE in there cutting jobs and things like that.

Jamie Hopkins: There is fraud more likely in the disability side of Social Security. That’s the area that honestly needs more of a reform when you hear about it. The actual Social Security, that retiree benefits has very little fraud, very little abuse, and actually even through the review here, I don’t think there’s actually been much of a finding of that. They said they found 100, a bunch of 150 year olds. That’s a coding thing if you actually look at it. There, there, aren’t 150-year-olds getting a single payment. There are zero, right? And that’s actually very clear. Social Security puts out the ages of the people who get checks. There are zero going there, so like that’s not a thing, although it is in the media, but it does need changes, right? It can’t continue on the path that it’s been on forever, but it’s a money-in and money-out system. So either you turn down the money that’s gonna go out of Social Security, or you turn up the taxes that go in. I think most people right now aren’t clamoring for higher taxes. So then the other way to make it more sustainable is to slow the money that’s going out of it.

Al: Obviously it’s had issues before and there’s been fixes. I mean, you increase the retirement age or you increase the percentage withheld or you increase the cap. Do you see these things happening again in the future to keep it a little bit more solvent or should we really be worried that we’re going to, the trust fund is going to run out and we’re just only going to have maybe 70%, 75% of the promised benefits?

Eric Ludwig: So I think that’s where some of these concerns come in, right? As if there’s going to be changes to the funding status of Social Security. How is that going to change the planning conversations around that, right? Like if they start to extend the age, that’s sort of the normal retirement age. If people want to still take it at 62, is that going to now represent an even smaller portion of their retirement income when normally it was a larger portion?

Steve Parrish: One thing that we do know is you can start at 62 or as late as 70. The longer you defer, the more you’re going to benefit from it. Now, you tell me when you’re going to die and I’ll tell you what to buy, I suppose.

Al: I know, exactly, right?

Steve Parrish: But the fact is, the break evens on these are maybe age 80. So as long as you’re going to live to age 80 or longer, it pays to wait on Social Security. Now, the question we get is yes, but in 2033 it’s going to go down 20% and right now it could be even more because of all the things that are going on with the government.

Al: Sure.

Steve Parrish: We’ve done a lot of runs on that and the fact is everybody’s would go down if it goes down.

Al: Sure.

Steve Parrish: So it still makes sense to delay unless you just know you’re going to die, right? So really. I’m telling people don’t overthink this. Right now, it’s still a great annuity. It’s still your base plan. And so sure, maybe you’re going to get a haircut and, on benefits, right? But don’t suddenly say, well, I want my money now because I can’t trust the government. I don’t buy that because I think the American voices will say, no, we got to fix this.

Eric Ludwig: The things that aren’t changing are that when you think about the percentage of retirement income that comes from Social Security, that’s relatively stable, right? So we know that your more affluent client, Social Security is going to be a smaller percentage. Whereas if you’re sort of lower on the wealth scale, Social Security can be up to 40% of your total retirement income.

Jamie Hopkins: Two-thirds of Americans in retirement, it’s more than half of their retirement income. For one-third of Americans, it is their only source of retirement income, right? One-third of Americans end up saving less than $10,000 for retirement when they get there. There is no system for them if we turn off Social Security.

Jeff Levine: For those who are in or approaching retirement right now, I don’t think too much will change. And, there’s a lot of reasons behind that. One of them is simply the, you know, the political climate. I mean, you don’t take away things from people who vote for you and the greatest voting bloc is seniors. I mean that the AARP is one of the most powerful lobbies in Washington. So seems unlikely from a political perspective that you want to be the one on record saying yes, I reduced your benefits, you know, so-

Steve Parrish: But a few things to think about is the voting power of the American public.

Al: Yes.

Steve Parrish: I still am comfortable, even confident, that we’ll have some kind of Social Security system because it’s such an important safety net.

Eric Ludwig: What will actually take place? We won’t know. Right. And I think the thing that kind of worries me a little bit is that those in office may not even know.

