Show Notes

• 00:00 – Intro: This Week on the YMYW Podcast
• 01:13 – Can I Take My Foot Off the Gas on Saving for Retirement? (Ron and Veronica, IN)
• 09:48 – Watch What Happens to Your 401(k) & IRA at Retirement? On YMYW TV and Download The Retirement Readiness Guide
• 10:43 – How to Bridge the Gap from Age 55 to Retirement Income at 57? (Scott, IL)
• 20:04 – How to Fund College? TSP to Roth Conversions? Retirement at 55? (Big Juan, TX)
• 24:45 – Calculate Your Free Financial Blueprint
• 25:45 – We’re 46 and 47, Is Our Retirement Plan a Pipe Dream? (Frank and Jane Drebin, WI)
• 32:26 – Next Week on the YMYW Podcast

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Transcription

Intro: This Week on the YMYW Podcast

Andi: You’ve been jamming money into your retirement accounts for years now. When is it okay to slow down? Joe and Big Al spitball for Ron and Veronica in Indiana, today on Your Money, Your Wealth® podcast number 528. And sorry Veronica, today Joe has decided your name is Victoria. Plus, how can Scott in Illinois bridge the gap from age 55 to retirement income at 57? How should Big Juan in Texas pay for college? Should he convert his TSP to Roth? Can he retire at 55? (That’s your last three-fer, Big Juan.) And finally, Frank and Jane Drebin in Wisconsin are 46 and 47 and wondering if their plans for retirement in 5 years is just a pipe dream. I’m Executive Producer Andi Last, and here are the hosts of Your Money, Your Wealth®, Joe Anderson, CFP® and Big Al Clopine, CPA.

Joe: Andi, did you say we had 40 pages of questions?

Andi: Actually, there’s probably more than that now. Yeah, I, let’s see, I have, there’s 27 emails that I have not even added to your email sheet. And the email sheet that you don’t have is already 16 pages long, so we’re probably on par with like 50 pages worth of emails.

Al: Oh boy. Okay.

Andi: But I didn’t give ’em all to you because I didn’t want you to have to print an entire ream of paper.

Al: I do appreciate that.

Joe: Got it. Alright.

Can I Take My Foot Off the Gas on Saving for Retirement? (Ron and Veronica, IN)

Joe: This is Ron and Victoria. They’re from Indiana. “Hey, Joe, Big Al. I’ve been listening for over a year and love the podcast.” Thank you. Killing it. “However, you make nerve wracking financial questions fun and entertaining.”

Al: Somehow we do that.

Joe: Oh, somehow, you know-

Al: – however-

Joe:- it’s gonna be like, hey, yeah, however you guys are a bunch of jackasses. “I listened just as much for the comedy as I do the substance.”

Al: Oh, wow.

Joe: Nice. Thank you. “I really enjoy an IPA or a bourbon in the cold months. In the warm months, I enjoy a little Miller light high noon, or Tito’s and soda with a lemon. My buddies like a- my buddies like to buy nice wine. So I try to drink that as often as they let me.” So he’s mooching off his buddies. This is the first time I’ve ever heard, well, my buddies- It’s usually like, Hey, I like some bourbon. My wife, she likes wine, right? Whatever. Hey, my buddies, Goddamn, they sure like-

Andi: Well, he likes his drinks, and then if his buddies are drinking wine, he’ll drink some of that too.

Joe: Well, my neighbor, yeah, I asked my neighbor what he likes to drink too. Oh, all right, Ron. Okay, so his buddies, they like to buy nice wine. Yeah, I gotta get over there when his buddies are there.

Al: I’m always knocking on the door. What are you drinking tonight?

Joe: Eh? I’m kinda in the mood for some wine. Honey.

Al: What do you got?

Joe: Can I, should I invite my buddies over?

Al: Bring your own booze.

Joe: Bring your own, BYOY. All right. “I enjoy their wine. All year long, no matter what the temperature is.”

Al: Yep. Of course.

Joe: Bada. Boom. Bada bing. “My wife loves a little cheap Sauvignon Blanc.” Oh. I guarantee they got millions. This guy’s drinking his buddy’s wine and his wife likes some cheap ass Sauvignon Blanc.

