Featuring Special Guest

j david stein

David Stein teaches people about money, how it works and how to invest it in his popular podcast, "Money For the Rest of Us." With over 25,000 listens per episode, "Money for the Rest of...

Mind The Gap: How To Make More Than You Spend In Retirement

J. David Stein, host of the Money for the Rest of Us podcast, on managing emotions when it comes to investing and market volatility, and how to Mind the Gap between income and spending in retirement. If that gap is too large, we’ve got 99 side hustles that can help you make some cash. Also, 6 Tax Planning Tips to Consider for 2017, withdrawing from a Roth to fund college, and cost basis of stock held in trust for beneficiaries.

Show Notes


Here is what I spent this year in terms of my budget, and here’s what I earned, and how do those two differ? And I call it Mind the Gap. You want to look at, what is your after-inflation earnings, your performance return on your portfolio, versus your spend rate? And if they’re pretty close, then you can be retired indefinitely. But if it’s wide, then you start eating into principal over time. Having some type of side project as a retiree, some other source of income, I think is critical. – J. David Stein, host, Money for the Rest of Us podcast

That’s J. David Stein, host of the Money for the Rest of Us podcast. Today on Your Money, Your Wealth, he tells Joe and Big Al about managing our emotions when it comes to investing and market volatility, and how to Mind the Gap between income and spending in retirement. And if that gap is a little too large for you, we’ve got 99 side hustles that can help you make some more cash. Also, 6 Tax Planning Tips to Consider for 2017, withdrawing from a Roth to fund college, and the cost basis of stock held in trust for beneficiaries. Now, here are Joe Anderson, CFP and Big Al Clopine, CPA.

1:03 – How Joe and Al Got Started in Finance

JA: Alan, how long have you been a CPA?

AC: I’m gonna say about 33 to 35 years, somewhere in there.

JA: 33 to 35 years. Tell me how you got into being a CPA. I think our listeners would like to know the background. Let me hear your bio.

AC: My bio? OK. Well, I went to University of California in San Diego. I was originally an engineering major. I felt my strength with was in math, more so than English. But I found very quickly that college level advanced engineering type calculus was rather difficult, and I even went up to my professor after about five or six weekly classes, I said, “can you help me out? What is this even for?” And I didn’t understand his answer. And then I asked my uncle, who’s an engineer. Uncle Bert. He goes, “Well, this is important if you want to build a bridge.” OK. Is there anything else you do with it? Is that it? (laughs) Anyway, I never did get a satisfactory answer, and I realized that that wasn’t going to be my calling. Now, remember, when I went to college, which was in the 70s, it was anti-establishment. Everything was against business. The fat cats. That’s the last thing you want to do is be a business major.

JA: Things haven’t really changed.

AC: Well, I suppose. Well, that’s not necessarily true. There was a whole generation of yuppies that sort of got back into it. Now the millennials have come back. They’re a little different group, but anyway. And UCSD didn’t have a business major anyway, so I switched to sociology because I thought I would be an urban planner. I thought that be kind of fun. And then I realized, no it doesn’t seem very interesting. Because what I really like is being outdoors, so then I wanted to be a park ranger. This is all a true story. So I spent two summers being a park ranger in the mountains in Idlewild, loved it, but I also realize that, nah, is not a good career. And I basically backed into accounting, honestly, this is the honest truth, because my dad was an accountant, and I thought, “Well, I’m like my dad, and I don’t know what else to try.” So that’s not a very great story. I think a lot of people, they kind of back into things. Maybe you were probably clearer. But a lot a lot of people that I know my age, we just had no idea. And now with kids, I have two two boys, they’ve both kind of back into what they’re doing. When you first go to college, a lot of people, I’d say the majority, really don’t know what they should be doing.

JA: Sure. Yeah. I loved math. But I was very terrible at math if I didn’t understand the logic behind it, in a sense. But if it came to, like, real life application. Then it’s like, “OK I understand where I need to go.” But then with the XY minus P equals Z, then I’m like OK, “Well, I’ve got to put some real life application into these letters for it to make sense to me.” Then as soon as I figured out how to do that.

AC: Yeah. Then you can make sense of it. And so I got all my accounting courses after my bachelor’s degree. And I found, interestingly enough, I found that with my accounting/sociology background, it was actually quite helpful, because compared to most of my contemporaries, accountants that have not learned how to organize their thoughts, communicate, write. And these are things that I learned with my sociology. It’s all about writing term papers and communicating. So I think that actually served me well. But I would say sociology as a standalone is pretty rough to go very far with that. If you go that route you need something else too.

JA: Sure. You know you take a look at college today. So there’s this huge push to put everyone through college. And I read something of all these majors, and what the average income is. Where a pipe fitter, you could make $100,000 a year. So you go to school for four years, you blow through a couple hundred thousand bucks.

AC: Your sociology majors can’t find a job. And they tell you you gotta get a Ph.D. At least a Masters.

JA: Right. You gotta go back to get your Masters.

AC: Another couple hundred thousand in debt. And then you look at your choices, what can you do? Well, I guess you could be a teacher. You’ll be a professor. Try to get your tenure, along with everyone else.

JA: Yeah. So there’s a lack of skilled labor. We have a lot of contractors and builders architects and things like that that are our clients. It’s a challenge. I could take on more projects, but I don’t have the people.

AC: There’s no one out there that knows how to wire a plug or whatever.

JA: Right. Electrician, where these trades 30, 40 years ago that was the way. With my family, my parents totally discouraged me from going to college. It was the opposite. I’m telling you, I would come home from high school, and my bedroom would be cluttered with pamphlets of Army, Navy, Air Force, Marines. On my pillow. My mom would do this. I’d be covered with it. I’d go to the bathroom. It would be like instead of toilet paper you’ve got an Army brochure. (laughs) I go to my closet, grab a shirt, no, my whole underwear drawer, no I don’t have boxers anymore it’s just pamphlets of the Army, Navy, Air Force, Marines.

AC: Wow, they really wanted you to do that.

JA: Yeah, they were like, “You’re not going to college. It’s too expensive. It’s a waste of time. You are not ready. Go to the military.” (laughs)

AC: That would shape you up. Well, you probably were kind of wild, younger, I would imagine. (laughs)

JA: (laughs) Oh yeah. Huge crazy wild. (laughs) But no, that motivated me, even more, to go to school. I paid for my own schooling, and it just was out of spite. (laughs) How terrible is that? I got my degree out of spite.

AC: Well whatever works. When you started college, did you know what you wanted to do?

JA: Yeah. Because my dad was a cabinet maker.

AC: And you figured, “I’ll be like my dad?”

JA: No. I can’t hammer a nail. And he was so disappointed with me. I was the biggest disappointment of his life.

