Show Notes

• 00:00 – Intro: This Week on the YMYW Podcast
• 01:01 – 43 With $850K. Am I Too Late to Build Enough Roth Money? (Mr & Mrs Smith, Dallas, TX)
• 11:29 – Nearly $7M Saved at 58 and 64. Do We Have Enough for a High-Spend Retirement? (Lucy & Desi, Jersey Shore, NJ)
• 23:38 – 61 and 59 With $4.5M Saved. Can I Retire Now With a 50/50 Portfolio? (Tony & Carmela, San Ramon, CA)
• 32:09 – Mid-50s with $685K Saved. Can One Spouse Retire While the Other Works? (Jacques & Johana, Florida)
• 38:53 – Are Long-Short Direct Indexing Tax Strategies Worth the Fees? (Juicy Squeeze)
• 47:04 – Should I Work as an Employee or Contractor After 70 on Social Security? (Wendi)
• 52:04 – Outro: Next Week on the YMYW Podcast

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Transcription

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

Intro: This Week on the YMYW Podcast

Andi: Mr and Mrs Smith have nearly $850,000 saved at age 43, but they’re very concerned about retirement. Lucy and Desi are 58 and 64 with nearly $7 million saved, but they still lie awake wondering if it’s enough for their high-expense life. Tony and Carmela are in a similar boat with millions saved at 61 and 59, but they’re worried their asset allocation won’t get them through their retirement. No matter the numbers, the fears sound exactly the same: Will you run out of money in retirement? Turns out overcoming that fear is not about hitting a magic number. We’ll find out what it’s all about today on Your Money, Your Wealth podcast number 566. Joe and Big Al also spitball Roth conversions, long/short direct indexing capital gains tax strategies for Juicy Squeeze, working after retirement for Wendi, and how one confusing word can completely change a retirement timing decision for Jacques and Johana. I’m Executive Producer Andi Last, and here are the hosts of Your Money, Your Wealth®, Joe Anderson, CFP®, and Big Al Clopine, CPA.

43 With $850K. Am I Too Late to Build Enough Roth Money? (Mr & Mrs Smith, Dallas, TX)

Joe: Mr. And Mrs. Smith, Joe and Al love the podcast. Been listening for about a year, and it’s one of my regular rotations to listen to when I’m taking my morning. Three mile walk.

Al: Wow.

Joe: Three mile walk. How long does that take? An hour?

Al: I, yeah, I think when I’m walking it, it’s about a, yeah. Three miles, 20 minute. Yeah.

That’s about an hour,

Joe: is it?

I drive a 2019 Chevy Traverse. that’s the company car. And my wife drives a 2020 Ford Fusion that will be giving, to my daughter next year. Drink of choice. A local craft beer. I’ve never tried it before. Oh, a local craft beer I’ve never tried before.

Al: He likes new ones.

Joe: Oh,

yeah.

Just preferable. A IPA hazy or West Coast.

Al: Oh, okay. I’ll go with the hazy.

Joe: Nope. No, thank you. I also thoroughly enjoy nice tequila to sip on or even a tequila, old fashioned.

Al: Wow.

Joe: All right. Here’s what we got going on. My wife and I are both 43, live in Dallas, Texas, actually suburb of Dallas.

We have about $650,000 in the 401(k), of which 128,000 is in Roth. We have Roth IRAs in the amount of a hundred thousand. And my wife has a rollover IRA of a hundred thousand. We have very little in our brokerage account because I’ve been focusing on building our Roth assets. I’m late to the game, but I’ve been doing backdoor Roth contributions for a couple of years, for me, but have not been contributing to my wife since hers is all pretax.

All right. I contribute to my Roth 401(k) and also do mega backdoor Roth contributions via my 401(k). I try to contribute and combine 20% between Roth 401(k) and after tax, which I convert to the Roth. But am I, but am inconsistent. Never drop below 10% contributions. My work match is dollar for dollar up to 5%, and then a 3% match at the end of the year.

My salaries around $200,000. End with bonus average around two 50 to two 80. The last couple of years, I’m kicking myself for not investing more seriously earlier. I love my job, so plan on working until I’m 65, but you never know. My wife does a little part-time work, but not enough to make a difference. I also have a pension through work that is estimated to be about $2,200 of monthly income when I retire.

So here’s the question or concern. I am of course concerned about not saving enough for retirement, running some projection. It looks like I could be okay, but I’m concerned. He’s really concerned. He said concerned six times, in a matter of a sentence and a half.

Al: That’s why he wrote us, I think.

Joe: Calm down, Mr. Smith. We’re here to help.

Al: That’s the number one thing we wanna tell you. It’s gonna be okay.

Joe: I’m, really concerned. I am concerned. Dude’s 40 and he’s gonna work until 65 and he is got, I don’t know, close to a million dollars.

Al: Yeah, I got eight 50. Call it. Sorry. I think you know what I, I’m just gonna go on record as saying if you’re 40, you got 850,000. Good for you.

Joe: Yes.

Al: That’s really good.

Joe: But he is running some projection it looks like. I could be okay, but I’m still concerned.

Al: Yeah.

Joe: I have no idea what I wanna spend when I retire, but my wife and I love to travel and we hope to have lots of grandkids to spoil.

Andi: He’s saying this at 43.

Joe: At 43 years old, grandkids,

Al: it could happen.

Joe: Okay. That’s awesome. I’m like, there’s no way I’m gonna see grandkids. I’ll be lucky to see my kids graduate high school.

Al: You, you just gonna have to hang on.

Joe: Oh man, I gotta do, get back on the P 90 x.

Al: Oh boy.

Joe: I think 175 do, thousand dollars per year is probably on the high end, but did I mention we like to travel? Did I mention? I’m really concerned.

Andi: I’m concerned.

Joe: I also started thinking about RMDs. You’re thinking about RMDs. Dude, would it make sense to start converting some of my wife’s ira a Roth now?

Then move on to my pre-tax 401(k) or wait until retirement, when my income will be less when projecting out retirement. My pre-tax 401(k), like it could be a big number with significant RMDs. Thanks for the spitball.

Andi: You remember the movie Mr. And Mrs. Smith, right?

