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 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 moderator for the firm's digital events. Prior to joining Pure, Andi was Media Operations Manager for a San Diego-based financial services firm [...]

Published On
January 9, 2024

We’re revisiting your favorite Your Money, Your Wealth® topics and Derails of 2023 in this Roth and retirement investing mega-episode. Safe investing when you’re risk averse, mutual funds vs. ETFs, stable value funds, and estimating retirement income needs when you’re a young saver with a pension made the YMYW best of 2023 on the investing side. On the Roth side, what to do when there’s too much money in your traditional IRA, whether Roth conversions are really as good as they sound, and who’s right about the Roth conversion strategy, our listener or his advisor? 

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Show Notes

  • (01:05) How to Safely Invest and Protect $400K When You’re Risk Averse (Tyler, OH – voice – from episode 425, among YMYW most popular 2023 episodes on YouTube)
  • (07:43) Stable Value Fund Vs. Brokerage Account for Living Expenses? (Sharon, Waukesha – voice – from episode 424, among YMYW most popular 2023 episodes on Apple Podcasts)
  • (17:02) Mutual Funds vs. ETFs in a Tax-Advantaged Account? (Midwestfabs, St Paul, MN from episode 420, among YMYW most popular 2023 episodes on Spotify)
  • (23:40) How Should Young Savers Invest Pensions and Estimate Retirement Income Needs? (Adam, Oregon – from episode 413, among YMYW most popular 2023 episodes on Spotify)
  • (29:43) I’m Not Sure Roth Conversions Are as Good as They Sound! (Christine, Seattle – from episode 440, among YMYW most popular 2023 episodes on  Apple Podcasts)
  • (39:31) Who’s Right About My Roth Conversion Strategy, Me or My Financial Advisor? (Brad, Sarasota, FL – from episode 409, published at the end of 2022, but one of our 2023 top viewed on YouTube)
  • (49:17) We Have Too Much in Traditional IRA. How’s Our Roth Conversion Plan? (Kelly, Idaho – from episode 423, among YMYW most popular 2023 episodes on YouTube)
  • (01:00:59) The Best YMYW Derails of 2023

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Thanks to our listeners, Your Money, Your Wealth® received the following recognition in 2023!


Andi: It’s a Roth and retirement investing mega-sode, today on Your Money, Your Wealth® podcast 463! We’re revisiting your favorite YMYW topics and Derails of 2023, based on downloads and views on our most popular platforms – Apple Podcasts, Spotify, and YouTube. Safe investing when you’re risk averse, mutual funds vs. ETFs, stable value funds, and estimating retirement income needs when you’re a young saver with a pension made the YMYW best of 2023 on the investing side. On the Roth side, what to do when there’s too much money in your traditional IRA, whether Roth conversions really as good as they sound, and who’s right about the Roth conversion strategy, our listener or his advisor? Check the description of this mega-episode to jump directly to any question, to see which episode each question originally comes from, and to see where it was most popular. I’m producer Andi Last, with the hosts of Your Money, Your Wealth®, Joe Anders on, CFP®, and Big Al Clopine, CPA, and first up is a voice message – they always get priority here on YMYW.

How to Safely Invest and Protect $400K When You’re Risk Averse (Tyler, OH – voice)

Tyler: “Hi, Joe, Alan and Andi. This is Tyler from Ohio. It’s been a couple years since I’ve called in, but I have a new situation that I was hoping to get your thoughts on. This involves my parents, who I would say are highly risk adverse people. In 2009, they took all of their retirement accounts out of the market, despite significant penalty and loss and turned to real estate, which my father’s been doing all his life. They are now in their late 70s and have just sold the last rental property that they have ‘cuz it’s time for them to get out. It’s just too much for them to handle anymore. So they are sitting on about $400,000, which I would consider cash because it is in a bank savings account, earning 0.1% interest. So just in our discussions with what they wanna do with the money, they are not sure, but they know they don’t wanna lose it. So I suggested they at least look at maybe an online savings account or perhaps some CDs so that they get a little yield versus 0.1%. And then they went to their bank, which of course they’ve been banking with for 30 years, to ask about other accounts that they have and came home with annuity brochures, which was very frustrating on my part. But in terms of their monthly income, their pensions and Social Security bring about $8000 a month, which completely cover their monthly expenses. So I don’t think they need an income stream of any sort. But I wanted to get your thoughts on what are kind of the appropriate investments they need to be considering if their goal is really just to protect this money and not necessarily to grow it. Love listening to the podcast. I do so in my Toyota minivan with my children. I usually have to turn the podcast up pretty loud to cover their complaints for mom listening to the podcast again. But I will say that my 17-year-old, who just got his first job this year, came home and asked me if I could help him set up a Roth IRA. So some of it’s sinking in despite them not wanting to hear it, but- Love it. Thank you for all the great advice and hope to hear from you.”

Joe: Wow.

Al: That’s great. Great question. And Tyler, we enjoyed listening to your voice and hearing your questions.

Joe: Yeah. 17-year-old, open up a little Roth IRA, the kid’s gonna be a billionaire. Thanks to us.

Al: You know it. I’m trying to think, what was I doing with my kids at 17? I don’t think they had earned income yet.

Andi: You weren’t forcing them to listen to a podcast, that’s for sure.

Al: No, but they both have Roths now.

Joe: No. All right. What do you think Al? So they went to the bank, bank was like, you want zero risk, so you should go into an annuity.

Al: Yeah. Which I’m not surprised ‘cuz that’s the same thing has happened to me at two different banks.

Joe: You could get a deferred annuity that’s gonna give you probably the same rates, maybe a little bit higher than a CD. The income grows tax-deferred. When you pull the income out, it’s gonna be ordinary income, so you don’t necessarily have to annuitize it. So if they want absolute guarantees, that’s an option. I don’t know if it’s my favorite option, but that’s definitely an option. There’s all sorts of different flavors of annuities. We kind of bash annuities on this show. But you know, if I’m looking at just the straight fixed deferred annuity or multi-year guaranteed annuity, that might not be a bad choice for someone that wants zero risk. Because you already know what they did before. When they saw their accounts go down, they said, screw this, I’m gonna cash out, pay taxes, pay penalties, and I’m gonna go into real estate. So that’s gonna hurt them more than probably a guaranteed product.

Al: Yeah. Well, you bring up a good point and that- and we probably don’t talk about it enough. So annuities get a bad name because a lot of them are somewhat misrepresented in terms of what you’re getting, what the benefits are, what the potential rates or returns are. The fact that it’s hard to get your money out without penalty. But- and the commissions, people say, well, there’s no costs in here, but there are costs, whether you know it or not. So not all annuities are bad. But I still wouldn’t go that route. I would go personally, I would go back to the bank and just open up a CD that- and I’ve checked recently because I just open up a CD myself last week at a large bank-

Joe: You had a little extra cash?

Al: Little extra cash. That wallet was getting so fat. I just had to take it over.

