Show Notes

• 00:00 – Intro: This Week on the YMYW Podcast
• 00:58 – Can I Retire at 57? When to Collect Social Security? Can I Afford a Motorhome? (Bauer & Laney, Mundelein, IL – voice)
• 07:47 – Can We Coast and Still Reach the Retirement Promised Land in Ten Years? (Brad, MI)
• 14:20 – Watch How to Avoid Wealth Busters on YMYW TV, download the Wealth Busters to Avoid Guide
• 15:00 – We’ve Got $10M Liquid: Roth Contributions & Conversions Now or Wait Until Retirement? (N&N, SF Bay area)
• 24:58 – Calculate Your Free Financial Blueprint
• 25:36 – Seems Weird That Our Money is in Taxable Accounts. Is That Good or Bad? (Elizabeth, CT)
• 31:57 – Outro: Next Week on the YMYW Podcast

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Transcription

Intro: This Week on the YMYW Podcast

Andi: Can Bauer in Illinois retire at age 57, and when should he collect Social Security? More importantly, can he afford a $300,000 motor home? Can Brad in Michigan coast for the next 10 years and still reach the promised land of retirement somewhere around age 53? Joe and Big Al spitball early retirement, today on Your Money, Your Wealth® podcast number 502. Plus, it seems weird to Elizabeth in Connecticut that all her money is in taxable accounts. Is that good or bad? And N&N in San Francisco Bay Area have $10 million liquid. Should they make Roth contributions and Roth conversions now, or wait until they retire? You can listen in your favorite podcast app, or watch us right now on YouTube or Spotify. I’m Executive Producer Andi Last, with the hosts of Your Money, Your Wealth®, Joe Anderson, CFP® and Big Al Clopine, CPA. To get a Retirement Spitball Analysis of your own, click Ask Joe and Big Al On Air in the episode description and send us an email or a priority voice message, like this one:

Can I Retire at 57? When to Collect Social Security? Can I Afford a Motorhome? (Bauer & Laney, Mundelein, IL – voice)

Bauer: “Hello, Andi, Joe and Big Al, tuning in from Mundelein, Illinois. I’m Bauer.  54 yo, my wife, Laney, 59 yo, my drink is an old fashioned and I drive a 2018 GMC Sierra. Laney drives a 2016 Infiniti. I work for the federal government with a gross pay of about $192,000. Laney’s a SAM and collects city government pension of $16,000 per year, no COLA. TSP balance is $1,375,000, all traditional 457. Roth IRA of $210,000. Traditional IRA $8000, kids’ college is paid for. Our spend is about $9000 per month. I have a mandatory retirement in June of 2027. I’ll be 57, Laney 61. My spitball request is will I be good to retire at 57 and not have to work? What will be my TSP drawdown? In retirement, I’ll get a pension of about $69,000 a year, adjusted for COLA, and we’ll collect a Social Security supplement of $16,800 per year until the age of 62. What age should we collect Social Security? Mine will be $30,000 at 62, $45,000 at 67, and $56,000 at 70, Laney’s Social Security would be $14,000 at 62, $20,000 at 67, and $24,000 at 70. And most importantly, can I afford a $300,000 Class A motorhome? Looking forward to the spits.”

Joe: Bauer.  Kind of a cool name.

Al: A great name.

Joe: $192,000. Mandatory retirement from the federal government at age 57.

Al: Right.

Joe: What do you think? It’s like secret, secret.

Al: I, I think I want that job.

Joe: What do you think he does? Something badass.

Al: Yeah. Gotta be. Something really cool.

Joe: Yeah. Bet he risks his life every day.

Al: Probably. Probably.

Andi: With a name like Bauer, it sounds like he should.

Joe: Oh.  Well, I think yes, all across the board.

Al: Yeah, I think so, too. So let’s let’s put some numbers to it. So even before Social Security, Joe, fixed income is $86,000.

Joe: Yeah, $70,000 plus.

Al: Yeah, and the spend, the spend is probably $100,000, we’ll say $110,000.

Joe: Sure.

Al: Somewhere around there. So shortfall, let’s just rounded to $25,000. He’s got $1,600,000. So that’s a low distribution rate, under 2%. So even before Social Security, this looks great as far. As when to take Social Security, I, I generally like to have the spouse that has the higher benefit go as long as they can, maybe age 70.  And then as far as the, the spouse that has a lesser level, it’s  kind of when you want to, I think. That’s kind of how I think about it.

Al: Yeah, you’re looking to lock in a guaranteed income, but he already has really good income that’s guaranteed by the pension of the federal government of $70,000.

Al: Yeah.  What we don’t know is what the, the, survivor benefit is on the pension.

Joe: The issue that I see is that he, $300,000 motor home is, you’re gonna have to finance it. There’s no liquidity besides the Roth in the TSP. I don’t know what he’s got in cash. Yeah. Right. So then his expenses go from $10,000 to, I don’t know, $13,000, $14,000 a month?

Al: Could be, yep.

Joe: And so now you’re not looking at a 2% burn rate, you’re probably looking closer to a 4%?

Al: Could be, plus, or if you just pull it all out, Joe, it’s – you gotta pull $300,000 out plus a whole bunch more to pay the tax.