Andi: That’s how you save millions. Drink everybody else’s wine.

Joe: Yeah. I guarantee the cheaper the better. “If she hits $12 a bottle, we must be celebrating something special.” Oh my goodness. Like Two Buck Chuck here. “I’m running in as I wanna know, if you think I could take my foot off the gas soon from a savings perspective. I think we’re aggressive savers.” Yep, I am- I’m almost sensing that here, Ron. “But I’m not sure based on my goals. Okay. “The goal would be able to reduce some stress. I created some random savings goal that, at times makes me stressed out, and I’m hoping I can slow that down soon. I’m in a very stressful job and would like to retire as soon as I can when I confidently, that I can confidently fund our goals. Okay. Other than maxing out my 401(k)s, IRAs, the only rational number I use for saving is about 20% of income.” All right, “Here’s the family-“Well, I would say, first of all, Ron, most people don’t even sniff saving 20% of income.

Al: No, that’s a great goal to get to.

Joe: All right, so here we go. “Here’s the family dynamics. My wife is 45 and she stays home to manage the home and the kids. I’m 53 and I’m in sales. My income varies from year to year and it ranges from the top of $500,000 or more per year. We have two kids, 15 and 12. We also have a really dumb and goofy golden retriever.” Okay, IRAs. Here it is, “$2,200,000, Roth IRA $600,000, brokerage account $3,000,000.” Oh, I- stop.

Al: You were right.

Joe: “ Cash $1,000,000, then I’m taking Social Security at 70.” Of course you are. The payment’s gonna be millions. “I have no pensions. 529 equals fully funded home, no mortgage. Every year we contributed to these accounts. 401(k) and catch up IRA’s brokerage account.” So he saves, saves $150,000. $150,000 a year?

Al: Correct. And he has got $6,800,000. I think you’re gonna be okay.

Joe: Yeah, Ron, I would keep up with that cheap ass Sauvignon Blanc and keep drinking your buddy’s (bleep). “Our currently yearly expenses are $245,000, not including our investments.” Where are you spending $245,000?  Kidding.

Al: Not on alcohol.

Joe: Nope. “My goal is to retire 58 to 60 if possible. I wanna spend more when I retire, but that number is hard to quantify. If I had to guess the number might be $300,000 or $325,000 per year and adjust that with inflation. Here’s my question. My main question, do you think I can stop funding my brokerage account when I turn 55 and use those funds as fun money or adding to my cash reserves? Could I spend all these funds guilt free knowing I’m not jeopardizing my future? Bonus question, do you think I’m on track to retire 58 to 60? If so, how much do you suggest we could spend per year? I know I’m blessed. However, sometimes I feel like an aggres- as aggressive as our savings goals are, it creates more stress and is needed in the long run. If I know it can confidently not add as much of my brokerage, it would help me mentally as well as is just trying to cross the finish line from the working life race. Thanks for all you do.” All right, Ron, Victoria, you wanna spend a couple hundred thousand, so $300,000?

Al: Yeah, so I, I had, I, had some fun with this, Joe. I already ran some numbers.

Jo: All right.

Al: So we started with $6,800,000 and I said, well, you wanna save you said you’d save at a high level for the next two years. I did 6%, save $150,000, you end up with about $7,900,000. You work 3 more years, 6%. And I’ve just said, well, maybe you’re just save in your 401(k) and IRA. So you eliminate $100,000 of savings, you end up with $9,600,000. That’s a great number. What do you want-?

Joe: So what was the two working year? So he continues to save as much as he’s saving for two more years.

Al: For two years, and then he stopped saving the money in the brokerage account. Which is kind of what he said. Can I slow this down after a couple years?

Joe: Okay. But he’s still working so he’s not fully done in two years.

Al: Yeah. ’cause he said he wants to retire 58 to 60.

Joe: Okay, got it.

