Joe Anderson
ABOUT Joseph

As CEO and President, Joe Anderson has created a unique, ambitious business model utilizing advanced service, training, sales, and marketing strategies to grow Pure Financial Advisors into the trustworthy, client-focused company it is today. Pure Financial, a Registered Investment Advisor (RIA), was ranked 15 out of 100 top ETF Power Users by RIA channel (2023), was [...]

Alan Clopine

Alan Clopine is the Executive Chairman of Pure Financial Advisors, LLC (Pure). He has been an executive leader of the Company for over a decade, including CFO, CEO, and Chairman. Alan joined the firm in 2008, about one year after it was established. In his tenure at Pure, the firm has grown from approximately $50 [...]

Andi Last

Andi Last brings over 30 years of broadcasting, media, and marketing experience to Pure Financial Advisors. She is the producer of the Your Money, Your Wealth® podcast, radio show, and TV show and manages the firm's YouTube channels. Prior to joining Pure, Andi was Media Operations Manager for a San Diego-based financial services firm with [...]

Published On
October 31, 2023

Can Jessie and Becky in Iowa retire now at age 52? Should Robert and his wife file their taxes separately, to pay less tax on their required minimum distributions? Can Joe and Al validate Mike in Minnesota’s retirement plan, and does a backdoor Roth make sense for him? How in the world will Mike in New York be able to retire at a reasonable age? And what will retirement income look like for Marty in San Diego? Just spitballs here, no retirement advice!

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Show Notes

  • (00:49) Can We Retire Now at Age 52? (Jessie and Becky, IA)
  • (10:09) Should We File Taxes Separately to Minimize Taxes on RMDs? (Robert)
  • (19:56) Validate Our Retirement Plan: Does a Backdoor Roth Make Sense? (Mike, MN)
  • (25:11) How in the World Am I Going to Retire at a Reasonable Age? (Mike, Utica, NY)
  • (29:19) What Will Our Retirement Income Look Like? (Marty, San Diego)
  • (35:06) The Derails

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Andi: Today on Your Money, Your Wealth® podcast 453, can Jessie and Becky in Iowa retire now at age 52? Should Robert and his wife file their taxes separately, to pay less tax on their required minimum distributions? Can Joe and Al validate Mike in Minnesota’s retirement plan, and does a backdoor Roth make sense for him? How in the world will Mike in New York be able to retire at a reasonable age? And what will retirement income look like for Marty in San Diego? If you’ve got money questions, or want a Retirement Spitball Analysis of your own, visit YourMoneyYourWealth.com and click Ask Joe & Big Al On Air. I’m producer Andi Last, and here to spitball on all of these questions – not to give recommendations or advice, mind you – are the hosts of Your Money, Your Wealth®, Joe Anderson, CFP® and Big Al Clopine, CPA.

Can We Retire Now at Age 52? (Jessie and Becky, IA)

Joe:  ”Hey, Andi, Joe, Big Al, thank you for the fantastic podcast. Looking for a spitball, my retirement readiness using fake names. We got Jessie and Becky from Iowa.” Andi, you picked those names?

Andi: No, they did. And the funny thing is halfway through the email, they switched back to their real names. So I had to change them back to Jessie and Becky.

Al: Well, good thing you read it.

Joe: “So we are both 52, y’all. We are recently empty nesters with 3 daughters. Our youngest just went off to college, which is fully funded through a 529. Our middle daughter just graduated college and started working full time and is nearly off our payroll.” Nearly. Sounds like Big Al.

Al: Oh, they’re never 100%.

Joe: “Our oldest is a special needs daughter living independently. We’ll have a special needs trust established and will be funded at the time of our death. Her day to day living expenses are covered. Our current income is around $200,000 a year and we’re putting $25,000 into our traditional retirement accounts. Our annual expenses, not including health insurance and taxes, are $86,000 per year. We want to retire right now.” They’re 52 years old. They’re done.

Al: Yeah, it’s enough already.

