Show Notes

• 00:00 – Intro: This Week on the YMYW Podcast
• 00:58 – Nearly $3M at 52 and 45. When Can We Retire Together? (Paul & Angela, FL)
• 12:56 – Mom Inherited Dad’s IRA at 84. Can She Still Roll It Into Her Own? (Mike, Riverside, CA)
• 18:13 – Bond Funds Keep Losing Value Despite Paying Interest. Treasuries Instead? (Edward, IL)
• 25:06 – $1.1M Pre-Tax: Roth for the Last 5 Years? (Blanche Devereaux, CA)
• 35:10 – How Much Will We Have by 2030? Is It Enough to Retire at 59? (Mr. & Mrs. Smith, Coastal NC)
• 39:26 – Comment: No NUA Step-Up at Death (Jeff)
• 42:20 – MYGA vs. Immediate Annuity. Is MYGA a CD in Disguise? (Holly, San Francisco)
• 44:18 – Outro: Next Week on the YMYW Podcast

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Transcription

(NOTE: Transcriptions are an approximation and may not be entirely correct)

Intro: This Week on the YMYW Podcast

Andi: Paul and Angela in Florida are 52 and 45. What’s the earliest the two of them can walk away from work at the same time, so Paul can spend a whole lot more time in the boat? That’s today on Your Money, Your Wealth podcast number 593. Then the fellas spitball for Mike in Riverside. His mom inherited his dad’s IRA at age 84. Can she still roll it into her own? Edward in Illinois is watching his bond funds lose value even while they pay him interest, and he’s wondering if treasuries are the fix. Blanche Devereaux in California is 55 with one-point-one million dollars in pre-tax. Should she go all-Roth for her last five working years? And Mr and Mrs Smith on the Carolina coast want to know if they can afford to retire at age 59. Jump into our YouTube comments and tell us what you think of Joe and Big Al’s spitballs today and whether you would do something different. I’m Executive Producer Andi Last, and here are the hosts of Your Money, Your Wealth®, Joe Anderson, CFP®, and Big Al Clopine, CPA.

Nearly $3M at 52 and 45. When Can We Retire Together? (Paul & Angela, FL)

Joe: “Hello, wise gentlemen and wiser Andi.” I agree with that.

Al: Which one? That she said we’re wise or wi- Yeah … Andi’s wiser?

Joe: Paul and Angela in Florida. Anything there?

Andi: I don’t think it’s a thing, but I’ll double check while you’re reading.

Joe: All right. Anita begs spitball on her situation, Paul 53 in September ’26 and Angela 46 in September ’26. So there’s seven years difference, Joe. Oh, we’re cracking jokes, are we?

Al: Already.

Joe: Angela drives a ’23 Telluride.

Al: Damn.

Joe: And likes a Mic Ultra. And Paul drives a crappy company car that enjoys a Yuengling. A Yuengling.

What’s that beer called? Yuengling?

Andi: Yu- Yingling is how I think-

Joe: Yuling … usually. Yuengling.

Yuli,

Yingling, Yuengling. Yep. Enjoys a Yuengling in Florida or a Spotted Cow in Sconnie. Had some Spotted Cow when I was in Minnesota too.

Al: You did?

Joe: Yeah. Yeah. My, my cousin lives in New Glarus, which is- Okay … where Spotted Cow is brewed.

Al: Oh, okay. Wait, is that like light beer or what is it?

Joe: A Spotted Cow, I don’t know. It’s, yeah, it’s, kinda like a pilsner I guess.

Al: Oh, yeah.

Joe: But yeah, I brought it over the border.

Al: Yeah.

Joe: I don’t know if that was legal or not, but- You did … you can only drink Spotted Cow in Wisconsin. If you drink it in any other state, you’re gonna, you’re gonna pay the price.

Al: it doesn’t work.

Joe: Yeah, the cows are gonna come and- Somehow,

Al: somehow you got away with it …

Joe: we did get away with it. It was- … very tasty. Yep. all right. They got 3 other cars for our kids, 16, 19 and 21. Man, that driveway must look like a parking lot.

Al: Yep.

Joe: Let’s see.

Al: I’m thinking of a gentleman we know in Rancho Santa Fe that probably could handle all of his cars.

Joe: Yeah, that’s about it. Any normal person- … that has five cars in a driveway- one’s best being- … that’s a guard …

Al: yeah …

Joe: one’s parked in, you know. let’s… $529,000, are they good for s- Okay, they got $529,000’s good for the state school, fully funded. Luckily, smart kids with scholarships too. Wow. Total combined income is $220,000. Combined traditional IRA is $1.4 million. Roth IRA is $560,000. Roth 403(b)is $500,000. We would like to spend $150,000 annually in today’s money in retirement. Social Security for Paul and Angela is 65, is approximately $6,000 a month. Paul would love to retire at 55 or at least consider it at 57, hopefully being the max. Angela would like to work seven more years after I retire and we could be fine on her salary of $115,000 until she retires, so we won’t have to touch our investments likely until I’m 64 and she’s 57. So when it’s safe for me… So guys, when is it safe for me to retire? And when is the earliest we can retire together? I like to fish, hunt Fisher, hunter

Al: Yeah

Joe: Does he live in Sconnie? Where does he live? He lives in Florida

Al: Well, Florida, but he- he’s got a place in Sconnie

Joe: Okay. You’d love to do that a lot more, but don’t necessarily need her in the boat. Blah-

Al: So she can be at work.

Joe: Yeah. Angela, see you later. Got a little Spotted Cow, case of Spotted Cow going out to the boat.

Thanks for the spitball. Forgot, Florida house paid for, 550, and Sconnie house worth 250, and I owe 125,000. Told Angela that it would have to be paid off before I retire. Okay. Very responsible of you, Paul.

Al: Man.

