Show Notes

• 00:00 – Intro: This Week on the YMYW Podcast
• 00:56 – 54 and 52 with $5.3M. Can We Both Retire Now? (Frida & Diego, CA)
• 18:13 – Which Pension Option Protects Us Both? (Stanley & Stella, NY)
• 30:23 – Should We Retire at 54 with $10 Million? (Gary, PA)
• 40:51 – Outro: Next Week on the YMYW Podcast
• 42:14 – The Derails: Frida & Diego, Tesla, Kir Royale, Streetcar and Brando, Joe’s pool remodel

Free Financial Resources: 

The 9th Annual YMYW Podcast Survey: US residents, share your opinions and experiences by August 31, 2026 for your chance at a $100 Amazon e-gift card! (password: ymyw)

Withdrawal Strategy Guide – free download

Retirement Spending: How Much is Too Much? – 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: Today on Your Money, Your Wealth® podcast number 594, Gary in Pennsylvania is 54 with $10 million, and get this, he still can’t decide whether he can walk away or if he needs to grind out a few more years. What is up with that? But before we get to Gary, Frida and Diego are 54 and 52 in California with $5.3 million, itching to start their go-go years. Can they both retire right now? And is $200,000 a year of spending pushing it? Stanley and Stella in New York have a pension decision to make. Choosing the wrong option could leave one of them exposed for life. Please leave an honest rating and review for YMYW in Apple Podcasts or any of the other apps that let you do that. When you do, you’re helping someone escape all of those boring money podcasts. I’m Executive Producer Andi Last, and here are the hosts of Your Money, Your Wealth®, Joe Anderson, CFP®, and Big Al Clopine, CPA.

54 and 52 with $5.3M. Can We Both Retire Now? (Frida & Diego, CA)

Joe: Diving right in, we got Frida from Diego, California.

Andi: No, Frida and Diego from California.

Joe: Oh, Frida and Diego

from California.

Andi: it’s a reference to Frida Kahlo and Diego Rivera

Al: Okay.

Joe: One more time?

Andi: Frida Kahlo, famous Mexican painter, and her husband, Diego Rivera, also a famous, muralist.

Al: Okay.

Joe: Okay.

Al: Nice.

Joe: “Hola, Joe, Big Al, Andi, writing in for Retirement Spitball. We’re Frida and Diego from San Francisco. I drive a 2014 Toyota RAV4.”

Andi: 2024.

Joe: “Hybrid. Frida drives a 2022 Tesla Model 3. she likes to drink, Kir Royales.” Wow. “And I enjoy negronis.” I haven’t had a negroni… I’ve only, probably only had a couple, but they were tasty.

Andi: I thought it was a beer, and I realized I was getting it confused with Negra Modelo.

Al: Oh, okay.

Joe: Yes. Negroni. “She’s 52, I’m 54, turning 55 at the end of this year.

Frida was laid off from a biotech firm three years ago, and is in no rush to return to the lab. I’ve been in marketing for a major tech company for almost 20 years, and feeling restless to get on with the next chapter. Travel, surfing, skiing, some passion projects, and maybe cleaning out the garage, or at least taking, or talking about cleaning out the garage.”

Let’s not get too ambitious.

Al: Let’s not get too ambitious there. Don’t get ahead of yourself, Diego.

Joe: Okay. Yeah. So let’s, let’s check out the numbers. “$1.6 million in a taxable brokerage account, E- ETFs and stocks mainly. This includes a safety buffer of short-term treasuries and munis of about 250 grand. 3.6 million in our 401s.

The allocation is 80/20 stock/bond. 50,000 in IRAs, $40,000 in an HSA, and I’ll take $5,000 of Social Security income at the age of 70, and Frida will take 3,200 when she turns 65. Our home is worth $1.6 million, and we have $300,000 left on a 15-year fixed at 2%. My salary with bonus, $270,000. I also have about $50,000 in RSUs and max out an ESPP plan.

We do a little backdoor Roth, got started on the back door and mega back door late unfortunately.” I wonder how long, Diego’s been listening to the program here, Big Al.

Al: Maybe not that long.

Joe: Not… Yeah. “Our current annual spending is $150,000 a year. That includes our mortgage, insurance, and all other spending.

We’d like to maximize our go-go years- … with about 170,000 to 200 grand in spending for at least a decade, but we’re flexible and plan on guardrails. No plans to move out of the state or downsize anytime soon. We’d like to optimize the ACA subsidies with the lower MAGI. And since we don’t have kids or heirs, except for the shaggy sheepdog, we’re less keen on Roth conversions, and just wanna enjoy our post-work life.”

What does having no heirs have anything to do with conversions?

Al: Well, I think it’s what people think of right off the bat, right? Which is since it’s not gonna go to anybody, it doesn’t matter.

Joe: It’s- I think a lot of poor advice is based

on

that

Al: Yeah. So you and I will unravel that.

Joe: Got it.

Al: Unpack that. Yep.

Joe: We’ll unpack it.

Al: Yep.

Joe: “As far as RMDs and taxes, we could pull some 401money out of using the 55 rule or do smaller conversions along the way to take some of the sting out of the RMDs down the road. What do you think? Can Diego join Frida in retirement in 2026? Is $200,000 in annual spending reasonable? Love the show.

Have spent many hours listening to your wisdom and banter during commutes, workouts, and walks with the pooch. Gracias, amigos. Frida and Diego.” Okay, they got a boatload of money. they wanna spend $200,000, they wanna retire at 55.

Al: Yep, right now.

Joe: Right now. Just- So what’s say you, Big Al?

Al: Well, I think the first thing I looked at is the distribution rate, which currently, if you go $200,000 divided into, say, $5.3 million, that’s a 3.8% distribution rate.