Joe: Jessie and Becky. They’re over it. They’re done. So In retirement, they need to increase their living expenses a little bit. They want to travel, they got some health care. So let’s plan on $125,000. “In looking at the Social Security Calculator, without any future contributions, Jessie would be eligible for $3,200 a month at age 67. Becky would be eligible at $1,600. We assume that in today’s dollars. We have no mortgage. We have no other debt.” Here’s the breakdown, Big Al, of assets. They got cash of $300,000. Retirement accounts, $2 million. Roth accounts, $400,000, and they got after tax brokerage account of another $900,000. Jeez, Louise, we got some big heavy hitters here this week.

Al: We do. Got some fat wallets already.

Joe: We got a little HSA account, $3,500, got a college fund of $130,000. So let’s just skip that. We got 9 plus 3, 1, 2, 3, what do you have? $3.5 million? $3.6 million?

Al: Yep. $3.5 million, let’s go with.

Joe: Congrats. At 52 years old.

Al: That’s amazing.

Joe: Al, did you have $3.6 million when you were 52 years old?

Al: No, I did not.

Joe: Because you had $8.6 million.

Al: Well, as you recall, at 52, I had a lot of real estate that wasn’t doing so well back then.

Joe: 52, that was 08.

Al: Those were tough times, actually. So I would gladly have been Jessie and Becky.

Joe: “Our asset allocation sits at 8% cash, 6% bonds, 86% equities. Jessie drives a 2017 Acura MDX and Becky drives a 2019 Cadillac.” A little XT5. I like the new caddies. “We appreciate your spitball regarding our readiness to retire today.” Okay. You got $3.6 million. You’re 52 years old. I think you’re looking pretty good.

Al: Yeah. So I did the math, Joe. If they want to spend $125,000 and they got $3.5 million, that’s a 3.6% distribution rate, which is normally a little bit higher than we want for 52 year olds. However, pretty good social security. So, it may be pretty darn close. If it were me, I would probably work 2 or 3 more years just to kind of cement this in a little bit better, but I think it’s pretty close.

Joe: Yeah, or they could work part time.

Al: Exactly. Or they could spend what they’re currently spending and do it immediately. $86,000 is what they’re spending right now.

Joe: But they have a health care cost that’s going to probably put a pinch on… maybe they travel every other year.

Al: Something like that. There’s lots of ways to do it. And even retiring now with what you want to spend. It’s pretty close. If I was set on that spending, me personally, I would work a few more years.

Joe: “Also, would you recommend-” No, we don’t recommend anything. We’re going to get in trouble here, Big Al. We’re not giving advice. This is not recommending. This is us just sitting at the bar having a couple pops talking. Hey, what do you think? I would love to retire. Can I retire? And then Al and I just kind of whip out our calculators. Yeah, you’re pretty close. And then they retire and then they run out of money and next thing you know, we get sued.

Al: Yeah. It’s like, one of you said 18 years ago, I could retire.

Joe: Yeah. I was Jessie and Becky. I don’t know if you remember me. We changed our names. So our real names are something else. They’re asking about Roth conversions in the years in early retirement. Well, so this is where it’s going to get a little bit tricky. Yes, I think on the surface, I think it makes a lot of sense to do Roth conversions because you could get your tax bracket really low because they have a brokerage account. The issue with the brokerage account, they also gave us a cost basis. So congratulations there. The level of detail we’re getting today is by far the best we’ve seen in years.

Al: It’s good. And it was done in less than a page.

Joe: Yes. And so the brokerage account is $900,000 with a basis of 4. So let’s say if they start depleting some of the money from the overall brokerage account, they might be able to stay in that 0% tax bracket. Because if you stay in the 10%, 12% tax bracket from a federal level, your capital gains are zero. So if they start doing Roth conversions, that’s going to kick their tax bracket up and capital gains sits on top of ordinary income, which will then make those capital gains taxable versus tax free. So they have to be careful with Roth conversions here too, if they’re going to live off the non qualified accounts, which they’ll have to at age 52.

Al: Yeah. No question about that. The top of the 12% bracket for a married couple is about $90,000 plus you get a standard deduction of about $25,000. So let’s call it $115,000, roughly, of income. If you don’t really have much income because you’re not taking anything out of the IRAs, which you wouldn’t get because you’re not 59.5. And so you live off your brokerage account and you could actually sell some of those stocks. You could sell about $115,000 of gain, less any other income you might have from what other source, and pay zero taxes on that capital gain. So it might be an opportunity to not only have your living expenses without taxes, but also get things rebalanced so that you’re appropriately invested for the future. So it’s kind of either or. Either you do that or you do Roth conversions. You don’t really do both in the same year.