Joe: Don’t want her in the boat. So you gotta pay off the house.

Al: I did a little math, Joe.

Joe: Sounds good.

Al: Okay. So we’ve got, we got 2.4 million r- at this point.

Okay? 6% interest, I said to 57, five years. I don’t know what he’s saving, I just put in 30,000. So he ends up at 3.4 million. And then if he’s not gonna touch it for 7 years, so then 7 years, 6%, no add- Wow … ends up with 5 million.

Joe: Yeah, five or 6 probably.

Al: Yep, 5.1. and his spend rate, of 150, 3% inflation 12 years from now, so that’s about 214. So distribution rate at that time would be about 4.2%, and that’s before Social Security, so I think that works. But I’m f- I’m not sure that’s what he really wants to do, even though he said… I think he wants to spend more as soon as he retires.

So I think there’s, probably multiple calculations that need to be made here, but based upon what he just said, I think it works.

Joe: 52 and 45, they got 3 million bucks. They wanna- 2,

Al: 2 mi- … spend 100-

Joe: 2 million … total liquid assets. Deferred is 1.3 and tax-free is 1.6, or no?

Al: m- no Wh- 1.1 plus 128 plus 160 plus 750.

Are you looking at another case?

Joe: No, I’m looking at Paul and Angela. I’m just reading Andi’s

Al: notes here. Oh, wait a minute. Y- yeah, sorry. I w- I’m looking at another case.

Andi: You

are looking

at a different case.

Al: it’s 2.4 million is what they got right now. It was me.

Joe: Yeah, all right. If I add this up, I got 1.4 plus we got another 1 million in Roths.

That’s 2.4.

Al: Yep.

Joe: And that’s what they got. okay. Total combined income of $220,000. They wanna spend $150,000 in today’s dollars.

Al: Yep.

Joe: Okay. 2.4- I, at 52 and 45- Yeah … they’re way fine.

Al: Yeah. he’d work 5 more years. He might be able to work less. She works 7 more years so they retire at the same age, so it’s fair.

I think that’s what he’s thinking.

Joe: Yeah, but not… Yeah, but here’s the issue. he’s wondering what’s- The issue’s not the dollars …

Andi: the earliest they can retire together.

Joe: It does actually- Ri- That’s the issue. That’s what I think the real crux of the- Oh, I, know … case is.

Al: But I-

Joe: Because there’s no way that she’s gonna let him grab the Spotted Cow and get on his bo- Climb into the boat.

Al: And the, and the-

Joe: Every day for 7 years while she’s grinding, paying all the bills.

Al: And there’s no way they’re gonna live on 115 when he wants to go hunting and fishing. And so-

Joe: hunting and fishing is-

Andi: And pay off the house in Sconnie.

Joe: But they got 5 years, or no, they got seven, five, five years.

Al: Five years.

Yep.

Joe: They make really good income. They don’t necessarily have to save a ton, to get there. But, you know, retiring in your 50s is pretty hard. Yep. Especially if you wanna spend $152,000. Yeah, that,

Al: that’s the tougher issue I think.

Joe: Yeah. Because at, at- At 57, you gotta wait 10 years. You gotta bridge a 10-year gap to get any other type of fixed income.

and you wanna spend 150, 10 years, it’s $1.5 million of total withdrawals- coming out of the overall account.

You got two and a half. that’s a big nut if you think about it. it’s a big nut. And plus $150,000 debt to pay off.

Al: on top of the-

Joe: So yeah, you’re looking at 2.7, not including inflation, of what’s gonna come out of the overall account.

You look at it that way, you’re like, “Oh man, I don’t know.” but it depends on what the market does. It depends on the growth of the overall account. It depends on, you know, how much money that you’re currently saving. I think they are in a awesome spot.

Al: I think so, too. I, so I, might, j- I might say it this way, which is when it, comes to a back of the envelope scenario, then I can say…

When people ask, “Can I retire at 62?” I can run the numbers and say, “Yeah, looks pretty good,” or, “Maybe a little tight,” or, maybe not quite yet.” But when they, w- when they ask, “When can I, when, can I retire, and when can we both retire?” That’s, that would req- if I’m doing back of the envelope, that would require probably 10 to 20 calculations, which I’m not gonna do on a spit ball.

That- that’s where you need, financial planning software to throw in these different assumptions, and it’s like, what if we both retire-

Joe: I don’t think you need financial planning software. I think you need advice … I,

Al: s- so that you can run it, so you can see, okay, what if we both retire-

Joe: Software’s…

Yeah, but you need- Well- … advice. I don’t think you need financial planning software.

Al: let me finish.

Joe: Okay. The software is the on- the software’s probably more dangerous because it, it depends on what assumptions that you put in there.

Al: Okay.

Joe: It is gonna show you all sorts of sh- stuff that could or could not-

be reality.

Al: Yeah, but if you had something like this in a software program, then you could say, “What happens if we both retire when I retire?” Or, “What happens if she works seven more years?” Or, “What happens if we spend 140 instead of 150?” Then I would, then you could sort of start around-

Joe: yeah, you could probably do that.

Because you have- … the experience of understanding of how, like, how to be thinking about it, what’s best case, worst case, what assumption should you

use.

I think people play with these calculators online and they potentially blow themselves up. They get overconfident. And so there’s so much, like, there’s, procedural knowledge- Right

of actually doing it versus going to ChatGPT and, finding- Yeah … an answer or going to a financial planning- Okay, but- … software calculator and trying to get the answer that way. All right.

Al: But you and I are not really communicating. So you need financial planning software and, and- I don’t think you need financial planning software

yeah, you do, and you need an advisor. You need some kind of advisor that knows how to interpret this. You’re not gonna have a financial planner sit here and run 25 scenarios on a back of envelope and say, “You know what? You could retire at 56 if you spend 126- Yeah, I understand

Joe: what you’re saying.