Joe: Yeah. That’s

Andi: Brad Pitt and Angelina Jolie.

Joe: Yeah.

Andi: Yeah.

Joe: I don’t think Brad Pitt and Angelina Jolie were thinking about, RMDs

Al: being concerned when they filmed that movie.

Joe: Okay.

Al: I don’t think so either.

Joe: This guy’s saving a ton of money.

Al: Yeah.

Joe: He’s doing the conversions. He’s got the mega back door. He’s got the regular back door. He is got the garage door.

He’s got all that going for him. Should you convert his wife’s IRA now? I, she’s got a hundred thousand dollars. They’re in their forties.

Al: Yeah.

Joe: He makes $280,000 a year. That’s gonna be in the 24.

Al: Yep.

Joe: 24. He’s got room to about 400,000 in the 24% tax bracket. Doesn’t make sense at 43 to convert in the 24 and have that to grow.

you’re gonna pay 25 grand in tax to get the a hundred thousand into the Roth.

Al: Yeah. Would you do that?

Joe: He doesn’t have a lot of non-qualified because he’s saving all the money into the Roth.

Al: Yeah. Right.  That’s the tricky part.

Joe: I would, do small conversions, you know, he’s only They’re in their forties. Do $10,000 a year.

Al: Yeah. What that you could afford the tax.

Joe: Yeah. You can afford a couple thousand dollars of extra tax.

Al: Yeah. Right, right.

Joe: Yeah. I would slowly convert some of that out in the 24. pay a few, bucks extra in tax.

Al: Yeah, I agree with that. I like that.

Joe: if you’re truly worried about RMDs, that is going to happen. In 40 years from now while you’re playing with your grandkids,

Al: actually, 30, 32 years from now. and we, don’t know what the rules will be at that point, but that’s what it is right now.

Joe: Yeah.

Al: So one, the one question about, am I, okay, it’s a lot of, there’s a lot of savings here, so I, like that. And spending that can be variable depending upon how much you end up with. But I just ran some quick numbers for you. 43 years of age, you wanna work 22 more years. That’s a lot, right? And I use 6%. You could use 7%, you know, but 6%, and I assumed you’re saving about 37,000 a year. The way I got that, I said your income is two 50 ish.

You’re saving between 10 and 20%. I said 15%. That’s 37 grand. So at 6% you end up with 4.6 million. At 7% you end up with five and a half million. So maybe you got 5 million. let’s just go with that. Right. So you wanna spend 175,000 in today’s dollars. In future dollars at a 3% inflation rate. That would be 335,000.

So that’s a lot. Right? Then you got a pension. I did a little inflation right around that. Maybe that’s about 50 grand. Maybe your shortfall’s about 2 85. I don’t know what your Social Security will be. I just said. 85 to do easy math, 200,000 into 5 million, 4%. Right. So I think you’re, I think you’re fine.

Any, anyone that is saving as much as you for as long as you’re saving and paying attention to this is gonna be in great shapes.

Joe: Yeah. I mean, he’s dialed, I don’t know, a ton of four year olds that are already doing forecasts on RMDs.

Al: I mean, how many times

Joe: and already buying, you know, baby clothes for grandkids.

Al: How many times have we done little seminars and people come up to us and said, say, you know what, I’m 50 years old. I haven’t saved a penny. Is it too late?

Joe: Yeah, a ton.

Al: it would be better if you started sooner, but no, it’s not too late at 50. It’s not too late. At 60, it’d be better to do it. 40. And if you got 800,000 at 40. Wow.

Joe: Right. I think that’s great. You know how many 70 year olds have come up to us and says, what is an RMD? Did that have millions in their retirement account. It’s like, what?

Al: That happens.

Joe: I didn’t know that. So he’s educated. Yeah. He’s, motivated. he’s an, he’s in an awesome spot. I, wouldn’t be as nearly as concerned as he is.

Al: Yeah. I think we can cross that three concerns.

Joe: Yes.

Al: Within two sentences.

Joe: But I think that’s just part of his DNA. Right. If you’re concerned, you get done.

Al: Yeah.

Joe: You, buckle down and you figure it out. So I don’t think it’s a bad thing to be a little bit concerned, but if he’s up Yeah. Pacing at night about his RMDs,

Al: taking back, can he afford grandchildren? College for grandchildren?

Joe: Yeah. yeah. no, congrats, Mr. And Mrs. Smith. Yeah. And the suburb of Dallas.

Al: It’s, yeah, it’s a great scenario. Keep it up.

Andi: Feeling a little like Mr and Mrs Smith? Doing all the right things but still concerned it may not be enough? Take a step back and watch 6 Signs You Truly Have Enough for Retirement, this week on YMYW TV. Joe and Big Al walk through how to tell the difference between being financially ready to retire and just emotionally ready to quit. Do you really know your retirement number? Do you have a withdrawal strategy that can hold up over decades? Is your Social Security timing optimized, your healthcare planned for, your budget realistic, and are you mentally ready to make that leap? You’ll also see how tax planning, portfolio design, RMDs, and your estate plan all fit together. Find the link to watch YMYW TV in the episode description. And to pressure-test yourself against all six signs, take the next step with our free Financial Blueprint. It’s a self-guided tour through your savings, spending, taxes, and withdrawals so you can see where you stand now and what you need to focus on next to get you where you want to be in the future. Click or tap the links in the episode description to watch YMYW TV and to calculate your free Financial Blueprint. And if this episode makes you think of someone who’s worried they might run out of money in retirement, do them a solid and share all these free financial resources with them.

Nearly $7M Saved at 58 and 64. Do We Have Enough for a High-Spend Retirement? (Lucy & Desi, Jersey Shore, NJ)

Joe: Alright, cool. Let’s go. We got looking for a little spitball. We are Lucy and Desi. Desi Arnaz, Lucille Ball.

Al: You bet.

Joe: that’s your,

Al: that’s my era.

Joe: Yeah. That’s your era.

Al: I, it was almost, I almost missed it. I had to watch reruns.

Joe: Oh, you did?

Al: Yeah. I’m, not that old,

Joe: writing in from the Jersey Shore.