Joe: You could barely sit down. You had to go to the bank, open a little CD.

Al: I had to rent a little pickup truck to get it there. So anyway-

Joe: – armored car.

Al: Yeah. Yeah, armored car.

Joe: Got it.

Al: So, but the rate at a big, too big to fail bank was over 4% for a 13-month CD. That’s what I would do right now. That doesn’t mean it’s gonna be that rate forever, but at least for the next year, to me, that’s a great rate. That’s what I would do because you can always get at your money. And if you do take your money out early on something like that-

Joe: Lose the interest?

Al: You lose the interest. So it’s not necessarily the end of the world, particularly when you’re used to getting 0.1% or in some cases 0.01% interest on a money market.

Joe: Yeah. I think it really depends on Tyler’s parents and they’re in their mid to late 70s, it sounds like they got a ton of cash flow, $8000 a month.

Al: It sounds like plenty for their living expenses.

Joe: Right. And so, if they wanna lock the money up for a little bit longer, they might be able to get a little bit higher yield, that’s guaranteed. You know, and I think they really like the guaranteed aspect of it.

Al: They want safety. And I think that to me, that’s the one instance where you might, I might be okay with that annuity if it’s one of the products that you just talked about and it’s for someone that wants zero risk, it can work.

Joe: So, yeah, I hope that helps. But, CD’s a good route. You know, there, there’s all sorts- you could even go money market today, you know-

Al: In some banks. The bank I checked, it was paying 0.03%, the money market there. So it wasn’t very good.

Joe: All right. Thanks Tyler and good luck to your 17-year-old, way to go.

Stable Value Fund Vs. Brokerage Account for Living Expenses? (Sharon, Waukesha – voice)

Sharon: “Good morning, Joe, Big Al, and Andi, Sharon from Waukesha. First, thank you for your podcast. Again, one of my faves. I’m still driving the 2016 Honda CR-V. Still catering to my two rescue cats, Izzy and Baby, and I wouldn’t turn down a cup or two of red wine. Hey, a couple questions around stable value funds and the use, the purpose of them, I guess. I have a stable value fund. It’s called the annual fixed rate fund in my 401(k). Although really my main question is figuring out where to pull money for living expenses in 2024. I retired at the end of 2021 and I’m currently draining all my cash as I ride out this down market. The cash runs out end of 2023. My annual expenses are about $55,000. I’ve already rolled my 401(k) into an IRA, but I do have some funds in my 401(k), specifically $58,000 in a 2030 target fund, and I have $41,000 in a stable value fund. It’s a stable value fund that I’m really kind of looking at. Current return rate on this fund is 5%, average return rate has been 5% or higher since inception, 1997. Zero fees associated with this stable value fund. I know I’ve asked you a question about this before in the past and you have sounded skeptical, but there are zero fees. Expense ratio as of 2022 is zero, purchase fee none, redemption fee none, 12B fee none, unless I’m missing a hidden fee. So does it make sense to draw down on this stable value fund for a living expenses in 2024? Or it’s just better to tap my brokerage? Is there any value enrolling that 2013 target fund of $58,000 into this stable value fund and building it? Or should I just roll both funds in my 401(k) to my IRA and be done and start draining my brokerage account to cover expenses for the next few years? What are your thoughts really around this stable value fund? What should I do with it? Especially now that savings rates are starting to rise. I currently get 4.2% for my cash savings. Should I be tapping it, keeping it for later, or rolling it into an IRA? Any thoughts? Thanks so much guys.”

Joe: Thank you, Sharon. Sounds like I was back at home.

Al: Yeah, right?

Joe: You could tell that Midwest accent.

Al: You got it. Yep. You heard that too?

Joe: Yeah. You betcha I did.

Al: Yeah.

Andi: Joe.

Al: You betcha.

Joe: Okay. Couple of thoughts. So she’s got multiple questions here, kind of baked into one.

Al: Yeah, she does. They’re kind interrelated, but there’s a few different points we’ll probably wanna make. Maybe we should explain what’s a stable value fund?

Joe: Well, I think before the investment you gotta come up with the strategy, right?

Al: Right. Yeah.

Joe: And so she’s drawing down cash is what she said. Do we know how old Sharon is?

Al: No, and we also don’t know her income, which we kind of need to know that.

Joe: She wants to live off of $55,000 a year. So I don’t know if she’s claiming Social Security or not. I don’t know if she’s got a pension or not. So if she’s drawing cash, maybe she should be drawing cash. She’d be drawing from her 401(k) at least to the top of the 10% tax bracket.

Al: Yeah. Well, right, exactly. I had the same thought, but we really don’t know what her income is, so, so, yeah. So, so the first thing you wanna do is look at your taxable income to figure out what tax bracket you’re in. And the 12% bracket for- I’m assume she’s single, she didn’t mention a husband- is about $45,000 taxable income. Which you always get a standard deduction of- what’s that, about $13,000 ish? So let’s just round it up. So income somewhere around $50,000 for a single taxpayer would put you roughly at the top of the 12% bracket, roughly, right? So, so then the question is, if your income is $40,000, not $50,000, so then you actually wanna take about $10,000 outta your IRA or 401(k) to fill up that low bracket, right? Because you’re gonna have to pay tax on that money anyway. So fill up that low bracket. Now, on the other hand, if she’s getting big pensions, you know, maybe not. Cuz her spendings $55,000 and she’s gotta use cash to pay for at least some of it.

Joe: Right. But if she’s taking, she, it sounds like, all right, I’m depleting my cash and then now I’m going to my brokerage account. And then I’m gonna roll this into the IRA. Oh, and by the way, I looked at this investment. And the stable value fund is getting 5%. Should I take it from there? Well, you gotta look at the taxation of the account, and then from there, you wanna start looking at how you invest those accounts to create the income that you need, especially if you’re retired.

Al: Yes. That is the right flow.

Joe: So high level with the stable value fund- if stable value funds are great, they’re in 401(k)s, it’s kind of like a pooled investment. So if it’s paying you 5%, no fees, yeah, all day long, you probably wanna go into that, especially as you’re transitioning into retirement. So by rolling the money out, can you get something comparatable? Is that a word? Comparatable?

Andi: Comparable.

Joe: Comparable. Comparable. Thank you.

Andi: Comparatable. That works.

Joe: Yeah.

Joe: Yeah.

Andi: It’s Joe’s language.

Joe: Felt like I was in Waukesha for a minute.

Al: You were between comparable and comparable.

Joe: Yes. So sure. In today’s interest rate environment. But she’s got very low fees, no fees, blah, blah, blah, blah, blah. You wanna make your life simpler. Do you wanna consolidate? But I think she needs an income strategy versus an investment strategy. You could buy something very comparable, like a stable value fund and your brokerage account. Right now it’s paying 4.5%, 5%. Can you get something fairly safe close to that today? Probably not as good, but pretty close. Yeah.