AC: Is your brother more handy with tools?

JA: Yeah he’s a lot handier.  If the furnace goes out, he probably knows what to do. Me? Forget about it. I was so disinterested in that. No. My mom was a stay at home mom and a secretary, so she didn’t make a lot of money. And my dad didn’t make a ton of money. My mom said we were so poor, it was po’. We can’t even afford the O and the R. We po’. (laughs) So that motivated me to say,  I want to do something to make a little bit more money. I want to get educated. I want to make sure that I can change that dynamic. And I was the first guy out of all my cousins to go to school to get a degree.

AC: Yeah and then you’re probably the first radio star and TV star.

JA: Oh yes. Infomercial king.

AC: On and on, you’ve sold more chamois than anyone. (laughs)

JA:  I’ve sold more knives. (laughs) They are so proud.

Big Al may not be an engineer and Joe may not be able to hammer a nail, but they know personal finance and retirement planning like the backs of their hands. Visit YourMoneyYourWealth.com to access their white papers, articles, webinars and over 400 video clips on tax planning, investing, retirement planning, Social Security, estate planning, small business strategies and more. I’d guess that just about ANY money question you have can be answered at YourMoneyYourWealth.com, but if by some small chance you need more help, you can always email us at info@purefinancial.com, or pick up the phone and call us at 888-99-GOALS. That’s 888-994-6257.

9:59 – J. David Stein, host, “Money For The Rest of Us” podcast

Money for the Rest of Us Podcast

J. David Stein Article: Mind the Gap

JA: Alan, it’s that time of the show.

AC: it is, where we have someone smarter than us.

JA: A lot smarter. (laughs) We have David Stein on the line. He has a phenomenal podcast, which I would recommend everyone to check out, its Money For the Rest of Us. Because money can get complicated and it’s like, well what about me? So I want to welcome David. David, thanks so much for joining us.

DS: Great to be here. Hey.

JA: Hey, just tell our listeners a little bit about your background, and why did you start Money For the Rest of Us?

DS: Well, sure. My background is as an institutional investor. So I spent 15 years on the investment side, first advising and endowments for foundations. Later actually we launched what’s called an outsourced CIO product, where we actually managed the investments for the endowments around foundations of asset allocation and chose managers, etc. Sort of took over the whole thing. And so I was our firm’s chief investment strategist and chief portfolio strategist for that particular product. And I did that for 15 years, but I was ready, in my mid-40’s, I was ready to try something else. And so my partners bought me out, and I called myself early retired for a year or two, and then found myself missing teaching investing, missing teaching about the economy, and so I launched the podcast a couple of years ago, just so I could continue to, in this case, help individuals understand what’s going on with money, investing in the economy.

JA: Given this week, had a lot of experts kind of on their toes a little bit. We had Donald Trump is now our president, and I’m sure you watched the futures a little bit – I guess every TV newscast was kind of showing it, as Donald Trump was pulling ahead. You saw the futures go down 700 points. So everyone’s thinking, “Oh man the market is going to crash.” But what the week has been OK. I mean how the heck do we explain that?

DS: Well you explain it by saying you cannot predict – these one-off events, and I had listeners expressing concern, “Well if Donald Trump got elected, the market’s going to crash. Should I be pulling my money out now?” This is a month or two ahead of time. And my response was, one off events, you just can’t predict what the reaction will be. And so, that’s not to say you can’t ever predict. But the reality is, the market, let’s say the S&P 500, a measure of US large company stock, falls on average 5% or more about three and a half times per year. So this is normal market volatility. Now, what I teach and the way I’ve always invested was, to adjust one’s asset allocation for what I call regime changes. Where the risk of a recession is high, the risk of a 20% decline in the stock market is high, and there is a little more forecasting or predictability where you at least can manage the risk. But the short term, binary, this particular person isn’t going to win or lose, or let’s say the Brexit, you just can’t predict both what’s going to happen, or even how the market’s going to react to them. You’re actually making two predictions there. What’s the outcome going to be, and then how the market’s going to react to it.

JA: Right. But we’re emotional creatures. And I think that’s one of the biggest things, from an education perspective, is that, hey, you cannot worry about the short term volatility. What’s the goal for the money? You probably need it for your retirement over the next 10, 20, 30, 40 years. So we’ll have many more presidents, we’ll have many more corrections, and we’ll have many more crises and everything else. What are some of the things that you’re talking about on your on your podcast nowadays?

DS: Well let me just follow up that other point, because we do have to manage our emotions. And one thing you do, I mean let’s say somebody – and I have people approach me, where they might have sold a business, they might have some cash. And this election is coming up. Now I don’t give specific advice, but in the spirit of general education, I’ve told people, “It’s OK to wait till after the election and then put the money to work.” These are not do-or-die decisions, and ultimately most of us are long-term buy and hold investors. But we have to do things to help us manage those emotions. And one might be to dollar cost average in if you get a lump sum of cash. Or you can wait out. It’s going to be a big binary event. It’s OK to wait before you invest.

In terms of the podcast, things we talked about recently, and the way the show is structured is just whatever happens to be of most interest to me, which tends also to be interesting to listeners, and so one of the things I experienced is, my insurance company had a 50% proposed increase for our health insurance, and so that got me thinking, “What’s going on here?” So we did an episode recently on what is driving these dramatic increases in health insurance costs? And it turns out, much of it is pharmaceutical companies essentially have monopoly power to price pharmaceuticals, particularly expensive cancer treatments, at whatever price they can get away with. In other words, the price discipline is, how badly will politicians and doctors yell when they set the price? And that type of environment, that is what’s driving up health care costs and health care premiums.

JA: And then what, the Epi-Pen, that was there was a pretty big deal.

DS: That’s a perfect example. In this case, people did yell about the 5,000% increase or whatever the significant increase was. But that is predominant throughout the health care industry, and ultimately it’s something that the Trump administration is going to have to deal with because it’s come to a head.

AC: Hey David, this is Al. We’ve got a lot of retirees listening, and pre-retirees, and I know your podcast sometimes deals with retirees. What is some of your best advice that you would give to somebody that’s just about to retire? What are the things they ought to be looking at?

DS: Well first off, it is an absolutely huge transition, and people don’t realize that, from having income, when you have a job, and suddenly you’re living off of investments. I did that when I was in my mid-40s. I quit my job and here is my nest egg, and I have to live off of it. And it’s jolting. And so what I tell retirees is find a source of income outside of investing. Have a lifestyle business or something of interest. And I think most retirees want to do something. The reality is, it could be boring being retired if all you’re doing is playing golf. And that’s kind of a cliche, but that’s the truth. And so, having some type of side project, or a side business, or something we can generate, even if it’s just 20 to $30,000 a year, it takes a lot of pressure off both emotionally and on your investment portfolio.