Al: That’s, that’s what I’m saying.

Joe: Okay.

Al: All right.

Joe: All right. But I think trying to guide someone to go to calculators is some- somewhat dangerous in my opinion.

Al: I don’t disagree with that. But- Yeah, I’m with you there.

Joe: So I think they can do a lot of different things. Yeah. They’re 52 and they’re 45.

Al: Yep.

Joe: They got 5 more years. We’ll see what happens. What, talk in the microphone?

Andi: Talk in your microphone, Joe.

Joe: Sorry.

Al: When he gets worked up, he looks the other way.

Andi: Yeah.

Andi: If you’re new to YMYW, get yourself to the episode description right now and find the link to the DIY Retirement Guide. It’s back as this week’s Special Offer. And It’s the single biggest, most useful thing we give away — and we only do it a few times a year. If you’ve ever wondered which order to pull from your accounts so you’re not handing the tax man more than you have to, or how to keep RMDs from lighting up your tax return, this guide is going to feel like someone finally turned the lights on. It’s full of the kind of practical, do-it-yourself information you would normally only get by attending one of our retirement classes or in a one-on-one meeting with one of our financial professionals. You’ll learn things like the five steps to plan your retirement income, starting with figuring out exactly where you stand today. How to choose a tax-efficient distribution method. How to build an investment strategy that can take a market punch. And how to protect yourself from the stuff that wrecks retirements: inflation, market swings, and those tax surprises we all love so much. Oh, and check out the formula on page 44 that will show you if you’re actually on track to retire when you want. Yeah, this is a huge guide. Click or tap the link in today’s episode description and claim the DIY Retirement Guide before the Special Offer changes sometime this Friday, August 7th. Go get it now.

Mom Inherited Dad’s IRA at 84. Can She Still Roll It Into Her Own? (Mike, Riverside, CA)

Joe: Let’s go to Riverdale. We got, Mike. Riverside. Riverside, so- Yeah … Riverdale is where Superman-

Andi: Yeah, don’t know Riverdale.

Joe: Yeah. That’s… Isn’t that Superman, Clark Kent?

Andi: Yeah. Wasn’t he Smallville?

Al: I’m sure there’s a Riverdale somewhere.

Joe: Is it Smallville or Riverdale? It’s both a- according to-

Andi: Okay. Just depends on which universe you’re in …

Joe: we should put… Yeah, I suppose. “Good morning, all.” Good morning. “I’ve been listening to YMYW podcast for the number of years and absolutely enjoy it. When I’m not driving my 2010 Toyota RAV4 with $275,000- 275,000 miles on it, I enjoy a, an occasional hoppy craft beer with a high IBU rating.” IBU, help me out.

Andi: Isn’t that international beer units?

Al: International Bitter, bitter units.

Andi: Oh, it’s beer – bitter units, yes.

Joe: Yeah, you look at the IBUs when-

Al: So he likes it- Yeah, I- … likes it bitter … I, don’t, yeah, I stay away from those. That’s a little too bitter for me.

Joe: Little bitter.

Al: Yep.

Joe: Okay, “My question is about spousal IRAs, so here’s the background.

My 84-year-old father passed away in 2021, and we started taking RMDs from his IRA at that time. My surviving mother was also 84 years old when my father passed, and she was taking her own IRA RMDs at that time. She inherited his IRA and kept it as an inherited account instead of doing a spousal rollover into her own IRA.

Ever since, she has had to calculate two different RMDs, one for her own IRA and one for the inherited IRA. My understanding is that as long as she takes her RMD for that year, she can take additional funds from the inherited IRA and move them into her own IRA, even though it’s been a few years since her husband has passed.

If she can do this, is it actually treated as a tax-free rollover since it’s an IRA to IRA, or is it a taxable distribution like her RMDs? I hope Joe and Al are having a great day there in San Diego, Hawaii, or whatever else they might be doing today. The same goes to Andi down in Australia, and I pray for your continued health.

Thanks in advance for your spitball and look forward to more, many more years of YMYW podcasts.”

Andi: Thank you, Mike. That was awesome.

Joe: Yeah, thank you. Yeah, very nice, Mike. Okay, so-

Al: 84-year-old father-

Joe: absolutely … he passed away in 2021.

Al: Yep.

Joe: And he was already taking his RMDs, of course.

Al: As w- as was she.

Joe: my surviving mother was the same age, at 84, when the father passed, and she was taking her. She kept the dad’s IRA in his name and is treating it as an inherited IRA.

Al: Correct. If you do that, you gotta do two RMDs.

Joe: Yes, you have to continue on- with that RMD, or she could have rolled it into hers and… But they’re the same age, so it doesn’t matter anyway.

Al: if she rolled it into hers, she’d only have one RMD.

Joe: She wouldn’t have to take… the, it would be the same dollar figure- Yeah

but it would only have to be out of the one R- I- IRA.

Al: Yeah. and that’s simpler. and, and yeah, that’s a tax-free rollover. So d- yeah, just make it simple. Just go ahead and do it. The reason why sometimes pe- people keep it separate is if one spouse was a lot older than the other one and they don’t wanna take as much RMD, so, but, yeah, in this case, put them together.

Joe: So, but what I got confused on is that can she take additional funds from the inherited IRA and move them into her own IRA?

Al: I think the second point is move the whole thing.

Joe: Move the whole thing. Why would you… W- what’s, w- There’s no-

Al: What’s the point? There’s no point in that.

Joe: Yeah. What’s the point- Yeah of, like, additional funds?

Al: Yeah.

Joe: Maybe her IRA is… yeah. So yeah, I would consolidate the IRAs into a, one IRA, her put it in her own name. You have one beneficiary. That would be Mike from Riverside.