Joe: And so, on the surface here, again, these are just spitballs giving the numbers. We have no idea what they’re invested in, how they’re going to continue to invest, how they’re going to create the income, how they’re going to take the money out, because you’re going to have to combine a couple of these different strategies to put the puzzle together. It’s a lot more complex sometimes than we make it sound just by, hey, yeah, 4%. Sounds good. Go for it. Pat on the back.

Al: And then they’re thinking they got the savings account. They got a long term savings account at 2% 5 years ago.

Joe: And it’s like, yeah, we’re running calculations at 6%, 6.5%. And it’s like, well, I didn’t hear that.

Al: Whoops.

Joe: Whoopsie.

Al: That’s why it’s important to re-emphasize, this is spitballing. We don’t really have all the facts.

Joe: We have zero facts. We have a couple of numbers on an email that you send us. Well they enjoy listening to the show as a native Minnesotan. “Appreciate Joe’s reference to the homeland. Thanks again for an entertaining and widely informative podcast.” All right. Hopefully that helps.

Andi: Take our retirement pop quiz in the podcast show notes to test your knowledge about retirement. Then, download the Retirement Readiness Guide to learn the secrets to controlling your taxes in retirement, creating income to last a lifetime, making the most of your retirement investing strategy, and much more. These plays will boost your retirement readiness despite the uncertainties of market volatility, inflation, rising healthcare costs, the future of Social Security and Medicare. Click the link in the description of today’s episode in your favorite podcast app, go to the show notes, take the Retirement Pop Quiz, and download the Retirement Readiness Guide for free. Then, tap the “share” button to share the podcast, the quiz, and the free resources with your family, friends, and colleagues.

Should We File Taxes Separately to Minimize Taxes on RMDs? (Robert)

Joe: “Hello, Andi, Joe, big Al. Found your podcast about 4 months ago after listening to many others and I’ve learned so much.” What have you learned? How much we like talking about beverages.

Andi: Alcohol.

Al: Dogs.

Joe: “I love that you guys get into the weeds with listener questions and I love the humor.” Thank you very much. “I drive a 2020 BMW X3 and we have an aging little rescue dog named Lily. I turn 72 next month and would appreciate a little spitball and any advice.” We don’t give advice, Robert. We’ll do a little spitball for you. “And where my wife and I are at with our retirement and what pitfalls can we avoid? I wish I discovered your podcast 5 years ago. My accounts consist of a brokerage account of $51,000, Roth of $48,000, rollover of $235,000, and another IRA that’s in a 3 year, I believe, fixed annuity at around $600,000.

Al: Total of a million.

Joe: “All at Fidelity. Also $60,000 in high yield savings. I’m working a few days a month making $1,000 to $2,000 a month.” He works 1 to 2 days a month and makes… A couple thousand bucks a day.

Al: Yeah I’ve, I called him up. I’ve just joined his firm.

Joe: Hiring there, brother? “But want to retire by the end of this year.” Why would you retire if you work 1 day a month and make $1,000? Or $2,000?

Al: It’ll keep you young, Robert.

Joe: Yes. “I’m getting about $38,000 in social security. My wife has $15,000 in a brokerage account, $115,000 in a Roth, $179,000 in an IRA, $292,000 in a managed brokerage account.”

Al: $600,000.

Joe: Okay, $600,000. “She’s got a pension of $4,000 a month from a teacher’s retirement.” So what’s that? $48,000 a year. “She also gets $186 a month from social security. We also have $30,000 in I bonds. We are told we can pull 10% from the annuities without penalties prior to maturity in 2 years. Next year, I turn 73, wife turns 72, and I will have to take RMDs. I converted about $30,000 this year from my to my Roth from my IRA. And I’m doing about $4,200 in QCDs to our church. My head spins when I think about all the nuances and strategies involved in making the right decisions regarding retirement. I would appreciate any advice regarding our situation.” My head is spinning just reading this email, Robert. “Number one, can my wife get spousal security if she has a teacher’s pension?” Yes and no. It’s going to be significantly reduced.