JA: I would imagine that was probably pretty hard for you. If you can retire in your 40s, I would imagine there was a couple of dollars in your bank account, and you are very good at managing money. But then the emotions that you have personally over your money versus being an institutional investor, I think are two different things. And then once you’re looking at this nest egg has got to last me, what 60 years. To keep your own emotions at bay was probably fairly difficult.

DS: Exactly. Because one can’t even imagine a 40-year retirement. We just we can’t comprehend what that even like. And so often, mentally, the way that you do it is you have to just manage one year at a time. “Here is what I spent this year in terms of my budget, and here’s what I earned,” and how do those two differ? And I call it Mind the Gap. You want to look at, what are your after-inflation earnings, your performance return on your portfolio, versus your spend rate? And if they’re pretty close, then you can be retired indefinitely. But if it’s wide, then you start eating into principal over time. And ultimately my solution was to find a way to generate some additional income, because in the four years or five years I’d quit my job, income, like interest, had basically been cut in half. Or other strategies, income oriented strategies, are generating much lower yields than they did even three or four years ago. And so in that environment, having some type of side project as a retiree, some other source of income, I think is critical. Maybe when you get into your 70s or 80s you can pull back. But if you’re in your 50s or 60s, one you’ll be bored if all you’re doing is traveling. You just have to do something.

JA: Right. I think the dollars and cents is one thing, the money is one thing, but just the sense of still feeling purposeful. That you have meaning, I think is key too. A lot of financial shows such as ours it’s like, let’s talk about taxes, investments, inflation, and blah blah blah. But then on the other side of the microphone or the speakers, it’s like what the hell am I going to do with my life here? I got all the money I need but I’m bored as hell. What am I going to do here?

DS: And people need a routine. And even as a retiree, you need some type of routine, this is what I do on a Monday or Tuesday. You take breaks from it, but you have to be creating something, ultimately. There has to be some outlet to create. And maybe that’s working with a charity or not for profit. Maybe it’s creating within unemployment. Maybe it’s a hobby. But there needs to be a formalized creation, in my mind, with people creating something every week. And maybe you get paid for it, maybe you don’t. But you have to have the routine, in terms of creating.

JA: That’s David Stein, folks please go to MoneyForTheRestOfUs.com. Check on his podcast. David, hey thanks so much for your time. Hopefully, we can get you back soon.

DS: That’d be great. Thanks for having me.

Southern California, are you on a smooth, well-paved road to retirement, armed with a good roadmap and clear directions? Join one of our Certified Financial Planners for a FREE Lunch N Learn in San Diego or Orange County and learn how to pave your road to retirement. Visit purefinancial.com/lunch to register for one of these free events – lunch included! Learn about investing for your future, generating retirement income, retirement plan distributions, and how to minimize income taxes. Get on a good road to retirement! Visit purefinancial.com/lunch to register for a FREE Lunch N Learn in San Diego or Orange County. That’s purefinancial.com/lunch

Time now for Big Al’s List: Every week, Big Al Clopine scours the media to find the best tips, do’s and don’ts, mistakes, myths and advice to improve your overall financial picture – in handy bullet-point format. This week, 6 Tax Planning Tips to Consider for 2017.

21:20 – Big Al’s List: 6 Tax Planning Tips to Consider for 2017 (Forbes)

Forbes Article: 6 Tax Planning Tips to Consider for 2017

AC: I don’t necessarily agree with all these. Let’s see what we have. But most of them I do.

JA: What’s the title?

AC: 6 Tax Planning Tips to Consider for 2017. Number one is: shelter your interest income inside your retirement accounts. If your investment portfolios are going to hold bonds, it’s best to hold these bonds inside tax deferred retirement plans, such as IRAs and 401(k)s.

JA: Asset location is what that is.

AC: That’s asset location. That’s a great concept, although I will say, if you’re in your 20s and 30s, you probably want mostly stocks in your accounts anyway, but this is probably more appropriate as you get into your 50s and 60s.

JA: Here’s the problem with it. People hear asset location strategies on the air. They’ll come in and they say, “Joe, Al, I’ve been listening to you, I heard asset location.” So they have a million bucks in their retirement account, and then they have $50,000 outside of their retirement account that’s in a brokerage account. So the $50,000 is all in stocks. And then the $1 million is all in bonds. “Because you told me to put bonds in my retirement account.”

AC: Yeah the first step is they have the right asset allocation. Which probably is, a common one, 60% stocks 40% bonds. So if you have, in that example, $50,000 stocks go in your trust account, non-retirement, then $55,0000 of stocks would go in your retirement account, $400,000 bonds. That’s what we’re talking about. I think that’s a good clarification. Here’s the next one, review your taxable account investments. Consider tax efficient mutual funds or separately managed accounts that strive to limit the number of taxable events inside of your portfolio. With combined federal and state capital gain rates possibly totaling over 30%, buy and hold strategies may be a suitable option for some investors. Agree or disagree?

JA: I have no idea.

AC: Because you weren’t listening. (laughs)

JA: Because you’re reading! It’s very difficult! You’ve got your glasses on, and you’ve got the smallest font.

AC: I know, that’s why I have the glasses on.

JA: You got to get to some bigger font there bud.

AC: Well, I do agree with the concept. The concept is, to the extent that you have assets outside of your retirement account, make sure they’re as tax efficient as possible. Buying and holding is a lot better than day trading.

JA: OK, now I get what you’re saying. Now you’re talking normal. (laughs) So let’s say you have an actively managed fund, versus maybe an exchange traded fund. Well, the actively managed fund could kick out dividends short term capital gains, and turnover within the fund, then that shows up on your tax return. You could lose money in the mutual fund, and you still have to pay tax on it because they have to distribute those gains within the fund, so it’s not necessarily tax efficient, where an exchange traded fund is extremely tax efficient.

AC: Yeah, and how many times do we see people buy into an actively managed mutual fund in December, and then they have this big capital gain dividend, even though they weren’t even in the fund for the year. So yeah, watch for that. Here’s the next one, rebalance your portfolio using cash flow. I don’t know that I agree with this, but…

JA: I do.

AC: Well, if you can. But they’re saying selling existing investments to rebalance the portfolio should typically be the last resort because selling can generate taxable gains.

JA: Well yeah, who’s he talking to there, because most people have their money in a retirement account?

AC: I know, but to the extent that you don’t. So I would phrase it a little bit differently. I mean, if you need cash flow, and that is a good time to rebalance – in other words, your stocks have done a run, so you sell some of your stocks, to pull money out, instead of doing it when you don’t need the cash flow. That’s an appropriate concept. But, I don’t want you to get the idea that rebalancing your portfolio, you wouldn’t do unless you’re pulling cash out because you’re worried about taxes. I think the investment part is more important than the taxes, although they’re both important. Don’t get me wrong.