Lucy is fully retired at the age of 58, living her best life. Sh. She spends her time playing tennis, pickleball, bridge, sailing paddling, cooking up big dinner parties for friends and family who are constant house guests. She’s the happiest when our four grown kids all in their twenties and just start out coming home for Homecooked meal, Desi’s 64, and still working in corporate America plans, to do so for the next couple of years.

He’s a high earner. Off it upwards of a million dollars.

Al: Wow.

Joe: okay. Due to, RSUs that are granted over time.

Al: Got it.

Joe: Okay. We have a total of $6.6 million million, saved, comprised of two IRAs, totaling $2.4 million in an active 401(k) of 1.5 in a taxable account of 2.8. It’s a lot of millions there.

Al: Yep.

Joe: The IRA and taxable account are being professionally managed. I’m sure it all sounds great, but there are two issues we are worried about. First, our $1.3 million mortgage balance runs us $10,000 a month. Second, we live relatively expensive life here on the high coastal area. We are not big spenders. you just told us you are.

But that’s okay. We are, we’re not judging, we eat out occasionally and don’t travel more than, once or twice a week or a year. No, once, or twice a year. However, our expenses are high supporting two residents in New Jersey. A home, in an apartment where property taxes are high. Currently spending about $35,000 a month, including the $10,000 mortgage, our real estate is probably worth five to $6 million total.

Second, there is no income beyond Social Security after retirement. Also, unvested R RSUs disappear upon retirement. Social Security will be maybe 35 to $4,000 a month, but we are gonna put that off as long as we can. We are worried that we have not saved enough to get us through what we expect to be a long active retirement.

This just proves it doesn’t matter how much money people have, right?

Al: It’s the relationship between spending and money.

Joe: The, individual that’s 40 that’s worried about his RMDs is worried. You know, you got the people that have a couple hundred thousand that are worried. Yeah. You got Lucy and Desi here.

They got eight mil, $7 million plus millions in real estate.

Al: Yes.

Joe: Worried.

Al: They’re worried.

Joe: Everyone’s worried about

Al: they’re, up at night.

Joe: Everyone’s worried about their money. That’s why we have jobs, Al That’s why we have jobs.

Al: I think you’re right.

Joe: we also have weddings and other big expenses on the horizon as kids continue the launching process.

We don’t feel we need to leave them a lot at the end, but we want to help them earlier in life if we can with down payments, weddings, seed money for their kids’ education. What is the number we need to feel comfortable with walking away from the paycheck? Should we pay down the mortgage again? It’s $1.3 million.

I can’t imagine the spanning won’t go down much. Especially since Desi wants to start doing all of the things too. So Lucy’s riding in, she’s living her best life. Pickleball, football, tennis, cooking.

Al: Yeah.

Joe: And she wants Desi to retire.

Al: A couple years,

Joe: she’s like,

Al: no,

Joe: this guy’s gonna keep grinding.

Al: It’s a million bucks a year.

Joe: You get a million dollars a year.

Al: Come on, work till 70

Joe: on, you’ve got this. No, you can’t have my fun yet. we both drive Volvos. Lucy bought hers in 2017. It’s a XC 90 off of lease. Desi bought a used 2019 low mileage XC 60. What are XC sixties and XC nineties?

Andi: I will look ’em up. Hold on.

Joe: Just very safe, cars.

Al: Yeah, they would, they would be safe.

Joe: Alright. And we’ve been known to order little dirty martinis from time to time, but we don’t actually drink.

much. Oh yeah. And Desi wants to buy a motorboat.

Al: Oh,

Joe: a motorboat.

Al: You know, a boat with a motor.

Joe: What’s his motorboat

de wants to buy a boat.

Al: The little putt-putt?

Joe: Yes. What? It’s not a sailboat. I guess he wants to buy a yacht.

Al: Yeah.

Andi: Oh, XC 90 is basically, it’s a SUV and XC 60 Oh XUV also looks like it’s kind of an SUV.

Al: Yeah. Just, a smaller one.

Joe: Oh,

Al: okay.

Joe: Here we go. Love the show. Don’t remember how I found it, but find it inspiring. Love Lucy. At the beach.

Al: You’re right, Lucy. Read it.

Joe: Lucy did write this. All right,

Al: how about that?

Joe: Okay,

Al: so they, she’s thinking 420,000 a year. And, Social Security. What if it’s about 50 grand a year?

Joe: He’s 58. How olds Desi?

Al: 64. He worked two more years. He’ll be near full retirement age by that point.

So let’s just go with the spend of four 20. Fixed income of 50 shortfall three 70. they got 6.6 million in assets. I just did current value ’cause he wanted to know Is, that enough? It’s a distribution rate of 5.6%. It’s a little rich.

Joe: Yeah.

plus tax.

Al: Yeah. Yeah. So four, a 4% distribution rate, would be, you’d have to have about 9.2 million at that spending, right?

Or, with the money that you have, maybe you just spent a hundred thousand less, you know, 2 64 plus the fixed income that would do. It maybe work a couple extra years. There’s a lot. I mean, when you have this much money, there’s, a lot of options and a lot of choices. But when you start throwing out big monies, like big money like this, and this is the points that I wanna make to our viewers and listeners, which is it almost doesn’t matter how much money you have, it’s the relationship with how much money you have versus how much you’re spending.

So we have teachers that have. A couple hundred thousand and they’ve got more money than they know what to do with. Yeah. And then we’ve got people that, spend a lot and have a lot, but it’s still not enough

Joe: and that’s totally fine.

Al: Yeah,

Joe: I bet. You know, he wants to buy a boat, a motorboat.

Al: she

Joe: knows motor boat motor.

Al: Oh, he does. Oh, he does wanna buy it. Yeah. Does he,

Joe: I don’t know. That’s 500 grand. They wanna spend $500,000 a year.

Al: Now they, they could sell one of their homes and, would you, but would you pay up the mortgage?

Joe: That’s what I was just three and a half percent.

Al: Yeah,

Joe: I don’t know.

Al: I don’t think I would,

Joe: but it’s like, I feel what they’re feeling in a sense of like, do you want to have a million and a half over your head when you’re retired and you’re spending $40,000 a month?

Al: Right.

Joe: And you could get rid of 10 of that.

Al: Yeah. Right.