Al: So I just went with that. So you got $9,600,000. What do you wanna spend? High end is $325,000, 5 year inflation. You, it’s about $375,000. $375,000 and a $9,600,000 without even regard to Social Security is 3.9%. It looks amazing. And that’s probably about what you can spend plus your Social Security, but that’s just the, you know, I guess the point here is these numbers look great. You could probably retire altogether right now if you want to, but- Just doing it based upon what you said. And it’s just a matter, like if you, let’s say you, you get sick of your job in 6 months and you want to retire right now, you can make this work, probably can’t spend that $325,000, but maybe you can spend $275,000 or some lower amount. So there’s a lot of ways, there’s a lot of options here, Joe, I would say.

Joe: Yeah. Okay. Lot of options. $6,000,000, 40, 50 some years old. I get it. He’s just stressing, but $250,000 lifestyle, that’s, not-

Al: It’s a lot. And, you know, people that save that much, it’s hard to then all of a sudden become a spender is what we’ve noticed. So just be aware of that. Yeah. You may spend less than you think.

Joe: Right. I mean, we see people that save this crazy amount of money here too, and then they do something, they spend a little bit more on something and then it’s like the guilt kills them.

Al: It does. Yeah. Right. Yeah. Right.

Joe: Yeah. I haven’t had any major stupid purchases lately, but I used to.

Al: Yeah, we used to hear about it.

Andi: No new Star Wars masks?

Joe: The Star Wars masks? Yeah.

Al: Darth Vader?

Joe: Yeah, Darth Vader. I got a couple storm troopers. Yep. Those are somewhere in the- they’re nowhere to be found, I have no idea.

Andi: Oh, wow. They went into storage after the marriage.

Joe: Yeah, the marriage killed it.

Andi: Do you still have the giant oversized golf bag?

Joe: Yeah. Then I bought like a Staff bag.

Andi: You got to keep that?

Joe: Oh yeah. It’s in the garage next to the golf simulator. It fits like 400 clubs, I swear to God.

Al: Wow.

Joe: I don’t have 400 clubs, but if I did, I could put it all in that one bag.

Al: Right.

Joe: It’s got like a TV and it-

Al: Well, you can carry Rose’s clubs and the two kids.

Joe: Yeah. There you go.

Al: So it’d be perfect.

Joe: No, we’re good.

Watch What Happens to Your 401(k) & IRA at Retirement? On YMYW TV and Download The Retirement Readiness Guide

Andi: You’ve been saving to your workplace retirement account for your entire career. So don’t shatter that retirement nest egg when you punch the clock for the very last time! This week on Your Money, Your Wealth TV, Joe and Big Al explain your options for accessing the money in your IRA, 401(k), or other retirement accounts when you leave your employer, while avoiding the common mistakes that could cost you thousands if not tens of thousands of dollars. Watch What Happens to Your 401(k) & IRA at Retirement? On YMYW TV, and download our Retirement Readiness Guide. 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. The seven plays in this free guide will arm you for retirement, despite the uncertainties of market volatility, inflation, rising healthcare costs, and the future of Social Security and Medicare. You’ll find links for both the TV show and the free guide in the episode description.

How to Bridge the Gap from Age 55 to Retirement Income at 57? (Scott, IL)

Joe: Alright, we got Scott from Illinois. He goes, “Hey gents. I’m a fairly new listener enjoying the show. I was hoping you could help me with recommending a withdrawal strategy specifically during my early retirement years from age 55 to 59 and a half. If all go according to plan- accordingly, to according to plan.”

Andi: Good save.

Al: That’s correct.

Joe: “I’ll be retired from my current employer in 3 years from now at age 55 after 28 years of service. I’m planning to use the rule of 55 to avoid their early withdrawal penalty. I have included some key financial details for future reference. The numbers reflect my conservative estimate on their anticipated value on my retirement date. I anticipate my to be my spouse to be earning $0 in wages for my entire early retirement period. In reality they, that might not be the case, but I’d like to plan for this scenario. I anticipate our expenses to be $80,000 after taxes. My employer does not allow in-plan Roth conversions, so I will need to wait until my full retirement age to incorporate that strategy. I do not qualify for a pension and Social Security, although I do not-“

Andi: I do qualify.