Al: Yep … and

Joe: yeah, she would continue to take on. But if he’s thinking can he take the RMD from the deceased’s father or the dad that died. Is that better, Andi? Yeah. and put it into hers, no, you’ll have to satisfy the RMD first-

Al: Right …

Joe: before you move any other funds. So, but yeah, you would just ACAT transfer that, the remaining IRA into her own.

Al: Yeah. And as you know, when your spouse passes, you have that option, keeping it separate.

Joe: Only spouses. Non-spouses do not.

Al: Only spouses. Good point. Yep, that’s exactly right. You can combine your spouse with yours. You can leave it separate so you have two accounts, two RMDs. That’s perfectly fine. In this case, you would go ahead and roll it. There’s no negative on doing that, makes it more simple.

You roll the whole thing. You don’t do a partial. You roll the whole thing and, you know, s- a lot of people do it right away or within a year, but it, there’s no timeframe. Joe, you could do it 20 years later if you wanted to.

Joe: Yeah.

Al: Same tax treatment.

Joe: cool. Okay. thanks for the email, Mike.

Bond Funds Keep Losing Value Despite Paying Interest. Treasuries Instead? (Edward, IL)

Joe: Let’s go to Edward in Illinois.

Al: Okay.

Joe: “I drive a 2022 Highlander hybrid. Love Miller Lite after golf, but not during.”

Al: He might not be your kinda golfer then.

Joe: No. I played a lot of golf last week. I was in Lake Tahoe.

Al: I know. How- I wanted to ask you about that. How’d it go?

Joe: It was phenomenal.

Al: yeah.

Joe: Yes.

Al: Who’d you get paired up with?

Joe: I played with Austin Reaves.

Al: Okay.

Joe: Do you know who that is?

Al: I don’t.

Joe: He just signed $180 million contract for the Los Angeles Lakers.

Al: Okay.

Joe: And then I played with, Hall of Fame running back, Marcus Allen.

Al: wow. Okay. That’s cool.

Joe: Yeah.

Al: Yeah. They’re both-

Andi: Was he a good golfer?

Joe: Marcus Allen?

Andi: Yeah.

Joe: Very good. A- Austin Reaves, very good. Austin Reaves can hit it a mile. He hit a drive 370 yards.

Al: Really?

Joe: It was crazy. It was a little bit downhill, down wind, but- Yeah … still, 370,

Al: that- That- that’s a good, that’s a good strip

Joe: … it’s, yeah, giant. very nice guy. He’s originally from Arkansas.

Al: And you felt like you played well, so you-

Joe: No, I fit right in. You fit, right in. They found out I was a celebrity.

Yeah. I was signing autographs to little kids.

Andi: Aw.

Joe: You know? Yeah. Met a lot of cool people. Met Larry David.

You know who he is?

Al: I do.

Joe: he’s funny.

Al: Yep, Seinfeld guy.

Joe: Yeah. Jimmy Mack.

Al: Jimmy Mack,

Joe: Jim McMahon …

Al: oh, Jim McMahon. Oh, the barefoot guy.

Joe: Yeah.

Al: Still play

Joe: barefoot? He can still play golf, but- Yeah … man, he, it- it’s hard for him to walk, his ankles.

Al: he’s been barefeet the whole time.

Joe: Yeah. Yeah. yeah, the celebrity list was, quite extensive, and, yeah, it was, a lot of fun.

Al: Yeah. Good for you.

Joe: Yeah. let’s see. So, but I was not drinking Miller Lite af- well, I was drinking Miller Lite after golf, but I was having a couple- But also during … yeah. You get nervous, man.

Al: I would with them.

Joe: I know.

Al: you’re better than I am. I’d be really nervous.

Joe: Yeah, I had the nerves up, for sure.

But, All right. So he’s looking at a strategy for bond funds.

Al: Okay.

Joe: All right. “I own all the favorites.” Oh, boy. I don’t know any of these. “PONAX- Boy … VANBOND, BAGSIX, et cetera. They pay interest every month, which I reinvest, then the NAV goes down to mark, to market, I guess. I just wanna earn the interest, better understand, I just want to earn the interest better than treasuries.” All right. “Now I stop reinvesting the dividends, but I don’t know if I have a good idea where and when to invest it. How should bond fund investing occur, or maybe I should just buy treasuries and settle for less interest?”

you’re overthinking this-

Al: Yeah …

Joe: way too much here, Edward. sit down, maybe play a round of golf, have a Miller Lite. And then the interest that comes out of the bond fund, just reinvest it-

Al: Yeah,

Joe: the- … into, stocks. You can reinvest it in cash, reinvest it back in- Whatever you want … the bond fund. Whatever, do, do whatever the heck you want.

It’s not like, hey, this interest comes every month. But your, l- give me a little P-O-N-A-X.

Al: That’s,

Andi: P-O-N-A-X is actually PIMCO, Income Fund A, Actively Managed Multi-Sector Bond Fund Income Focus- Oh, that’s the, yeah, the PIMCO … but with credit induction, duration risk.

Al: yep.

Joe: All right, so it’s the income fund.

How about the total return, little Bill Gross?

Al: Yeah.

Joe: He’s been gone from PIMCO- He has … now for, like, 20 years.

Al: yep,

Joe: He kind of,

Al: So I would say I agree with you, Joe. It’s like if you’re gonna have this kind of strategy, the reason why you have it is to, for income, and he doesn’t need the income.

So what’s the point of- having these income funds?

Joe: Yeah.

Al: It, it- I mean, I like the idea of having bonds. Don’t get me wrong. but, it, you know, I… If you don’t need the income, just reinvest. that’s what I… So I’m not sure why he stopped that and now he’s confused on what to do with it.