Joe: And it’s like, okay, we got weddings and we wanna launch our kids and we down payments and this and that. You only, you know, yeah. There’s, a lot of places where they wanna put that money.

Yeah, it’s, gonna be tight given where their spending is and what they want to do because they wanna live a rich retirement, which they deserve.

Yeah. The guy’s grinding in corporate America. Yeah. Making a million bucks a year.

Al: I get it.

Joe: I guarantee that his job is,

Al: you think it’s stressful

Joe: A little bit. A little bit. I mean, a guy’s 64 still grinding, making a million bucks a year. Yeah. I mean, I’m sure he is a he’s got a very high power job that has a ton of responsibility.

I’m sure he wants to get on the motorboat.

Al: I, yeah, would, I would agree.

Joe: He double martini

Al: and I would if I were him too.

Joe: Yeah.

Al: So, so me personally, based upon what I know about the fact pattern. I, might sell the second home and then I think this probably works fine. Maybe you pay down the mortgage or maybe you just have more assets.

Joe: You’re not gonna do that.

Al: Maybe,

Joe: but one’s a condo and one’s a house. One’s a lake house, and one’s a like in the city or something you think?

Al: I don’t know.

Joe: Yeah, I don’t know either. but then, yeah, they live in Jersey. It’s property taxes and taxes alone is

Al: you. You know what happens though, Joe, and we’ve seen this a number of times, is people that make a lot of money, they get used to spending a certain level.

And that’s hard to go backwards actually.

Joe: Especially too, it’s like, you wanna enjoy it.

Al: Yeah. Yeah.

Joe: he’s not working 20 hour weeks.

Al: No, he’s not.

Joe: And so I get in so w. When he retires, when Desi retires. That’s a lot more time that Desi has to spend money.

Al: Yes. The expenses may go up

Joe: and then, Hey, let’s travel. Now that we, we don’t, yeah. The expenses may go up actually.

Al: Yeah.

Joe: And then, alright. The kids need this. The grandkids come along. Oh, we have?

Al: we

Joe: got the weddings.

Al: We got the weddings.

Joe: yeah. and I think they could do it.

Al: No, they can totally do it.

Joe: The numbers will but you gotta be careful too, how this thing is, invested.

How are they gonna take the distributions? How are they gonna get the income? What are they gonna do with, you know, so there’s a lot of moving parts where they, have to map this out, a little bit more. With a little bit more sophistication.

Al: Yeah. I mean the taxes alone on, 4 million of deferred plus, he’s gonna be adding to it.

I mean, that’s a lot, right?

Joe: they wanna spend $400,000 a year, I mean, $400,000 depending on where they’re gonna pull that money from. I mean, they’re gonna be in pretty high tax bracket.

Al: I would agree. Yeah.

Joe: I don’t know what. Interest and dividends are kicking onto the taxable account.

So, yeah, there’s, tax strategy, the investment, how to create the income, how do you manage the risk because they’re pulling a lot out of this thing. And if that market turns and that 7 million or 6.6 goes to five

Al: It feels different.

Joe: Oh my gosh.

Al: Yeah. Yeah.

Joe: Right. so yeah, I think if, we’ve had markets like we’ve had over the last, you know. 20 years, you’re, in golden shape, but the markets are gonna turn at some point. Is it this year? Is it next year? I don’t know. We haven’t seen a, you know, 2022 was kind of a bad year, but we recovered fine. COVID was kind of a blip, but we recovered fine there too. Yep. But now that Desi and Lucy are retired. And they’re taking those dollars onto the O overall account. That’s why people are such bad investors because of the emotions, and they’re worried where they got six point, they got $7 million in their worry.

Al: I’m making a million a year.

Joe: Yeah, I’m making a million a year. And they’re worried. Just wait until the million dollars a year goes away. Right? They’re spending a half a million dollars a year from the portfolio and the market turns. That’s when you worry. But if you have a strategy in place and understand, you know, and ride things out, and you know, it’s funny, it seems like we haven’t talked about that in so long. But I guarantee it’s gonna come and we’re gonna get, oh, what do I do? Should I sell? Should I do this or that, or whatever. No one’s ever talking about that.

Al: No. ’cause it’s been a while,

Joe: because it’s been a while.

Al: cause we have an extended downturn

Joe: and it’s gonna happen sooner than we realize because we haven’t talked about it in years.

Al: That is true.

Joe: People are getting complacent.

Al: Yep.

Joe: Yeah, we met a guy. Yeah. Let’s plan an 800,000. Okay. We could do that.

Al: Yeah. Why not? Huh?

Joe: Why not?

61 and 59 With $4.5M Saved. Can I Retire Now With a 50/50 Portfolio? (Tony & Carmela, San Ramon, CA)

Joe: Okay. Let’s see. Hey, Joe Al and Andi, love your podcast. It was the first one I started listening to you and it’s still my favorite. Wow.  First one ever he’s listening to.

Al: Yeah, that’s pretty good.

Joe: It’s still the favorite. I love the humor and above all the humility.

Al: Okay.

Joe: Humility. All right. Some other podcasters are such blowhards. Yeah. No, sh– This industry is full of all, man. I’m telling you, the ego’s everywhere.

Al: There’s a couple

Joe: just pompous. It doesn’t have to be that way Big Al.

Al: It doesn’t.

Joe: It just doesn’t.

Al: We try to change it.

Joe: Yeah. We’re changing. Totally full of themselves. You are all super talented, yet you don’t take yourselves too seriously. Nope, we certainly don’t. My name is Tony and I’m 61. I’m married to Carmela. Oh, Sopranos. Tony Soprano. Yep. Yeah, 59. That was a really good show. You just don’t make TV like that anymore.

Al, you probably loved that show, huh?

Al: I couldn’t, wait for the next episode. But then after I watched that, I got so depressed that it turned on Hallmark.

Joe: I like to retire now and when, he’s hoping for a spitball live in San Ramon, California with two grown and out of college kids. We drive whatever car will start, and I drink hard liquor while Carmella is more of a wine gal. Here’s some data about our combined financial situation. We got a traditional 401(k) 2 million bucks, Roth 401(k), 200,000.

We got brokerage cash bonds, 2.3 million, estimated Social Security, 67 $60,000 a year. Sitting pretty good there, Tony.