That’s before any kind of fixed income.

Joe: Sure.

Al: And then if they go 170, that was the range, right? That was the low end. it’s a 3.2% distribution rate. I think that’s fine. I think, I think they… Is this the one where they talked about guardrails?

Joe: Yeah.

Al: Yeah. I think, I sorta like that strategy. And, basically what that is, meaning maybe you try for a 3.5% distribution rate or whatever it may be as your starting point, and then if there’s years where the market does better than average, then you might take a little bit more.

Or years when the market does less than average, or even go down, you might take out a little bit less. So that way you’re sorta a little bit flexible spending. I think that makes this c- type of scenario work out better. So I, yeah, I think this probably works.

Joe: So he’ll retire at 55, have about a 3.5% bur- burn rate plus tax.

okay, so it’s a little rich, but he’s just gotta bridge the gap for-

Al: That’s exactly- …

Joe: 10 years-

that’s right … for her, and then another five for him, so 15-year total bridge.

Al: Yep.

Joe: So, okay.

Al: Or if e- one of them gets a little bit of part-time income, that could help a little bit. But- So- … I think there’s a lot of assets here.

it’s, you know, usually at this age we’d wanna see about a 3.5% distribution rate or less, but, because that’s not even including their fixed income and they can be flexible on their spending, I, yeah, I think that’s probably okay.

Joe: Okay. 80/20 stock bonds. They’ll, probably have to reallocate a little bit here on how they’re thinking about creating the income from the portfolio.

Where you wanna pull from. So he’s thinking rule of 55. So if you do the rule of 55, then you pull out of the retirement account until up to the 12% tax bracket, and then you would pull the rest from the taxable account. But I would be curious to see what the basis is on that taxable account. I don’t know if it’s high or low or how much gain.

Because then when he retires, let’s assume he retires Jan 1. so he’s got the full year to create his own income, and all the income that is generated for them to live off of is on his own doing from his assets.

So- Then it’s like, where do you withdraw? Do you just take it from the brokerage account?

Because if he has low basis-

he could take advantage of the 0% capital gain rate.

Al: He could.

Joe: And so you might wanna think about that to reallocate that taxable account to get it out of an 80/20 split because you probably wanna live off of some of that over the next 10 years.

And if it’s all in stock, if the stock goes down, you know, you don’t necessarily wanna sell stocks when they’re down to, to live off of.

So, or is it a combination of, you know, do you take advantage of the 0% tax rate and then you also take some distributions from the tax deferred to live off of? Or do you live off of the taxable and then do conversions? You know, so th- there’s a variety of things that, that I would wanna look at, a 55-year-old with $5 million, with $1.5 million in liquidity that I could live off of- Right

to really rearrange kinda some of this tax deferred.

Al: So he wants to keep the income low-

Joe: For ACA- …

Al: for the subsidies … yeah,

Joe: subsidies and things like that.

Al: Yeah, which if, you don’t know what that is, that’s when your income is low enough, and you need to buy health insurance ’cause you’re not Medicare age yet, which is 65.

Then you get subsidies, or credits if you will, on your taxes. So you, pay, y- in, in essence your, premiums are less than you would normally pay, and there’s, nothing wrong with that strategy. ‘Cause

Joe: he’s, po- in poverty.

Al: He’s in poverty. But- Well, I was gonna say, there’s nothing wrong with the strategy.

However, when you got $3.5 million in a retirement account, I would wanna get some of that into a Roth IRA. And I think if, it were me, I would do at least the first two years to the t- top of the 24% bracket. Get a, big chunk in, u- upon retirement. Maybe even, you know, maybe those couple years you use COBRA, right?

And, so you’re not worried about ACA anyway. I’d wanna get a, a, more of a head start on, the Roth IRAs early at age 55. After that, I think if you wanna do ACA subsidies, maybe only convert in years where the, market takes a dive, and you wanna get some cheap dollars in there and have it, have the, the recovery happen, you know, in the Roth IRA where you pay no tax.

So I, think I m- I might think about that.

Joe: But here- here’s how I would think about Roth conversions for someone that doesn’t have kids.

Al: Yeah. Yeah, please, because I think a lot of people don’t understand that.

Joe: But, i- yeah, and, I think a lot of publications or if cha- you know, you go on ChatGPT or whatever, it, the first thing is always like a legacy play.

Al: Yeah,

Joe: But it’s a tax control play is how you wanna be thinking about this.

Because the advice if you go online and say, “All right, I wanna retire. Can I retire?” They’re gonna give you, the, probably a distribution rate. All right, and here you’re at 3.5%, just like what Al did the numbers.

Hey, it looks okay. You got to bridge until Social Security, which is 10 to 15 years. Okay, things look okay. draw down your taxable accounts first. Let your deferred continue to defer, so why pay the ordinary income tax now? And then you’d take those dollars out last. Or your Roth dollars last, or they would pass to the next generation.

And then your kids would have this pot of gold that is tax-free.

Al: Sure.

Joe: He’s gonna retire at 55. She’s gonna be 53 years old. So they have plenty of time to, to truly get tax-diversified.

They are not diversified from a tax perspective. They’re heavily weighted in tax-deferred, if you think of it, as an asset allocation.

So I wanna have money in all three pools. I wanna have money in tax-deferred, taxable, and tax-free, so as I start taking distributions, as Social Security comes in. He’s not gonna pull his Social Security till age 70.

So he’s got… And then she’s gonna pull hers at 65, so that’s roughly right around the same time.

I wanna make sure that I can control my taxes from age 65 until the rest of my life. So he’s got 10 years to kinda play around with these dollars.

