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 manages the firm's YouTube channels. Prior to joining Pure, Andi was Media Operations Manager for a San Diego-based financial services firm with [...]

Published On
October 10, 2023

How much can you safely spend in retirement? Is the four percent rule outdated? Joe and Big Al spitball on a safe retirement distribution rate for those in the 55-60 age range for Clay in Ohio. They also spitball on withdrawal rates when there’s a pension in the mix for Johnny and June in the Bay Area of California, and for William in Maryland, who is concerned he might be exposing himself to sequence of returns risk by spending too much in early retirement. Plus, when does Dan have to take required minimum distributions from the IRA he inherited from his Dad in 2021? Finally, Wayne in San Diego wants to know how to protect his bank accounts from FedNow, the Federal Reserve’s new peer-to-peer payment system (kinda like Venmo, but not).

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Show Notes

    • (00:53) What’s a Safe Retirement Distribution Rate? (Clay, OH)
    • (07:57) Can We Retire at Ages 50 and 48? (Johnny & June, East Bay, CA)
    • (19:01) Spitball My Retirement Withdrawal Rate (William, MD)
    • (23:53) When Am I Required to Take Money From My Inherited IRA? (Dan)
    • (24:50) How to Protect Money From FedNow? (Wayne, San Diego)
    • (28:54) The Derails

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Andi: How much can you safely spend in retirement? Is the four percent rule outdated? Today on Your Money, Your Wealth® podcast 450, Joe and Big Al spitball on a safe retirement distribution rate for those in the 55-60 age range for Clay in Ohio. They also spitball on withdrawal rates when there’s a pension in the mix for Johnny and June in the Bay Area of California, and for William in Maryland, who is concerned he might be exposing himself to sequence of returns risk by spending too much in early retirement. Plus, when does Dan have to take required minimum distributions from the IRA he inherited from his Dad in 2021? Finally, Wayne in San Diego wants to know how to protect his bank accounts from FedNow, the Federal Reserve’s new peer-to-peer payment system. I’m producer Andi Last, and here are the hosts of Your Money, Your Wealth®, Joe Anderson, CFP® and Big Al Clopine, CPA.

What’s a Safe Retirement Distribution Rate? (Clay, OH)

Joe:   What do we got here? Clay from Ohio “In a perfect spitball world.”
Now we have perfect spitball worlds.

Al: Yeah! There’s no such thing by the way, but we try to get as close as we can.

Joe: “What is the highest distribution rate that you would feel relatively safe? If you could throw some percentages out there for us planning, starting at 55 up to 60.” Okay. 55. Three or less.

Al: I’d say three tops. At 60, I’d say 3.5 tops, but I mean, there’s so many variables, right?

Joe: Here’s the distribution rate. And I think I’ve said this a couple of times, but it’s just to get you in the same ballpark or the area.

Al: Are you in the ballpark?

Joe: You don’t want to plan a distribution strategy based on a burn rate. We’re looking at, do they have enough capital saved to potentially produce enough income to last the rest of the year? Depending on what their goals are. We do the math just to see if they are close? Are they in the ballpark? Are they in the same zip code? When you retire, you’re not taking 4% out each year. You have to create a more sophisticated strategy, in my opinion, that has to deal with what are the market conditions? What are the tax considerations? Where’s the money held? How are you selling? There’s a lot of other things that go along with it versus just saying, Hey, I’m going to take 4% from my portfolio and move on. I think you want to be a little bit more creative in your strategy.

Al: The other big factor is how is it invested? If it’s in a checking account, earning zero percent, then your distribution rate is pretty low, maybe below zero.

Andi: Would the first question be, how much do you actually have saved?

Joe: No, it doesn’t matter.

Al: It depends on the relationship between that and your spending. You go through what your spending is, you subtract out your fixed income, like social security, you get a shortfall, you know, whatever it is, call it $40,000 shortfall.
You got a million dollars, you divide 40 into a million. That’s 4%. If you’re 65 or older, you’re in the ballpark.