Joe: “I do qualify for a pension and Social Security, although I do not anticipate electing either until my maximum benefit age. It would be great to hear your perspective on how to optimize my withdrawal strategy in the early stages of retirement and understand how it fits into my longer term strategy. Thanks.” Okay. That seems somewhat complicated, but you bust this thing out. Okay. We got, so what, he’s 55 and is going to retire.

Al: He’s 52. He wants to retire at 55. So he gave us numbers of what he thinks it’ll be at 55.

Joe: Got it. “$2,200,000 in traditional IRA, $250,000 in a Roth. They got two IRAs, $30,000 apiece, him and his spouse, he’s got $75,000 in HSA, $100,000 in savings account, $100,000 in a brokerage account.” He’s gonna retire at 55, needs $80,000.” So how do we bridge the gap from 55 to 67 is probably the plan here.

Al: It is the plan, I mean-

Joe: So he needs $1,000,000 to come out as a distribution over that 12 year time period.

Al: Yeah. $80,000 times 12. That’s about right.

Joe: Alright, so he’s got currently. Two, $2,600,000.

Al: Yeah, two point- Call it- $2,800,000 actually.

Joe: Oh, $2,800,000.

Al: Yep.

Joe: Alright. Sorry. So what, what do you think Big Al?

Al: Well, I think that, I mean, so he’s, what he’s referring to is that if you retire from your job at age 55 or older, you can actually, and keep the money in the 401(k) you can distribute money outta the 401(k) before age 59 and a half. And not pay that 10% penalty. You still pay taxes on it, of course, but you eliminate the penalty. So I think in a case like this where most of Scott’s money is in the 401(k), then I think that’s a great way to go. So you bridge that gap by you, you pull it outta the 401(k), you have to be 55 when you retire. If you retire 54 and 11 months, it doesn’t work. So make sure you’re 55 when you retire, but then you’ve got another 4 and a half years, you can withdraw money outta that 401(k) without penalty, and then of course you’ll continue that. As far as whether this is sustainable, that’s another question. It depends, you know what the Social Security would be.

Joe: What is that, 3%?

Al: Yeah.

Joe: Roughly. You include taxes on?

Al: Yeah, Actually, if you think of it that way, I hadn’t even done the math, but yeah, that’s right. $80,000 out of, call it $3,000,000 just for a quick, yeah, it’s probably 3% ish. Maybe even less so. So should- it should work.

Joe: Yeah. He is got a pension and Social Security. We don’t know what those dollar figures are. He is gonna claim that, I don’t know, maybe at 67 or even 70. Yeah. So if he’s pulling 3% out plus tax at 55, he’s got $3,000,000. Yeah. I mean, even if the pension’s meaningful, then yeah, I would look at $80,000, he’s married, his wife doesn’t have any earned income. You know, you could probably still do a little bit of conversion. So I think his real question is probably, what’s the withdrawal strategy? How do I convert? I can’t do an in-plan conversion now. I need $80,000 for my $3,000,000. Hypothetically. Most of that’s in a retirement account. $2,300,000.

Al: Yeah. Yeah. Right.

Joe: $2,300,000 is in a retirement account. He doesn’t have that much outside. He’s got $200,000, you know, in a taxable account. Right? So let’s say you need $80,000, there’s no other earned income. Your taxable income, if you pulled the $80,000 from the retirement account is gonna be roughly $50,000. So he would have another $50,000 available in the 12% tax bracket to do a Roth conversion of that amount. Yeah. That’s to keep in the 12%.

Al: That’s about right. Yep.

Joe: Would, should he do the 22%? Because then you got taxes on that, you wanna be careful. Yeah. I think you would go into the 22% tax bracket with some conversions, but I would just calculate how much tax that you can afford to pay over the next couple of years, because you don’t wanna blow out your entire nonqualified or you know, the liquidity there. But I think absolutely with the amount of money you wanna have diversification for sure when you’re creating the income. And so he’s got time, he is gonna retire young, but he can’t do inner plan conversions-

Al: – so you’d have to wait till 55, retirement. Right.

Joe: But he can’t, ’cause he can’t do an inner-

Al: Couldn’t he at 55?