Al: Well, even CDs now in some cases are paying over 4% or even 4.5%. So, yeah, you probably can, I think the- my understanding of stable value funds is the same as you. They’re in 401(k)s only, and they have an insurance component. Because then if the market goes down, you still get your same payment and that insurance component does cost money. So, there are fees inside the stable value fund itself. There may not be a purchase fund fee-

Joe: redemption fee-

Al: – or redemption fee-

Joe: -well, B1 fee.

Al: There may not be that, I get that right. But they’re- someone’s gotta pay for the insurance and it’s the people that own the funds. So there, there are fees in- Sharon, in your term, hidden. They’re usually- they’re not hidden. They’re-

Joe: But they’re minimal, but I wouldn’t even care.

Al: They’re minimal and it’s in, what the 30-page summary document that you get. It’s, they’re hard to find is what I’ll say. But yeah. That you’re getting a good rate of return. But I 100% agree with Joe. It’s actually where you should pull the money out first, and then secondly, how you should be invested. And if you really are getting 5% or more, then that’s a great place to be. Now the stock market over the last 100  years, S&P has earned almost 10%. Now, we haven’t seen that the last couple years. But just be aware, when you have a stable value fund you’re giving up some upside. In the market, but what you’re getting-

Joe: – is safety.

Al: -The safety which is not bad.

Joe: Yeah. Risk and expected return are related. I love 5%, especially for someone’s transitioning into retirement or in retirement.

Al: Me too.

Joe: It sounds like she’s not a huge spender. $55,000 a year. She’s probably saved a couple of nickels. So, we don’t know what her fixed income sources are, so how much of the portfolio that she needs, and we don’t know how big of a portfolio that she has. I know she’s called in or wrote us in the past and we could probably do some research, but that’s unheard for us.

Al: That’s too much work. We just take ’em off the cuff, spit ball as we say.

Joe: So hopefully that helps. Yes, stable value fund, 5%. Put more money into it. Keep it in there. Draw it out. But look at your tax bracket before you start taking it out.

Andi: For a good retirement spitball, the fellas need to know four things about your finances: number one, how much do you, and your spouse, if you have one, have saved for retirement in tax-deferred, tax-free, and taxable accounts? How much fixed income will you have in retirement, that’s number 2 – for example, from Social Security and pensions? Number 3, how old are you and when do you want to retire? And finally, number 4, how much do you expect to spend annually in retirement, preferably adjusted for inflation? Don’t forget to give us whatever name you’d like us to call you, and your real location, in case state taxes factor into your spitball. Then, we want to know where or when you listen, how you found us, and of course, what you drink, because Joe and Big Al really want to understand your entire situation. Click the link in the description of today’s episode in your favorite podcast app, go to the show notes, click Ask Joe and Big Al On Air, and send in your retirement spitball as a priority voice message like the ones we just heard, or in an email, like these:

Mutual Funds vs. ETFs in a Tax-Advantaged Account? (Midwestfabs, St Paul, MN)

Joe: Uhh…

Andi: Midwestfabs.

Joe: Midwestfabs from St. Paul, Minnesota. “Hello again from the banks of the mighty Mississippi River. Thanks for taking the time and shedding some light on my employer match question and directing me to the video links, white papers, et cetera, dedicated to the nuances of the SECURE Act 2.0. Good stuff.” I have no idea what the hell he’s talking about.

Andi: He asked you to do several shows about the SECURE Act.

Joe: Oh, did you send him a bunch of stuff?

Andi: I sent him stuff. We talked about stuff that was available, so, yeah.

Joe: So you and Midwest Fabs are like tight buds.

Andi: All of us are, we’re all buddies.

Joe: Got it. “After listening-“

Andi: “-between the ears-“

Joe: “- between the ears, dedicating a few shows to the nearly 350 or so pages of the SECURE Act embedded within the 4000 or so pages of the spending bill was not on top of YMYW’s to-do list. My questions are about asset vehicle location.”

Andi: So in other words, he accepts the fact that you were rejecting his request for several shows on the SECURE Act.

Joe: Yeah. Cause there’s not much there.

Al: I mean the bullet points you can get from Googling it and you’ll know almost what you need to know.

Joe: There’s thousands of pages of just nonsense.

Al: And a lot of it’s the spending bill, which has nothing to do with what we’re talking about.

Joe: Right. I mean, the big things on the SECURE Act is probably, you know, 3 or 4 things that we’ve already mentioned multiple times. You know, the RMD has changed, the 529 plans. Then there’s some, a lot of different changes to overall retirement plans, the Rothification of things, increased matches, you know, but it’s not going to really secure every neighborhood’s financial future or whatever the hell’s secured-

Al: As it was illustrated.

Joe: Yep.

Al: Yep. It helps, a little.

Joe: It does. “If one has a choice-“

Andi: -between-

Joe: I, I, I got, that kind of took me off there. BW, I wasn’t sure what BW means. Between-

Al: B slash W-

Andi: To me that’s black and white.

Joe: Is it black and white or between?

Andi: It’s between.

Al: I had no idea what that meant, but anyway, you’re right. That’s it. Makes sense- between.

Joe: “If one has a choice between a low cost index fund or a similarly structured ETF, does it make a difference in a tax advantage account in which one someone should use? How about taxable type of account? Aside from expense ratios, what else should one consider when deciding which investment vehicle to use and where?” Okay, there’s more to this. “I would think that in tax advantage accounts, regardless on how the underlying fund is traded, capital gains, losses, dividends, et cetera, it should not matter. But choosing a mutual fund or ETF in a taxable account might not be as advantageous due to the unwanted creation of potential taxable events associated with a mutual fund. Currently a…”

Al: -varietal?

Joe: -varietal? “- varietal Growler 6-pack- Growler. Oh, there you go. Growler. I know what that is. “-6-pack from the Steel Toe Brewing Company in St. Louis Park in a rotation in the basement fridge.” All right. He’s got the basement fridge. “I also have a new walking companion, named by the rescue organization, Jake from State Farm, to accompany me while I digilently – didg – DILIGENTLY keep up with the best podcast on the interweb.”

Midwestfabs' dog Jake From State FarmAndi: This is Jake from State Farm on screen right now.

Al: Oh yeah. Very cute. Looks, looks friendly.

Joe: “Many thanks for the simplicity, real and funny spitball wisdom you share with the YMYW tribe.” Why the hell do I feel like I’m drunk now?

Andi: It’s been all that Steel Toe IPA.

Al: You’re thinking about beers.

Joe: I know. Now I’m all foggy brain. “Congratulations to Andi for her newly bestowed title by another YMYW listener of the Boss Lady. Cheers. Midwest Fabs.”

Al: Yeah, she kind of controls us, doesn’t she, Joe?

Joe: She is the Boss Lady.

Andi: I try to keep this 3-ring circus within the 3 rings.

Al: And you do a great job. Or so we’re told. Joe and I actually don’t listen to the podcast, cause we’ve already done it.