Al: You know, I’m, liking the numbers.

Joe: Our investments are 50 equity, 50 fixed income. With the equity split of 50 US 50. Rest of the world. Our home is worth 1.5 million and we own it outright.

Keep talking.

We are, planning on working part-time until we take Social Security, so I think we will need to cover a shortfall about a hundred thousand dollars per year, $160,000 spanning minus $60,000 Social Security or part-time income. Some questions looking for spitballs. How does our retirement look? Not bad.

Al: I’m gonna say amazing.

Joe: Yep. I’m planning on doing Roth conversions up to the top of the 12% tax bracket, but no higher. I expect I can do this for five or six years. What do you think? What do you do more? What has he got? $2 million in a retirement account? he wants to spend, he needs a hundred thousand.

He’s got roughly 5 million. when I do more. 12 per Yeah, I would, do, I would probably go to the 22.

Al: I would too. and, it’s because you’ve got 2 million already in the retirement account. If, we’re a lower number, I might say, you know, that’s, you know, you’re okay. But that’s a lot at age 61.

Joe: Yeah.

Al: You know, that could, that’s gonna

Joe: double.

Al: That could double or more.

Joe: Yeah. Yeah. Is 50% equity, 50% fixed income, too conservative. I sleep better at night with this allocation. So you just answered your question, Tony, but I don’t wanna run outta cash and go back to work and whack people. Thank you guys so much.

Keep up the good work. no. I like the 50 50. You could go 60 40. It’s not gonna make that big of a difference, but if it can make you sleep at night with the amount of money that you have.

Al: I, I am fine with 50 50 with these numbers.

Joe: Yeah, totally.

Al: Yep.

Joe: yeah, I You’re doing an awesome job. You, when, does he wanna retire though?

67. No, I’m sorry.

Andi: He says he wants to retire now.

Joe: Oh, now

Al: he’s gonna work part-time to cover the short.

Joe: Oh, the 60,000 short football is the, part-time

Al: He’s not even gonna be using, you know, a lot of his assets.

Joe: Well, a hundred thousand dollars a year of them.

Al: I know, but that’s. that’s a pretty low percentage.

Joe: Yeah.

Al: Two and a half percent or less percent.

Joe: I would the, yeah, the only thing I would look at is probably convert to the 22% tax bracket. You got a lot of liquidity, in the taxable account. You the $2 million deferred. Can double your RMDs, we’ll put you into the 22% tax bracket anyway. And who knows what the 20 two’s gonna be.

If you think it’s gonna be 22 or higher, then you convert to the 22. If you don’t want to pay the tax and you want to kick the can down the road and pay the tax later, then convert to the 12. But just know you’re probably gonna end up paying more tax long term. You’re not gonna remember the taxes that you paid 10 years prior and you’re gonna be a lot happier that you have all that money in a Roth.

Al: There you go.

Joe: Yeah. I get it. You know, here’s another individual that’s done a phenomenal job saving $5 million roughly

Of liquid assets. He’s, the home is paid for.

And hey, I’m worried about running outta money.

Al: Right.

Joe: It doesn’t matter how much money that you have, that’s why you need to have a plan strategy to figure out exactly, you know, how much that you can, what should the asset allocation be?

You know, we’re just spit balling here back in the envelope.

Al: Right, right.

Joe: just, but, when things turn again, He’s, this is where people make mistakes. They don’t do the strategy that they laid themselves out to.

If the market drops 10%, 15%, 20%. That is the perfect time to do conversions, and you would massively do larger conversions to the 22.

Tony, on the other hand, I bet he wouldn’t because he doesn’t want, all right, here, I don’t wanna spend any more money to pay the tax or I don’t want, so you lay out a strategy given perfect markets, but you also have to lay on a strategy for bad markets. And sometimes the tax strategies work way better in bad markets, and you have to be disciplined and true to the strategy.

And be committed to it because, you know, when you get out on the other side, you’re gonna be so much better off. But doing that in, those times, is, super challenging.

Al: It is. And I you bring up a really good point, which, is in a down market. Just a little example. You convert a hundred thousand dollars and it, becomes a great market, right?

By the time you have to pay the tax, it goes up 50 grand. So now it’s one 50. Let’s just say your tax was 30%, but it’s gonna feel like 20% because really you’re, paying that 30,000 on 150,000 because you got that, all that extra growth tax free. That is definitely the best time to do Roth conversions when the market’s down.

But you’re right, Joe, people. Don’t think that way unless they kinda have a plan and have this charted out.

Yep,

Joe: They get complacent. So, but no, you’ve done a great job. You’re 61 years old. It’s time to retire.

Al: Yeah. Time to have fun.

Joe: Yep.

Andi: We’ve been hearing some very different facts but the same retirement fear over and over: will your money last for your entire retirement? And if you haven’t figured it out yet, one major way to calm that fear is by creating a written financial plan that clearly defines your goals and the path to successfully get you through retirement. Getting a spitball from Joe and Big Al is great for learning the concepts, but please, do not base your entire future on a quick analysis from a podcast. When you sit down one on one with an experienced professional on Joe and Big Al’s team at Pure Financial Advisors, they’ll look at your entire financial picture: your savings, your tax situation, your spending, your tolerance for risk, and your needs and goals in retirement. You won’t get a one-size-fits-all answer. They’ll help you craft a written plan tailored for you and your family’s specific circumstances. You can meet in person at one of our offices in Seattle, Chicago, Denver, Phoenix, Salt Lake City, Nashville, Northern and Southern California, or online via Zoom right in the comfort of your own home. Learn your answers to all the questions we’re hearing in this episode: when should you really retire, how should you manage your taxes, how much can you safely spend, and what risks are you not seeing yet? Stop guessing or hoping for the best. Get clarity and confidence. Click or tap the link in the episode description or call 888-994-6257 to schedule your free financial assessment today.

Mid-50s with $685K Saved. Can One Spouse Retire While the Other Works? (Jacques & Johana, Florida)

Joe: We got Hey, Joe, Big Al, Andi Jacquez in Johana from Florida.

Andi: It’s just Jacques.