So we’ll look at what tax bracket that you’re in now. We’ll look at what tax bracket that you’re going to be at RMD age. If he does a s- you know, just takes the taxable first and then lets the deferred go, he’s gonna be in the, probably the 24% tax bracket because the RMD’s gonna be so big.

Al: Yeah. At, at, at least, right?

Joe: At least, right? Yeah. Who knows? And, if tax rates go up, he’s just gonna lose- more of that money to taxes.

Al: Yeah, and so I 100% agree. So, so s- if you think about it this way, the reason why you do Roth conversions at age 54, 55 is because if you live to 85 or 90, that’s a lot of years where you’re gonna be paying a lot of tax.

And one way to think about it is if you have $3.5 million in a deferred account at 55, now I know you’re gonna pull, he’ll pull some, right? Sure. They’ll, pull some. But just the rule of 72, 7% interest, earnings rate, growth rate, then what’s gonna happen is you’re,

Joe: At 65, it’s 7 million.

Al: Yeah, it’s 7. It could be-

Joe: At 75- …

Al: 14 million …

Joe: it’s 14 million.

Al: That’s a $600,000, R- An RMD … more than. That’s, yeah, RMD. And so you’re doing it for yourself really. I mean, it’s,

Joe: So y- you wanna even out the tax bind over your lifetime, in a sense. And if you do that, if you think about it in a stretch of, “All right, I have a 35-year retirement.

If I retire at 55- Yep … I, wanna pay the lowest amount of tax possible and have the highest amount of income to me and my family possible,” you would wanna do conversions if you ran the numbers. Because what will happen is that you’ll pay very, little tax, and you get your ACA, and you get your subsidies, and you get cheap insurance all in the beginning of your overall retirement.

Yeah. And then all of a sudden you get to get a J curve, and the IRS is gonna love you for it. They’re gonna take so much dollars from you, depending on how much that you let this grow. If you don’t wanna do the conversions, I think what he’s thinking there too, he’s like, “Well, I’ll use the rule of 55.” And what the rule of 55 is, that you can take dollars from a 401plan if you separate from service at 55 years of age or older.

It’s not 59 and a half with a 401. IRAs is 59 and a half. A 401is 55 as long as you separate from service. So he might be thinking, “All right. Well, I’ll take from the retirement accounts to live off of. So I’ll take up to the top of the 12% tax bracket,” which would be about $130,000 that he could draw from each year.

And then maybe the other $100,000 would come from the taxable account. That could be an interesting strategy as well. But- I, really like the, the flexibility of having money in a tax-free account because then, let’s say if you have larger purchases, you wanna do something, you wanna go travel the world, you want…

You can have balance. I’m gonna pull a little bit from my retirement account to a certain tax bracket, but I want a lot more income. Well, then I can pull from my taxable account, pay cap gains, and if I want more income, then I can pull from my tax-free account and not pay any tax at all. If everything is coming from the tax-deferred account, the more dollars that I pull out, the more taxes potentially I’m gonna pay.

There is no way around the tax. So then it’s looking at, well, what’s the least amount of tax that I can pay? And if doing a conversion and having that money compound over the next 10 years, 15 years in a Roth, I mean, I agree with you, I would wanna jumpstart this, trying to get as much money over the next couple of years as possible into the Roth.

and then from there, then you can be oppor- opportunistic, I guess-

if, you wanna look at it that way. But I would run the numbers and just kinda see, all right, well, this is how much money potentially I can save in tax if I do the right strategy.

Al: Yeah, and I think it goes back to tax projections.

If you look at one year at a time, you’re gonna say, “Don’t do it.”

Joe: Don’t do it.

Al: If you look at 25 years or 30 years at one time-

Joe: You’ll do it all day

Al: long … you’ll do it all day long because the taxes that you save in the future, and that’s because of required minimum distributions that kick in currently at age 73, but soon to be age 75.

Joe: How many, what, what percentage of people do you think have $3.5 million in a 40- in a deferred account at 54 and 52?

Al: It’s very low. Very low. So basically what, this is the classic case where we would say this is a tax time bomb. Remember?

Joe: Totally.

Al: Remember that term?

Joe: So if you’re getting generic advice, you’re gonna get the advice that doesn’t apply to someone like this.

This guy in, Frida and Diego, what, I don’t know, maybe 5% of the population have that.

Al: I’d say less than that.

Joe: Yeah. That would be generous.

Al: Yeah, that would be generous. But may- you know. But it’s, when you’re in that situation at this age, the compounding by the time you hit RMD age- Yep … you’ll be shocked what tax bracket they’re in.

And you and I have seen this on the other side. So in other words, people that were o- one year or two years away from R- RMD age, and then it’s like, “Oh my gosh, I didn’t, never thought about this. What can I do?” It’s like, well, you could’ve done a lot 10, 15 years ago, but- Yeah … hard, hard right now.

Joe: Yeah, they come to us at 68.

Remember your boy, Mitt Romney?

How much money did he have in his retirement account?

Al: Oh, it was millions and millions

Joe: This is like the biggest IRA ever known to man.

Al: ‘Cause he, he put his company stock, which did well, in it. I mean, good, for the rate of return, but tax, issue.

Joe: all right.

Well, congratulations. yeah, you’re good to go. Great job.