Joe: I could barely stand making it through it, let alone spend another hour listening to it. So I don’t even know what I’m –
what’s his question?

Al: Here’s the question. ETFs versus low-cost mutual funds, which is better in a non-retirement account, non-qualified account? And I would say ETFs are slightly better. To be perfectly honest, both are super tax efficient, but the most tax efficient would be an ETF. Because, in a index fund, sometimes the fund manager has to liquidate funds, you know, sell stocks for distributions requested by investors, and then that means everyone gets their pro rata share of that capital gain. So you get those capital gain dividends right at year end. In a ETF you’ve got far less of that because generally when someone needs to liquidate, they’ve liquidated their own unit and it doesn’t affect you. Otherwise, and that that’s not like a huge difference. But it is slightly better, I would say to have an ETF.

Joe: Yeah, the structure of an ETF is a little bit more tax efficient, but if you’re in an index fund, just realize there’s not a ton of turnover in index funds.

Al: Yeah, that’s what I’m saying. It’s not that much different. Now if you’re invested in an actively traded mutual fund, that’s completely different. Because now you got a fund manager trying to beat the market and they’re buying and selling all the time, which causes a lot of capital gains, which you’ll have to pay for.

Joe: Or unless you are in this fund company that is very large, Vanguard. I think they changed like what, to admiral shares or they did something. And then they, every, I mean, people got hit pretty hard with the capital gain, even though they’re indexed fund and they’re very tax efficient. But-

Al: So yeah, if you have a choice, all things being equal, I would go ETF. But yeah, certainly the fund expenses are very important. I’d rather go for a cheaper index fund than a more expensive ETF.

How Should Young Savers Invest Pensions and Estimate Retirement Income Needs? (Adam, Oregon)

Joe: We got Adam from Oregon writes in. He goes, “Joe, Big Al, Andi, big fan of your podcast. Have a question about pensions and how they factor into asset allocation in overall retirement planning. My wife and I expect to receive a pension when we retire. She is a federal employee and I’m a state employee. I’m 36 yo, she’s 38 yo. I’ve heard some people consider their pension as bonds receive fixed income in their portfolios and then invest mostly or entirely in equities. I think you have suggested that people first look at what their income needs are in retirement. And then subtract from that amount, their expected pension in order to figure out the gap and they will need to fill with non-pension funds.” Very good, Adam. That’s listening.

Al: Yeah, yep. And we agree with that.

Joe: “We are probably a couple of decades away from retirement, so it’s hard to say what our income needs will be. For now, should we invest more heavily in equities and less in bonds?” Yes. “Or should we be less aggressive knowing we have that guaranteed income stream?” Oh, interesting. Okay. Take the other side of that, I guess. “How should we be thinking about our pension as part of our overall portfolio? We’d love to hear you chat a bit about pensions. We’re currently about 85% equities, 15% bonds. I expect my pension to replace 45% of my salary and my wife’s to replace 33% of hers. I’m driving an old Ford until it won’t go anymore. Recently lost our sweet dog, a Boston terrier mix, 13 years old.” I’m sorry to hear that. “Enjoy good hazy IPA. Thanks. Love the show.” All right, Adam, great question. So he’s looking at it from, hey, if I don’t need to take on the risk, why should I? Or should I just put the pedal to the metal and floor it? Because I don’t need this money for 20 years. I’m on the latter.

Al: Yeah. I am too. I am too.

Joe: You got plenty of time to have the markets recover if the markets were to crash. You want the market to crash. You want it to continue to be as volatile as all get out. Because the dollars that you’re saving each month or each pay period or quarter whenever you’re saving cycle is, you know, if the markets are down, you’re buying more shares at a cheaper price. I would be looking at loading up more on Roth IRAs because your pensions are going to be taxed at ordinary income. And then this will give you the diversification to have higher income at lower tax rates. So if I was Adam and I was having a little lazy IPA or a hazy IPA-

Al: Yeah hazy IPA.

Andi: Or lazy IPA, whatever.

Al: Either one is good.

Joe: We turn lazy after we have a couple hazys.

Al: Yes.

Joe: I would say go all equities and all Roth.

Al: Yeah. I like that too. I would go, I would- I don’t have any problems sticking with the current allocation, 85% stocks. You could go 90%, you go 100%. You just have to understand stock volatility, right? And some people can’t handle that, right? And it can’t handle it, then back it up a little bit. But at any rate, yeah, that would be the better answer. And then when you get to retirement, you run through that calculation that you already went through, right? You don’t even think about your pension. It just is what it is. Your pension is your pension, do your shortfall, and figure out what allocation you need to have going into retirement, and then you’re golden.

Joe: Yeah, I think once he gets close to 10 years from retirement, then you might want to slowly start changing your allocation or maybe a little bit before that. You don’t want to do it right at retirement. But, you know, you want to be planning each year of, all right, well, what is the allocation look like? Are you on track? Not on track? What target rate of return are you expecting each year to get to a certain dollar figure? You know, how did you do this year compared to last year? You know, what moves did you make during market volatility? You know, so this is an ongoing process. So, some years you might go a 100% pre-tax versus Roth, but as I’m kind of thinking out loud, and just looking at a lot of our clients that have pensions that were good savers, they have these large pensions and then they also have large 401(k) accounts and they have nothing else. So a 100% of their income is coming either from a 401(k) plan or 403(b) plan, IRAs and then pensions and everything is taxed at ordinary income rates. And they’re not big spenders and so then what happens when they get a little bit older, the RMDs kick in. And then it’s all- then they’re losing even more of their hard-earned money that they save 20, 30 years trying to build. So Adam’s in a good spot so he can be a little bit more diversified and savvy in his overall savings strategy knowing that he’s going to have a fixed income source later in life to protect his floor and essential expenses.

Andi: When it comes to investing, we tend to let our emotions and our biases cloud our judgment and influence our actions, especially when the market is volatile or unpredictable. We buy high and sell low, chasing the market trends and following the crowd. We overestimate our abilities and underestimate the risks. We are our own worst enemy! We could avoid all that. We just need to learn how to manage our emotions and stick to our investment plan, no matter what the market does. Calm your nerves and boost your returns. Watch Emotional Investing on YMYW TV and download the companion Emotionless Investing Guide, our special offer until this Friday only, so get yours ASAP. Joe and Big Al will teach you how to overcome your emotional biases, with practical tips and strategies to help you make smart and consistent investment decisions not driven by your emotions. Just click the link in the description of today’s episode in your favorite podcast app to go to the show notes, access these free financial resources, and share ’em with a friend before this Friday.

I’m Not Sure Roth Conversions Are as Good as They Sound! (Christine, Seattle)

Joe: “Hey guys. So you might be surprised to hear me say this, but I’m not sure- I’m not so sure if Roth conversions are good as they sound.” Wow.

Al: Wow, okay. Oh, we’re going to have a little point cross point debate?