Joe: Are you looking at how much money that you have? You have $100,000 saved. How much money can you pull from that account? If you’re 65 years old, we could say you could probably pull $4,000 from the account per year. That’s the distribution rate. But of course, as you’re doing the planning, you want to know how much money that you have saved. What are you spending? What is your fixed income? What are the tax considerations and so on and so forth. What are the ultimate goals of the money? Is there a legacy play or do you want to bounce the last check, you know, to the mortuary?

Al: What’s your longevity, do you think? Also, I had another one, but I just forgot. It was really good.

Joe: It was solid.

Al: It was so good. Oh, I know what it is. What’s your social security going to be? Cause that factors into this too.

Joe: Do you have pensions? Other fixed income? Do you have real estate?

Al: You might have a 6% distribution rate at 60 and be fine because you got big fat social security and pensions coming.

Joe: In a perfect world, let’s say you’re 100% invested in equities and the stock market does 20% over the next 20 years. And it does 20% every single year. Well, there you go. That’s your distribution rate.

Al: That’s true.

Joe: How this all came about was looking at, all right, let’s put together A portfolio, it’s roughly a 60/40 portfolio, 60% equity and 40% bonds. Let’s back test this thing a thousand million times in all sorts of different market conditions. The market’s down the first 10 years, the market comes back up and there’s a certain average rate of return. If the portfolio average is 6%, you take out inflation. If you pull out 4%, you have a safe withdrawal rate. That’s really making this simplified, but that’s where these burn rates came about. There’s been a lot more studies in recent times of saying, well, 4% that’s probably not the right number.

Al: That was because the fixed income was so low.

Joe: And the interest rates were zero

Al: Now fixed income rates are higher. So maybe it’s changed.

Joe: Now it’s back to 4%,

Al: We’ve heard your 70 could be 5%. You’re right, Joe, this is just kind of a guideline. This isn’t gospel. If you do this calculation and your distribution rates 11%, you’re nowhere near doing this,you’re not even close. But if you’re around 4% at 60, you’re around 3.5, right? 55, maybe 3 or less.

Joe: Some years you could probably pull out a lot more. Depending on what the portfolio did and what the market did and what your spending needs are and what the spending need is for the next year. Sometimes people spend a lot more money in their 60s and 70s and then they kind of tone down their spending when they hit their 80s and 90s. There’s all sorts of different ways on how to slice and dice this. That’s why I think distribution or retirement income strategy and planning is a lot more challenging. There’s a lot more nuances to it versus saying, hey, I’m 45, I want to retire at 65. That’s a pretty easy spitball. It’s like, well, here’s what you got. Here’s what you need. And this is the ballpark, here’s the area code that you want to get into. You need a million dollars, $700,000, $500,000, $5 million, whatever it is, we can kind of guide and do a really quick back of the envelope calculation. Then once it comes time to retire, then the whole ball game’s changed.

Al: You’ve always said that it’s much easier to figure out how much to save, but then when you have it, how do you make that last for your lifetime? There’s so many different variables.

Joe: That’s ongoing, you’re going to have to call in every year for a spitball cause some years it’s going to be 8%. Some years it’s like, You can’t take any.

Andi: And then you guys will never be able to quit.

Al: Oh, yeah we will. We’ll find a replacement.

Andi: When you shift from saving for retirement to spending in retirement, your financial strategies need to change… but your plan for retirement withdrawals could be full of trap doors! Learn the basics of withdrawing money from your portfolio in retirement, and how to identify and avoid the trap doors you find along the way. Click the link in the description of today’s episode in your podcast app to go to the show notes, watch the Withdrawal Trap Doors episode of YMYW TV, and download the free companion Withdrawal Strategy Guide for more on sustainable distribution rates, optimizing the order and location of your withdrawals, the impact of market volatility and inflation on your retirement spend-down plan, and tax-saving strategies to make your money last longer in retirement. Tell a friend! And if you’ve got a question or need a spitball of your own, click Ask Joe and Al On Air there in the podcast show notes and send it on in.

Can We Retire at Ages 50 and 48? (Johnny & June, East Bay, CA)

Joe: Johnny and June in East Bay, California. “Hey, Andi, Joe”

Andi: That’s a good reference.

Joe: Yeah. Johnny and June. “Hey, Andi, Joe, and Al. Your show makes my super commute tolerable.“

Al: Pleased to help.