Jamie Hopkins: This is one, I have a completely different view than the mass audience, and I’ve been hammering this one for a long time. I actually wrote an article about this, too.  My concern of this self-fulfilling prophecy that, a lot of people, and you looked at Americans saying, you look, I don’t think it’s gonna be there for me.  And, what I was concerned about this is, this goes back almost 15 years, I said eventually when people say that enough, it’s going to lead us to this ability to actually cut back on Social Security. Everybody can disagree with me on this. But if you actually look at the numbers, Social Security is the single most efficient financial instrument that’s ever been built in the history of the world. There’s conversations about fraud and all those things. Social Security’s total overhead runs at 0.3%. So if you think about any company ever, there is no company that runs at 0.3% overhead.  So every time somebody’s like, oh, we need something better and more efficient. And I’m like, that’s nonsense. There’s, you can’t run it like that. They don’t have marketing. They don’t have training. They don’t have sales. They don’t have all the things that build overhead in traditional companies. And maybe that’s some of the people’s criticism. If you ever gone to a Social Security office, you can’t really get a great answer, but they don’t spend on it. And everybody’s part of it. It has been an incredibly efficient system. And if you look at our senior population in the United States, right, it has kept them out of poverty at a higher rate than the average of the United States. It’s been very, very good for that.

Now, for younger individuals, I think there likely are going to be changes. We have to have changes, whether it’s delaying the age at which Social Security may begin, or increasing the Social Security taxes, some combination of all of those things.

Now, does it need changes and some adjustments? Yeah, because it is running out of money in the sense of we had a big baby boomer population come in. People live longer than we were expecting. And so that’s put stress on the calculation. But it’s money in and it’s money out.

Jeff Levine: Congress historically has given people a pretty good runway for when they made changes. And they’re pretty good about estimating the changes and how well they will do. For instance, right now, a lot of people probably are familiar with the fact that if you have fairly modest income, none of your Social Security is taxable.  And if you have some more income, up to 50% of your Social Security is taxable. In some cases, for higher earners in retirement, up to 85% is taxable. Those changes, along with the fact that right now there’s a transition period where full retirement age is going from 66 to 67, those changes all were made in the year I was born, 1983. So it has literally been 40-plus years since those changes were enacted. And at the time, well first of all, the full retirement age thing, 66, 67, is only starting to impact people now.

Al: Right.

Jeff Levine: Like, they gave people 40 years to plan. And, when they made those changes, they said, we think Social Security, by doing this, will remain solvent for another 50 years. That was their projection.

Al: Right.

Jeff Levine: Well, right now, Social Security is projected to run out of money in about 2031, 2033, depending upon what study you believe. That’s 50 years. Like they were really good when they were right. Large numbers of people, you can make pretty accurate projections. So I think there’ll be some tough decisions in Washington as to where to draw those lines and who to make changes for and who not to. But I think if you’re in your 40s, you’re probably not looking at the system being exactly what it is today. But if you’re in your, you know, mid to late 60s, I think you can count on whatever you’re getting today or projected to get today to be there for you.

Al: Yeah, I feel like that’s one thing that can be fixed and solved, and yeah, maybe tough decisions. And I feel like politicians don’t want to make those decisions because they’re unpopular, but we have in the past and it seems like we will moving forward.

Jeff Levine: We’ll get there. Unfortunately, the further we get towards 2033 the more drastic those changes need to be. And so, you know, there may have to be larger changes than necessary because our politicians may not have the courage to act sooner rather than later. But eventually, they’re going to- I mean it is an important component of so many individuals’ retirements that they’re going to have to find a way to fix it again. It’s probably some combination of changing the full retirement age, changing the tax rates, maybe changing the amount of income that is subject to the tax rates. I mean, there’s lots of levers that they can pull and then ultimately it’s probably going to be a combination of several of them.

Watch Are You Ready to Retire? on YMYW TV and Download the Retirement Readiness Guide

Andi: Thanks to the American College of Financial Services for making it possible for us to bring insights from all of these thought leaders right to you, our YMYW audience. Check the links in the episode description to read about them and their long and impressive list of financial designations and certifications. Over the next several weeks I’ll be posting full interviews with them and several others exclusively on our YouTube channel, so subscribe and turn on notifications. This week on Your Money, Your Wealth® TV, also on our YouTube channel, Joe and Big Al help you figure out if you’re on track for retirement, or going off the rails? Chances are you have put some money away and have some ideas as to what you’ll do with your time once you say goodbye to your day job. But do you know if you’re really ready to retire? How much is truly enough? Joe and Big Al put retirement numbers and strategies to the test with a pre-retirement review. Click or tap the links in the episode description to watch Are You Ready to Retire and to download the Retirement Readiness Guide for free.