Joe: So the, he was getting interest every month, which I reinvest when the NAV goes down. Okay? So when interest goes down, the nav goes down, and then he bu- he’s buying back more shares. So I think he should- it’s the same- It’s the same thing as a dividend.

Al: Y- right. Same valuation, just more shares and cheaper stock.

Joe: So don’t worry about… Yeah, I think your bond funds, keep the bond funds, and if you just c- continue to reinvest, or you can take the interest and buy, a s- a stock fund.

Al: here’s another comment I would have, Joe, is, I don’t really like it when people segment their investments. I’d rather have an overall strategy- and what, and how does the bond fit into the overall strategy? Instead of trying to take it out and try to figure out what to do with that one little piece.

Joe: Y- and this is common, though. It’s like, okay, here I want interest, or I want income, so I have a dividend income strategy, or I have, you know, high coupon or high yield bonds- or I’m picking these different bond funds that, th- and they’re looking at the yield versus all right, what total rate of return do you need to generate on the portfolio? What are the goals and what are you trying to accomplish, and how much risk do you wanna take to get you to where you wanna go?

And then have a strategy if you need the income to figure out how to get the income to you.

Do you take the dividend or do you take the interest, or do you just sell part of the shares of a, a different investment to get the income that you need? What’s the taxation on it? So there’s a lot of other layers here that you have to kinda consider, versus just…

Y- he’s collecting almost like he’s collecting investments.

Al: Yeah, “I like these three. What do you think?”

Joe: Yeah, I like these three. It’s like, you know, m- my son with his Matchbox cars. You know, oh, I really love these. You know, what do- oh, I don’t like those, or what do I do with this? No. It’s just look at the overall portfolio.

I think you’re dead on, Al. So don’t overthink it. I mean, the more that people overthink this, the more trouble that they get into.

Because then they’re overanalyzing and it’s like, maybe I should do this or that,” and they start playing with the-

their investments a little bit more than they should.

And, you know, they’re buying and selling usually then at the wrong time because they’re, way hyper-focused.

There’s studies, and don’t get me wrong. Being hyper-focused is fine. You wanna concentrate on your investments and understand what’s going on in your financial life, but emotion plays such a key, y- you know, such a factor in our decision-making process with our money that, you know, when things go well, we probably do things differently when things are bad.

You probably wanna have the same disciplined strategy in good markets and bad. Sure. But have a strategy that’s already written out of what you’re going to do in those types of markets. But he’s, like, looking at, maybe I should take it, maybe I shouldn’t. Should I go into Treasury? Should I not? You know? Yeah, you can own them all. But just understand what you wanna do with the income.

Al: Yep. Okay.

$1.1M Pre-Tax: Roth for the Last 5 Years? (Blanche Devereaux, CA)

Joe: Thank you for stapling. This was a lot easier- … today, Aaron. All right, we got Blanche. Blanche Devereaux.

Andi: Blanche Devereaux. Do you know that name?

Joe: Golden Girls.

Andi: Yes, very good.

Al: Wow. Look at you.

Joe: God, just killing it. My sleep score was, like, 62 last night.

Al: And you’re still sharp as a-

Joe: Just sharp as a tack … yeah. I’m usually in the f- 40s. My-

Al: It’s a good night for you

Joe: … yeah, my, my REM sleep was 2%.

Al: Were you in the okay REM, or okay score, not low? I think 60 is-

Joe: No, I get a different score. I’m on, the Sleep8 score.

Al: Oh. Eight sleep. Yeah, you have a different thing. I got the Apple one.

Joe: Yeah, I don’t have the Apple one. Yeah. I have, something that I sleep on. You-

Al: You sleep on it?

Joe: Yeah.

Al: Really?

Joe: It’s, like, Sleep8 or Eight Sleep. Help me out, Andi. It’s Sleep8? Just- Let’s say- … do something like that. I think- I

Al: just, I just wear my watch.

Joe: No, the thing is the best thing in the world because it cools down, and then it warms up.

Al: Oh, if you need it.

Joe: Oh, yeah.

Al: It checks your,

your

core temp.

Joe: Your body. Yeah. Yeah, the body temp. Yeah. Okay. And I’m like, I like it a little chilly when I-

Al: Yeah …

Joe: go to sleep.

Al: Yeah.

Joe: So I can just crank that thing down.

Al: That’s what the experts say. Ha- have it be a little chilly-

Joe: Oh, yeah …

Al: you go to sleep. Yep.

Joe: Yeah. And so, I know the goal-

Andi: Eight Sleep.

Joe: Yeah … Eight Sleep. Yeah, eight hours of sleep. It’s so good. Highly recommend. I’m not getting paid by Eight Sleep, but-

Al: And, you’re getting how many hours?

Joe: How many hours do I get?

I get about six. That’s good. Six and a half.

Al: Yep.

Joe: Yep.

Al: That’s-

Joe: On the weekends I get a little bit more, I know. A bit

Al: more. Yeah.

Joe: Yep, ’cause I go to bed a little bit earlier, and I don’t get up at 4:30 in the morning.

Al: Yeah, it’s funny, my average is about the same. Six hours and 15 minutes to six hours and 30.

Yep. That’s what, m- as- if I look at a year a- average, that’s what it comes out to be.

Joe: Yep. we probably need a little bit more.

Al: It’s hard. Yeah. I’ve got a dog that wakes me up for a walk.

Joe: Does your dog, sleep with you?

Go under the covers? Are you one of those guys? No.

Al: But it’s, first of all, it’s he, buddy.

Joe: Oh, he.

Al: but-

Joe: Oh, I’m sorry.

Al: But, you know.

Joe: Prefers Anne, actually. Oh.

Al: But, yeah, no, he, especially this time of year when it’s warm, he wants to go to the, the f- the linoleum floor, I mean, the tile floor- Yep … and sleep there and cool down, and then when-

Joe: Don’t ask me to say nolone- nolonium.