Andi: Joe and Big Al mapped out where Frida and Diego should pull their income from, and in what order, to keep the tax bill down. Do you know how you’re going to do that with your retirement savings? That’s the whole ballgame, and getting the order wrong can cost you years of income when you need it the most in retirement. This week’s episode of the YMYW TV show digs into retirement spending, and how much is too much. Joe and Big Al run real numbers on withdrawal rates, required minimum distributions, and that healthcare gap before Medicare kicks in. Don’t miss this one. Our Withdrawal Strategy Guide is this week’s special offer, too. It’s a plain-English walkthrough of how to sequence your withdrawals so more of your money stays in your portfolio instead of going to the IRS. Watch this week’s show and download the Withdrawal Strategy Guide for free at the links in the episode description. You’ll also see links to our blogs, educational videos and webinars, and other free guides as well. Do a friend a favor and share the show and all these free financial resources with a friend.

Which Pension Option Protects Us Both? (Stanley & Stella, NY)

Joe: All right. Let’s, let’s move on. We’re gonna go to Stanley and Stella from Tennessee. This is Stanley and- Tennessee Williams.

Al: Actually from New York.

Joe: What the hell am I reading? Yeah.

Andi: Did you ever see the movie Streetcar Named Desire with Marlon Brando?

Joe: no.

Andi: Okay. It was based on-

Joe: It’s a little before my time

Andi: … a play by a playwright named Tennessee Williams.

Joe: But Stanley and Stella wrote it.

Andi: No, Stanley and Stella are the characters in Streetcar Named Desire, written by-

Joe: That was written by

Tennessee Williams

Al: … Tennessee Williams. There you go. Now, you’re on the right page.

Yeah. And these guys are from New York State.

Joe: Got it.

Andi: Stanley in the movie is famous for yelling, “Stella!”

Al: You know what? It was even before my time. How about that?

Joe: There you go. “All right. I’m 62, gonna be, retiring here soon. My wife is 59 and a half, and has been retired for the last four years. She enjoys an old fashioned.

I drink a local honey whiskey.” I don’t know if I like honey in my whiskey.

Al: I don’t really like whiskey, and I don’t think I like honey on top of it.

Joe: I like old fashioneds.

Al: Yeah, I know you do.

Joe: A little local honey whiskey. Okay. Might have to try it. “She drives a 2017 Honda HR-V and I drive a 2017 Mazda 3. My salary’s $135,000.

I max out a Roth 457 in our original Roth, or our individual Roth IRAs. Her pension is $45,000 a year. My pension’s $75,000 a year- Okay. Single 63,000, 100% pop-up. 65,000, 75% pop-up. 68,000, 50% pop-up.

Andi: What is pop-up?

Joe: You know what pop-up is?

Al: I, I do. I had to look it up, though. So a pop-up, Joe, is where if the, If the, the retiree dies first, it’s still the same amount that goes to the survivor.

But if the- The wife dies … if the wife dies first, it pops up to what the single rate would’ve been.

Joe: Yep. They’ll pop up-

Andi: Thank you for not using predecease.

Joe: “Health insurance premiums will be covered by my unused sick level, sick leave and Medicare. I will receive a payout of about $45,000 for unused annual leave and comp time.

We have no debt, no children. We currently spend about $110,000 per year and plan to increase spending on travel to Italia, Ireland, and Greece.”

Al: How many of those you been to?

Joe: none.

Al: None. Okay.

Joe: Not, not one of them.

Al: Get started.

Joe: I gotta get started

Al: yep.

Joe: I do plan on going to, Italia here at some point.

Al: Yeah. But, I’ll be there in, September. Okay. If, you wanna pop over.

Joe: All right. I don’t think I can make it this year. “We also plan to renovate our kitchen, two bathrooms, and install an in-ground pool and landscaping.” Wow, that sounds expensive.

Al: It does. You would know.

Joe: I do. I-

Andi: I was gonna say, from experience.

Joe: “We have, $37,000 in a money market account, $450,000 in a brokerage, $895,000 in our IRA, there’s $525,000 in a Roth. We inherited an IRA of $40,000 and expect real estate sale proceeds of about 100 grand later this year. Which pension option should I choose?” Come on. I don’t know. “Should I use the $45,000 for catch-up Roth contributions, future Roth conversions, or renovation expenses?

Thank you. We always rely on kindness of strangers.”

Andi: That’s a

line

from-

Al: Apparently that’s a line from the movie …

Andi: from A Streetcar Named Desire.

Joe: Got it. All right. So let’s help Stanley and Stella out.

Al: Yeah, what, what would you do on the pension?

Joe: what would I do on the pension? So they spend $100,000 a year.

They have right now total liquid assets of what, 2 million bucks?

Al: Yep.

Joe: let’s see. T- the pension, he’s got,

Al: Well, let me, help you out here … $73,000, $63,000-

Joe: Yeah … $55,000

Al: or

$68,000.

Even if you do the lowest pension option, $63,000, you end up with $108,000 fixed income.

Joe: Okay.

Al: And they’re spending $110,000.

Although they wanna travel and, renovate their home. So even if, you bump the spending up to $150,000 for some travel and whatever, that’s a shortfall, fall of $42,000, which is a 2% distribution rate, so they could actually spend more. That’s even at the lowest pension rate.

Joe: I don’t, I- you have to kind of run a internal rate of return on this, and I don’t have the time-

to, do all these calculations.

Al: to me it’s super simple.

Joe: You just take the lowest one and call it good?

Al: And in case something happens to me, Ann’s fine.

Joe: Yeah.

Al: That’s exactly what I would do.

Joe: Yeah. Yeah. If, yeah, I suppose if you don’t wanna… Th- that’s interesting, Al, because you usually like to get to the, you know, cross your Ts and dot your Is on the numbers.

But, that makes sense.

Al: No, not when it comes to pensions. I’m a big fan of, survivor ben-

Joe: Fixed, income

Al: Yeah, fixed income survivor benefit.

Joe: Yep, okay. Yeah. No, I agree with you. I’m, I don’t… and they’re, re- relatively close, right?