Should We Bother Saving for Retirement? We’re Inheriting $20M. (Lucy & Ricky, WI)

Joe: All right, let’s get to it.
Al: Okay.
Joe: “Hello everyone at Your Money, Your Wealth®. My name is Lucy. I live in Northern Wisconsin with my husband, Ricky. We’re middle-aged with children. My drink of choice is a brandy old-fashioned sour. I drive a 2024 F150. I need your help spitballing a hypothetical future scenario. My husband Ricky’s parents are quite wealthy due to success in selling a large business. His parents are relatively secretive on how much money they have or how they plan to pass it to him and his four siblings when they do pass. Other than that, the children will receive the estate. An estimate, I think the total estate will be worth over $100,000,000. I believe that the children receive all of this, divided equally, of course. My concern is that we are going to spend our prime earning years saving money, spending money, and worrying about how to maximize our current and future financial situation without knowing what that inheritance will look like or how it will be structured. Of course, we can maximize our Roth contributions and take advantage of our company match with our employers, but I wonder beyond that if we should even save for retirement. Instead, pay off any debt and live comfortably until we receive that inheritance. Do you have any idea what their advisor would be telling them to do with their money? What type of investment tools and strategies would someone like this be using to pass their wealth on to their children? Do you have any other thoughts? And what we should be preparing now for that inheritance. Thank you, Lucy.”

Andi: Lucy’s got designs on Ricky’s inheritance there.

Joe: Yeah. I wouldn’t bet a dime on that inheritance. They’re going to spend it and they’re probably going to give it to charity. A lot of it’s going to go to estate tax.

Al: I got to concur with you. I mean, you don’t plan your own retirement based upon an inheritance that you know nothing about. So yeah, what if they give it all to charity? Just like Joe said, it could happen. They haven’t told you about it. I mean, you don’t know it’s going to be divided equally. You don’t. It sounds like you don’t know any of these things, and plus, I would say this. Pretend like it’s not there. If it comes in, great, but pretend like it’s not there. Live your life. You’ll feel more satisfied and more fulfilled just by doing this yourself, right? So pretend it’s not there. If it comes in, great. Then send us another question and we’ll help you out with the, with, what to do with all that, with that big lump sum.

Joe: But yeah, when you look at an estate that large, there’s a lot of different things that, you know, you need to do to avoid large estate or death taxes. And, you know, with the appropriate planning, you know, it gets super complex.

Al: Right.

Joe: And it’s not like, all right, well here, there’s 4 siblings, he’s got $100,000,000 dollars, so cut me a check for $20,000,000. Right? Or there’s, you know, check me, it’s going to be significantly less than that. A lot of it, it probably goes into different foundations.

Al: Yeah, I’m thinking of it.

Joe: It probably goes into limited partnerships. It probably goes into all sorts of more complex type of strategies and structures because you have to give up a lot of control to, to try to mitigate any type of estate tax.

Al: Right. And the estate taxes is high 40%, right? So it’s gonna be- it’s gonna be a lot or you buy life insurance to pay the estate tax or you set up-

Joe: But an estate of $100,000,000, you’re not gonna buy that big of a life insurance contract.

Al: It’d be difficult, right? So you’d probably do a lot of other things, like, like a family limited partnership, like you said, maybe you do, some outright gifts, a Cupert, a charitable lead trust, a charitable remainder trust. I wouldn’t think that they’re gonna get the whole $20,000, not even close to it.

Joe: Yeah. And it’s probably going to come to them payments over a long period of time.

Al: Right.

Joe: So, yeah. I would just think of this as gravy, on top of that. Unless they specifically say, hey, this is your inheritance, but- It sounds like they’re pretty secretive and your guesstimating on what those dollar figures are. So-

Al: A lot of people with that much money will give a bunch of money to charity because they don’t want to have the kids-

Joe: You know, $100,000,000 because look at Lucy’s already like, Hey, I’m going to stop saving, I’m going to, you know, I guess I could put money into a Roth.

Al: I don’t really want to.

Joe: I don’t want to.

Al: We want to live it up.

Joe: Yeah. Come on.