Joe: Yeah. A little debate. “I have an opportunity to convert $100,000 this year to the top of the 24% tax bracket. To do this, I would have to sell non-qualified retirement assets and pay a 15% capital gains on those to pay the tax I owe this year. So to net $24,000 for the tax on the conversion and have enough to pay the 15% capital gains tax, I actually have to sell $28,000. With $28,000 no longer growing for me, do I really come out ahead? I need to factor in the loss of 20 years of growth for the $28,000. Don’t I? Here are the calculations I did. Looking 20 years down the road and assuming money doubles every 10 years for ease of calculations.” So she’s saying- this is Christine from Seattle-

Al: – for calculation.

Joe: So she’s saying, all right here I have this money in a retirement account. That’s going to grow for me. And then I have this money outside of a retirement account. That’s going to grow for me.

Al: So let’s compare.

Joe: So let’s compare. Because I have this other money that’s going to the IRS if I pay the tax. So I don’t think this makes sense to do a Roth conversion. So she’s going to convert $100,000 and pay the tax bill upfront, yields $288,000 that comes out tax-free. $100,000 minus $28,000 tax on conversion equals $72,000 times 2 is $144,000. Growth of 10 years is $28,000. You follow that math, Al?

Andi: $288,000.

Al: Yeah. Yeah. So 10 years, it becomes $144,000. After 20 years, it becomes $288,000, which I agree. That’s a correct back of the envelope assumption.

Joe: “If I don’t convert that $28,000 that she would have paid to taxes is going to keep working for me. And I have $512,000 that’s taxed when I take it out. $100,000 plus $28,000 times two equals $256,000, and then 20 years of growth, $512,000. If my thinking isn’t flawed, then it must be- it seems I could pay a roughly 44% tax rate and still net the same as if I do conversions now. And I don’t think my tax rate will be that high in retirement. At least I hope not. It’s summer, so I’m drinking Mount Gay and Tonic with a lime.” A lot of gin and tonic drinkers.

Andi: Read on.

Joe: Al, I think you got to switch. Start being a gin and tonic guy.

Al: Okay. I like rum, but maybe I’ll give it a shot.

Joe: All right. “That’s a smooth golden Barbados rum, by the way, not gin.”

Al: Oh, so you’re talking my language now.

Joe: Yeah. God, I just talked too soon, didn’t I?

Al: Andi said read on.

Joe: Yeah, I know. It’s not Gin. Andi’s always right. “Don’t knock it until you try it. Very smooth and refreshing. And Al might even like a little splash of pineapple.”

Al: Oh Christine, I’m positive. I would like a splash of pineapple in that.

Joe: I would vomit. “I look forward to hearing your spitball and probably make fun of my throwing all these numbers around and using terms like net and non-qualifying like I know what I’m talking about. I’m talking to you, Joe. But I love you all anyway.” And I appreciate you, Christine in Seattle.

Andi: With a heart. Thank you, Christine.

Joe: Yeah. Thank you. God, I must just like blowing a lot of people up over the years.

Al: Apparently. That’s what seems to but Christine still loves you. And in fact, Christine, love the hearts. Keep them coming. We like to feel loved.

Joe: All right. Her math is flawed.

Al: It is flawed. Agreed. What do you see?

Joe: Yeah, I don’t know what calculator she’s using. Maybe it’s an abacus.

Al: I can tell you what she did wrong. So the $100,000, you don’t add $28,000 to it. It just means you didn’t pay $28,000. So let’s start there. So the $100,000 after 10 years multiplied by two is where $200,000 times another 10 years times two becomes $400,000, not $512,000.8But you take $400,000. I’m just going to use the same tax rate that she used, 28%. Okay, 20% tax and $400,000 is-

Joe: 24%. 24% she used.

Al: Well, she used 28% in her other calculation.

Joe: Oh. Because she had to pay some capital gains on the 24%.

Al: So same. Same. So $112,000 is the tax. Subtract it from $400,000. What do you know? You get that same exact figure, $288,000. And that’s true every time you do this calculation. And for people that think they’re falling behind, cause they got less assets, you’ve got the same spending purchasing power because you don’t have to pay the tax. Now, how this gets better, by the way, is maybe you put your investments in your Roth that have a higher expected rate of return, right? Or maybe you convert in a lower tax bracket. And so you end up paying taxes later. There’s lots of ways that this can work, but that’s what’s wrong with this calculation. It’s actually same same.

Joe: So to say another way, let’s say, because I want to use her example in the sense of saying, all right, let’s say I have $100,000 that’s in a IRA. And I have $25,000- I’m going to keep the math even simpler. Just for doubling purposes. I got $100,000 in a retirement account. I have $25,000 outside of retirement account. So when I look at my statement from whatever brokerage house, it’s going to say, I have $125,000. So Christine listens to this terrible show called Your Money, Your Wealth® and she converts the $100,000 into a Roth IRA. The IRS is going to say, you know what, Christine, you owe me $25,000 for that conversion because you’re in the 25% tax bracket, please send $25,000. So Christine sends them $25,000. Now she looks at her statement and she only has $100,000 shown on the statement. So in most people’s mind, they’re like, yeah, why would I do a conversion? Because $125,000 is going to grow to a bigger dollar figure than $100,000. And I agree with that 1000%, if you ignore taxes. Because now I have $100,000. Let’s say I convert it, it’s in a Roth IRA. That $100,000 doubles over 10 years and then it doubles again. So I have $200,000. Now I have $400,000. Let’s just say it doubles over 10 years and 10 years from now. I have $200,000 in a Roth. That’s all mine. I bought out my partnership from the IRS. I can take that money and do what I want with it. However, in the other example, I had $100,000 and $25,000 in 10 years, that doubles. So my retirement account grows to $200,000 and my brokerage account grows to $50,000. So I have $250,000. So at that point, if I pull the $200,000 out of the retirement account at 25%, what is that? That’s $50,000. It’s the same same. No matter how you want to look at this, how it becomes to your advantage to have different pools of money is A) you get the partnership and the middleman out of the game. So now all of that money is 100% yours tax-free. You take the likelihood of future tax rates off the table. Wherever tax rates change to, if they go down, if they go up, you bought the tax today and you take that off the table. I think more importantly, when you have a strategy that you can take money from different pools to control your taxes in retirement, this makes the biggest difference in the world. Also, there is no required minimum distributions in a Roth IRA. Also, as it continues to grow and compound, if you die prematurely and it goes to your spouse, it goes to your spouse tax-free. If you die, both spouses die prematurely, it goes to kids or grandkids or nieces or nephews, it goes to them tax-free. It is forever, forever tax-free. So we talked about this last week, Al, would you rather have $7,000,000 in a Roth IRA? I’m going to cut you a check right now today, or $10,000,000 in a retirement account, what would you rather have?