Al: they’re very close.

Joe: 63, 65, 68.

Al: Plus there’s a pop-up.

Joe: who doesn’t love a pop-up? yeah.

Al: Did you know what a pop-up was?

Joe: Yeah, I haven’t seen pop-up- Okay … in, I don’t know.

Al: I,

Joe: I- Probably 15 years …

Al: I had never heard of it.

Joe: Yep.

Al: A- anyway. Now how about the home improvement? Do you-

Joe: Do… Okay, so he wants to do two bathrooms, a kitchen, and an in-ground pool, and landscaping.

Al: Yeah.

Joe: I don’t know, if he’s in California, that’s a million dollars.

Al: True. But he’s in New York State. Maybe he’s a-

Andi: And they wanna travel.

Al: Yeah,

Joe: So, so, like, what, two bathrooms.

Al: Okay.

Joe: What is that, 40 grand?

Al: Well, and I think what he’s talking about, she’s got a pension of $45,000, so maybe it’s multi-year, but does he use that $45,000 to pay off the renovations, or does he earmark that for Roth contributions or paying tax on- ”

Joe: Should I use the $45,000 for catch-up?”

So he’s got a lump sum coming, she’s got a lump sum coming in?

Al: Every year. Her pension’s $45,000 per year. So I think that’s what he’s-

Andi: Right, he’s talking about using his unused, sick time of $45,000.

Joe: Yeah, $45,000. Her pension is 45 grand a year. My pension’s $73,000 a year, and then I will receive a payout of $45,000 for his unused annual leave.

Al: Yeah. Oh, I-

Joe: So that $45,000- Got it … should he use that for- Yeah, catch-up Roth contribution?

Al: Okay.

Joe: So, but if he’s retired, he doesn’t have earned income, so he cannot contribute to a Roth IRA. Or when does he wanna actual retire? He’s gonna retire this year, so.

Al: Yeah, w- I guess it could be the same year.

Joe: Okay. I don’t think $45,000 is gonna cover an in-ground pool, landscaping- It’s not … two bathrooms, and a kitchen.

Al: It’s not. I, agree with you. Nevertheless, I would use it for the renovation, ’cause it’s there and available. That’s what I would do.

Joe: What does he have for taxable investments? He’s got $500,000 in taxable inve- what does he have for debt?

Al: Debt is, I think, I don’t think there’s any.

Joe: There’s no debt on the home? Yeah. With the home worth?

Al: It’s there.

Joe: Did he say?

Al: Maybe, well, he didn’t say, actually, come to think of it.

Joe: I don’t know. Would you do a home equity line for the, the reno?

Or would you- Depe- … pay from the brokerage account?

Al: Depends how much it is, right?

With the final cost-

Andi: Yeah, they said, “We have no debt and no children,” so confirmed. They’re, they, don’t even have a debt on the house.

Al: Yeah, so, so I, think I would pr- me personally, I would, I’d probably use the $45,000 to pay towards the renovation, and any additional amount I would be tempted to do a home equity loan, I think, on that, and then just pay that off s- over time.

That’s-

Joe: ‘Cause he got plenty of fixed income.

Al: Yeah. Exactly.

Joe: So-

Al: I mean, basically, with all that extra fixed income and-

Joe: It’s okay to gamble a little bit of debt if, you got that much fixed income- depending on the rate, and- he’ll probably-

Al: That’s probably what, that’s probably what I would do.

Use, use the 45 grand to go ahead and pay whatever it went towards, the renovation, and borrow the rest. I think that home equity loan, I think that’s what I’d do.

Joe: I think that’s what I would do, too. ‘Cause-

He’s, got a, a decent amount in a Roth, 500 grand-

Al: He does …

Joe: I wouldn’t touch that.

Al: Yep.

Joe: He’s got $500,000 in a money market and brokerage account. Yep. I don’t know, maybe you spend a little bit of that, but 45, I agree with you 100%, pump that in there. He’s got the deferred account of 935 with the inherited IRAs and his 403s and 457s or 401s, whatever he’s got.

Al: Yep,

Joe: so yeah

I would st- would you do conversions?

Al: If I could get him-

Joe: What is he? 62 and 60. He’s got 10 years. He’s not gonna touch any of that retirement account. Yeah. It’s a million bucks.

Al: Well, he’s got- He’s gonna- He has an inherited IRA, so he’s gotta be taking money out of that. How much is that?

Joe: I don’t think it’s, nearly as much as his-

Al: Oh, it’s only…

Yeah, it’s only 40,000.

Joe: Yeah.

Al: Yeah, you’re right. But so, so yeah, it’s, he’s not gonna touch that for-

Joe: He’s gonna have $2 million in his retirement account

Al: … for 13 years.

Joe: $80,000 is the RMD, roughly, if he gets 7% over that 10 years.

He’s got 150,000 of fixed income. That’s gonna put him at 250 minus 50.

Al: Yeah, I-

Joe: 200,000. He’s gonna be touching the 24% tax bracket.

Al: Yeah, or at least, I mean, converting into the 22 would be- 22 makes- It’s simple, ’cause that’s a couple hundred thousand and he’s makes, they’ll make 108 if he takes the lower pension option.

Yes, I would be converting all the way through, and you got the money in taxable to pay for the tax.

Joe: Yep. If then, yeah, so I would, take a home equity line. I might even only play interest only until my RMDs.

Al: Okay.

Joe: Because the RMDs is gonna force more income out of the retirement accounts, and he’s gonna be forced to pay tax on it, and then you take the excess RMDs, and then you pay off the debt.

Al: Could do that. I would do that if he was 72.