JA: I think they were getting cute. Who’s the author?

AC: Mark Avallone from Forbes.

JA: OK whatever. (laughs) He’s a journalist. So he heard something from someone, and it’s like, it’s more efficient, let’s say if you have dividends coming out of your stocks, instead of selling the shares, you take the dividends, you put that in cash, and then you rebalance with the cash. Yeah, that’s a decent strategy. But he’s kind of getting a little too big for his britches.

AC: Yeah. I like the next one though: realize tax losses throughout the year.

JA: Yeah. If you do tax loss harvesting, a rebalance is not going to hurt you. Because that loss will offset that gain, short term or long term, every time.

AC: That’s right. Yeah and we’ve talked about that on a lot of shows. We don’t have to go into that right now since we only got a couple of minutes. The next one is: make a contribution to an IRA or a Roth IRA. Completely agree. What he doesn’t say is a 401(k), which is even better. If your company has a 401(k), because of an IRA, you can put $5,500 in, and a 401(k) it’s $18,000. And then there’s a catch-up, there’s an extra $1,000 if you’re over 50, in an IRA, and an extra $6,000 if it’s a 401(k), so you can actually get a lot more money into a 401(k) if you have one. Plus, not to mention, probably most, many employers have matches. So you put money in the 401(k), you get an employer match as well. So you put in 10% of your income, and maybe your employer puts another 3 or 4% of your income in. So it’s like you’re putting in 13, 14% of your income, even though it only costs to 10. So yeah good deal right? Finally, consider a Roth IRA conversion.

JA: Oh wow. I agree. Next. (laughs)

AC: We’ve talked about that ad nauseam, but it bears repeating. I think we talked about that even in our last show, last week, but just in case you didn’t hear our show last week, you want to consider taking money out of your IRA and moving it over to Roth IRA. That’s called a Roth conversion. Yes, you have to pay taxes on what you convert, but all future growth and income and even the principal is tax-free forever for you, your spouse, your kids.

JA: 100% tax-free, there is no better rate than zero. So you have to look at your tax bracket to see what tax bracket that you’re in. And then you look at the retirement account and say, maybe you want to convert 10, 15, 25, whatever the number is, to max out your bracket. And then now that money, you pay taxes today, but there is no way around the tax, Al. That money is going to grow tax deferred. And then at some point, you will pay the tax. And if you save a lot of money, don’t be fooled that you think you’re going to be in a lower tax bracket. We find that people that save a lot of money want to maintain their lifestyle. So what that means is that if the money is coming from the retirement account, you’re replacing your paycheck with those dollars, you’re going to be potentially in the same tax bracket. And then once required distributions, we see people pop up into a bracket. So I would convert as much as you can that makes sense – but you need a little bit more analysis.

Get that retirement analysis by signing up for a free two-meeting assessment with a Certified Financial Planner at YourMoneyYourWealth.com. Also on the website right now, if you or someone you know is turning 65, it’s time to start navigating the Medicare maze, so you can choose the right plan for you, at the right cost. The Understanding Medicare Video Series, featuring Certified Financial Planners Joe Anderson and Jason Thomas is available now, free and on demand, from the Learning Center at YourMoneyYourWealth.com. Learn the basics of Medicare, how to Bridge the Gap to Medicare, and 11 Common Medicare Mistakes to Avoid. Just visit the Learning Center at YourMoneyYourWealth.com to watch the Understanding Medicare Video Series for free, on demand.

28:59 – Running The Retirement Numbers: Be Honest And Save More Damn Money

JA: Couple of things, bud, when it comes to preparing yourself for retirement. Let me just talk about a couple of different things that could potentially derail your retirement. What do you think is the biggest one? You’ve been doing this a while. People approach retirement, and then we already talked about the softer side, where they don’t necessarily know what they want to do on a day by day basis, to say how do I continue to get this purpose? Can I do something different, let me get out of the grind, but let me still be productive in society, and so on. But when you’re looking at dollars and cents, as a CPA, what do you think?

AC: What’s the biggest mistake?

JA: Yeah, or just the things that potentially could derail you. So I am looking at retirement next year, and you say, “Hey, be careful of this.”

AC: (laughs) Got it. Well, to me the very first thing that’s basic, I guess, is to just run the numbers – the dollar and cents. You do a little analysis and figure out what you’re spending, what you want to spend in retirement, you look at what your fixed income sources are. You figure out, “What’s the shortfall? I want to spend 50 grand, my fixed income is 20 grand, so I need $30,000 from my investments. So I divide my $30,000 by 4% just as a quick rule of thumb, and I get something like $750,000. That’s what I should have as a nest egg. I mean, that’s not a perfect method, but at least it gives you a starting point for thinking about things.

JA: How many people you think do that?

AC: None.

JA: Zero, right?

AC: Yeah, one out of a hundred. I think most people just assume they’re going to be OK, or they hope they’ll be OK.

JA: If you’re driving from San Diego to New York, you’re going to get a map, and you’re going to say here’s the road, here are the freeways, here’s where we’re going to stop. We’re going to stop in this city at this time, we’re going to do this.

AC: And it’s winter so we’re going to take the south road.

JA: Right, we’re going to go to Chattanooga.

AC: If it’s summer we’re going to go north because we want to avoid the heat in Texas or whatever.

JA: Right. And you’ll probably make sure the GPS is working.

AC: Yeah that’s right, and you’ll have extra water.

JA: Yes and you’ll probably have a couple of extra credit cards. Put one in the glove box just in case your wallet gets lost

AC: Have an extra banana or granola bar just in case.

JA: You’re going to be prepared for that. And that’s just a stupid trip across the country in a car.

AC: Yeah, that’s not the rest of your life.

JA: No, and that trip might cost you a few thousand dollars. Retirement is going to cost you a couple of million, probably. Total cost if you have a 30-year life expectancy. And even if I want to spend $50,000, if I look at an inflation rate with that, $50,000 per year, increasing that up.

AC: That’s not even a stretch.

JA: But most people just look either at an age, “OK, well at 65, I’m going to punch, because I have kind of an inkling that this is what my Social Security is going to be, and I’ve saved a couple of hundred thousand dollars.”

AC: Right, and I’m probably ok.

JA: Yeah, I’m going to be fine.

AC: I’m not a millionaire but I’m doing pretty good. I listen to this show and Joe and Al said the average 401(k) balance is $97,000. Double that. I’m twice as good as the average.