Al: Yeah, I’ll take the $7,000,000 any day because it’s- I’ve got complete flexibility on pulling money out. See, that’s the thing is if all your money is in an IRA and you want to pull extra out for a trip or for to buy a car and it throws you into higher bracket, you’re stuck. But if you’ve got a Roth, you can pull whatever out of your IRA that you normally do and then get the rest from the Roth, stay in that same lower tax bracket. You just have so much more flexibility.

Joe: Right. So you have to look at the purchasing power of the money, not necessarily what’s on your statement. Hopefully that clears that up.

Who’s Right About My Roth Conversion Strategy, Me or My Financial Advisor? (Brad, Sarasota, FL)

Joe: Okay. We’re going to Sarasota, Florida here, Big Al.

Al: Okay. Let’s do it.

Joe: We got Brad. He goes, “Hello, Joe- or Hello, Al, Joe and Andi. I love your podcast. You guys are funny, informative, and always entertaining. I never miss an episode. My wife and I are both retired, 63 years old, and moved to Florida from Connecticut about 3 years ago. We love CT, but we’re not missing the winters or the taxes.” Oh, my goodness. I’d be like, I’m not missing the winters. The winters suck. Cold. “We drive a 2019 Ford Fusion hybrid, which we like very much. With all due respect to James Bond, I like martinis, very dry and always stirred, never shaken.”

Al: Okay. Got it.

Joe: Look at Brad, badass from Sarasota, with the hybrid, dressed as James Bond. “I have a difference of opinion with our financial advisor, and it relates to Roth conversions that I would like to get your perspective on. Our retirement assets include $1,700,000 in traditional IRAs, $220,000 in a Roth, $81,000 in HSA, and about $900,000 in a brokerage account. Our investments are mostly balanced between stocks, bonds, and indexed funds, with cash reserves covering two to 3 years of living expenses.” Okay, very good, Brad. Yes, very James Bond like. That portfolio. It’s very big and sexy. “I collect a pension from my former employer of $62,000 a year. We are deferring our Social Security until age 70, which at that time we expect around $78,000 a year. Plus, the deferred to fixed annuity will get us right at $150,000 for lifetime income. I want to draw down our traditional IRAs during our gap years to pay the taxes now at our current historic low rates, maxing out the 22% tax bracket each year. Living in Florida, we pay no state income tax. This amounts to about $150,000 of traditional IRA distributions each year.” So he’s 63, right? And then he is bridging a gap until age 70. So then at age 70, he doesn’t need any more money from the portfolio, it sounds like, because he’s going to have $150,000 fixed income. I’m just assuming that that’s probably what he needs.

Al: Yeah, well, either that or with his portfolio. But the $150,000 plus portfolio would be fine.

Joe: Okay. “I’m allocating $50,000 of the $150,000 of IRA withdrawals to Roth conversions each year. My goal is to fund Roth while using the remaining IRA proceeds and the other savings to cover our living expenses. I plan to continue with annual $50,000 Roth conversions at least until the current tax rates expire in 2026. Our financial advisor strongly disagrees with my Roth conversion strategy. His reasoning is that since we are drawing down the IRA for our living expenses during our gap years, the Roth conversions provide little benefit. By the time we are required to take RMDs, the IRA will be depleted to the point that the RMD tax will be inconsequential.”

Andi: Inconsequential.

Joe: Yes.

Andi: Without consequence.

Joe: Yes.

Al: Yes.

Joe: Those big words always get me. “We feel it’s better to leave the money in the IRA and allow it to grow tax-deferred until it’s needed.” Okay.

Al: Okay.

Andi: He feels it’s better. The advisor does.

Joe: Oh, Okay. Yes. “I’m not sure if I agree with our financial advisor on this. We’re maxing out the 22% tax bracket with our IRA distributions anyway, and I see little harm in directing some of the money to the Roth. The Roth will give us financial flexibility and the opportunity to pass tax-free assets to our heirs. Appreciate if you could spitball this for me. Thanks.” All right. Brad aka James Bond. What do you think?

Al: Well, first of all, I disagree with your advisor, but I think there’s a better plan than even the one you have.

Joe: I agree. 1000%.

Al: Because you have $865,000 in a taxable brokerage account. Wouldn’t it make more sense to live off of that for a while and do $150,000 Roth conversion? You got money to pay the taxes, Now you end up with a lot more money in a Roth IRA. And then retirement at age 70 is much better from a tax standpoint. Remember, you’ve got $150,000 of fixed income, which is already going to put you in the 22% bracket currently, which will be 25% here by 2026. So any RMD that you have on top of that-

Joe: – if it’s $1, it’s going to cost you-

Al: -25%. And you’re probably going to approach Alternative Minimum Tax, which will be more like 28% or even 35% because of that stupid expense that gets phased out with increased income. So you’re actually going to be in a pretty high tax bracket. You want to get as much into the Roth as you can.

Joe: Yep, I would agree with that 1000%, because let’s say you don’t do anything. You let the IRA defer. Okay, so it’s $1,700,000. He’s 63 years old. In 10 years, he’s 73, where he has to take his required distribution. So what do you think that’s going to be worth? Like $3,000,000? Let’s say it could be even worth more than that. $3,500,000. So his RMD at that point is going to be $120,000 on top of his $150,000 income. Well now he’s blown up. It’s like, well, don’t touch the RA until you absolutely need to. That’s the advice a lot of advisors give. Because why do you think- and I’m not going to blow up his advisor because I’m sure he’s a very good advisor and he’s helping out Brad, but a lot of times advisors won’t recommend this. Because if you do a Roth conversion, what happens to the portfolio?

Al: Yeah, it gets reduced.

Joe: It gets reduced.

Al: Because you have to pay the tax.

Joe: And how are advisors paid? On the amount of the portfolio.

Al: Correct.

Joe: So if you’re converting money into a Roth IRA and you’re taking additional money out of the portfolio to pay the tax, you are going to be better off. But the advisor may not be better off because there’s a lower balance. I’m not saying that he’s thinking of this by any stretch of the imagination, but it’s true. It’s like, you look at it, it’s like a little bit more work for the advisor. It’s like, well, you know what, why even bother? Just let it continue to defer. You know? It’s going to be great, it’ll be fine. And then you’re 72 years old and all of a sudden you’re going to get your butt kicked by a huge tax bill.

Al: So I’m going to take the advisor’s side here just for a second, okay? Just for fun. So he’s thinking that if $150,000 gets drained from this account over the next 7 years, let’s call that $1,000,000. And so you had $1,700,000, you’ve drained out $1,000,000, now you got $700,000. Of course it’ll be higher because of growth. Assuming the market grows. So let’s say you got $1,000,000 or maybe a little more, but let’s just say $1,000,000. But even $1,000,000, that’s at a 4% RMD rate, which is roughly what it is in the first year. That’s a $40,000 additional income that sits on top of your $150,000 that you already have. Not to mention whatever kind of income you have from your brokerage account. So you’re probably going to be an alternate minimum taxes with the old tax rates coming back, although you live in Florida, so maybe not. But anyway, you’re going to be 25% to 28%, potentially even 35%, versus right now-

Joe: at 22%-

Al: -22%. I would do the conversions.