Joe: I suppose. I know he- 10 years is kind of a long time, you know?

Al: Because interest rate risk and-

Joe: Yep,

Al: yeah, all that.

Joe: But he’s got the cash to pay off the note tomorrow.

Al: True, if, interest rates go up.

Joe: Yeah. If something kinda weird happens- Yeah … you, y- I guess you would have a little bit more flexibility there, so.

Al: Yeah, true.

Joe: Lot of opportunity. but if he thinks he can do all that for 45 grand, I need the name of his contractor.

Al: I’m not sure he s- Well, I think it’s m- I think it, money towards it maybe.

Joe: I gotta find more out from Stella and Stanley. I wanna see pictures of the before and after.

Al: Yeah.

Joe: I wanna see if everything’s level, if he got it at-

Al: 45 grand. Well, in ground pool, it could s- be you dig out and put a little plastic pool in.

Andi: The 9th annual YMYW Podcast Survey is open right now, and it’s your chance to tell us in great detail what would make Your Money, Your Wealth even better for you. You might even win a $100 Amazon e-gift card for telling us what you think. Already some of you have told us you didn’t know we had free financial resources besides the YMYW podcast and the TV show and the free guides. In the description of every episode you’ll find links to all sorts of financial education that you’ve been missing. We’ve got educational videos on everything from passive versus active investing to how to fund college without overpaying. We’ve got blogs with insights on dealing with economic uncertainty and worrying about war. Find these links and the one to the 9th annual YMYW podcast survey in the episode description. Use the password ymyw, all lower case, to access that survey. Complete all 16 questions by 5pm on August 31st. US residents only for the giveaway, no purchase necessary. One $100 Amazon e-gift card winner will be chosen at the close of the survey and announced on the podcast on September 1st. Good luck!

Should We Retire at 54 with $10 Million? (Gary, PA)

Joe: Let’s go to Gary from, PA. Look out. Okay, “Wife and I are 54 years old. Drive Honda cars and nothing fancy all of our lives. Drink of choice for me is a 14, 15-year-old single malt, and my wife loves margaritas.”

So he’s like nothing fancy, but I want a 15-year-old single malt.

Al: I didn’t even know they aged them that long.

Joe: Yeah, at all. That sounds tasty.

Andi: That’s his idea of simple.

Joe: That’s… All right. Little margarita for the wife. “We currently make about 600 to $900,000 based on our company stock.” Okay, so you don’t make much either there, Gary.

Al: That’s why he’s drinking simple drinks.

Joe: Yeah. Yeah, pretty simple guy. “We have always lived below our means and currently have… And our annual expenses are 120,000, but will go up once we have to buy medical insurance. Debt, zero.” Of course. “We paid off our house and cars long time ago. Kids are all working, so no more college or expenses.”

Al: Okay.

Joe: Okay, let’s see what they got in assets here. Assets, 401s, IRAs, 4 million.

Al: Okay.

Joe: Brokerage account, 5 million. With two stocks worth around a million dollars, so they got single stock risk

Al: In, parentheses- In parentheses …

so

we wouldn’t miss that

Joe: Just, yeah, we wouldn’t miss that one. They got $5 million all in two stocks.

Al: Just to help you guys out.

Joe: F- FYI, I, could have some single stock risk. we got some Roth IRAs of $800,000. We got a house of a million dollars. Asset mix, eight, $8.5 million in diversified ETFs. Rest in bonds and money markets yielding about 4%. What the hell question do you think this guy’s gonna ask us?

Al: It’s a great question. It’s, if you’re keeping score, it’s about 10 million.

Joe: Okay. You’re good. we both max out our 401s, including the mega backdoor portions, that contributes to Roth. We don’t bo- we don’t do any IRA, but just dump remaining in index funds weekly. Here’s the questions. Wife and I plan to call it quits at the end of the year, 2026, as we both turn 55 next year.

These guys are 54 years old with 10 mil.

Al: Yeah. Crazy.

Joe: based on the numbers above, and expenses, it’s more like a 2% withdrawal rate would be enough even when we add more travel expense. Should we call it done at the end of the year or accumulate more for two or three years?

Al: Let’s see.

Joe: Go, Gary. Come on. You got to 10 million, let’s get to 20.

Just keep pushing.

Al: Yeah. quit whenever you want.

Joe: It’s gonna be impossible for this guy to spend.

Al: I know. I, know it is. I, inflated his spending from 120 to 200 for insurance and travel, which he won’t spend it on, and that’s a 2% distribution rate.

Joe: There’s no way.

Al: Yeah.

Joe: Yeah.

Andi: Would you say this is a bragger email, Joe?

Joe: No, I don’t think so. I think, I, think this guy is truly concerned- About spending his money. I think there’s a number he has in mind, and I think every year that number goes up as the market goes up.

Al: All right.

Joe: He’s, had this single stock risk for a while, and he sees that. He knows he has to sell it, but he doesn’t want to.

I think he’s, probably like, “Man, should I just work…” Like, 55, that’s pretty young.

And then he makes $900,000 a year. You give up a $900,000 paycheck, I mean, I would be second-guessing, third-guessing, fourth-guessing too, and probably writing in to finance podcast to get advice-

Al: To see-

Joe: … from a couple of schmucks.

Al: Got it. Okay. Colorful language there.

Andi: Okay, bleeping that one.

Joe: “Should we call it done at the end?” Yes, I would do.

Al: I would call it done. You know, you know, I, but I agree with you. How many people we’ve seen that have a lot of money and they just can’t spend it?

Joe: Yeah, because they’ve never spent a dime.

Al: They, they’re so used to saving, they can’t turn that switch.