Joe: No.

Al: You’re terminated from service. Couldn’t you do a withdrawal then?

Joe: I think, well-

Al:- depends on upon the plan, I suppose.

Joe: It depends on the plan. Maybe he could take some of the dollars out and put it into an IRA.

Al: That’s what I was saying. Maybe you take $500,000 out or whatever. Whatever he wants to convert over the next few years.

Joe: Because he can’t convert it in the plan. Right. So can he take some of the money outta the plan ’cause he separated from service? Yeah, keep the money in the plan. So take advantage of the 55 rule to at least take those dollars out without any penalty.

Al: That’s what I was thinking. He can’t do it now ’cause he’s still working. But separated from service, he may be able to keep some money in the plan and take some money out- by taking it out that mean- that means rolling it from a 401(k) to an IRA and that money you could actually convert. But Joe is correct. You do have to be mindful of how much tax you’re gonna pay. And ’cause you don’t you- you’ve got a couple hundred thousand in your brokerage and cash, which is great, right. But at the same time, you’ve got a lot of money in a IRA, 401(k) that you’d like to convert. So that’s where you just have to be a little careful.

Joe: Yeah. Or he’s gonna have to wait until 59 and a half to do it. Or if he wants to roll the money out at age 55, and put it into an IRA, he could do a 72T tax election. Which is a separate, equal periodic payment.

Al: Could, yea. That could be another approach too.

Joe: So now you got money and you could split up the IRAs. Maybe you do this, you have to run the numbers here though. Yeah, so he’s got $2,500,000. His wife is only, not only, but she’s got $30,000. So you could easily convert that. Right. But he probably needs to convert a lot more because he’s got $2,300,000. Right. One strategy is that he could do a, let’s say he, he rolls the money out of the 401(k) at 55. And puts it into an IRA. And we had to do this a couple of times ’cause people make mistakes and they don’t know they can pull the money out of the 401(k) plan at 55 without penalty. So they roll it into the IRA. It’s like, oh, well, I need access to the money. How do I get access to the money? Well, you could do a 72T tax election, which is a separate equal periodic payment, and maybe he splits it up into two. Yeah, so because you have to take the payment out every single year until you turn 59 and a half or 5 years, whichever’s longer. And so he could do that.

Al: He could.

Joe: Maybe you can get $40,000, $50,000 outta the SEPP. Then he is got the other IRA that he could convert. Right. And then he could live off of, you know, some of the brokerage dollars over the next 5 years. Yeah.

Al: And of course one. Yeah, true. He could.

Joe: I don’t know. That seems like a lot of work to do conversions for 5 years.

Al: Personally, I’d rather if I could take some out, leave some in, and then just-

Joe: Yeah. I doubt he could do that though, to be honest.

Al: You don’t think so?

Joe: I don’t think so.

Al: Okay. Well it’s worth checking anyway.

Joe: Yeah, for sure. It’s worth checking, but yeah.

Joe: All well, good luck Scott. Check your plan doc. Read the plan document to see if at 55 you can do a partial rollover-

Al: – when you’re term- when you’re separated from service, that’s the case.

Joe: And then, so you keep money in the 401(k) plan, and then you do a partial rollover. You put that into the IRA so you can convert some of those dollars over that 5-year period. That would be the easiest and cleanest for sure-

Al: – if possible. Yeah.

Joe: All right. Cool.

How to Fund College? TSP to Roth Conversions? Retirement at 55? (Big Juan, TX)

Joe: All right. we got Big Juan from Texas. “Hey Andi, Joe, Big Al.” Big Al. Big Juan.

Al: Yeah. How about that?

Joe: “Love the show. Found it on YouTube and now enjoying episodes when I’m on the treadmill doing some housework. Vital details. Rarely drink. Rarely drive. Long story.” All right, Big Juan. But we do own the world’s most annoying Yorkshire Ter- Terrier.”

Al: I’m guessing that Yorkshire barks all the time.

Joe: I’m guessing that’s it. “I’m 54, wife’s 52. I retired one year ago from USG Service-”

Andi: US Government.