Al: And that’s why parents are secretive. They want you to continue your life and be motivated and fulfilled on your own. So I’m not surprised, you know, hopefully this happens, right? And maybe it will, probably will. I don’t know. But I’m just, I wouldn’t count on it for your own planning.

When to Claim Social Security? Should I Do Roth Conversions? Medicare vs. Advantage? (Tybob, AZ)

Joe: Alright, we got “Hello to Andi, Joe and Al. Tybo here and my drink of choice is a hazy IPA or a dark lager from a craft brewery.” Those are two of the worst beers that I think I have in my fridge today.

Al: No, I like hazy. So I’ll take that.

Joe: All right.   “Your show was recommended to me by a friend last year. Loved the show and have recently referred my brother who is now addicted and listening to back episodes of your programs. I’m single, live in Arizona, the bedroom community of for California defectors. State income tax here is about 2.5%.  Spending exclusively of in of income tax is currently $6000 a month, and this includes $1500 allocated to travel. I recently retired. I’m 67 and looking for a little spitball analysis on the timing for when to draw Social Security and when other Roth conversions should be considered in my retirement plans. Can you also give me your thoughts on Medicare Supplement Plans versus Advantage Plans? Got a brokerage account of $4,000,000.” Wow, couldn’t you lead with that, TyBob?  “Got cash about $100,000, inherited IRA of $200,000, traditional IRA $1,200,000, HSA $160,000, Roth IRAs $160,000. Thanks for making a boring topic entertaining. Boom, TyBob.”

Al: You know why he didn’t lead with that? Because you would have made fun of him. You know, when you say, you’re just trying to brag.

Joe: What he’s looking for in Medicare Advantage plans? He’s got like $8,000,000? Dude, get the Cadillac. Okay, check that one out the box.

Al: Yeah. Yeah.

Joe: You need to do conversions. Yes, you need conversions. You got $1,200,000. You’re probably are spitting out a bunch of income from your brokerage account. Your RMDs are- what is he, 67? So he’s got another 8 years. So that’s gonna be $2,500,000, roughly.

Al: Yeah, actually he’s got till 73, but still.

Joe: So-

Al: Yeah, got 6 years.

Joe: He’s got $80,000. He’s single. It’s gonna be $80,000 plus the Social Security. I would push out Social Security at least until age 70. I would do Roth conversions to age till 73 for sure.

Al: Yep.

Joe: And you still probably want to do some conversions depending on how much that you can get those RMDs down.

Al: I think so. I think you do the conversions right now. You live off the non-qual. And, you know, as far as Social Security, probably 70. It doesn’t say whether he’s single or married or whether he has kids.

Joe: He’s single.

Al: Single. Okay. All right. So yeah, you wait till 70 unless you’ve got health issues or impaired life expectancy. And then take it sooner, right? But break even is around age 80 ish, depending upon the assumptions you use. So generally when you have a lot of money and you can afford to wait, you wait, unless you’ve got health issues.

Joe: What, you got some Medicare advice for him since-?

Al: Yeah. go for the Cadillac. Go for A, B, D.

Joe: Is that what you got?

Al: I’m not even on it yet. I’m too young.  Anyway, yeah, the, A, B, and D is like, like a PPO, if you will, and C is like an HMO. You just have more chances, more opportunities to go to who you want to with A, B and D.

Joe: Yeah. Well, congratulations Tybo.  Hell of a job.  Yeah, I had some boys from Arizona in over the weekend.

Al: You did?

Joe: Yeah, a little golf tourney. That’s good.

Al: Got it. Yeah, cool.

Joe: It was a High Slope, high scores with High Slope.

Al: Oh I remember him. Yeah. Yeah.

Joe: Yeah, he did a little bit on the old radio show.

Al: He sure did. Yeah, he did what, college basketball.

Joe: No college football.

Al: Football. Yeah, that’s right.

Joe: High scores with High Slope!  Check the archives out on that one.

Al: Yeah, right. That was a while ago.

Andi: I don’t even, I wasn’t here for that, so I’m not even sure those archives still exist.

Al: That was way before you.  That’s when we did it live in the studios.

Joe: Yep.

Al: Yeah.

Joe: Can you believe we’ve been doing this 20 years?

Al: It’s hard to believe, but that’s about right.

Joe: Okay.

Andi: Time flies when you’re having fun.

Al: Yeah. That’s true.