Al: I would say very little, not much.

Joe: I think she’s already claiming her own benefit, which is $186 a month with a $4,000 STRS pension or teacher’s retirement pension. So, no, I think she’s good. “Number two, are there any tax advantages to filing separately rather than jointly regarding taxes? When I retire in three months, my only income would be Social Security.” We get this question often.

Al: We do, and the answer is it depends on what state you live in. So, let me answer. If you’re in a community property state like our state, California, and I think there’s 11 or 12 others, then no. Community property state, you have to report half of each other’s income, and you end up paying more tax. Now, in a non community property state, it may be.

Joe: But only on the state level, not necessarily on the federal level, right?

Al: No federal level, too. I run both. In other words, you file two different returns for the federal and you have your accountant run the return both ways. The software will do that and then the accountant can tell you, yeah this year let’s go separate or next year joint or whatever it may be. So you can. And the reason it’s different in non community property states is you only have to report your own income. It’s not this 50/50 split like a community property state.

Andi: And it’s not a problem if you switch back and forth where you file married joint and the next you file separate?

Al: I don’t think so. The truth is I’ve hardly ever done it because we live in California. My tax clients used to be in California, so it really never came up, but I don’t think it matters, I think you could switch back and forth.

Joe: Because here’s what the concept is that, well, here, my wife has this $48,000 pension and she’s got other income or whatever she has. And I don’t have any income. So my income is 0. My wife has a bunch of income. So if we file separately, well then I’m not going to pay any taxes and then she’ll just pay taxes on her return.

Al: Yeah. And then he’s thinking I can do some Roth conversions on my side and pay very little.

Joe: Exactly, and I can take advantage of these lower rates and convert money into a Roth and not pay any tax or, like you said, pay very little. But in California, it’s basically the same and you just phase yourself out of other things pretty quickly because… The IRS, it appears they don’t really care for people filing separately, but that’s just my observation.

Al: Well, here’s my observation. They don’t necessarily care about it, but they do get sort of penalized because in many cases you do end up better. So they have quicker limitations, so to even it out a little bit more is what I’ve seen.

Joe: Third question from Robert here, “based on our ages, what would be a reasonable budget for us? I think we need $5,000 a month to cover expenses. My wife gives me $1,200 a month to help with the overall household expenses. Regarding where we take the money to pay the taxes on RMDs or any other actual items I can dig to mitigate taxes moving forward would be greatly appreciated. Keep up the wonderful work.” So he wants to spend $5,000 a month. I think you’re good. Her pension covers that.

Al: Totally good. Although the way I read the question, he says $5,000 a month to cover my expenses. So I think they might have separate money.

Joe: But she’s giving him $1,200.

Al: Right. And so I’ve got the answer. You can spend $92,000. Here’s how I get it. So I take your $1 million at 4%. That’s $40,000. I take your social security of $38,000. I take money coming from your wife of $14,000, which leads me to believe you could spend around $92,000, assuming that I’m understanding this question right. That you’re asking just for your side, because we don’t have enough information on what your wife wants to spend. So if I got the question right, I think you could spend about $90,000.

Joe: I think it’s way more than that.

Al: Well, yes but I’m taking him in a bubble because I think that’s how he asked it.

Joe: So you’re saying that Robert here…

Al: I’m saying Robert can spend $92,000

Joe: But his wife Myrtle is spending something now. So you think that it’s completely separate? Where he’s talking to his wife and is like, Hey, can you throw me a bone? I need another $1,200 on top of the $5,000 that I have so I can spend. And then you spend whatever you want from your pensions in your dollars. Is that how you’re reading this?

Al: That is, but let me answer it your way. So Robert can spend $92,000 and based upon wife’s income let’s see, minus the $1,200 ish probably another $70,000.

Joe: Yeah I’m thinking close to $200,000, $150,000.

Al: Yeah. I get $150,000, $160,000 joint. But if you’re just looking at your side, I think it’s $90,000.

Joe: Is that how you and your wife run your finances?

Al: No, absolutely not. But some people do, Joe.

Andi: I know some friends of mine, they’ve been married since 1981, and they’ve kept their finances separate the entire time.