Joe: “Thanks for all you do. When we’re not driving our 2015 Tesla Model S. Our 2018 Subaru Outback, or riding our bikes,” Now they sound like a little outdoorsman.

Al: Yeah, right! That’s my kind of people.

Joe: “Or when we’re hiking, we occasionally sip on local red wines or happy or hazy IPAs.”

Al: Definitely my people.

Joe: Yeah. “We love your spitball analysis of when we can safely and comfortably retire. All right. Here we go. I’m 41. My wife is 39. Our kids are six and four. I’m a full time government lawyer. My wife is a part time lawyer in the private sector. Current total EGI for both of us is $280,000 a year. I have a lovely pension. They’ll pay out about $120,000 a year at 50.”

Al: Wow. Where do we sign up for that? I already missed it.

Andi: You gotta be a government lawyer.

Joe: I don’t know if I want to be a government lawyer, even to get that.
“And if I retire at 55, the thing jumps up to $250,000, big Al.“

Al: More than double for working five more years.

Joe: Jeez. Sounds like a no brainer there.

Al: Yep, seems like it.

Joe: But, I don’t know, maybe five years as a government attorney is like an eternity.

Al: You lose 10 years of your life.

Joe: You lose 15 years. “The pension has a COLA. It’s capped at 2% per year. Current expenses are about $180,000 a year.” I like how he has to say, hey, the Bay Area is super expensive. You don’t have to justify. We don’t care.

Al: It’s all right. Hey, I miss the California Bay Area. I think we all know it’s pretty expensive.

Joe: “Current net worth, net worth is about $1. 9 million; broken down as follows. Taxable brokerage is 1.15, wife’s 401(k) and my 457 is $500,000 all pre tax. Roth accounts $150,000, cash about $100,000, 1.2 almost in brokerage accounts, Al. That’s $250,000 annual income.

Al: They’re saving a lot.

Joe: At 40 years old. Interesting. It’s quite impressive.

Al: It’s very impressive. Maybe his wife has a tech company, being in that area?

Joe: She’s not. She’s a part time attorney.

Al: I missed that. Okay. No stock options.

Joe: Nothing.

Al: Maybe she’s a part time attorney for a tech company.

Andi: Maybe she was a full time attorney until recently.

Joe: I don’t know. Inheritance maybe?

Al: Possible too.

Joe: Could be. But I just offended them.

Al: You did. You totally,

Joe: I’m going to get an interrent letter.

Al: It’s like, Joe, we are savers.

Joe: We have been grinding, but Hey, you’re spending $180,000 in the Bay area. You making $280,000 and you’re saving a bunch in a retirement account

Al: And there’s a bunch of tax. So there’s not much left. So I get your logic. Just doing a little math.

Joe: It’s called a spitball.

Al: It is. It is. It kind of struck me the same way.

Joe: All right. “We max out our 401(k)’s and 457 every year and a little backdoor Roth to max. We do not receive any employer match. We are not adding anything to our brokerage account anymore. Beyond the drip.” You know what a drip is?

Al: Yes. It’s usually for firemen, isn’t it?

Joe: For firemen; what, like, because the hose might have a little,

Al: And also gardeners get the drip.

Andi: It’s a dividend reinvestment plan.

Al: It’s for government employees, typically firemen employees. It’s an extra pension plan. Okay. I didn’t know what it stood for.

Joe: A dividend reinvestment plan?

Al: Now I know. Got educated by Andi.

Joe: It’s a non qualified, they’re just going directly to the company, I believe.
Okay. Let’s see, because the cost of fresh berries and craft beer has gone through the roof.

Andi: That’s why they’re not adding anything to the brokerage.

Joe: Got it. They just picked up that little hazy IPA addiction.

Al: Right

Joe: We also have about $200,000 in 529 plans and we don’t intend to contribute anything else or go out of pocket for college. All right. So here’s the question. Can we retire when I’m 50 and my wife is 48? We would both have the ability to work part time if necessary. I know that if I hold out until 55 before retiring, that would be sitting pretty.”

Al: I agree with that.