Al: it was, I meant tile.

I don’t know why I was thinking of linoleum. But, that was what you did in the ’80s.

Joe: I know. When… No, my dad laid it.

Al: Anyway, at the, first little inkling of light, then he’ll jump on the bed.

Joe: Got it.

Al: And wanna see who’s stirring, who’s gonna give me a walk.

Joe: Got it.

Al: Yep.

Joe: Then crawls under the covers and cuddles with you for a little bit?

Al: no, but he will, s- out of the covers he will sit right next to me till I-

Joe: Until you get up …

Al: he knows when I move, and then that’s his cue, “Okay.”

Joe: That’s it. Got it. Yeah. Okay, Blanche. Let’s get back to Blanche. Okay.

Andi: So I have to ask, why do you know who Blanche from The Golden Girls is, Joe?

Joe: I’ll tell you, Andi. I was, I was in Minnesota a couple weeks ago. Yep. And I did this Airbnb, and they didn’t have… They had the weirdest cable in the world. I don’t know what the hell it was.

Al: Got it.

Joe: it wasn’t a smart TV where you could, like, you know, get your Netflix- Yeah, pick whatever you want

or whatever.

Al: Yeah. It was- You just had to go with cable network.

Joe: I- yeah, and it was-

Al: That was

Joe: the best … Rose had it on a channel, and, I watched- And I get up early, right? Got it. And I was like up, and The Golden Girls was on, and I think I watched, 3 episodes.

Al: You didn’t, That explained it … you could turn it off, yeah.

Joe: I did not turn it off because- … I didn’t know where the remote was. And-

Al: Oh, it’s that old kind. You had to go push the button.

Joe: I had to go up and, yeah, push the button.

Al: Yeah, change the channel with the little dial.

Joe: Yeah, so I watched a couple, episodes of The Golden Girls.

Al: Okay. Well-

Joe: I did watch one, and then the next day I got up early and it was on again, and I watched, another episode with no sound.

Al: Oh.

Joe: So- Which is better … I don’t know which one was better. It was b- 50/50. I could make up my own, you know-

Andi: Yeah. Oh, yeah. You missed all those cutting menopausal jokes.

Joe: Oh, I made my own dialogue. It was like, “I wonder what Blanche is- ” “… saying now to that old lady.” that was her… Yeah. okay. “Hi guys.” Okay.

“Love your show. I listen to your show every week and appreciate all the advice you provide. My favorite drink is red wine. I’d love a retirement spitball analysis and I want to know if I should be contributing to a Roth or traditional 401(k)for these last five years of work.” All right. A single mom of two.

Youngest daughter will be out of college in five years. Yay. Now fif- I’m 55 and wanna work until I’m 60. I have $1.1 million in a traditional IRA, 130,000 in a Roth, 160 in a Roth 401(k), and 750 in a brokerage account. Damn, girl. 55, killing the game. Our fixed income will be Social Security and I’m eligible for $4200 at 67.

Current annual earnings is about 275 to $300,000 per year. I expect to spend around $120,000 a year in retirement. That’s a high estimate. Could be closer to 90. Okay. I’ll be on my boyfriend’s medical insurance when I retire, so I don’t have to worry about that expense. How can you be on your boyfriend’s medical?

Andi: I was wondering the exact same thing. Yeah, me too. I guess, I, are there some companies that actually allow that? is it plan specific?

Joe: Or, or is she gonna get married? Blanche is gonna get married- Maybe … to her boyfriend in the next five years. Maybe,

Al: maybe that’s… I wonder if he knows that.

Joe: Maybe. I don’t know.

yeah, I don’t know. I’ve, or- or they could be partners. But don’t they have to be, like, legally something to- I think so … to be on an employer plan?

Al: As far as I know.

Joe: We’re not insurance, No … health insurance experts here.

Al: and espe- I think that’s how it is in California. the, and apparently that’s where she’s from.

Joe: Yeah. Blanche, 55. She’s 55. How does she know the Golden Girls? Was it-

you and I do … was it that… Don’t, because I just watched it- … two weeks ago, three weeks ago.

Al: I would say her parents watched it.

Joe: Like, Al, that’s your show.

Al: I, I-

Joe: Is that even before your time?

Al: I, no, I’ve seen it. I did- I didn’t really care for it- No

that much.

Joe: All right. So my home is worth $1.2 million and will be paid off in five years. So what you think? I think you’re doing awesome. You got $2 million-

Andi: So daughter’s gonna be out of college in five years, and the house is gonna be paid off in five years, and she’ll be on her boyfriend’s medical insurance when she retires

Joe: She’s got this thing dialed.

Al: Yeah, she does.

Joe: She’s got $120,000 spend, probably a little bit less than that. Her fixed income is gonna be 50,000. She needs anywhere from 60, $70,000. She’s got 2 million. Yeah, I mean, let’s say if that doesn’t even grow, she doesn’t save another dime, I think, she’s in really good shape.

Al: Yeah, and I even, I had the same idea, so I checked it out, Joe.

In five years, 6%, without any more savings, I end up with 2.7 million. And even when you inflate our spending, it’s okay. The 120,000 might be a little rich, but that, again, that’s before Social Security, which I’m not even factoring in. So yeah, it looks good.

Joe: Yeah, looks really good. Congratulations. Nice job.

Al: But the que- the q- one of the questions is Roth or traditional? Last five years of contributing.

Joe: okay, so she makes 275 to 300. She only has $300,000 in a Roth.

Al: Yeah, and she’s single.

Joe: She’s 55. She’s gonna live until 95.

Yeah … $300,000, she’s in the 20, top of 20 f- no, she’s in- No … the 32.

Al: She’s in 32, yeah.

Joe: That’s, pretty expensive.

Al: In fact, she’s at 300, she could be in the 35% tax bracket.