It-

Joe: It is so hard for people to turn that switch. It’s like-

Al: Yeah …

Joe: the anxiety, Yeah. Now I’m- … the emotions …

Al: now I’m not adding, I’m gonna reduce.

Joe: It’s a totally different mindset. I mean, I, think people take, like, retirement, not necessarily, like, m- just everything to do with retirement a little bit for granted.

Like, “Hey, I wanna get to a certain number and I don’t wanna work anymore. I wanna say F you to the man and walk out the door, and you know, get in my RV and travel the country,” and all of that. But then all of a sudden the paycheck goes away.

Al: Yeah.

Joe: You know? And it’s like, “Oh, man- I gotta start creating the income on my own, and now I gotta spend money instead of save money.”

And then you’re gonna see your accounts fluctuate, the market turns. I mean, there’s all sorts of different emotions that go along with that. so, remember when we used to talk about, like, practice retirement? That was kinda stupid, but- I think you p- people should, sh- should think about that.

You know? Dress rehearsal, is that what you

Al: said? Yeah, Well, that’s- Test drive it … that’s because they were spending too much and we want them to spend less is, on what they could spend in retirement, see if they could actually do it. But this is the other direction. I, so I’m gonna say a couple things here.

So, so quit whenever you want. but-

Joe: How should we go about reducing our tax liabilities from before-

Al: but hold, on one second. All right. Sorry. but if you like your job and wanna keep going for it, I mean, you’re 55, you’re young, you’ve got lots of energy, y- you can do that too.

But it’s quit when you want. But someone like this, Joe, that is, with this amount of income, probably been a hard charger for a long time. Oh, believe me. And so I think the single best advice I can give you is make sure if you quit, you’re going to something instead of just quitting. In other words, have an activity that you wanna do, several activities you wanna do.

Or maybe it’s a lot of travel, maybe it’s volunteering, maybe it’s spending time with kids and/or grandkids. Have something or multiple things that you’re quitting to go do instead of I’m gonna quit and then figure it out.

Joe: What do you think he does making 900 grand a year?

Al: It fluctuates between…

Joe: So he gets company stock.

Al: Yep.

Joe: So he must work for a publicly traded company that gets RSUs?

Al: Yep, so it’s probably a tech company. Yep. and I’m guessing could it, could, he could, maybe sales or maybe he’s a, like a executive.

Joe: Yeah. I would think, an executive of a tech company.

Al: Yeah.

That’s what I’m

guessing.

Joe: That’d be my guess.

Al: Yeah. That’s a good guess. And, you know what? If it’s his baby, maybe he doesn’t wanna quit yet, and maybe he could work part-time just to keep it going, you know, whatever.

Joe: Yeah.

Al: But I guess the point is he doesn’t have to work if he doesn’t want to.

Joe: I would imagine it’s stressful.

Al: Yep.

Joe: I, I think so. I would imagine it’s demanding.

That’s why he wants to… He’s like, “Hey, you know, I’d like to leave at 55 next year, but should I keep grinding it out for two or three years?” Yeah. Well, if you grind it out for two or three years, I mean, you’re gonna have a f- even that much more security. Right … So-

Al: And if that, feels right.

Joe: If that feels right. I mean, if that’s gonna help you sleep at night, that’s the most important thing is- Sure … your health at this point, you know? you have a, a, a ton of money that you’ll probably never, ever outlive, so then it’s just figuring out, all right, well, how do I stay alive long enough, to try to spend it all down.

Al: yeah.

Joe: but yeah. It’s, but yeah, congratulations. Yeah, fantastic. He’s done a, a killer job. but spend a little bit, right? I mean, a lot of this is gonna go to the IRS unless he spends it down. Should he use the rule of 55? No. Just convert the hell out of these dollars over the next 10 years.

Al: Exactly. Yep.

Joe: He’s got kids. His kids are probably gonna be super successful because I could just imagine- … what big Gary was like.

Al: Y- yeah. Or maybe they’re gonna go the other way ’cause he’s never home.

Joe: I doubt it. No, he was always home. He was home at 6:00 for dinner. yeah, okay.

Al: Yeah.

Joe: Don’t use the rule of 55.

Again, the rule of 55 is taking money out of re- 401plan and avoid the 10% penalty. You could do that. I would roll all it into an IRA, and then I would convert. I would live off of my taxable investments. I would be thinking about, your single stock risk. So there’s plenty of strategies there to kinda mitigate some of the, that risk and slowly diversify out, what we talked about.

But, you know, you could do some options. You could do a direct index. There’s, th- there’s multiple of, of- Yeah … strategies.

Al: In this case, there’s probably some tax-loss harvesting.

Joe: Tons. I mean, at, at, at a $5 million brokerage account.

But I don’t know how he’s managing the risk there or how he is tax managing that brokerage account.

We’re seeing a lot larger, brokerage accounts, you know, that have so much gains in it, they don’t want to sell- because it’s like, “I don’t wanna pay the tax.” So what are they doing? They’re almost creating, like, another retirement account.

Al: That’s true.

Joe: You know what I mean? Yeah. It’s like, “Well, I don’t wanna touch the retirement account because I don’t wanna pay ordinary income tax.

Well, I don’t wanna touch my brokerage account ’cause I don’t wanna pay capital gains tax.”

Al: We hear that a lot.

Joe: “So I’m gonna keep working,” which is-

Al: Which is ordinary income tax

Joe: … which is ordinary income tax on my, wages.

Al: I hear you.

Yeah, I would convert to the top of the 24% bracket, live on, the taxable account, and do that each and every year for indefinitely.

Joe: Yeah.

Al: Is what I would do.