Joe: I agree with that too. “I don’t want to work 50 plus hours a week beyond the point at which I have hit financial independence.

Al: Got it.

Joe: I like that too.

Al: Yeah, you’re knocking on that door, aren’t you?

Joe: I am knocking on that door, Big Al. Thanks to my, you know, your spitball analysis of my situation.

Al: You were able to get there.

Joe: “We expect our living costs to remain fixed, plus inflation, until our kids are both out of the house. And then, hopefully, the cost will decrease a bit.” All right. “We don’t want to bank on Social Security bailing us out. In regards to the sequence of return risk or if it bites us.” Oh, he’s been listening to this show.

Al: Yeah, apparently. It’s that long commute.

Joe: “What’s a safe withdrawal rate when I’ve got the pension as a guaranteed income? Also, my wife’s plan now allows for Roth 401(k) contributions and my 457 should add a Roth option come 2024 2025. We could probably afford to max those out 100% Roth if we turn out the dividend reinvestment in our brokerage account and use that extra dividend income to help cover our living expenses. Would you advise that and or any Roth conversions over the next 9 to 14 years? Well, that was probably too many questions, and I’m grateful if you take the time to answer one or more of them. Cheers, Johnny and June”.

Al: Got it. Okay.

Joe: He’s got a giant pension at age 50. $125,000 a year.

Al: $120,000, and it basically doubles in five more years.

Joe: He wants to retire at 50, because he doesn’t want to grind.

Al: He does.

Joe: If he doesn’t have to.

Al: I get it. I mean, if you’re financially independent, why keep working if you don’t want to.

Joe: Especially being a government lawyer,

Andi: Working 50 plus hours a week,

Joe: What do you think that job entails? Just like government contracts.

Al: That would be a good guess, right?

Joe: Yeah. That sounds exciting.

Al: It could be keeping government employees out of trouble. I mean, it could be lots of things.

Joe: He’s on call for the government employee that gets in trouble over the weekend.

Al: Or for the government that lets go of someone that shouldn’t.

Joe: Maybe employment law for the government.

Al: It’s possible.

Joe: All right. So $280,000, he wants to spend $180,000. So $180,000 over the next five years, given inflation is going to be what $200

Al: He wants to work nine more years. So I did a little math. Let me help you out because this takes a little pre-calculation. So his expenses at 50, 9 years from now is going to be $235, 000, roughly. If we take the same with 3% inflation.

Joe: 235, call it. And then he’s got 125.

Al: Let’s say his $1.9 million. And I’m just saying maxing out 401(k), 457 for nine more years at 6%, that gets them at 3.7, which is, yeah, which basically doubles. Then the way you look at it is he’s really close

Joe: He’s probably 20,000 off.

Al: Yeah, I would say so too. So $235,000 expenses, $120,000 of pension. So if you think about the distribution rate, actually, I just ran it at 3%, which is maybe a little rich, but close. That comes out to $231,000. Probably safer at 50 to run it 2.5% just to be a little safer. If you do that, it’s $93,000. Now you’re probably about $20,000 off, just like you thought. So if it were me, personally, I would work at least two more years to 52 because then you’re in a safer spot. I mean, but, on the other hand, if you don’t want to do it, you don’t want to do it, you could…

Joe: He said he could work part time, so… Here’s the math again, real simply, is that we’re inflating out his expenses at $180,000 over 10 years at 3.5%. Then $180,000 of purchasing power turns into $235,000 which is a pretty big number, but hey, you know, he lives in the Bay and he likes the hazy IPAs and he likes the berries. So you got $235,000 is the nut, but wait a minute, he’s got this giant pension of $130,000 roughly. He doesn’t necessarily need to create $230,000 from his portfolio. He needs to create that minus his pension. So around $100,000 and $110,000. Is that the right number?

Al: Yeah, he probably needs around $110,000, $115,000.

Joe: He’s going to be 50 years old. If I have $100,000 that I need to spend, you don’t want to take out probably any more than 3%, maybe 2.5%.

Al: Correct.

Joe: So what John and June, Johnny and Junie need to do Is probably get to $3.5 million dollars by the time he retires. That’s going to be enough cushion to give him a 2.5 to 3 % distribution from the portfolio to cover that shortfall to create that $100,000.