Joe: I would go pre-tax.

Al: Me too.

Joe: And then I would c- start converting in five years.

Al: Me too. Yep, agreed.

Joe: She’s got $750,000 in a taxable account. That will continue to grow. She can help. That would supplement the rest, her, of her income.

And then do conversions to the top of the 22 from age 60 to 67.

Al: Yeah.

Joe: Start taking Social Security, and then take the rest from the deferred account to supplement her income.

Al: Yeah. I, like that, and maybe if there’s a, down year, you’d, she’d converts the 24-

Joe: Yep …

Al: and then gets that recovery- Yeah

you know, in- inside the, the Roth.

Joe: Yeah, or she marries the boyfriend.

Al: Sure. Then she doesn’t have to worry about it.

Joe: no. Then the, the tax bracket’s double. Maybe the boyfriend doesn’t-

Al: maybe,

Joe: yeah … the boyfriend doesn’t make nearly as much as she does or have the much as assets as she does. otherwise- That’s why he calls her boyfriend

Al: that’s, and that’s, otherwise, he would be writing in.

Joe: But yep. ”

Al: I got this girlfriend that…”

Joe: No, I guarantee she’s killing it, and- Yep … that’s why she doesn’t wanna get married.

Al: Yeah.

Joe: He’s already done that game. She’s a-

Al: Yeah. I would say you’re, that’s-

Joe: Single mom …

Al: that’s a good hunch. Yep.

Joe: Two. Yeah. Yeah. Awesome job. Yep. It’s really impressive.

Al: Agreed. Yep. Good enough.

Andi: Some of you tell me you love the banter, the drinks, and the Golden Girls talk. Others say skip the funny stuff and just give us the spitballs. What do you actually want more of? The 9th annual YMYW Podcast Survey is open right now, and it’s your chance to tell us what to keep and what to cut, and to steer this show toward what you want it to be. And you could win a hundred dollar Amazon e-gift card just for weighing in. Find the survey link in the episode description and use the password ymyw, all lower case, to access it. US residents, complete all 16 questions by 5pm Pacific on August 31st and you’re in the running for a $100 Amazon e-gift card. The winner will be announced on the show on September 1st.

How Much Will We Have by 2030? Is It Enough to Retire at 59? (Mr. & Mrs. Smith, Coastal NC)

Joe: We got, “Hi, Big Al and Joe. You may refer me to Mr. and Mrs. Smith from Coastal North Carolina.”

Al: Okay

Joe: “Newer listener, as I have just started planning for retirement, but love the show.

Currently 55, and Mrs. Smith is 52. We have two cats which are medium to low maintenance.” All right. Aren’t all cats kinda low maintenance? Yeah. “We are very active and love traveling. We have following, We have the following. Mr. Smith has an HSA of 20,000, an IRA of 700, 401(k)of 177, a Roth IRA of 30,000. Mrs.

Smith has an HSA of 14,000, IRA of 160, 401(k)of 200, and joint taxable of 13. We each contribute the max to individual HSA single filer. I contribute the max to a 401(k)with 6% match and catch-up for 55-year-old. Mrs. Smith contributes 24,000 per her 401(k). What do you anticipate we will have in 2030?” Okay, that’s simple math, right?

Al: Yep.

Joe: “I drive a 2021 Tundra, and Mrs. Smith drives a Mercedes GLC 300. Mrs. Smith likes a Bay Breeze with Malibu rum, and I keep it simple with a little Corona and lime, although I don’t mind a good Azul tequila in a Topo Chico on the rocks occasionally.” That’s the-

Andi: Yeah, Sean from Orlando did that.

Joe: Yep.

What the hell is it called again? What’s the-

Andi: He called it a ranch water, wasn’t it?

Joe: Ranch water. There we go. Ranch water. Yeah. Yeah. All right. “Would like to retire at 59 with, with a spend of 70, $7,000 per month. Is that possible? Room for vacations? Thanks sincerely, Mr. Smith, diehard listener.”

Al: Okay, so that one I can compute-

Joe: All right. Let’s do it … ‘

Al: cause that’s point to point.

Joe: Got it. Point to point- … easy. Future value, present value.

Al: Yeah, so, so we start with, 1.3 million. Four years from now, I did a 6% rate of return, which by the way is conservative.

Certainly not guaranteed, but it’s conservative.

and adding a- I’m just estimated 65 grand a year between their 401(k)s and match. I don’t know exactly what he’s making, but I just threw that in. So they end up with almost 2 million at that point. If they s- wanna spend 84,000 doing a 3%, inflation rate, four years, 95,000, it’s, about a 5% distribution rate without considering Social Security.

Joe: At 59. 59.

Al: Might be a little high. I, might, if I were them, I might wanna go till 62 let- let’s say. Yeah. Something like that. Yeah. And plus, if they wanna travel… See, that’s the thing, Joe, when you wanna travel, it’s like every year you work, you have that much more money, and you can live that much better lifestyle, so may- for some people, maybe that’s worth it.

Joe: What do you budget for vacations?

Al: I don’t know. I don’t know. They, he didn’t say.

Joe: 10 grand? Yeah. Is

Al: that- That’d be reasonable.

Joe: Okay.

Al: Yeah, but I think 59 might be a little ambitious.

Joe: Yeah, I think so too. you used four, right? 4%?

Al: For inflation? Or for

Joe: what? No, for growth? Or you- Stocks. Stocks …

Al: you picked- you picked.

All right. Yep.

Joe: Okay. Yeah, so couple more years or-

Al: Or more budget travel. I mean, it’s, these are all personal choices really.

Joe: Yeah. I mean, there’s a lot of levers they c- they can pull. They’re very close.

Al: Yeah, they are. I agree with that.