Joe: Oh, it is. It’s not Jacquez. Jacquez Greene? Jacques and Johana from Florida. Is that, is, am I missing something there?

Andi: Not that I’m aware of.

Joe: Okay. Maybe Jacques Costeau.

Al: Yeah, I think that’s the right pronunciation probably.

Joe: Okay. Alright. love the show and the spitballs. Everyone has such different situations and times are changing, so it’s a lot of fun listening.

We’re in our mid fifties and would like to continue Oh. And would like to retire early at the end of 2026 if possible. While Johana. Would like to continue working maybe five years, but maybe a few less hours while keeping health benefits. I drive a 2019 Honda truck. It is a truck. Even though many F-150 owners may disagree.

It’s a Honda.

Al: Yeah,

Joe: can’t call that a truck.

Al: Oh, so you’re agreeing with him? Yeah. No. Or with the F-150 owners.

Joe: I’m with the F-150 owners,

Andi: what it turns out.

Al: Got it.

Andi: Jacques and Johana may actually refer to a Formula One champion Jacques Villeneuve and his wife Johana, or apparently there was also a movie called The Big Blue, where the couple in it was Jacques and Johana.

Al: Okay.

Joe: Big Blue.

Andi: Uh-huh with Jean-Marc Barre and Rosanna Arquette in 1988.

Joe: Okay. I was just a young lad.

all right. Okay. So Johana wants worked a couple less hours. He drives his 2019 Honda truck.

Al: Yep.

Joe: in a 2021 Subaru.

Al: Okay.

Joe: He has a Honda truck in a Subaru.

Al: Yeah,

Joe: I’m sure he is not from Seattle. Portland, maybe. I enjoy a good sweet tea while Johana enjoys whatever tropical drink Jacques makes.

Al: Okay.

Joe: We currently spend ’em around $105,000 annually, and after those expenses, we have an extra $50,000 after taxes with half going to taxable account, and half going to some family debt.

And the last two years of our child’s college. So the debt obligations should be minimal after two years. While Florida is a current state, we have some land in another state. Also knows state tax to plan to build a smaller home with the proceeds of our Florida home. A million dollars to equity and mortgage of a hundred thousand.

We estimate our annual expenses will move in downsize to drop to $85,000 a year, but Johana income should drop as well. All right. Let’s see. What do they got here? We got about $500,000 in our pre-tax accounts, $20,000 tax free. I think I should put more of my contribution percentage into the Roth over my remaining time at work.

we both contribute about 15% to our retirement accounts. We have $125,000 in a taxable account, $40,000 in a CD and a high yield savings account. in my pension of $85,000 a year with a 1% cola will start in January, 2026, and I currently plan to roll my 457 when I leave employment there and use the rule of 55.

Okay, hold on there buddy. I could continue to work until 62 there, but would like to leave earlier much. Earlier.

Al: Okay.

Joe: Johana thinks we both will probably need to work a few, more years bef before we end up moving, but I think otherwise we’re open to Social Security at 62, 67, 70 or maybe taking one early, one late depending on the sequence of returns makes for any spitballing.

And we’ll continue listening. Even you tell me Johana is right. Good. All right. He wants to retire at the end of the year. Estimated expenses are, call it a hundred thousand dollars a year.

Al: Yeah.

Joe: All right. Good. His pension is going to give them $85,000 a year. I, he needs 15 grand.

Al: Yeah, IW Which is fine. I’ve got a question on that though, because he says my pension of 85,000 with a 1% cola, which sounds like a payment stream.

Joe: Yeah. We

Al: will start in January, 2026, and I currently plan to roll it to my 457, so it, so is that a lump sum or is a payment

Joe: Oh.

Al: I’m, I was confused at then.

Joe: Oh, roll it. I didn’t get the, it,

Al: it,

Joe: that’s, that, that changes everything. Al. It does. One to two. Two letters

Al: it.

Joe: Two letters. Oh my God. Could make, or break this guy’s retirement.

Al: Yeah. So the answer is we don’t know. Yeah, we’re clueless

Joe: Jacques, because you said it.

Al: steel fish

Andi: It depends on what the meaning of the word It is.

Joe: Oh my God. I dunno if it’s $85,000 a year. I think you’re good.

Al: Yeah, me

Joe: too. If it’s $85,000 one time payment

Al: to roll

Joe: you

Al: to

Joe: roll, no, you’re, you gotta

Al: keep working.

Joe: You gotta keep working for a while.

Al: I think that’s our answer. If it’s, a payment stream, you’re fine. If it’s just a lump sum, you’re gonna try to roll, it’s not enough. You need to work longer.

Joe: Yeah. The pension is not gonna have a 10% penalty if you. Take it at 85,000, but if he’s gonna move to $85,000 and he wants to roll that into the 457, well the 457 plan is not a rule of 55, a 457 plan.

You could take the money out with a, without a 10% penalty anytime.

Al: Yeah. And could you even roll it to 457 if it were a lump sum?

Joe: I don’t know.

Al: I don’t,

Joe: I would’ve to look at the plan doc

there.

Al: Yeah. It seems kind of unlikely, but I don’t know.

Joe: That’s a plan. Yeah. Right. What, what the hell does Jacque do again?

Where does he work?

Al: I don’t think he’s,

Joe: he has to work for the, government, the state,

Al: let’s see. I don’t,

Joe: because he is got a 457 plan and a pension.

Al: yeah, you’re right.

Joe: So I’m guessing he works for the state or

Al: we, also don’t know what Joanna’s salary is, so it’s hard for us to say whether Jacques, you can retire.

we need to kind of know what she’s making as well.

Joe: Yeah. They currently spend a hundred thousand dollars after those expenses. We have 50,000 after taxes now. yeah, this is a tough one. if he gets the pension, go for it. If it’s a one time, keep working.

Al: Yeah. I think that’s the answer.

Joe: Yeah. Yeah. ’cause it’s, all about it. It’s all about it.

Are Long-Short Direct Indexing Tax Strategies Worth the Fees? (Juicy Squeeze)

Joe: Alright, Joe and Big Al. Juicy Squeezy here.

Andi: Juicy Squeeze.

Joe: Juicy.

Andi: That’s what he calls himself.

Al: Yeah. Yeah.