Al: It’s close. Actually, it works out to be 3.7 at 6% and they’re just a few thousand short, but they’re basically right there. If it were me, I would work another year or two.

Joe: Just to give you the cushion.

Al: Just to give more cushions that you add another $20,000 per year of pension. That’s what I would do. Plus I’ll say one other thing, being a father of two children. So your kids are six and four. Nine years from now,

Joe: 16 and 15, 14,

Al: 16 and 12, let’s say, you know, 13. Do you really want to be home all day with them? I guess all I’m saying is

Joe: You would, you still bathe your kids.

Al: Where did that come from? They’re In their thirties. When they were three, sure. Anyway, so, in all seriousness, I have a feeling you may change your mind by the time you get to age 50. It happened to me. That’s why I’m saying that. Remember I was going to retire at 48.

Joe: Yeah, you were.

Al: And here I am. And here you are, still chugging away 20 years later.

Al: But you know, the thing is, at age 50, You’re just about financially independent. So sometimes just knowing that gives you more confidence and freedom at your work and you know, whatever you say, it’s all right.

Joe: You don’t give a F.

Al: That is correct.

Spitball My Retirement Withdrawal Rate (William, MD)

Joe: All right, let’s go to Maryland, shall we? “I’m writing to ask for a spitball of a proper withdrawal rate from my retirement accounts to ensure I can support my lifestyle in retirement and won’t run out of money. I’m 56 years old and retired after 30 years of service from the federal government, March 2023, six months ago, I plan to have a second career, but have experienced a serious medical problem and have been unable to work while the condition is improving I may not be able to work for some time, if at all.” Oh Cancer. Sorry to hear that.

Al: Yeah, I’m very sorry to hear that.

Joe: “My situation. I’m married to my wife. She’s 49. She makes $130,000 a year. We divide our household expenses and for us to maintain our lifestyle in my retirement, I need to produce $8,000 per month or $96,000 annually. This is in addition to my wife’s income.” Let’s break down that paragraph one more time. So he’s married. She makes $130,000. We divide our household expenses. And he goes, and for us to maintain our lifestyle in my retirement, I need to produce $8,000 a month.

Al: So clearly he’s got his side, she’s got her side. He’s gotta produce $8,000 a month.

Joe: So it’s his retirement and his lifestyle.

Andi: He’s already retired. He’s 56 years old and retired after 30 years of service.

Joe: I understand.

Al: Yep. That’s right. It’s almost like he’s single. Almost.

Joe: From a financial perspective.

Al: Correct.

Joe: Okay. “Here’s my current income numbers with sources. He’s got $9,000 a month in federal pensions. no, 9, 000 a month, Total From the sources. Okay. He’s got a federal pension of $4,400. He’s got a disability pension of $1,200. He’s taking a distribution from a thrift savings plan of $4,000 a month. So he’s taking a 3.5% withdrawal rate for $1. 4 million TSP accounts. Income from a second career, zero. Future income streams. So he’s going to have a military pension of $700 a month. Then he’s going to have Social Security. So we got different numbers of Social Security at 62, 67, and so on. He also has some other dollars. $440,000 in total. He’s got a Roth IRA of $120,000, rollover of $50,000, SEP IRA of $10,000, and a brokerage account of $260,000. So if I add up all liquid assets, $1.4 plus that is what, 1.9ish?

Al: Yeah, 1.8, 1.9, yep.

Joe: Okay, and then he’s got about $80,000; 4, 5, 6, 7, 8?

Al: He’s got…

Joe: Just in fixed pensions.

Al: 4,400 plus 12, whoops.

Joe: So 7,000? Something like that.

Al: Yeah, 4,400, 12. I can’t even use your calculator, it doesn’t even work. 4,400, 1,200, 5,600 times 12, so that’s $67,000. Okay, and he wants 96,000. So 96 minus 67, so he needs about 29,000. He’s got about 2 million, so it’s a pretty low distribution rate, right?

Joe: It’s pretty doable.

Al: Let’s say I have a 1.8, I’m getting a 1.6% distribution rate. I think it, yeah, I think at 56 years old with future income coming, I think you’re just fine. I don’t think you need to even worry about working.