JA: Yeah, you got to realize that there some other things that you need to take a look at. Then we can peel the onion a little bit more.  So let’s say they do that. They listen to the show and they’re saying, “I’m spending $50,000 and I know that my wife and I or my husband and I will have about $30,000 of Social Security fixed income. So I’m short x.” And then they do the equation, they’re like, “OK I need $500,000, a million dollars, 700,” whatever the number is. So then they just look at that number, and they keep the exact same investment strategy throughout. So it’s like, no, those dollars need to work for you. They need to generate income, so how are you going to generate the income that you need? How are you going to be pulling the 10, 20, $30,000 out of the portfolio? What assets are you going to pull from? You can’t buy a bond to generate that. And you can’t look at dividend paying stocks to do that. So you have to have a totally unique, different strategy, based on your specific goals and needs.

AC: Yeah, we know the simple statistics are, for a couple age 65, at least one of them is going to make it to age 90. There’s more than a 50% chance of that. There’s actually a 50% chance that at least one of you is going to make it to 92, is the current number. And that’s going up each year, as medical advances, and we’re taking better care of ourselves, and things like that.

JA: They’re either taking on way too much risk or not enough risk. Which is kind of usually what we see. I’ll look at a portfolio and I’ll say, “yeah that’s a great portfolio for a 25-year-old. You’re 65.”

AC: You might want to tone it down a little bit. The other extreme, Joe, Al, I can’t lose any principal.

JA: Exactly. I’m not losing a dime.

AC: So you’re going to invest in CDs. So that’s a guaranteed loss because we know you’re not going to keep up with inflation. That what I know is a losing strategy.

JA: Yeah but you’re going broke slowly.

AC: Let me rephrase that. If you’ve got enough liquid capital and you’re fine with a half a percent or a 1% rate of return, if those numbers work out for you, and you don’t want any the risk, go for it. There’s nothing wrong with that.

JA: No I agree with you 100%. It’s just simple planning tools that are out there, that are so available, and you look at the statistics: the number one fear of most people is having enough money in retirement at certain ages. If you look at the Baby Boomers or people that are approaching retirement, it’s like, “I don’t want to run out of money. I don’t know if I have enough money. I’m worried about health care costs, I’m worried about X Y and Z.” But how many of those actually have kind of taken a step back to put together just a simple plan? Just write it down on one sheet of paper, it doesn’t have to be an elaborate 500-page document.

AC: Let me ask you a question. So there are retirement calculators out there that you can get online and plug in a few numbers and get some kind of answer. Is that a good idea?

JA: I think it’s a starting point. Sure.

AC: It’s a start. It’s got limitations.

JA: I would not base my overall strategy on that. Because here’s what people do with those things, Al. They’ll put in their numbers. “So here’s when I want to retire. Here’s my Social Security. Here’s what I’m spending.” And they’ll give inflation rates, and what do you think an expected rate of return is on your investments. And then it’ll show this number, and they’re like, “I don’t like that number. So let me play with the assumptions. Well let’s go to inflation at .5 and my rate of return on my investments, 12, and  I’m only going to live until 70. Oh look, it works!”

AC: Yeah, I’ll spend 50% of my normal spending.

JA: Yeah. “There’s no way I’m going to spend that much, I’m really going to rein it in because I hate my job, I want to get the hell out of here.” You could convince yourself in anything. That’s why I think having the third party is key to keep you at bay, at least to be honest with you and say your assumptions are way out of whack.

AC: I think so. I actually just did a retirement calculator earlier this week, and it started out with, “does your company have a 401(k)?” I typed in “Yes.” “Are you saying to the match?” Yes. “Are you saving the max?” Yes. “Do you know there’s a catch-up?” Yes. And then, “Are you saving to the full amount?” Yes. “Are you sure you’re saving to the full amount?” Yes. And then it goes, “You’re good!” It was a little too simplistic. (laughs)

JA: Solid! (laughs) Yeah. We get spreadsheet after spreadsheet from individuals that do their own “financial plan.” And then I remember this guy like it was yesterday. He said he retired early, it was funny. He went to one of my retirement planning classes. And then I ask, “how many of you are currently retired?” And he raises his hand. And he looked fairly young. And so we go through it. And then at the break of the class, his wife comes up to me and she’s like, “I’m freaking out. He got laid off. He’s not retired.” So he comes in with this elaborate spreadsheet, and he’s like, “I really focused on all this” he’s got two kids that he wants to pay for schooling. And then I’m like, “your numbers are way off.” And then, of course, he got super defensive with me. I’m like, “I’m not here to kiss your you-know-what. I’m here to tell you the truth of what I’ve seen in my 20 years of experience. If you don’t want it, leave.” “Oh no, you don’t know.” And he’s rationalizing everything. “No, you don’t understand. My kids are geniuses. They’re going to get full ride scholarships.” It’s like, oh my god.

AC: Right. And one is an Olympic athlete, gonna get a free ride.

JA: Yeah, “my other son, you should see him play ball. He’s going to be a pro. He’s going to take care of me.” Whatever. But we rationalize all this stuff because we don’t want to face the truth. We don’t want to say, “I’m a little bit behind. I gotta be uncomfortable for a little bit because I got to say a little bit more money.” If you get 6% versus 5%, just save more damn money is the bottom line.

37:31 – 99 Side Hustles

Side Hustle Nation: 99 Side Hustle Ideas

JA: I wanted to get this guy on our show. The Side Hustle guy. Nick Loper, I believe is his name. And so he came up with a list of 99 Side Hustles that you can do. So we’re talking about retirement, not being prepared – or just other things to keep you busy in retirement.

AC: Yeah, whether it’s making money or just something to give you some purpose. Are you gonna read them all?

JA: No no no. I’m just going to go through… how about being a Task Rabbit? Have you ever heard of that? TaskRabbit is an on demand errand running service that enlists regular people to help out. You can earn money in your spare time completing real world tasks on the unique platform. So one user in Atlanta makes a full time living assembling IKEA furniture.

AC: Oh! I can use that person! (laughs)

JA: Yeah right? You get the box and you’re like what is this?

AC: My son Ryan, he bought a desk in Colorado that he had to assemble. I think he’s never tried to do that. He got halfway through it. He wrenched his back and then he just gave it away. It never got built right – at least by him. (laughs)

JA: Yes. I’m trying to get my mom into this – some blogging.

AC: How do you make money on blogging? Through advertisers maybe?

JA: Yeah. Some people are making a lot of money. And yeah you get advertisers, you get – I don’t know, I don’t make any money blogging, so I’m probably not the right person. (laughs) But John Dykstra is the master of quickly building and monetizing blog sites from zero to six figures. There’s also Lindsay and Bjork from PinchOfYum.com, on how they built it up from $17,000 a month part time. And you’ve got Pat Flynn building a six figure fitness blog.

AC: Really, okay. So there’s some opportunity.

JA: There could be some opportunity, I guess if you like to write if you like to get out there.