Joe: United States Government Service. “-to become Mr. Mom for our two teenage boys in the last few years of college. Wife still works with USG, will retire in the next 3 to 12 years. My pension and wife’s net pay gives us about $10,500 a month. We’ll get $5000 to $7000 a month in rent from 3 investment properties. The properties are mortgaged for the next 15 years between 5% and 7% and will not generate actual profit until mortgages are paid off. Our annual expenses, including the mortgage payments, are about $12,000 a month. Here’s the current breakdown. My wife and my wife’s combined regular TSPs are $3,500,000. My wife’s combined Roth IRAs are $800,000, brokerage account $500,000, wife’s HAS’s $8000, 3 rental properties $1,900,000, cash $15,000. Question one. One kid starts college two years, the other 4 years, we don’t have 529 plans. Is it wise to tap my Roth or is it better to use our brokerage account to college- To fund our college? Do you see any other creative ways to finance college given our situation?” Okay, let’s stop there.

Al: Yeah, that’s a good question.

Joe: God, I would stay so far away from the Roth if I had to, to fund college. I would much rather take a loan than take it from the Roth.

Al: Yeah, I mean, I would either set up a 529 plan now, you still got some time. Or I would use the brokerage account. To me, those two are much better. The Roth, it’s difficult to get money into the Roth and you would like that to compound growth so you can use it throughout your retirement to keep your taxes low. So I, yeah, I would not use that if you don’t have to.

Joe: Okay. “Number two, would Roth conversion from my TSP be advisable in my current situation? I think I know the answer given your general bent on the topic.” Wow. Big Juan throwing heat. Just throwing big gas. Yeah. Yeah. Juan, you know the answer.

Al: You got $3,000,000plus in a TSP taxable. Yeah. You’d like to get more in Roth. That makes sense.

Joe: Tax rates are relatively low. Yeah. Yeah. “Question three. Once my wife retires, we expect $12,000 a month expenses to increase with inflation. Our pensions will net us $9000 a month. Rents will net us $5000 to $7000, but will also rise with inflation. Our health insurance is vested. Social Security will be about $6000, but not until age 70, and we can’t tap TSP or Roth until age 59 and a half. What’s your spitball analysis about whether my better half could retire in 3 years at age 55?”

Al: Well, they’ve, they have about, currently they have about $4,700,000 and he says $9000 per month pensions. So that’s, that’s $108,000 and they wanna spend about $144,000 that’s inclusive of mortgages, which will be paid off. But even if you look at $144,000 spending, $108,000 pensions, $36,000 shortfall against $4,700,000, that’s less than a 1% distribution rate. It looks phenomenal. Yeah. So, yeah, go for it. No reason not to.

Joe: Okay.

Al: Any other thoughts?

Joe: Any other sage advice?

Al: Well, I think that, I mean, if, what I said is right and your shortfall is $36,000, then you’ve, you can live off the brokerage account till you’re 59 and a half, which will be probably right about that time anyway and you can start withdrawing from your TSP. But yeah, Roth conversions make sense too. So the rental properties, you know, I know that’s what you gross $5000 to $7000, but there’s other expenses too. So don’t forget the maintenance and the property taxes and maybe property management fees and the like. So just, you know, it’s not all profit as, you know, so just factor that in.

Calculate Your Free Financial Blueprint

Andi: Calculate your likelihood of retirement success with a Financial Blueprint. Click or tap the Financial Blueprint link in the episode description, input your details, and our free tool will analyze your current cash flow, assets, and projected retirement spending. It’ll output a detailed report with three scenarios to help you determine your probability of retirement success, including future taxes and actionable steps you can take now to achieve your financial goals. Next, schedule a free financial assessment with one of the experienced human professionals on Joe and Big Al’s team at Pure Financial Advisors to review your Financial Blueprint. They’ll help you develop a thorough financial plan that addresses your unique immediate needs and your long-term retirement vision. At the end of the assessment process, you can decide whether Pure Financial Advisors is a good match for your retirement planning needs, and what the next steps look like. Click or tap the links in the episode description to get your Financial Blueprint and to schedule your Financial Assessment – both for free, courtesy of Your Money, Your Wealth and Pure Financial Advisors.