Joe: Yeah. Yeah. Yeah. So yeah, they’re doing a really good job, 55, 52, over a million-

Al: Yeah

Joe: three in liquid assets. I think they’re really putting the gas on the savings now. Yeah. He’s maxing out. They got a match. She’s almost maxing out there. You know, continue to save as much as you can. Yep. Work, maybe a year or two longer, spend maybe a couple bucks less, and-

Al: Yeah …

Joe: I think you’re in good shape.

Comment: No NUA Step-Up at Death (Jeff)

Joe: All right. We got a comment from Jeff. He goes, “Hey, I’m a big fan of the podcast, but wanted to point out an error made by Joe and Al on episode 583 regarding NUA.”

All right, Joe- Hey … what do you got for us?

Al: Yeah.

Joe: You do not get a step-up in basis on NUA at death. You only get a step-up on the increase in value from the account value at the time of distribution in death.

Andi: Until death.

Joe: yeah. Does that make sense? So let’s say- Yeah, the- So net unrealized appreciation is that if you have stock in your retirement account, you could take the stock out of the retirement account-

and you pay ordinary income taxes on the basis. So let’s say it’s the, it’s worth the, you paid $20 for it, it’s worth $100,000 today. You pay ordinary income on 20,000, the $80,000 of gain is taxed at capital gains rate.

Al: When you sell.

Joe: When you sell.

Al: Yeah.

Joe: And so if you die- Before- … you do not get a- … before you sell.

Yeah … you do not get a step-up on the $80,000 of net unrealized appreciation.

But if you never sold and that 100,000 grew to 200,000, you get a step-up on the growth of, once you took it out of the retirement account- Yeah,

Al: that’s right …

Joe: but you wouldn’t get a step-up in the NUA.

Al: Yeah, so in other words, the $80,000 in your example, you have to pay tax on that, whether it’s you or your beneficiaries.

Joe: How would the IRS ever find that out?

Al: They wouldn’t.

Joe: How, I wouldn’t even know how would you- How would you report that? Like, you’re dead

Al: Well-

Joe: You know what I mean?

Al: it just becomes the basis for the beneficiary, so it just, it’s a, the, the, the- But

Joe: I, do you-

Al: Whatever the total value is, let’s call it 300

Joe: But I know, but d- l- let’s say I did a net unrealized appreciation.

And it, does, that stay somewhere on my tax return?

Al: No, I kinda doubt. And so

Joe: 10 years later I die. So I have a brokerage account. Is it labeled on the brokerage account that there was a net unrealized appreciation done- I,

Al: I- …

Joe: in that brokerage account?

Al: I doubt it. I would- I don’t think so.

Joe: I don’t know.

Al: I mean, but a lot of taxation is you’re on the honor system.

Joe: Yeah, but I know, but I’m, just saying- No one knows that I did a net unrealized appreciation

That,

Al: that- Including the beneficiary …

Joe: including the- yeah, exactly. They would definitely not know, in a sense. “Hey, yeah, Dad’s got a brokerage account of, you

know-

Yeah

$500,000.”

Al: But I guess the, the point is, what Jeff said is correct. I don’t know if we said it too quickly or it sounded wrong, but that is a correct statement. I do agree with that.

Joe: Yep.

MYGA vs. Immediate Annuity. Is MYGA a CD in Disguise? (Holly, San Francisco)

Joe: All right, last one, we got Holly from San Francisco.

Okay. “Hi, Andi. I just listened to last week’s episode and someone had asked about MYGA annuity.”

Al: Okay.

Joe: Oh, God. “Joe and Big Al explained what an immediate annuity was- … but I believe it’s a different product. Common ones seem to be for a five or seven-year period, and they mostly hold all your money with no payouts until the end of the five or seven-year term, at which point you get the entire amount plus all the interest?

The rates sound too good to be true- … and I feel like there is surely a catch.”

Al: Okay.

Joe: “I’d love to know more.” Did you do any research on MYGAs?

Al: I did.

Joe: Okay, good.

Al: Yeah.

Joe: Help me out.

Al: It’s, it’s not something we’d know a ton about. Yeah, so, Holly-

Joe: Multi-year-

Al: Multi-year guaranteed annuity. Holly’s right. It’s kinda like a, the insurance company’s version of a CD. it’s locked up, right? So, so in other words, you put money in for three years, five years, seven years, even 10 years, right? And then you don’t have to pay taxes currently, ’cause it’s inside the annuity, but then when you cash it out later, you pay tax on the interest all at that time, or if you set up an income stream, you could do a 1035 exchange on ’em to roll it into the next annuity if you wanted to.

But that’s, that’s a true statement, what she said. I don’t remember what we said. I probably deferred to you, ’cause I don’t know much about ’em.

Joe: Yeah, I think I explained, an immediate annuity.

Al: Yeah, I think you did. So- That’s what she says anyway.

Joe: Yeah. thank you, Holly. all right. That’s it for us. We’re gonna get outta here. thanks for listening. We’ll see you guys next week. Show’s called Your Money, Your Wealth.

Outro: Next Week on the YMYW Podcast

Andi: You made it to the end, which puts you in rare company, so this is just between us. I write these “next week on YMYW” bits in good faith and then the fellas do whatever they want. So, hopefully next week we’ll hear whether Frida and Diego in California can retire right now at 54 and 52 with $5.3M, which pension option protects Stanley and Stella in New York, when Eeyore and Nurse Kathi in Florida should stop doing Roth conversions, if Gary in Pennsylvania can retire at 54 with $10M, how Mr. Mojo Risin in Georgia can find a genuinely good CPA, and if a 15% monthly return is too good to be true for BB and Shell. Will Joe and Al get to all of these next week in 594 or will we have to wait until 595? Your guess is as good as mine. Follow or subscribe wherever you’re watching or listening and find out with the rest of us.

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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