AC: Sure. You know what I was reading yesterday Joe, is Wal-Mart is thinking about test marketing a concept of home delivery. So that a person, where their offices and where they live, if they have people around where they live, delivering goods on the way home and making some side income.

JA: Sure. So they’re trying to compete now with Amazon with Amazon. Well, that makes sense, they gotta do something. Car flipping. So if you like cars and you’re good around cars, and you could buy and sell in on a profit, potentially.

AC: Right, some people love that stuff. That would not be my deal.

JA: No. Then you’ve got cleaning services, maybe computer tutoring.

AC: You know, that’s an important one.

JA: Let’s see, dog walking of course.

AC: Yes. My son has done that. It doesn’t provide a full-time income, but it’s a little side hustle.

JA: How about gig walking, ever heard of that? Gig Walk: a free smartphone app that pays you to complete small tasks in your neighborhood, like photographing the inside of a store.

AC: Is that for Google Maps or something?

JA: Maybe. Human billboard. Big Al, you can do that. If you’re not afraid of embarrassing yourself on a street corner, there are always businesses looking to hire sign spinners.

AC: The best people for that are about 18 years old, 20 years old, they have lots energy.

JA: You know Dani Martin, our compliance officer, had some friends that had a restaurant, it was hot dogs and pizza. So she put on a hot dog suit for Saturday and had some signs, hey, have a hot dog. (laughs) So there you go. I don’t know what she made, probably earned $6.

So, have you planned for retirement as well as you planned for your most recent road trip, or do you need to line up a side hustle? Make sure your assumptions and your retirement strategy aren’t out of whack – visit YourMoneyYourWealth.com and sign up for free, honest, two-meeting financial assessment with a Certified Financial Planner. Find out how much money you’ll need in retirement, what Social Security strategies are available to you, and how much income can you get from your portfolio. Make sure your retirement strategy is aligned with your retirement goals. Sign up for a free two-meeting assessment with a Certified Financial Planner at YourMoneyYourWealth.com

It’s time to dip into the email bag, with financial questions courtesy of Advisor Insights from Investopedia, and you, the Your Money, Your Wealth listeners. Joe and Big Al are always willing to answer your money questions! Email info@purefinancial.com – or you can send your questions directly to joe.anderson@purefinancial.com, or alan.clopine@purefinancial.com

42:35 – Can I Withdraw from my Roth IRA?

JA: All right. “I’d like to withdraw from my Roth IRA contributions ASAP for educational expenses, but my HR department is telling me that I need to wait until my termination in a month or so before I can touch with Vanguard to withdraw my funds. Something doesn’t sound right about this. Why did they tell me this, and are they being truthful?”

AC: That’s a good question.

JA: So the title of this email is, “can an employer prevent a Roth IRA withdrawal until I’ve left the company?”

AC: OK. Well, let me maybe clarify. A Roth IRA is an individual account, that would have nothing to do with your company, so I assume it’s a Roth 401(k), probably, that they’re talking about.

JA: I guess we can answer two questions. Let’s start with the IRA.

AC: Yeah. If you had a Roth IRA, it has nothing to do with your employer.

JA: Yeah, so why are you calling your employer?

AC: You can take contributions out. You can take out what you contributed, dollar for dollar if you want to you, there’s no penalty. If you take out the earnings and you’re younger than 59 and a half, then there are penalties there.

JA: Right, and taxes. But maybe the HR lady is like Ma Bell. She’s like, “Oh Jeffrey, you don’t want to be taking money out of your Roth IRA.” She could be like just be motherly or fatherly.

AC: Could be. But let’s say it’s a Roth 401(k), which seems more likely. And that could be true, Joe, because, in a lot of cases, you cannot necessarily take money out of your 401(k) before you either retire or terminate from service, or age 59 and a half. That’s a common stipulation in these plans.

JA: And I don’t know the age of this individual, but they’re stating they want to use it for educational expenses, so I’d imagine they’re a little bit younger.

AC: Yeah. Unless they’re using it for a kid. But yeah, chances are they’re younger than 59 and a half, I’m guessing.

JA: So here’s some confusion. So there’s Roth. Good old Senator Roth, 1997. 1998 was the first time you could contribute to a Roth IRA. Roth IRAs are after tax contributions. Put the money in, it grows 100% tax-free. So Roth IRAs, people are familiar with Roth IRAs, hopefully by now if people listen to the show for any length of time. The benefit there is, of course, there’s no better rate than zero, and so when you pull the dollars out, you don’t pay a dime in tax. Some stipulations, it has FIFO tax treatment, “first in first out.” So if you ever want to take contributions out of a Roth IRA, you have full access to those dollars. Again, we’re talking about a Roth IRA, individual retirement account that you hold at a mutual fund company, at a bank, in a brokerage house, wherever, it’s your individual account that you’re making contributions on your own, not through your paycheck, but through your savings account, or your after tax earnings, that you are voluntarily contributing to into that plan.

AC: And I think that’s important. So that has nothing to do with your employer. If you have a Roth IRA, that’s your own individual account, which is separate from your employer.

JA: So you’re making those contributions like I said, it doesn’t matter, you can always have access to whatever that you put in. But the earnings need to season inside that Roth IRA for five years, or 59 and a half, whichever is longer. So if you’re in your 30s, no big deal, you contribute to it. You started your Roth at 30, you continued to contribute to that Roth IRA plan all the way until you’re 65. Well, you have full access to the money. If you want access prior to 59 and a half, you have access to the dollars. As long as you’re only taking out the basis – your contributions. So now you’ve got to be pretty careful with this because the IRS doesn’t mess around. There are different forms. Let’s say you do a nondeductible IRA contribution, you file an 8606 form. Then it shows to the IRS that you did not take a deduction for that, and they’re not going to tax you on that.

But you’re not filing, potentially, an 8606 form when you do a Roth IRA contribution. And maybe you’ve made several Roth IRA contributions throughout the years, and then now you want to buy a new home, or maybe a boat, or maybe a vacation, or whatever it is, you’re like, “I’m going to go after the Roth” and you distribute the entire Roth out, and maybe $50,000 of basis, and maybe only $10,000 of gain. So you cash the whole $60,000 out. You should only be taxed with the $10,000 if you’re under 59 and a half. If you’re over 59 and a half then it doesn’t matter. But if you’re under 59 and a half, that’s where it gets a little bit tricky. Because the IRS is saying, ” well, you’re under 59 and a half, you cashed it out. Even though $10,000 should only have been taxed and penalized because the other $50,000 is the basis, how do they know?

AC: Yeah, they don’t. And so you’re kind of on the honor system.

JA: But then there’s what the 5498. Those are fairly new, aren’t they?