I’m 50 With $2.4M Saved. Should I Do 72(t) Tax Elections and Retire Now? (Speedy Racer, North GA)

Joe: All right. Let’s go to, “Hi, Andi, Big Al and Little Joe.” Oh, we haven’t heard that joke yet.

Al: Oh, how about that?

Joe: It just never gets old. Never, ever gets old.

Al: That’s a good one.

Joe: “I appreciate a spitball on my situation. I’m hoping to retire in the next few years as soon as possible preferred. I’m 50, single, two furry kids, mutts, drive a VW Golf and ride motorcycles. Beverage of choice is, monster and vodka.”

Al: Wow.

Joe: “And I listen to your podcast while working out-” Of course, he’s getting jacked. A little back and bys, chest and tris.  All right, “As I work out daily-“I mean, what do you bench? You know? Well, what do you got?  “-as I work out daily, I’m gonna need you to increase your podcast.  Chop, chop.”

Al: Well, we got, how many, we got 500 some prior episodes. Andi: Yeah, we’re up to 521 now, so-

Al: Okay, all right, that should do it for you.

Joe: All right. “Salary is $120,000 annual plus bonuses.  I max out my Roth 401(k) through my employer with a 6% match and I add $1000 monthly to my brokerage account. My nest egg is $1,5000,000 and my traditional, $500,000 in a Roth, $400,000 in a brokerage account, $15,000 in HSA. House is worth $700,000, $100,000 remaining on the mortgage. Social Security at 70 will be $50,000, assume I stop working today. Each year I keep working only at $750,000 a year to my Social Security payment based on my earnings record.  Given the underfunding of Social Security, I assume I’ll only collect 75% of that, or $35,000 annually.  My initial plan was to execute a 72(t) tax election on the IRA to cover me until 59 and a half. The current Fed midterm rate is 120%.  Which is- “ is that the AFR rate?  120%. “It’s 5.4, which delivers $80,000. My living expenses are $100,000, including taxes, so I figured the 72(t) tax plus a small distribution from my brokerage account could cover inflation, should be sufficient until I reach 60.  At that point-“ man, this guy really wants to get the hell out of it.

Al: He does, doesn’t he?

Joe: “At this point, I’ll adjust my IRA distributions to zero out of my traditional IRA accounts over the next 15, 18 years, so I’ll be living off of Social Security and Roth distributions for the rest of my life. While I might be missing out on a bit of the standard deduction for tax purposes, after 75 to 78 though, of not having to pay taxes in my elderly years sounds very promising and simple. My assumptions are a conservative 6% growth rate my nest egg, 5% inflation on medical expenses, 3% inflation on everything else. Based upon my spreadsheets, this covers me until age 100, with $1,000,000 of Roth left over.  I would adjust my future spending to minimize the leftovers. Thoughts.”  Okay.

Al: Okay, well we got, he’s 50 years old.

Joe: Who is this? This is a Speedy Racer in North Georgia.

Al: He’s got about $2,400,000. Wants to retire now, right? So we gotta look at the numbers right now, right? So there’s, $2,400,000. Wants to spend $100,000. He’s got $2,400,000. That would be a 4.2% distribution rate.  Without regards to Social Security, which will come later.

Joe: 50. Okay.

Al: And Social Security won’t come for a while, depending upon when he takes it.

Joe: Early. 20 years.

Al: Yes. Call it 20 years, age 70.

Al: So you got to make that 4% distribution rate work all the way to Social Security. If you take that at 70, it’s, I, me personally, I, if I were retiring at 50, I would want a closer to a 3% distribution rate. Which on $2,400,000 would be closer to $70,000. So, if I was going to retire at 50 with these numbers, I probably would get a part-time job, make $30,000 and call that good. That’s what I, that’s what I might do.

Joe: Okay, let’s explain the 72(t) tax election because I think his numbers-  I would have to run it through our calculation. There’s three, so a 72(t), doesn’t that seem high?

Al: It does, but I ran it because it seemed high to me.

Joe: Oh, you did?

Al: I did, and I got $60,000 in one calculator and $80,000 in another, so I guess it’s okay.