Joe: “I need to have a retirement plan in which I do not work anymore.”

Al: You got it. You’re already there.

Joe: You’re good. “Am I withdrawing too much money in early retirement leading to a sequence of return risk? No. I don’t think so.

Al: I don’t think so either.

Joe: You got to look at the distribution rate, not from one account, from all of your accounts.

Al: Yes. And actually, if you look at that, like it’s 1. 4 million plus it’s 440.

This distribution rate is actually 2.7, which isn’t that bad, but that doesn’t account for these other income streams coming online.

Joe: We’re not even including social security and then his military pension. Just with the pensions and the fixed income he’s getting now, and then you want to take the burn rate or the distribution rate on all of your liquid assets. He’s just taking it from the TSP, which is worth 1.4. But you add in your Roth IRA of 120, your rollover IRA of 50, the SEP IRA of 10, and your brokerage account of 260. Then you’re looking at, this is my liquid assets. What is the distribution rate of all of the liquid assets? You’re under 3% at 56. Your wife is still working.

Al: With future income coming in. Yeah, you’re fine.

Joe: Yep, I love it. Alright, well sorry about the illness. Hopefully you’re on the mend and congratulations on your financial independence.

Andi: Click Ask Joe and Big Al On Air in the podcast show notes and send in your financial details to have the fellas do a retirement spitball analysis for you. Or for the same price – that is, free – use our new calculator at EASIretirement.com – that’s EASIretirement.com. Create a login, enter your income, savings, and expenses, and see your chance of a successful retirement in about two minutes. If your odds of a successful retirement aren’t as high as you’d like, you can change the numbers and see in an instant how much increasing your savings or working longer changes your retirement projections. You’ll get more visuals than a retirement spitball analysis, but no funny. To review more comprehensive scenarios and projections, just click Planner Plus in the calculator and schedule a one-on-one with an advisor. Start calculating your odds of retirement success now at EASIretirement.com. That’s EASI retirement dot com.

When Am I Required to Take Money From My Inherited IRA? (Dan)

Joe: We got Dan, he writes in. He goes, “I drink Bud Light and drive a 2019 Chevy Malibu. I know – boring. Two kids in college at the moment equals boring.

Al: That boring car.

Joe: Sadly. My dad died at 85 years old in 2021, and I inherited his IRA that was already in RMDs. So, it was after the required beginning date.

Al: Correct. And at age 85, that would be true.

Joe: Yes, sir. “He was a great guy, and he would have loved your humor and funny chemistry, the three of you have.” Oh, thank you very much. “My question is the confusion around RMD requirements. Research shows the funds must be withdrawn fully in 10 years, but when do I have to take the RMD? The rule seems to be year after death. However, I thought there was some COVID exception or provision in the 2019 law. I miss taking the RMD for 2022 and haven’t yet for 2023. RMDs were taken in 2021 earlier in the year before dad passed. Will I get a penalty in 2022 for not taking the RMD? Thanks again for what you do. And thanks for making these boring and nerdy topics entertaining.”

Al: Oh, I like it.

Joe: This is complex because of the SECURE Act that came about, it changed the rules in regards to distributions from retirement accounts. I think most people that listen to the show understand that once you reach a certain age, you’re required to take money out of the retirement account because the government wants to get some taxes because it was a pre tax account that grew tax deferred.

Al: We’ve had a lot of different ages, 70 and a half, 72, 73, 75.

Joe: Before when a non-spouse beneficiary were to pass away, then the non-spouse beneficiary, such as a child or son or daughter of that owner was able to stretch out the tax liability over their life expectancy. So if someone was very young that inherited it, they could stretch out that tax for a very long time. So the Secure Act came about and they said, you know what, no, we want to put a stop to this. We want to get our tax money quicker. And so they put a time frame on it. And this was actually what the law was prior to the stretch. Actually, it was a shorter time period. I believe it was five years. So they said, hey, you got ten years to take the money out. But then the question came, let’s say if the person died with a retirement account before the required beginning date or after the required beginning date. And what all that means is that were they currently taking RMDs? So let’s say Dan’s dad was taking RMDs and then he passed away. He took the RMD the year that he passed. Now Dan inherits it and he’s like, when do I have to take the RMD? I know I have to clear out the account in 10 years. But do I have to pull it out the year of death, the year after death? Well, I haven’t done anything. So am I going to get penalized? The answer’s no.