Joe: Alright. What the hell is Juicy Squeeze.

Andi: Get into the email. It’ll make a little more sense.

Joe: Okay. Maybe.

Al: Yeah, maybe we’ll find out.

Joe: All right. Not a big fan of the word juicy.

Andi: It’s up there with delicious?

Joe: Yeah. It’s up there with delicious.

Al: is, that’s not a word you normally say.

Joe: No,

Al: this is really juicy.

Joe: If someone said that would be like. It’s just like a chalkboard, you know, nails on a chalkboard.

Al: Yeah. I guess I have to agree with you on that. I don’t, I can’t recall ever using that though.

Joe: I don’t think I could hang out with someone that would use the word ju juicy

Al: sa. Same. So you haven’t said it and I haven’t said it, hence we’re still together.

Joe: Yes. Oh yeah. all right. I’m 57 years old along with my wife, and we’re both retired.

We have two and a half million dollars saved in our taxable accounts. Another 2 million saved in an IRA account. Fixed income is pretty much Social Security, about $50,000 a year, assuming that’s still around, and our spending is about $180,000 a year. Here’s my money question for both of y’all. It’s regarding a long, short direct indexing strategies via lost harvesting programs.

God, he wants to do long, short, direct indexing strategies. Okay, there, via tax loss harvesting programs. Now, you might be familiar with, I’m considering these strategies for a capital gains tax that I’m going to be anticipating in two years from a private investment I’m in. We’re looking to exit. I’m gonna be about a million and a half at exit.

My question is, are these long short strategies true tax savings or are they merely tax deferral? I’m doing it again

Al: or no matter what your answer is. I’m doing it. I’m doing it.

Joe: You know what? Don’t even answer me ’cause I’m doing it. all right, for capital gains tax to try to offset a huge tax hit, but my big question is, are there fees of about one and a half percent involved?

And also if you were to exit, you know, say seven years in, there are potential winding down fees, and I’m wondering. With these fees, is the juice worth the squeeze?

Al: Okay, you said it twice now.

Joe: Oh, got it. Is the juice worth the squeeze?

Al: You didn’t say juicy there.

Joe: That’s, yeah, that’s why he’s Juicy Squeeze.

Okay, looking forward to hearing what you guys have to say. In the meantime, I’ll be going back to my favorite drink, which is tequila and lime in a squeeze. A little bit more lime on that tequila. Thanks guys. Juicy. Squeeze part. Communion.

Al: That’s right. Try to get past that.

Joe: Yep. okay, so he’s got a big capital gain that’s coming up from a private investment.

Al: Yeah.

Joe: He said it’s a million and a half gain.

Al: Right.

Joe: So he wants to do an investment. So I think he’s getting pitched to say you could do a direct index. I don’t know if you have to do a long, short, you have to lose money to get the tax benefit,

Al: which is not your first choice.

Joe: just FYI tax loss harvesting.

To use any of these strategies to offset the tax hit because you made a lot of money, you have to lose money. So if someone’s pitching. A strategy to say here, you’re gonna lose a lot of money to offset your gains. First of all, that’s probably not the right move. long short, so in tax loss harvesting, those are two totally different things.

Tax loss, harvesting, or direct index. A direct index is that you’re investing in individual securities, that is mirroring an index versus just buying an index fund, to make it real simple like an index fund. Let’s say the s and p 500 has, you know, several different types of industries within the s and p 500.

If you do a direct index that mirrors the s and p 500, some industries in the s and p 500 might be up, and some industries in the s and p 500 might be down. But if you own the index fund, and let’s say the, the gains are higher than the loss, the, yes, the, index fund is gonna show a gain.

Al: Right.

Joe: But if you direct index it, you can actually tax lost harvest the industries that are down. So you can kind of split up the s and p 500 or any other index for that matter, and really narrow in. And so you can harvest the losses on whatever categories of stocks or the individual securities themselves to sell and buy something similar and harvest those losses to offset future gains.

Al: Right.

Joe: So that’s a direct index and that’s tax laws harvesting. So does that make sense? If you have a couple million dollars in a non-retirement account? Sure. Yeah. Because if you’re well diversified, you’re gonna have some industries or some stocks or some areas of the market that are gonna be up and others are gonna be down.

Should I use a long, short strategy is something completely different.

Al: Got it. And what’s that?

Joe: I’m, it’s enough alternative strategy that some of the, positions are long, so in some of the positions you’re short selling.

Al: Got it.

Joe: So it’s, more complex for the average investor. It’s trying to be non-correlated to the overall markets. is it a place for a part of your portfolio? Sure. Depending on what your risk tolerance is. The guy’s got $4 million, right?

Al: Right.

Joe: yeah. AQR is a really good company. but don’t buy an investment because you’re gonna lose money to offset another investment that did very well.

Al: I think that’s probably well said. Now, I’ll just add this, you, can do tax less harvesting without direct indexing. And, the way you do that, instead of buying one, index fund like the s and p 500, maybe you buy 10. Or 15 different index funds that invest in different parts of the market.

You could sort of stick with us and do large companies, small companies, value growth. You could go international, you could even do some sector funds if you wanted to do certain industries. And, so you can do it yourself. You don’t necessarily have to pay a percent and a half if that’s, I guess, what the fees are. But the strategy is valid. And here’s what happens is when you’ve got a loss. it shows up on your tax return. You can use that against any losses in the year that you create the loss. And you can take another $3,000 against ordinary income. Any extra losses carry over, and I think that’s what you’re interested in, is your carry over losses to be able to offset your big gain later.

But Joe, you’re right. I mean, the whole strategy is based upon you losing money. So.

Joe: Yeah, it’s it’s a way to tax manage a non-qualified account. So I, love the direct index. idea. but to put everything into a long short, the, reason why the fee’s one point a half percent because it’s a long, short fund. I mean, it’s technical is all get out.

Al: They’re doing some work.

Joe: They’re heavily doing some working really smart people that, that get paid a lot of money.

Al: Right. Right.

Joe: So do you want to go into that specific strategy with $2 million of your non-qualified accounts? I would say absolutely not. just spitballing, but you know, can you do a direct index and go into, you know, have a, little bit into a long short versus have US growth. You have small company, you can still be totally diversified in a direct index that will give you a little bit higher opportunity to tax lost harvest.