Joe: So, a 72(t) tax election basically allows you to take money out of a retirement account, an IRA specifically, under the age of 59 and a half, but it’s called SEPP, separate equal periodic payment. So you have to take the money out of the retirement account at least for 5 years or 59 and a half, whichever is longer. And there’s a calculation that you have to run through an AFR rate, applicable federal rate, and you put it through, there’s 3 different choices. There’s the RMD, there’s the amortization and-

Al:- another one.

Joe: Annuitization maybe? I’m better, man. Don’t quote me on this. Don’t record me.

Andi: Too late.

Joe: But, so you run those 3 through and then it’s like, alright, well, he did that. It sounds like Speedy Racer did. I don’t know if that’s a male or female, but it was like, alright, I get $80,000 a year from that and I can take the money out of my retirement account without having to pay a 10% penalty. I still have to pay the taxes on the dollars, but I can avoid that 10% penalty. So it’s a great way to get money out of the retirement account and avoid the 10% penalty, but it’s a horrible way to take money out of a retirement account. Because you’re stuck with that distribution for his case until he’s 59 and a half, which would be close to 10 years.

Al: I know, but if he wants to spend $100,000 and let’s say it’s right, it’s $80,000. Then, actually, that’s okay.

Joe: Yeah, but he’s gotta take $80,000 out. What happens when the market tanks?

Al: Well, sure, I mean, he has to take, well, then that’s-

Joe: Now he’s forced to pull $80,000 out of the account, and maybe he goes back to work. Like all right now he’s 55 years old and he’s like I’m bored. I’ve already done everything, I traveled and someone offers him, Hey, you know what? We have this project for you. Then he goes back to work and he’s making $150,000 or $200,000. He has to continue to pull the $80,000 dollars out. I mean, there’s no flexibility there. So it’s a terrible way to take the money out, I think.

Al: Well, right, but let’s just say he could, let’s just say he could be flexible on the spending or he gets a part time job. He takes the money out and he has extra money that he doesn’t use. He just reinvests it. So now it’s reinvested outside of retirement.

Joe: I agree. He got, he, but he’s stuck paying the tax.

Al: I agreed with that.

Joe: I’d much rather defer the tax than pay the tax, or if I’m going to pay the tax, I’d rather convert it.

Al: Yeah.

Joe: It’d grow tax-free.

Al: Yeah.

Joe: But I would not do a 72(t) tax election for 10 years. That’s just, it’s, that just seems way too long.

Al: Too restrictive, right. Yeah, that’s, a good point. I think my point, I guess I went to step two. Which is, I’m not sure the numbers even work. I think it’s, I think he’s taken too much out of his portfolio before he hits Social Security.  Whether it’s 72(t), or whether it’s from his brokerage account, or whether it’s from his Roth, you got penalties on Roth. Although you could take out the contributions, you know, but do you really want to do that at age 50? Start spending your Roth? Not really.

Joe: Yeah, I love the plan. I love the planning that he’s doing. He’s got spreadsheets galore, and he’s running right. He’s running at 6% growth rate, run 5% inflation on healthcare, run 3%, 3.5% because your nominal rate is a lot lower. So I’m fine using a straight line rate of return if you’re running a high inflation rate because your nominal rate is 2%, 2.5%, 3%. Versus, you know, 6% growth. It’s like you’re never going to get 6% growth on your money. You’re going to get 8% and minus 4%, then 12%, and then whatever.

Al: Yeah. Minus inflation.

Joe: So, but that’s why another, there’s a risk factor here doing a 72(t) for that long is that  back in the 2000s, people did this when the dot.com bust, right? Everyone was super rich and young on, you know, but it’s like, okay, well now my money went to hell. And I still have to take these distributions out and I’m gonna- they did a reprieve the IRS actually was like, you know what, we could stop this at a one time deal because so many- well I don’t know if so many people did they had to have if the IRS stepped in and-  but after that it’s like I was never a huge fan of the- this SEPP or 72(t) tax election.

Al: Yeah, well maybe what he could do if he really wants to do this plan is maybe, I think you can, now how does that work Joe? Can you do, can you have separate IRAs and just do 72(t) on one of them?

Joe: Yes, uh, huh.

Al: So maybe you split it, maybe you do a third of it. Maybe you do $500,000, 72(t) on that. You take $25,000 out, do the rest in brokerage and get a part time job like I talked about that, then I think you, you got more flexibility.

Joe: It seems like Speedy Racer here, just, he wants to punch.