Al: I agree with that. It is no for 2022.

Joe: And potentially 2023.

Al: We’ll see.

Joe: It’s not, but if I’m a betting man, which I’m not. I would say he’s fine for 2023 as well.

Al: For sure you’re fine for 2022. And here’s why. It’s because when the 10 year rule came out, most accountants and CPAs thought that meant you could wait till year 10 and take everything out. And then a lot of CPAs took that approach. And, but the IRS came back after the fact and said, no if there was an RMD already started, we want you to take out a little bit each year to continue that. And then take out the rest in year 10. It’s like, well, that would have been nice to know that. Last year, right? They waived 2021 and it was so confusing. They waived 2022. Will they waive 2023?

Joe: We don’t know.

Al: We don’t know. I would go ahead and take the RMD this year to make sure personally, but yeah, you’re okay for 2022 just because it was very confusing the way the law was written.

Joe: And it’s still not clear.

Al: Not really.

Joe: We’ll probably get some more clarity at some point. Thanks for the question. Did we make RMDs fun there?

Al: We tried.

How to Protect Money From FedNow? (Wayne, San Diego)

Joe: We got Wayne writes in, “How can we protect our checking and savings and IRAs from FedNow?

Al: FedNow.

Joe: Is he talking about the Federal Reserve?

Al: No, he’s talking about a new program. The Federal Reserve did come up with a new instant payment system.

Joe: FedNow.

Al: FedNow.

Joe: What is FedNow?

Al: That’s what it’s called.

Joe: Teach me, educate me.

Al: I am, I just told you. It’s a Federal Reserve set up a new instant payment system allowing, like, I can send you Cash within seconds.

Joe: It’s like Venmo.

Al: It is. I don’t know why this is better, but anyway,

Andi: Because it’s from the federal government. That definitely makes it better, right…

Al: It does seem like Venmo already does that, but at any rate,

Andi: And PayPal and Cash App and all those things.

Al: Yeah, and my bank, I can do that too but I have to know their account number. So that makes that harder anyway. Here’s the concern, Moody’s said, this could be a problem for instant cash for the banks, not necessarily for you and me, but for the banks, because they’re going to have to make sure money doesn’t slip out 24/7. And then the people committing fraud, cybersecurity.

Joe: Hold on with FedNow you can throw me cash. But you still need my account number, don’t you?

Al: I don’t think so. I think it’s probably more like Venmo, where you already put it in. I don’t know what the difference is, to be honest.

Joe: Any love here.

Andi: I believe all you have to have is a phone number and an email address.

Joe: And the money comes from where? The Fed?

Al: No, it comes from your account.

Andi: It comes from your account, just like with PayPal or Venmo. It’s just that this is the federal version of that.

Joe: So, why the hell would I worry about my checking account if I’m not involved with it?

Al: Because Moody’s is saying that the banks have more exposure to lost money. So maybe the smaller ones might have issues and maybe more failures. That’s what they’re implying. I’m not too worried about that myself. And if I were… I would make sure I was at a bank too big to fail. Right?

Joe: Ooh, too big to fail.

Al: Yeah. Brought that one out.

Joe: Love it. Brings me back to 2008.

Al: Correct.

Joe: Alright. Note to self, probably not, I guess send us email questions on things we have no clue about.

Al: Well, but we can take a look, which I did and I had to educate you.

Joe: Yeah, great research.

Al: It was crack.

Joe: Crack research.

Al: I’ve got one page here so I’m on top of it.

Joe: Hopefully that helps. The show is called Your Money, Your Wealth®.

Andi: Super-commute and Venmo in the Derails at the end of the episode, so stick around. 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 – that includes Amazon and Audible, Castbox, Goodpods, Pandora, PlayerFM, Pocket Casts, Podcast Addict, Podchaser, Podknife, and Spotify.

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The Derails



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.

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