Al: Yep.

Joe: So they go out to dinner and it’s like, Hey, can we get split checks?

Andi: No. Sometimes one will pay the next time the other will pay. If they’re doing house renovations, then some of it comes out of your account. Some of it comes out of my account. I’ll pay for fixing the refrigerator this week, and next month you pay for something else – and they’ve done that for years.

Joe: You think they have a journal?

Andi: Probably.

Joe: Hey, I picked up Applebee’s last week.

Al: I’ll tell you where I think it’s common is second marriages when you’ve already accumulated assets and you have different kids, that’s very common that they keep it separate. So that’s one way. Another way is I know couples too, from the very start, Andi, just like you, they just wanted to keep their finances separate. That’s just how they’ve done it.

Andi: Joe’s going, “Dang it, I wish I had thought of that.”

Joe: Yeah. I know.

Al: It’s too late.

Joe: Well, it’s my first, t’s her second. She’s got a kid. So, yeah I’m going to start employing that. We’ll see how far that goes.

Al: I wouldn’t recommend it if you haven’t already done it.

Validate Our Retirement Plan: Does a Backdoor Roth Make Sense? (Mike, MN)

Joe: We got Mike from Minnesota on the line here. He goes, “hello, I’m seeking validation or recommendations”. What’s up with these recommendations? We don’t give recommendations here. We don’t give advice. So validation. Can we even give a validation?

Al: No.

Andi: You can spitball.

Al: We’re spitballing. We’re just chatting on a bar stool about your situation based upon what we know about you.

Andi: The longer the show goes on, the less likely it is to be a good spitball because they’re drinking.

Joe: Alright. What’s he asking here? He’s got a household income of $250,000. “Here is some personal information about us. We are 41 and 43 years old, 5 and 2 year old daughters. We have $0 debt outside of a $220,000 mortgage, which will be paid off in 3 years.” He’s maxing out his 401(k), he’s maxing out a simple IRA, and they’re maxing out an HSA, and they got a couple thousand going into little 529 plans. They’re also trying to put in 15% in a taxable brokerage after their Roth 401(k). “I’m also curious considering our income and tax rate, if a backdoor Roth makes sense for use, or if we should just contribute with the taxable account as we anticipate our retirement withdrawal will be less than $100,000 annually. Currently, we have $400,000 in retirement accounts. Thank you. And please continue the great work you do to educate us through your podcast.” This is one of the strangest questions we’ve got.

Al: So back to a Roth, does that still make sense? That’s one. Is there another question?

Joe: I don’t know. He’s going to pull out $100,000. I don’t know when.

Al: Well, if you’re asking us to spitball whether you’re on track for retirement, we don’t have enough information.

Joe: We need to know when you want to retire. But if you’re going to spend $100,000, is that in today’s dollars? But let’s do this. Al, you got your calculator?

Al: I do.

Joe: So he’s putting in, let’s say it’s $40,000 a year, $400,000 at $40,000 a year contributions.

Al: I’ll do 6% and why don’t we go about…

Joe: 20 years?

Al: Yeah. 20 years. That sounds good.

Joe: $2.5 million, something like that? Maybe $2 million?

Al: Let’s see. I did something wrong here.

Andi: See? I told you the more you drink, the harder it gets.

Joe: $2.8 million. So if you continue to contribute what you’re contributing with $400,000 in retirement accounts and you go 20 years, you got $2.8 million. Let’s call it 3%, well at 62, probably 4%. So it’s $100,000 and some change.

Al: Yeah, I get $112,000. Let’s just say $110,000 is probably the number. Plus you got social security coming, which I don’t think we know what that is. If $100,000 is what you want to spend, and that’s in today’s dollars and we use a 3% inflation rate, that’s going to be $180,000.

Joe: It’s close.

Al: Close. We don’t know what social security is. That’s typically what fills the gap in a situation like this. And maybe work 23 years. But I guess the point is you’ve got something very workable here.

Joe: If that’s a question, we’re just making this up now as we go.

Al: It is good when we have specific questions rather than… but the one question was, “should I keep doing a backdoor Roth?” And the answer is yes, next question.