Al: He wants out. I get it.

Joe: You know, he’s got two furry kids.  He wants to ride his motorcycle. He wants to cruise, right?

Al: Yeah. While he’s still young enough to do it.

Joe: Smoke cigarettes and get on that bike and cruise around North Georgia.

Al: Yeah, I get it.

Joe: I like it. Yeah, he’s going to get bored, I’m telling you.

Al: Not necessarily.

Joe: You tried to retire at 50. Look at you now.

Al: I did, yeah, but that’s because I couldn’t, because the real estate market crashed.

Joe: Well, the stock market could crash and Speedy Racer’s going to speed right back to the office.

Al: True.

Download the Key Financial Data Guide for free

Andi: Along with their email list and their HP12C financial calculators, the Key Financial Data Guide is a must-have for Joe and Big Al to be able to spitball for you. Download a free copy for yourself from the link in the episode description. It’ll show you at a glance the 2025 tax brackets and capital gains tax rates, retirement plan contribution limits, tax on Social Security, Medicare premiums, and all the current credits, deductions, exemptions, distributions, and exclusions. All the numbers that affect your financial strategies as you plan for retirement. One listener said that, basically, this guide alone is worth the price of admission to YMYW – so, priceless! Just click or tap the links in the description of today’s episode to download the 2025 Key Financial Data Guide, to Ask Joe and Big Al for your Retirement Spitball Analysis, and to access plenty of other free financial resources.

Comment: Your Podcast Is Impactful for the “Gilligans” (Gilligan, NY)

Joe: Gilligan.  It’s a comment.

Al: Comment. Okay.

Joe: All right. So this guy’s going to blow us up, I guess.

Al: We’ll see.

Joe: All right. She loves throwing those comments in there where it’s like, yeah, you guys are jackasses.

Andi: Read on Joe.

Joe: All right. Here we go. “Hi, Andi, Joe, Big Al. On a previous podcast, someone made a comment that they would rather hear from more Gilligan than hearing from Thurston Howell. I totally understand that comment and I agree, but I wanted to share a personal story about Gilligan.  I hope it helps you realize how impactful your podcast is and also gives hope to all the Gilligans listening.”

Al: Oh, so this could be a positive.

Joe: Oh, okay. “I earned less than $15,000 as a full-time laboratory scientist out of college. My family was low middle class and actually had to use food stamps for a year and a half after dad was in a serious car accident. The importance of disability insurance is another important topic. When I eventually made $30,000 a year, I was making more than my parents. We had 3 kids. I felt rich.  I’m still a research scientist, and did not make $100,000 until I was 44 years old. Probably averaged 3%, 4% annual increases. I bought a small house at 26, 10% interest, 5.5% inflation, and got married 2 years later. I had 2 children that lived a typical life. We saved, invested a small amount of money, and lived below my needs, lived below my means. I drive cars for at least 10 years. And my best car lasted 20.  I was never interested in impressing others, and loved when they called my cars pieces of crap.  While growing up, I listened to a radio show that talked about mutual funds, investing, and very basic concepts. I was fascinated and determined to be focused on investing.  I feel embarrassed to say this, but my total investable assets are over $7,000,000.”

Al: Wow.

Joe: Jeez. Good for you, brother.

Al: Yeah, that’s a great story.

Joe: “Low cost index funds and believe that time is key. Save early and often. I’m sure someone smarter could have done much better, but I also know I could have done much worse. Apologies. But I still have lots of questions and appreciate the knowledge that you share. I continue to read investment books and listen to several podcasts each week. Yours is the best.” Yes.

Al: In all caps.

Joe: All right. “And I look forward to Tuesdays, honestly. I have many more details to share, but I hope the above info is sufficient to give other Gilligans out there some hope. Thanks Andi, Joe, Big Al, you’re, you are amazing people whose message will land on another Gilligan and change their lives and their children’s lives. All the best to you and yours, Gilligan.  Now, Thurston?”

Al: I think Gilligan is now Thurston.

Joe: All right. Yeah, you go.  Gee, drink, little coconut milk. Well, of course, dude. You make $30,000 a year, you have a $7,000,000, you’re gonna hit coconuts off the tree in the island of Gilligan.  “Bamboo Island Taxi.” What the hell is that?

Andi: That’s his car!