Al: Yeah, agreed. it’s, it is more tax efficient that way.

Joe: hopefully that helps. Is the juice worth the squeeze? Yeah, it can be.

Al: It can be. Depends on the losses.

Joe: exactly. Depends on the losses. If the market blows up, guess what? You won’t pay any tax.

Al: No.

Should I Work as an Employee or Contractor After 70 on Social Security? (Wendi)

Joe: We got Wendi. Hi. I am 72 years old collecting Social Security. I’ll be working remotely doing artwork for a brewery company starting January 1st. So she already started.

Andi: Yeah.

Joe: Should I refill my expired business license and work as an independent contractor with no taxes taken out or go on payroll? they take workman’s comp and Social Security even though I don’t need the What do you recommend? We don’t recommend anything, Wendi, we give you some ideas.

Al: Yeah, we spitball a little bit.

Joe: Yeah. So she’s going to do some artwork for a brewing company.

Al: I like it.

Joe: What’s a brewing company?  What do you think

Al: someplace that makes beer.

Andi: It’s a place that makes beer. Joe, I thought, I would think you would know that.

Joe: I understand. Which one? Which one?

Al: Oh, which one? You said what is a brewing company?

Joe: What? maybe I did. That’s what I heard. I need to go to a brewing cu.

Al: Yeah. I don’t know which one. And we don’t even know what city she’s in. It makes it hard.

Joe: It does. So what do you think independent contractor? 10 99.

Al: No, I’d go payroll.

Joe: Payroll, yeah.

Al: And the reason, Joe, I mean if it all things being equal with payroll, you do have your taxes with withheld, so you don’t, you’re not surprised that you’re in number one. Number two, yes, you have Social Security withheld, but. If you’re self-employed, you, your Social Security is twice as expensive because you’re paying your portion and the company portion that matches yours.

So instead of 7.65% withheld on your paycheck, it would be 15%, 15.3 to be exact, as a independent contractor. So the taxes are cheaper, plus you don’t get surprised in April. Right? All things being equal, that’s what I would do.

Joe: How much money do you think you’re. Miss Wendy’s making with her artwork quite a bit or just a couple of bucks?

Al: I think a couple bucks. Yep.

Joe: I don’t know.

Andi: I mean, we don’t know if, she has the option of choosing between whether she’s an independent contractor or an employee. That might not even be something that is up to her. They may tell her, no, we are gonna, you know, do this under a, contract.

Al: It could be. and I would say this, for those that are trying to decide if you, if they have a choice whether to be independent contractor or employee, then what you, if you’re gonna be an independent contractor, you should raise your rates a little bit because you’re not getting any benefits.

You’re paying more self-employment taxes, your taxes are higher as an independent contractor. So just be aware of that. If you have your choice, all things being equal, you’d have a slightly higher rate.

Joe: Yeah. But you also have. A little bit of, flexibility as an independent contractor in regards to write-offs from a tax perspective.

Al: You can take more deductions.

Joe: Yeah, I can take more deductions. Yeah. You can be creative with your retirement plans. Yeah. There’s more options there.

Al: Yeah.

Joe: so

Al: I, I think would

Joe: you,

Al: I feel like

Joe: does it depend on how much money you make you think is gonna depend on,

Al: I think it depends on how much you have an expenses.

So you bring up a good point. Usually when you’re at, when you’re, doing some kind of service, you don’t have a lot of expenses.

Joe: Right, right, right.

Al: Creating art, I don’t know. I mean, we got what kind of art you got? You got easel, you know, maybe it’s computer generated, maybe you write off some of your computer so that there could be some.

That’s a good point. So I would say if it’s, just a small amount of income, maybe you just do independent con, you don’t need to have a business license to be an independent contractor.

Joe: When do you need a business license?

Al: theoretically, when you start working in a city. But all I’m saying is.

No one tracks that when you’re small. That’s all I’m saying.

Joe: she’s already got one, just refile

Al: just to refile it. Yeah,

Joe: it’s fire. Get it back going on. all right. good luck, Wendy. let us know what brewery Yeah. So we can follow your artwork.

Al: That’s important.

Joe: That’s it. We got through ’em all.

Andi,

Andi: thank you very much. I appreciate that.

Joe: Yeah. Have you seen Landman yet?

Al: Landman? No. I don’t know what that is.

Joe: Come on. Billy Bob Thornton.

Al: I know Billy Bob Thornton.

Joe: Yeah. It’s a TV show.

Al: Yeah. I don’t watch much tv. I watch Netflix though.

Joe: It’s on, it’s yeah, it’s on, it Prime.

Al: Oh, I, haven’t seen it.

Joe: Do you have Prime?

Al: Yeah.

Joe: What do you watch on Prime besides Hallmark?

Al: Ted Lasso.

Joe: Ted Lasso. Okay. Is that still a show? Is that still a thing?

Al: we’re, no.

Joe: Oh,

Al: I’m just trying to remember what I watched on Prime, some movies.

Joe: what are you watching on Netflix? What’s the go-to right now?

Al: I’m not gonna tell you. It’s, private. I’ll leave it at that. And we’re loving it.

Joe: Okay. Good. Good, all right. That’s it for us. We’ll see you next time. Show’s called Your Money, Your Wealth®.

Outro: Next Week on the YMYW Podcast

Andi: Next week on YMYW, should Al and Peggy from Illinois go Roth late in their career, or stick with saving pre-tax? Should they take the pension lump sum or lifetime income?  Should Lana and Sterling in Nebraska do Roth conversions or realize capital gains before moving to a higher tax state? Should Tami and Eric in Baton Rouge pay for college or protect their own retirement? And Eloise in Connecticut is asking if it’s finally time to drop long-term care insurance at age 70.

If today’s episode hit home, help someone else calm their retirement fear by telling a friend about the show. Make sure you’re following or subscribed in your favorite podcast app and on YouTube so you don’t eever miss an episode. And we want to hear from you. If you’ve ever felt anxious about running out of money, what finally helped you feel more confident? Was it a number, a strategy, or having a written financial plan? Drop your thoughts in the YouTube comments and join in the conversation.

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.

_______

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