Joe: All right, Mike. Well, you’re saving a ton of money. You’re saving $40,000 in the 250. What? I don’t even know what percentage that is, but it’s…

Al: It’s a good percentage. That’s 16%.

Joe: Oh, yeah. That’s fair. That’s strong. That’s a strong percentage. “How’s my portfolio?” Yeah, it’s strong.

Al: Don’t worry about the balance. It’s strong.

Joe: “How’s my savings rate?” Strong. You’re doing a hell of a job, Mike. Hopefully that helps a little bit.

Andi: What about you, are your portfolio and savings rate “strong?” Spend a couple minutes with our retirement calculator at EASIretirement.com and find out – it’s free. Create an account, plug your income, savings, and expenses, and see how likely you are to run out of money in retirement. E-A-S-I stands for education, assessment, strategy, implementation: these are the building blocks of a sound retirement plan. YMYW provides the education, and the calculator helps you assess your financial wellness and map out your strategy. Then, click Planner Plus anywhere in the calculator to talk one on one with an experienced financial advisor to begin implementing a plan. Try it for yourself now at EASIRetirement.com and let us know what you think. That’s EASIretirement.com. 

How in the World Am I Going to Retire at a Reasonable Age? (Mike, Utica, NY)

Joe: “Hey there, Joe, Big Al. Just want to reach back out and say that my kids did go to stuntman training.” Didn’t we…?

Andi: He’s following up letting us know that yeah, they went and they enjoyed it.

Joe: “They had an absolute blast. They learn how to fight like they do in the movies. It’s very interesting to watch them on the weekends. Anyway, we’re currently on our way to the National Museum of Funeral History.”

Al: They had some other trip to some weird place, didn’t they?

Joe: Yeah.

Al: I can’t remember what it was.

Andi: I can’t either. Is that like foreshadowing? They’re going to stuntman training, so now they need to know funeral history?

Al: Could be.

Joe: “Of course, it wouldn’t be a happy road trip without throwing on a couple of your old episodes. The kids love it. Just had a question about how in the world am I going to retire at a reasonable age. I’m 45 and my wife’s 44. I work outside the home and she’s a homemaker and also homeschools the kids.” What if she teaches them a little bit more on the stunts?

Al: Could be, or bat funerals or whatever their interests are.

Joe: “I make about $120,000 a year and currently have about $150,000 in my 401(k), $30,000 in a Roth IRA, contribute a total of $1,500 to my 401(k), $500 to my Roth, monthly. Would I be on track to retire at age 70 if I estimate my expenses to be $70,000? Or will I work until I keel over? Will I have to contribute more to hit my goal at 70? Any insight you guys can provide would be awesome.”

Al: Well, I did a little math there, Joe. So let me take a stab at this. So they’ve got $180,000 to start with. They’re adding $24,000 a year. I just used 6%. Pretty conservative rate. Over 25 years. They end up with $2.1 million, 4% distribution rate, $84,000 and then social security, who knows? I’m just, I’m going to estimate $60,000 at that point. So that’s $144,000 roughly of a quick calculation of income and their expenses at 70, 25 years from now at 3% is $146,000. So it’s the same number. So, yeah, it seems like, Mike, you may be on track. What I would be interested in if I were you is, how much more would I need to spend so that I could retire at 67 or whatever age you decide. And then maybe it’s worth putting in a little bit more to do that if that’s what your goal is. That’s how I would approach this. But based upon these very quick numbers, I think I think you’re on track.

Joe: A couple of things to note here, too. As we go through all of these different cases, there’s so many things that can change. Inflation can go up, it can go down. We use certain averages. The rate of return on the overall portfolio, if you get a 0.5% more over 15, 20 years, that’s a big number. Your living expenses might go up or down. You might move. There might be a health issue where you might have to pull a lot of money out of the overall accounts to do something for an emergency. So, this is why this is a process. And please don’t email us every 6 months to say, hey, am I still on track? This is something for you all to really pay attention to. But what we’re trying to do is give you a good starting point. To say, hey, am I on track? Am I doing the right things? Are there some ideas and strategies that I should be looking at? Or maybe you have questions in regards to certain tax laws, if you qualify or don’t. And we’re trying to have fun with this. And thank you all for bringing in a ton of these emails. I don’t know when we’ll ever get through with them, but from a compliance perspective…

Al: This is like the compliance show.