AC: Yeah, they’re pretty new. And those can sometimes have the basis for it. The whole thing is not very well organized, and not even very accurate in terms of what the IRS is getting. So as a lot of income taxation, you are on the honor system, and if you’re ever questioned, you have to show that there is the basis. A simple example: let’s say you put $5,000 into your Roth IRA each year, and you did it for four years, so you got $20,000 in it. And over that time, or maybe 10 years later, that account’s worth $50,000. So you got $20,000 in contributions, and $30,000 a growth. You can always take the $20,000 out. We don’t recommend it, by the way, because you’d rather have that grow tax-free through your retirement years. But if you need it, if it’s an emergency, or whatever, you can pull out that $20,000. No harm, no foul, at any age. You just can’t withdraw that $30,000 of growth. That’s what we’re saying. You can at age 59 and a half, but you can’t do it before that.

JA: Yeah. Then you have to take a look at the five-year clock. The five-year clock works, the first dollar that hits your first Roth IRA, to have a tax-free withdrawal, a qualified distribution, so there’s a couple of tests. You need to have the Roth established for five years, or you have to be 59 and a half to get the tax free earnings out. So let’s say you’re 62 years old. You start your Roth IRA today. Your first one, you’ve never established a Roth IRA, you’re thinking, “Hey, I want to get a Roth IRA going,” you establish the Roth today. Well, now you’re 62. And you’re a really good stock picker and that $5,000 goes to $10,000 in a couple of months. And then, “I’m over 59 and a half. I can take the whole $10,000 out.” You cannot. You have to let those earnings season for five years. So, the point of this story is that you have to first know the five-year clock rules. But I think to avoid all this, start a Roth.

AC: Yes. So there’s one five year clock. Not every year.

JA: Unless it’s a conversion if you’re under 59 and a half. Then you have a five-year clock for each conversion. (laughs)

AC: (laughs) I’m not gonna go there, that gets more complicated. But when it’s a contribution, you do a Roth contribution at age 30, and you never do another one, and you start doing them again in your 60s. Well, you’ve already met the five-year clock on all future Roth contributions. So there is no 5. There’s no additional five-year clock, in that example. And you’re right. Roth conversions are completely different, and this is where it gets really confusing. And we’ve had people come up to us and say, “you guys are wrong. I read it here,” and we’re saying, “No, that’s the conversion. Those rules are different when you’re under 59 and a half. But it’s, as most tax laws, very hard to explain.

JA: The five-year clock for conversions was put in place because people were abusing the law, in the sense of, they were under 59 and a half, they were doing a Roth IRA conversion. And then let’s say a couple of days later, they are taking those dollars out. They paid the tax on the conversion, but they’re under 59 and a half. So they pulled the money out and they avoided the 10% penalty.

AC: Right. So the IRS said, “no when you do a conversion and you’re under 59 and a half, you gotta wait five years for each conversion before you take that money out.”

JA: Correct. I don’t even know why that rule exists. It’s stupid. I mean, let’s say if I’m 40 years old, I do a Roth IRA conversion of $20,000. So now the $20,000 is in my Roth. I wait till I’m 45, now I can take the conversion out without the 10% penalty.

AC: Yeah, I don’t know. Why don’t they just wait till 59 and a half? Because that’s that’s the intent. that’s the intent. If I converted 58, all I got to do is wait till I’m 59 and a half, not five years, so I don’t know. I think they’re just trying to sway people. I guess if you wait five years, you hold out for five years, then hopefully you’re like, I don’t want to take the money out.

AC: Yeah, you changed your financial situation. That’s what they judged was the time it took to turn things around.

JA: And next time I want to make an Amazon purchase, I’m going wait five years. (laughs)

AC: I got to put it in my cart, and five years later I’m gonna buy it. (laughs)

JA: (laughs) Exactly. The next impulse buy that you have, you just wait five years and we’ll see if you still want it.

AC: Actually, a very wise financial planner that I talked to in my youth, his rule, and I thought it was a good one on impulse buying, he said, “When you really need to buy something, then just say, ‘OK, wait 30 days. I got to have this.’ Just wait 30 days and see if in 30 days you still got to have it. And the answer is usually no.”

JA: How about if it’s an Epi-Pen? (laughs)

AC: (laughs) Well that’s the impulse buy, that’s necessary. But your Chewbacca mask or your Darth Vader mask. (laughs) If you would’ve waited 30 days on that you’d be in much better shape.

JA: (laughs) We’re going to have a new segment on the show. The worst impulse purchases ever.  I was at the gas station right by our office there. So I go in, and like, before I teach these adult education classes, I pop in there, I grab a water and a Monster energy drink, just to get me all fired up. So go in there, buy my stuff, and he’s like, “yeah, heard you like Darth Vader.”

AC: How’d he know that?

JA: Big fan of the show.

AC: Oh, and we talked about that.

JA: Yeah, I was sitting there and I heard your voice. I’m like, “What the hell? Why am I hearing Big Al? I’m in the gas station. He’s not here.” And then I thought it was my phone. And I was like, “well maybe I had the podcast on the phone because I listen to the podcast 24/7 because I can’t get enough of it. And then the gas station guy, all of a sudden there was a commercial, you and I are on the radio teasing something, and I go, “Hey bud, that’s me.” He’s like “Yeah. Oh yeah. Wow. Big Al. Love Big Al. Nice to meet you, Joel.” (laughs)

AC: Yeah, I don’t know what your name is, but we love Big Al. (laughs)

JA: Hey, can you tell Big Al to come in? Does he need gas? (laughs)

Your Money, Your Wealth isn’t just a podcast, it’s also a TV show! Check out Your Money, Your Wealth on YouTube to watch clips on estate planning with attorney Nicole Newman, Trump’s Proposed Tax Plan, Social Security Savvy, all about the 401(k), and much more. Coming soon, an in depth look at Medicare, and reverse mortgages with retirement researcher Wade Pfau. (drop)  Don’t miss the Your Money, Your Wealth TV Show – just search YouTube for Pure Financial Advisors and Your Money, Your Wealth.

JA: Maybe one more email then we’ll get out of here.

AC: OK, what do you got?

54:44 – When I Pass Away, What Is the Cost Basis of My Stock That Is Held in Trust for My Beneficiaries?

JA: OK. “When I pass away, what is the cost basis of my stock that is held in trust for my beneficiaries?” That is the full question.