Joe: All day long. Or blow them out and do the $50,000 conversion. Who cares? If you do $50,000 conversion over the next 10 years, that’s a lot of money sitting in the Roth that will compound tax-free forever. So why would that be a waste of time, right? Let me do some quick- over 8 years. Let’s say he does $50,000 over 8 years. All right? And then let’s say the market grows at 6%. Now, he’s got $524,000 sitting in the Roth IRA and he is going to be 70 years old.

Al: On top of what he starts with, which is $200,000, which will grow also.

Joe: So let’s call it $800,000 sitting in a Roth. So let’s see, then that grows for another 25 years at 6%, right? So that’s a couple of million dollars compounding 100% tax-free, right? No, that’s not worth it. Don’t do it.

Al: It’s peanuts.

Joe: What does his advisor advise on? Just multi-billion dollar families? Come on. I don’t know. I’m sure he’s a really good guy.

Andi: For lifetime tax-free growth on your investments, you really need to understand Roth accounts and how they work. Go to the podcast show notes at YourMoneyYourWealth.com and download the Ultimate Guide to Roth IRAs for free. You’ll have valuable information – in print, mind you – about not only Roth IRA contributions and conversions, but also the infamous Backdoor Roth strategy, for when you make too much money to contribute directly to a Roth. Plus, you’ll learn the differences and pros and cons of saving in a traditional IRA vs. a Roth IRA vs. a Roth 401(k), and the rules for taking money from your Roth account, and much more. Click the link in the description of today’s episode in your podcast app, go to the show notes, download the Ultimate Guide to Roth IRAs, and share YMYW and the free financial resources with anyone you know who would benefit.

We Have Too Much in Traditional IRA. How’s Our Roth Conversion Plan? (Kelly, Idaho)

Joe: We got “Dear Andi, Big Al and yo Joe, raving fan here writing in from Idaho. Love, love, love your weekly podcast. You 3 are awesome, and I look forward to your banter and laugh every week. Yes, I have another one of those pesky Roth conversion questions. Here’s our situation. Husband is 67. I’m 63. I retired two years ago. Hubby is 90% retired from a small business. We spent the last two years unraveling our life in San Diego-” That’s backyard. Yeah. Or front yard.

Al: Yeah., it’s, it’s here, right?

Andi: Our yard.

Joe: Well, yeah. We’re in the kitchen.

Al: Right now.

Joe: “- and rebuilding a new life in Idaho.”

Al: Yeah. Awesome.

Joe: Okay. We just finished building our retirement home and we also bought a small farm that is owned free and clear. Our annual living expense is around $80,000 of current dollars. Hubby just started taking Social Security at $24,000 a year. He calls it his whiskey and shotgun shell money.” Ooh, boom. Hubby, I wanna hang out with hubby. We could have some whiskey and shoot some guns.

Al: I’m thinking maybe Idaho’s a good place for you there.

Joe: Look at Idaho. “I don’t plan to take Social Security until at least 67. That’s $40,000 a year- or at each 70, it’s $50,000 a year. Once that happens, most of our living expenses will be covered by Social Security. Until then, we are living on savings and dividends. Neither of us have pensions. We met with our financial planner last year, confirmed that we had plenty of money. And he even suggested we take a stab at spending more. Like many, our issue is we have too much in the traditional IRA and we’d like your spitball to whether our plan outlined below makes sense. Here’s a current portfolio. Got a traditional IRA $2,100,000, brokerage account $1,300,000, Roth IRA $220,000, HSA $175,000, Simple IRA $130,000, inherited IRA of $1,000,000. Total portfolio, $4,000,000.”

Andi: $100,000 on the inherited IRA.

Joe: I stand corrected, what did I say?

Al: $1,000,000.

Andi: $1,000,000.

Joe: “We are planning to start Roth conversions this year. Our taxable income will be around $90,000. We’re thinking of converting around $185,000 to keep us under the $250,000 AGI. Our thinking is we’d like to avoid the net investment income tax. Also since my RMD with the SECURE 2.0 has been pushed out to age 75, we have a few more years to work on reducing that potential RMD. We’re thinking we’ll convert about $600,000 in the next 3 years. Then after that, we’ll continue doing conversions, but in smaller amounts. Does this seem like a logical approach? Are we overthinking the impact of net investment income tax? We have funds in our brokerage account to pay the taxes, but we don’t want to overdue conversions either. Our goal is not to convert all to IRAs, just enough to achieve a better balance between these types of accounts. We have no children, so we can spend every penny we have. We have 3 hunting dogs, two German short-haired pointers and one Boykin spaniel.” Boykin?

Al: I guess.

Joe: All right.

Al: So it says.

Joe: “My husband-“ Oh, there it is. I knew it was coming up. “-Ford F150. It’s got shotgun and whiskey.

Al: Oh, I can see that.

Joe: And it says “big surprise.” Oh, that’s hilarious.

Al: Yeah, right.

Joe: Kelly. “And I drive a swanky 2022 Lincoln Navigator.” Oh wow. That’s sexy.

Al: Yeah, that’s totally cool.

Joe: Look at Kelly in Idaho.

Al: That brand new Idaho Navigator.

Joe: You got it. “That was my stab at spending more money. I sold my 2013 Toyota Highlander commuter car with 220,000 miles, and I just wrote a check for the new Navigator. That was a new experience and it felt great. I don’t drink often, but when I do, my drink of choice is an ice cold margarita on the rocks with salt. And I’m happy to say we found some great Mexican joints here in Idaho, so it keeps us from being homesick from San Diego. Thanks for all you are doing and keeping your show informative and entertaining. You are helping so many of us create a brighter financial future. All the best, Kelly.” Well, congratulations Kelly.

Al: Yeah, that’s fantastic.

Joe: Okay. Got a conversion question. Yeah, but here’s, here’s the deal. $2,500,000. They wanna convert $600,000 in the next 3 years, (two times 4, 8, 80 some, and they’re going to the $250,000 mark) $250,000 is gonna be in one tax bracket.

Al: That’s in the 24% bracket.

Joe: Yeah, I like that number. I would convert, yeah, to the 24% tax bracket.

Al: Well, she’s saying should I stop in the 24%? Because they don’t wanna pay net investment income tax.

Joe: But they have $220,000, no, hold on. They have $1,300,000 in Roth, so net investment income tax. So if they’re selling anything in their brokerage account, they have to pay a capital gains rate.

Al: Or dividends and interest.

Joe: And so-

Al: Got that too.

Joe: Then there’s another 3.8% tax on top of whatever is subject to capital gains. I would say it’s probably going to be somewhat minimal.