Joe: Oh, Bamboo Island Taxi?

Andi: Cause it’s got, it’s Gilligan, get it?

Joe: Oh, got it. Oh, coconut, got it. I’m so stupid. “My wife works too, but did not earn more than me. I paid for my own college loans, never came back to money via inheritance, lottery, insurance, legal settlements, etc. The only one stopping you from being FI is yourself. A higher salary will not help. You’ll just spend more. Pay yourself first. Placing it in investments because you are worth it.”  Very good. Nice, final words there from Gilligan.

Al: I love it. Thanks, Gilligan.

Joe: Yeah, I think that’s the hardest thing to do because you’re right. The more people make, the more they spend.

Al: Yeah, I mean, how many people have we seen that have very high salaries and have very little saved?

Joe: I still will never forget the guy that made, he was an attorney, partner in a law firm.  Probably a million dollar salary plus. And he’s been making that for years.

Al: Yes.

Joe: The wife and him came in, and they had nothing, and he was in his 60s.

Al: Right.

Joe: And then she’s like,  well, what do you think we could cut? Maybe you could cut the Pandora without commercials.  I was like, what are you talking about? That’s like $4 a month. You need to cut $400,000 a month.

Al: And they all say the same thing.

Joe: Oh, we don’t spend lavishly.

Al: We’re not lavish spenders.

Joe: No. Yeah, we definitely spend-

Al: It’s only $600,000 a year.

Joe: It’s like, well, how much do you think you spend a month? Oh, I don’t know, at least $3000.  That’s it. $3000. You make $1,500,000. And you have nothing and you’re 60. And you say you spent $36,000 a year? What’s your property taxes? Oh, that’s right. Yeah. Do you get robbed daily?  Do you have a drug problem?

Al: Gambling.

Joe: Oh, man.

Al: Oh boy.

Joe: But yeah, pay yourself first. I think that’s the best advice you can absolutely give anyone because you are definitely worth it. I love that line. You are absolutely worth it. Think of your future self. Right. I mean, God, like I said, it’s crazy how long, 20 years we’ve been doing this stuff. It’s like I’m 50. I never thought I’d be 50. I’m an old man.

Andi: Hey now, come on!

Joe: It’s like, man, I’m ready to I want to be like that one dude that is going to do a 72(t) tax election. I’m out of here. I’m FI.  I’m done.

Andi: And you are done.

Joe: Okay, we’ll see you guys next week. We’ll be back next week. Actually, I’m heading to Hawaii. That’s where, the island of Al.

Al: You know, that’s good for you. You go to Maui, play a little golf.

Joe: I am, a little Kapalua.

Al: I like that. I was just there in January, volunteering as you know.

Joe: I know.

Al: Yeah.

Joe: Alright, well I’ll fill you in. Thank you everyone. Thanks Andi. Thanks.

Andi: Thank you.

Joe: Thanks Al. We’ll see you guys next week.

Al: Bye-Bye.

Next Week on the YMYW Podcast

Andi: Many of you want to know how much you can afford to spend in retirement, but what is your retirement income style? Watch and listen next week as our interview series from the Horizons Conference continues with Dr. Wade Pfau, returning to YMYW to talk about your retirement income style awareness. Plus, Al Bundy in St. Louis asks Joe and Big Al for a spitball on his withdrawal strategy and what he should do with his IRA and 401(k) money. Join us then won’t you please?

Your Money, Your Wealth is presented by Pure Financial Advisors. Meet with one of the experienced professionals on Joe and Big Al’s team at Pure for a financial assessment. It’s a deeper dive than a spitball, there’s no obligation, and it’s free. Call 888-994-6257 or click or tap the link in the description to schedule your free financial assessment. Pure currently has 10 offices around the US where you can meet in person, and we’re growing every day. But you can also get your free assessment right from home via Zoom no matter where you are in the world. The Pure team will help you create a detailed plan tailored to meet your needs and goals in retirement.

Now this part is different so listen up:

Pure Financial Advisors is a registered investment advisor. Neither Pure Financial Advisors nor the presenters are affiliated or endorsed by the Social Security Administration. The information contained within this presentation is for informational purposes only. It is based on current Social Security rules and is subject to change in the future. Individuals are advised not to rely on any information contained in the podcast in the process of making a full and informed investment, legal, or tax decision.
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