Andi: Have they come down on you, Joe?

Joe: Yeah, I’m getting my ass kicked over here. So this episode we’ll keep on playing to the regulators when they come knocking on your door, Andi.

What Will Our Retirement Income Look Like? (Marty, San Diego)

We got Marty. San Diego. “Hey gang. Wife and I are both 40 years old. We live in San Diego. Together we make about $165,000 gross. We fully invest in our Roth IRAs, put a couple hundred bucks in the HSA and 529 each month. My wife contributes enough to get the max in her 401(k), only 3% or so. We have about $150,000 in our Roth, $80,000 in pre tax accounts. $35,000 in cash, $20,000 in 529, $20,000 in after tax brokerage.”

Al: $300,000.

Joe: “We both plan on working for 20 to 25 years as we like our jobs of a teacher and a nurse. We both also have pensions and together they should total around $230,000 or so a year at 65.” Wow, that’s a big number.

Al: Yeah, that’s very strong.

Joe: Okay. Well, that’s it. “Can we retire?” Sure. Another crispy boy. “I don’t know what our expenses will be in retirement. We currently spend about $12,000 a month. We’re pretty simple people who will want to travel a bit. Eat good food and spoil our future grandkids. Nothing super excessive. Can you spitball what our retirement income may look like? Also, how would it look differently if we stopped contributing to our Roths in about 5 years? We are considering upgrading to a different house. And I don’t know if we can upgrade as well as put the money into the Roths. Lastly, if I do feel like it’s getting too tight to contribute to our Roth, should I sell the stocks in my after tax brokerage and use the money to invest a few more years in our Roths, or just keep it in the brokerage? Thanks. I’ve been binge listening to the show, and I’ve laughed and learned a lot. Marty.” Thank you, Marty. I like where his head’s at. He’s going to have a ton of money in pensions. But that’s assuming that if they work 20, 25 years, something could happen, God forbid nothing happens, but something could, that could blow them up, so I don’t want them to stop saving money.

Al: I agree. I did just a little simple math. It’s starting at $300,000 doing the Roth IRAs. I just did $13,000 a year between the two of them, 25 years, even though there’s a catch up later. And they probably end up 6% at about $2 million. At a 4% distribution rate at that point is $80,000, and they say the pension is $230,000, just assuming it’s a flat number. Maybe it’s going to be a lot higher, but that’s $310,000. And if I look at their current expenses of $144,000, 3% of 25 years, I get $300,000. So they’re right on track. So I would say, Marty, this looks pretty good. If you want to take a little bit of money out for the home. Yeah, you can figure it out. You’re kind of right there, but I think you got some room to maneuver.

Joe: Yep. I agree. Take the money from the brokerage and put it into the Roth, if you can’t afford it from cash flow. Because you always have FIFO tax treatment, first in, first out. So any dollar that you put into a Roth IRA, you can take right back out, no taxes, no penalties. But all the earnings are going to continue to grow for you tax free. So I’d much rather have money in a Roth. Let’s say, if the money in the brokerage account is still earmarked for your retirement, well then put it into a Roth IRA for sure if you can’t cash flow. Let’s say you want the nicer home, or the bigger home, or I don’t know if it’s nicer, maybe it’s bigger, different area, whatever. And then cash flow is a little tight. If you want to stop contributing, but still put money into the Roth each and every year by transferring it from the brokerage account, because you still have access to it. There’s still liquidity there. You just won’t have access to the earnings until you’re 59.5 or 5 years, whichever is longer. So if you get the new play, curious on what kind of new fridge he’s going to put in the garage.

Al: Yeah. And then drop us a line. Joe’s going to show up unannounced. You better have a lot of Coors at all times.

Joe: Keep that thing stocked. Cool. Are we done?

Andi: We’re done. That’s all.

Joe: That is it for us. Appreciate y’all listening. We’ll catch you again next time. Show’s called Your Money, Your Wealth®.

Andi: Canadian whiskey, hard seltzer, what up and howsit, 17 years of YMYW, Joe’s mellowing, crispy boys in the garage fridge, and binge-ing in the Derails at the end of the episode, so stick around.

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The Derails



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