AC: OK well that’s easy. So when you pass away, and I’m going to first talk about California, which is a community property state, and California, when you pass away, it doesn’t really matter. If you’re married and one spouse passes away, the other spouse receives a full step up in basis. If you’re in a non-community property state, you only get half step up in basis. But to answer this question specifically, so when you pass away and you got assets that will be in trust for the kids, they would get a full step up in basis, as long as it’s not in a retirement account. I’m presuming it’s not in a retirement account. So you bought this stock for $10,000, and now it’s worth $50,000. Just as an example. So when the kids inherit it, their cost basis is $50,000, the value your date of death. Then they can sell it for $50,000 and pay no tax. Had you sold it the day before you passed away, there’s a $40,000 gain in that example, and you’d pay tax on that. But your kids, in trust or the trust sells it, doesn’t matter, then there’s no tax to pay, unless it goes up from that point. Maybe the $50,000 stock, by the time the trust sells it, it’s worth $60,000. Then there’s a $10,000 gain in that example.

JA: So that’s any non-qualified asset, that’s a capital asset. So there could be real estate. So let’s say, your folks who have a property that they bought for $50,000, it’s worth $500,000 today in Southern California, and they pass away, you inherit the house, and you’re like, “I’ve got a lot of tax to pay here.” Well no, it’s a full step up in basis, so now your basis is $500,000. Hey, does it make a difference if it’s in a trust or not?

AC: If it’s in a trust, well it depends on the type of trust.

JA: Let’s say they don’t have a trust. It’s not a trust, does it matter?

AC: Well, if they don’t have a trust, they own it personally, they get the full step up in basis.

JA: I mean I guess the question is, it doesn’t necessarily have to be in a trust to get the step up in basis.

AC: No. That’s a good point. Yeah. If it’s in their living trust, full step up in basis. If they don’t have a trust, full step up in basis.

JA: Unless now it’s joint. So there are some tiling issues that some people have. Let’s say you’ve got a married couple. Both spouses that’s when people inherit it, you would get a full step up in basis anyway, but you could get a half step up in some instances.

AC: It’s a good point because that happens sometimes like a couple will own their house jointly in California, community property state. Had they held it within their trust, or if even if they don’t have a trust, you’re supposed to hold it as community property with rights of survivorship, then you get a full step up in basis. The survivor, if it’s held in joint tenancy, which in a lot of cases that’s what people do by default, when your spouse passes, then you receive only a half step up in basis, which means if you were to sell the property, then half of it is at that higher amount. But the other half doesn’t. And so you could have a higher gain. Now, of course, exclusions on selling your residence, and there are all kinds of ways to avoid tax, but that’s a really easy one to avoid taxes for your spouse if you pass away, is to hold the property is community property. And if you have a living trust, it’s already held as community property. That’s the way the attorney is going to write that.

JA: But then you get into retirement accounts, and that’s a whole different ball of wax.

AC: Yeah, retirement accounts, there is no step up in basis. Meaning that you have an IRA, you have a 401(k), because when you pull the money out, then you’ve got to pay tax on it. And when your kids inherit it, they have to pay tax on it. There’s another one too, is an installment note. If you sell a property and receive a note instead of all cash, in other words, you’re receiving payments, like you’re the bank, well there’s no step up in that note. So when the kids inherit that note, they’ll still have to pay tax. They just kind of take over your position. And Joe I just want to say one more thing quickly, and that is, a lot of times people in their 80s, they’ve got rental property, and they want to sell it, because they know the kids don’t want it, and they want to go ahead and sell it to make it simpler for the kids, and that could be a huge mistake, because they’ll have to pay all the taxes on that sale. If they just pass away with the properties and let the kids do the sale, then there is no tax because of the step up in basis.

JA: How about if they live until 100, Al?

AC: Have the kids manage it.

JA: You could probably do a 1031 exchange.

AC: You could.

JA: Just put it into a big property, get a property manager and hold on.

AC: Yeah. Just let the kids take care at that point.

JA: Yeah. Well, I think there’s a lot of different things too, like stock portfolios. Individuals will come in and, “I’ve been managing this for 50 years and I’m in my 80s. Can you help manage it?” And so then that’s kind of a tough position when you’re in your late 80s and maybe, I hate to be sexist, but a lot of those scenarios, it’s the the the old man that had been running the finances. And he’s in ill health, and it’s like, “I want to make sure that the family is taken care of.” And it’s all non-qualified because, in their 80s, they didn’t have 401(k)s when they were working.

AC: Yeah, all their assets are outside of retirement accounts.

JA: It’s all individual stocks. They never sold them. So they got huge gains. They might be living off of dividends, or they have pension plans. It’s like, “well yeah can you help manage this?” And it’s so morbid too. Well if you just hold on and you die then it gets a step up in basis.

AC: You have to have that discussion though.

JA: Right because the taxation on it, it’s like, “OK well if we manage it, we’re going to have to blow out some of these positions. It’s going to cause tax.” So I’m not going to charge you just to hold your position. I mean, that doesn’t make any sense. Nobody’s going to charge you a couple hundred bucks an hour to come in once a year. But then when you pass away, then there’s a lot of work. So it gets a little fuzzy.

AC: But I hate to have the primary strategy is to die. I don’t like that. But sometimes that’s the right one. (laughs)

JA: Well, come back when you’re dead. We’ll love to help you out then. It’s just awful. (laughs) That’s it for us today. We’ll see you again next week. Show’s called Your Money, Your Wealth.


So, to recap today’s show: A step-up in cost basis depends on which state you’re in. When you run the retirement numbers, you need impartial professional advice, you need to be honest with yourself, and you may just need to save more damn money. And hey, there are at least 99 side hustles out there that can help you with that!

Special thanks to our guest, J. David Stein, host of the Money For The Rest of Us podcast, for telling us how to Mind The Gap between income and spending in retirement. Visit MoneyForTheRestOfUs.com to learn more.

Subscribe to the podcast at YourMoneyYourWealth.com, through your favorite podcatcher or on iTunes, where you can also check out our ratings and reviews. And remember, if you have a burning money question for Joe and Big Al to answer on Your Money, Your Wealth, just email info@purefinancial.com – we may even call you and put you on the air! Listen next week for more Your Money, Your Wealth, presented by Pure Financial Advisors. For your free financial assessment, visit PureFinancial.com

Pure Financial Advisors is a registered investment advisor. This show does not intend to provide personalized investment advice through this broadcast and does not represent that the securities or services discussed are suitable for any investor. Investors are advised not to rely on any information contained in the broadcast in the process of making a full and informed investment decision.

Your Money, Your Wealth Opening song, Motown Gold by Karl James Pestka, is licensed under a  Creative Commons Attribution 3.0 Unported License.

About the Hosts

Joe Anderson



As President of Pure Financial Advisors, Joe Anderson has led the company to achieve over $1.5 billion in assets under management and has grown their client base to over 1,300 in just nine years of the...

Alan Clopine



Alan Clopine is the CEO & CFO of Pure Financial Advisors. He currently shares the CEO role with Michael Fenison, the original founder of the company. Alan is primarily responsible for the day-to-day activities of...