We’re 46 and 47, Is Our Retirement Plan a Pipe Dream? (Frank and Jane Drebin, WI)

Joe: Alright, last one. Okay, last one of the day. Okay. We got Frank and Jane Durbin.

Al: Okay.

Andi: Drebin.

Joe: Drebin. Oh, Frank Drebin.

Andi: Yes.

Joe: Yep. Naked Gun.

Andi: You got it.

Joe: Yep. And Jane, that was, “Hey, nice beaver.” “Yeah, I just got it stuffed.”

Andi: For anybody who doesn’t understand that reference, please go watch the movie.

Joe: What? She just got it stuffed. You’ve never seen The Naked Gun?

Al: I’ve seen it.

Joe: That’s a great movie.

Al: I wouldn’t have said that, but you did.

Joe: It’s a movie quote. Okay. “Hey, Joe, Al. I have a spitball question for you about when my wife and I can retire. I’m 46, my wife is 47. I’d like to retire in 5-ish years. I’m not sure if that is feasible. We make a combined $300,000 annual, $200,000 for me, $100,000 for her. We currently have $325,000 in a Roth $965,000 in a SEP, traditional 403(b), IRAs, $51,000 in HAS, $400,000 in a brokerage, $100,000 in cash. That equals $1,800,000. We add $7000 per year to the Roth via backdoor, $50,000 in a SEP, $7000 in traditional and $23,500 in the 403(b). Okay, and the remaining surplus of $25,000 to $75,000 goes into the old brokerage account. I’m hoping to spend $100,000 per year in retirement. However, we still owe $378,000 on our home at 6.5% interest, which comes to about $40,000 a year. It would be an expense on top of the $100,000 until we pay it off. I own my own business and it’s oh, and it’s occupying real estate, which I believe-“

Andi: -accompanying real estate- So he owns his own business and he accompanying real estate.

Joe: Yeah. What did I say? Occupying, let’s say it was close though. You- he’s occupying his real estate.

Al: I think our listeners got it.

Joe: Come on. Okay. I told you I’m tired.

Andi: Okay. And funny as hell.

Al: You do have a 3-year-old, right?

Joe: I get up at 4:30 in the morning.

Al: I know. Go to the gym and-

Joe: That’s right. Yeah. Yeah. My life’s Groundhogs Day.

Al: I, yeah, I can see that.

Joe: And it’s like, no wonder why I like to get myself visually like in the- in the emails here, right? I wanna be like, what are you drinking, Frank? Yeah.

Al: Right, and then can I join you?

Joe: You know? Then you think of the movie and it’s like, all right. Okay. “If I sold my business in 5 years for $1,000,000 and used the proceeds to pay off my mortgage and invested the rest, would we be sitting pretty or is this just a pipe dream? I have no debt on the business, so I assume I would pay capital gains. Also, I know health insurance would be an issue for us as our insurance is through my wife’s work, and if she retired too, we would have to hit the health insurance marketplace. Maybe I could convince my wife to keep working. Ha, appreciate your spitballing your thoughts. By the way, my drink of choice is New Glares Moonman.” Man, I, like Spotted Cow from the old New Glares.

Al: Yeah.

Joe: He’s Wisconsin, right?

Al: Yeah. It’s gotta be all right. Only IPA available in Wisconsin.

Joe: He says he’s the only IP available in Wisconsin. Yeah, my cousin lives in New Glares.

Al: Really?

Joe: Yeah. Okay. “And my wife prefers water.” Well, she needs to, while you’re pounding the Moonman, if you feel like you’re on the moon after you have a couple of those. “I drive a 2017 Honda Ridgeline, and my wife drives a 2023 Toyota Prius.” Wow. They still make Priuses? Yeah, they do. All right, cool.

Al: They’ve got a new one. Prius Prime.

Joe: Oh. Alright.

Al: I have a friend that drives one.

Joe: Okay.

Al: Actually I have two friends that drive one.

Joe: Prius is coming back. Alright. “Can is- this a pipe dream?” I don’t even know where-

Al: Well, let me give you a couple numbers.