Al: Yeah. Right. Here’s what I would do. I would- I get your point, and it’s a good point because once you get above $250,000 adjusted gross income, you’ve gotta pay an extra 3.8% tax on your passive income, including interest, dividends, capital gains, rental income, and the like. So then it’s, if you could keep it under that, you can avoid that tax. But the way I would think about it, maybe even see what happens is if you take it to the top of the 24% bracket, which is a lot higher, just add that net investment tax in there and see what the tax rate is and compare that to your future rate. You might actually want to go to, what is it, $360,000 this year?

Joe: But you gotta also compute IRMAA in there too, because -they’re 62 years old.

Al: Yeah, true. That’s not gonna happen for, well, it’s gonna happen. I mean-

Joe: So at 65-

Al: At 65, so they’re okay this year.

Joe: Yeah, they’re okay this year.

Al: Yeah. Good point. So that’s another one.

Joe: Because here’s my point, they don’t have any kids. It’s this gonna be Shotgun Shelly and Kelly.

Al: Shotgun Shelly and Kelly?

Joe: Hubby, I just called him Shotgun Shelly. Driving that Ford F150 drinking a little Jack Daniels. Okay. $2,100,000. So $80,000 is the conversion- I mean is the RMD, right?

Al: Yeah. Although by the time they turn 75, it’ll be probably more than double that because they’re 62.

Joe: Oh, there’s- oh, okay. So you’re saying that $2,100,000 is gonna grow, so they’re 62, RMDs in 13 years. That could be, could be $4,000,000.

Al: $4,000,000. $4,000,000 or $5,000,000, yep.

Joe: Or it could be $2,000,000. So on the low end it’s it could be $160,000. Their other income is how much?

Al: Well, their taxable income is $90,000 this year. So I guess you add $25,000 for standard deduction. So it’s probably call it $110,000, $120,000.

Joe: Okay. And then-

Al: So you add another-

Joe: $160,000 on that, or $100,000?

Al: Yes.

Joe: So it’s $220,000.

Al: Yeah. Somewhere in there.

Joe: You’ve just gotta look at what tax bracket that you’re in now, what you’re gonna be in the future, that the Jobs Cuts and Tax Act. Or the-

Andi: Tax Cuts and Jobs Act.

Al: 2018.

Joe: Yes. Thank you. 2026 that’s coming right around the corners.

Al: I know.

Joe: So you got a couple years until the low tax rates expire. So I would look at net investment income tax, add that back in if you wanted to go to the top of the 24%. Maybe you just blow it out, go top of the 24% tax bracket, pay the tax, get that money into a Roth, and then look at it each year. And say, okay, well here we’re getting close to Medicare age. I wanna look at the IRMAA tax, the net investment income tax. And you put all those other added things that happens when you increase your AGI and you put that in the pool and then that’s, and then you- with the tax, and you add that together to see what tax rate that is. So you put your marginal tax rate, Idaho’s tax rate, plus whatever add-ons for higher IRMAA and the net investment income tax. And then you calculate it out to say, all right, well, is this gonna be a lower rate still then where we’re heading in the future? And if it’s still a lower rate, you convert. If it’s a higher rate, you don’t.

Al: Yeah, that sounds complicated, the way you explained it.

Joe: I know.

Al: But that is the correct answer.

Joe: Sorry. Alright. Yeah, just kind of babbled on there.

Al: It’s all good. I mean, that is the right answer.

Joe: So, thank you Kelly. And tell Shotgun Shelly, he’s got a new nickname.

Al: And Kelly, I would say any of this that you’re considering is fine. Stopping at $250,000 is fine.

Joe: Do nothing is still fine.

Al: Yeah, yeah. You’re in great shape.

Joe: Buy another Navigator. Buy more whiskey, play some golf.

Al: Right. Get some more bullets.

Joe: Okay. Well, there you have it, folks.

Al: It’s a wrap.

Joe: That’s a wrap, we’ll see y’all next time. Show’s called Your Money, Your Wealth®.

Andi: 2023 was an excellent year for Your Money, Your Wealth®, thanks to you. You downloaded this show over a million times in 2023, and over 3 million times since the podcast started. You got us on several best-of lists in 2023, all of which you can find in the podcast show notes, with the likes of Ramsey, Orman, and NPR! Wow. Thank you, friends! This show definitely would not be a show without you.

We’ll wrap things up today with our funniest Derails of 2023, including the mop, minus vs. less vs. dash vs. hyphen, the beer fridge, beef demographics, the Bing-hamptons, and our favorite one-star review of the year, so stick around to the end of the episode. Help new listeners find YMYW by telling your friends about the show, and by leaving your honest reviews and ratings for Your Money, Your Wealth in Apple Podcasts, and any other podcast app that accepts them like Amazon, Audible, Castbox, Goodpods, Pandora, PlayerFM, Pocket Casts, Podcast Addict, Podchaser, Podknife, and Spotify.

Your Money, Your Wealth® is presented by Pure Financial Advisors. Click the “Get An Assessment” button in the podcast show notes at YourMoneyYourWealth.com or call 888-994-6257 to schedule your free financial assessment, in person at one of our many offices around the country. As of this episode, that includes San Diego, Irvine, Brea, Woodland Hills, and our newest office in Davis, California, plus Denver Colorado, Chicago, Illinois, and Mercer Island, Washington. You can also schedule a free assessment via Zoom to take place at a time and date convenient for you, no matter where you are in the world. Chances are, one of the experienced financial professionals on Joe and Big Al’s team at Pure will be able to identify strategies that’ll help you create a more successful retirement.

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.

The Best YMYW Derails of 2023



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.

• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC, a Registered Investment Advisor.

• Pure Financial Advisors LLC does not offer tax or legal advice. Consult with your tax advisor or attorney regarding specific situations.

• Opinions expressed are not intended as investment advice or to predict future performance.

• Past performance does not guarantee future results.

• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.

CFP® – The CERTIFIED FINANCIAL PLANNER™ certification is by the Certified Financial Planner Board of Standards, Inc. To attain the right to use the CFP® designation, an individual must satisfactorily fulfill education, experience and ethics requirements as well as pass a comprehensive exam. Thirty hours of continuing education is required every two years to maintain the designation.

AIF® – Accredited Investment Fiduciary designation is administered by the Center for Fiduciary Studies fi360. To receive the AIF Designation, an individual must meet prerequisite criteria, complete a training program, and pass a comprehensive examination. Six hours of continuing education is required annually to maintain the designation.

CPA – Certified Public Accountant is a license set by the American Institute of Certified Public Accountants and administered by the National Association of State Boards of Accountancy. Eligibility to sit for the Uniform CPA Exam is determined by individual State Boards of Accountancy. Typically, the requirement is a U.S. bachelor’s degree which includes a minimum number of qualifying credit hours in accounting and business administration with an additional one-year study. All CPA candidates must pass the Uniform CPA Examination to qualify for a CPA certificate and license (i.e., permit to practice) to practice public accounting. CPAs are required to take continuing education courses to renew their license, and most states require CPAs to complete an ethics course during every renewal period.