Joe: But he’s gotta realize that… All right. So he’s got total liquid assets of $10 million. If he converts to the top of 24 each, e- each and every year- you know, that depends on, of course, on what the market does. That $10 million is probably gonna dip a little bit because of the tax that you’re going to pay.

But the $4 million in tax-deferred accounts is not 4 million. It’s like two and a half million. So if you look at it after tax. So sometimes people are like, “Oh, I don’t really wanna pay the tax here because I don’t wanna see my…” You know, because this guy probably has a number in mind. You know, he wanted to hit a certain dollar figure on his- Yeah

brokerage statement to say, “Okay, sigh of relief, I can retire.” Most people’s is a lot less than $10 million, but Big G here in PA, he’s a baller.

Al: Yeah. Yeah, but someone like this, you know how this works. The number was two million, and then it’s four million- Four, then it’s eight … and then it’s five, and it, just keeps going up.

Yeah.

Joe: Is that why you’re still working, Big Al?

Al: Barely.

Joe: Got it.

Outro: Next Week on the YMYW Podcast

Andi: Next week on YMYW, Eeyore and Nurse Kathi in Florida want to know when to stop doing Roth conversions? Harry and Sally in New York and “When Can I Retire From 12 Hour Days” in Virginia wonder when they should take their Social Security benefits. Join us next week to find out, won’t you please?

And real quick before you go, if today’s episode got you thinking, do me two favors: follow or subscribe wherever you watch or listen so you never miss one, and tell a friend who’s wrestling with the same retirement questions. Word of mouth is how we grow, and it only takes like takes ten seconds.

If listening to Joe and Big Al spitball other people’s retirements has you wondering about your own, Why not get a free financial assessment? It’s a two-meeting sit-down with an experienced professional who’ll look at your whole picture: your spending, your withdrawal order, your tax situation, and they’ll show you where you really stand. There’s no cost, there’s no obligation. Just click the free assessment link in the episode description to get started, or call (888) 994-6257. We’ve got 13 offices around the country, or you can meet in person, via Zoom, from anywhere.

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.

The Derails: Frida & Diego, Tesla, Kir Royale, Streetcar and Brando, Joe’s pool remodel

Joe: That was a movie.

Andi: Yes. I was, gonna say, that’s probably who you would know, would be Salma Hayek and Alfred Molina-

Joe: Yes, Salma

Andi: Hayek

in the movie Frida. There you go But they were actually based on the originals of Frida Kahlo and Diego Rivera.

Joe: Got it.

Al: Okay.

Andi: But we don’t- And so here are some of Frida’s famous paintings, and here are some of Diego’s famous paintings.

Joe: So what they painted themselves.

Andi: She was known for doing self-portraits, yes.

Got it. He was more of a muralist, so he did large designs. And I think these folks might be from San Francisco, and so he actually did some murals in San Francisco. San Francisco’s City Hall-

Joe: Got

Andi: it. Oh, wow … for example.

Joe: What’s going on with Tesla? They don’t make the Model 3, it’s just a Model- Y and Model something?

Al: I, honestly have lost track. I’ve got a Model 3 from 2022, same car. I don’t even know what they’re doing now. But I don’t think I’ve seen many, if any, Model 3s lately. Yeah, I don’t- So it’s, yeah.

Joe: I’ve-

Andi: And Al, didn’t you tell us a long time ago that the, the models were S, 3, X and Y to spell out sexy?

Al: Correct.

Yep. That’s exactly right.

Joe: Okay.

Andi: Do you know that one, Joe?

Joe: No, I don’t.

Andi: I had Kir Royale when I was, I lived in Paris for about a month, and that became a favorite drink, and it’s actually… do you know what Crème de cassis is?

Joe: No. Maybe.

Andi: So it’s a, black currant liqueur, liqueur- Yeah … with champagne or sparkling wine.

and it’s, yeah, it’s really, tasty.

Joe: Man. Is that your favorite movie, Andi?

Andi: No. Just I did see it, and I, really, liked Marlon Brando’s acting, so.

Al: Okay. Okay. We need to watch that, then. Okay.

Andi: Did you like- And he sings in the movie Guys and Dolls, if you ever wanna see him actually, singing with, Frank Sinatra.

Al: Oh, okay. Nope. You know I do. Nope. I’m good. You’re good.

Joe: yeah. I kind of just changed a little bit on my pool.

Al: How much is it? It,

Joe: it was, more than 45 grand. And they’re still working on it, like-

Al: Are they? …

Joe: 18 months later.

Al: Oh, wow.

Joe: Well, I, we, it was kind of a gaudy pool. Like, it felt like it should’ve been in the Venetian.

Al: So-

Joe: You know what I mean? Really? Oh, terrible.

Al: Did it have statues and things? You got statues.

Joe: Yeah.

Al: Water coming out of somebody’s mouth.

Joe: Yep, pretty much. Pretty much. And then these weird kind of, It was… Yeah, it wasn’t good.

Al: Got it. Yeah, you’ve had a lot of pool experience.

Joe: Oh, I’m a pool man.

When you got two kids, you gotta have a pool, and you gotta be-

Al: Got it.

Joe: Yeah. They like the pool.

Al: yeah.

Joe: so yeah, this summer, not a lot of pool time.

So we’re just looking at a-

Al: You’re looking at constructing. Just,

Joe: yeah.

Al: Get, a little plastic pool.

They’ll love it. Yep. they won’t know the difference hardly.

Joe: Not that much change. We just kinda stripped it out, tore some things out, and then I thought it was gonna take a month.

Al: Yeah,

Joe: No.

Al: 18,

Joe: huh? No, yeah. Well, it’s not- And,

Al: going.

Joe: But it’s, been- … it’s been a while.

_______

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