Joe: Thank you. I know that we did them.

Al: So, so we’re starting with about $1,800,000 if, I’ll just take your numbers. You’re adding about, if I use the lower end of what you’re adding about $120,000 a year, 6% over 5 years, you probably end up with about $3,100,000. If you sell the business for $1,000,000, well you’ve gotta, gotta pay closing costs. You gotta pay taxes. Right. Then you gotta pay off the mortgage, right? So, I don’t know, maybe you end up with $300,000 or $400,000. Maybe you end up with $3,500,000. Some, somewhere around there.

Joe: You mean he’s gonna lose six- Oh, what’s the mortgage on the business?

Al: Well, he’s got, he wants to pay up his home mortgage. Which is about $400,00.

Joe: Oh. Got it. Okay.

Al: Yeah, so I’m just counting that in. So, so if he does that, if he’s got $3,400,000, $3,500,000, his $100,000 that he wants to spend without the mortgage, so that would be about a 3.4% distribution rate. He’s kind of, kind of right there, I would say.

Joe: How old is he?

Al: He’s 46 and he is talking about-

Joe: 50 again?

Al: Yeah. 51.

Joe: God, everyone wants to retire at 50.

Al: I know, right?

Joe: Well, me too. Yeah.

Al: Are you ever retiring tomorrow?

Joe: It’s coming, Al. It’s coming.

Joe: Yeah, I think, I think it looks pretty good, but I would say it, it’s, not like there’s a, huge margin for error, so just be careful. When it comes to your distribution strategy from your assets, then just try to have a little bit of flexibility. Markets do well, you spend a little bit more that year. Markets do less well or go down, you may want to cut back a little bit on spending that year, so just be aware of that. I would say.

Joe: Yeah, I mean he is done a really good job. You’re 47 years old and you got a giant net worth. You own your business. I dunno, for people that own their own business, I think it’s really difficult for them to retire at 50.

Al: It kind of is. ’cause you’re used to kind of charging.

Joe: Yeah. Right. And I mean, it’s not easy to have a successful business. Most small businesses fail and you know, I think he’s done a really good job. So, yeah. he could pick up a, little side hustle. I don’t know. Can he sell the business and stay on for a little bit?

Al: Yeah, that would be kinda cool.

Joe: Maybe consult back to the business.

Al: Right. Maybe work halftime.

Joe: Or just, be like Al and just never leave and just, work like 3 hours a week.

Al: You know what?

Joe: You have a giant ass paycheck-

Al: If you can get that gig, I wholly recommend it. It works for me.

Joe: Yeah. That’s it for us. Thanks for the questions. Thanks for listening. Really appreciate everyone’s support. Andi, wonderful job. Big Al. You too, bud.

Al: And back at you.

Joe: Aaron. Way to go. All right, we’ll see you guys next time. The show’s called Your Money, Your Wealth®.

Next Week on the YMYW Podcast

Andi: John in Boston is in the 32% tax bracket and Flight Deck Dad and Irish Girl in Pensacola have a bunch of tax free pension income. Does it make sense for them to pay the taxes now to do Roth conversions? Tune in as Joe and Big Al spitball on these and other questions next week on Your Money, Your Wealth. Follow us in your favorite podcast app. Subscribe and watch us and join the conversation in the comments on our YouTube channel, and leave your honest reviews and ratings in Apple Podcasts. If you’ve already done all that, maybe tell a friend or 10 to do it too.

Your Money, Your Wealth is presented by Pure Financial Advisors. Getting a spitball from Joe and Big Al is a great way to get a vague idea of how ready you are for retirement, but trust me, you do not want to base the rest of your life on “vague”. Go deep instead, with one of the experienced professionals on Joe and Big Al’s team at Pure. It doesn’t cost you anything and it doesn’t commit you to anything. They’ll analyze your entire financial situation to help you develop a retirement plan that’s sharp and in focus. Schedule your meeting with the Pure team at any of our locations nationwide, or get the same great service in an online Zoom meeting without leaving home. Click or tap the Free Financial Assessment link in the episode description, or call 888-994-6257 to get started.

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

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