Joe: If he pulls $300,000 out to pay cash, I mean, pay cash for that-

Al: – gonna have to pull out $400,000 or more.

Joe: Yeah, or more. Just to pay the tax on the $300,000. So it’s not a $300,000 motorhome anymore. It’s a $450,000 motorhome.

Al: Yeah, and I suspect the $300,000 motorhome takes a little bit for upkeep and gasoline and things like that.

Joe: Yeah, it depends on where Bauer wants to go.

Al: Yeah, right.

Joe: But I think all in all it, it works out. You just have to run the numbers and run the math a little bit. But from a retirement perspective, I think it looks great. From taking out $300,000 or how you finance that or what the added expenses are is going to be a little bit tricky, but I still think that he can potentially do it. Of course, depending on how he invests everything too, if he is super aggressive and, you know, he loses 20%, 30% on that bridge. Because it’s a bridge from 47 to 67,  is 10 years where they’re pulling out quite a bit, potentially, until the Social Security comes in.

Al: Right. So, depending upon how they finance the motor home. But I would say, Bauer, I’m talking to you right now.  If that’s your dream, the $300,000 motorhome, yeah, you can pull this off. You just, we’re just giving you a couple of cautions about if you take all the money out of the IRA to pay for this, they got to take quite a bit more out to pay the tax. So you probably want to finance at least part of it, if not all of it. And then you got to figure out what the interest payments are and, and kind of factor that into your budgeting.

Joe: He’s got 3 years, so he’s got pretty good income now. I don’t know.  Depending on what he has, or he doesn’t have any debt, it sounds like, on his home, maybe he refinances the house.

Al: Yeah, maybe.

Joe: Takes out a couple of bucks there, I would imagine financing there is going to be a little bit cheaper than at the old motorhome dealership.  Right. He wants to work for another 3 years and he’s got good income, so I’m sure he’d qualify. So there’s ways that you can kind of move some money around a little bit, and then you can aggressively pay it off with the retirement accounts.

Just you don’t have to blow yourself up in really high tax brackets.

Al: Yeah, that’s the key, right?

Joe: You’re not pulling $300,000 out. You might pull an additional $50,000 out depending on where tax rates go, so you can keep in those rates to pay off the debt.

Al: Yeah. And we might say, don’t use your Roth IRA- for the motor-

Joe: Oh, keep that.

Al: It could be tempting, Joe, but don’t do it.

Joe: Mandatory, who’s got mandatory retirement at 57 federal government?

Al: Usually, yeah, law enforcement or FBI, maybe field agent, I don’t know.

Joe: Yeah, because he’s seen a lot of stuff, it’s like that, you’re done, you’ve done your service.

Al: Right.

Joe: All right, Bauer, thanks for everything. Thank you for the question and good luck on retirement and have fun in that motorhome.

Can We Coast and Still Reach the Retirement Promised Land in Ten Years? (Brad, MI)

Joe: All right. We got Brad from Michigan. “Hey, Joe. Big Al. Andi. Your podcast is completely addicting. I now look forward to, historically, the worst day of the week, Tuesday.”  Tuesday. Is that the worst day of the week?

Al: I guess.

Joe: I don’t know.  What’s your worst day?

Al: Me?

Joe: Yeah.

Al: I don’t have a worst day.

Joe: I know. Every day is like sunshine. You’re like, what’s that stupid movie when it’s like, Oh God, I love Mondays. Just jumps out of bed, starts singing show tunes.

Al: I can’t say I had a, yeah, I don’t know. I don’t, I can’t think. How about you? I can’t think of one. What’s your worst day?

Joe: I don’t know. I don’t really care for Mondays all that much.

Al: Yeah. I’ve noticed your expression sometimes on Mondays.

Joe: Well, when I, yeah.  I just got a long week ahead of me.

Al: True.

Joe: But I mean, I don’t hate ‘em. It’s not like I have a case of the Mondays.

Al: No, you don’t.  Maybe for an hour.

Joe: Yeah.  When I gotta listen to your sermons.

Al: Trying to get you out of your funk.

Joe: Yeah, that works.  But Tuesdays, I like Tuesdays. Tuesdays are one of my favorite days.

Al: Ah, okay.

Joe: I like Tuesdays, Wednesdays, Thursdays, of course, Friday, Saturday, Sunday.

Al: Sunday’s all good.

Joe: Yeah. Monday. Okay. Monday morning, it’s kind of like-

Al: Monday morning is the one.

Joe: Here we go.

Andi: By process of elimination, it becomes Monday.

Joe: Yeah. Well, I have like 50 appointments a week and you have this.

Al: True. That wasn’t always the case, but that’s how it is right now.

Joe: Got it.  Okay, let’s see. Well, let’s see if we can spitball for Big Brad.  “As my wife Anna and I want to retire in early 50s, right? I’m 42, sales and like a cold two hearted ale and I drive a 2011 Lexus. And my 41-year-old wife is a nurse, will enjoy a Pinot and drives a 2020 Lincoln Navigator. Cars and home, $700,000, paid for, no debt. We have $750,000 in cash and brokerage, $850,000 in 401(k)s, $400,000 Roths, 529 funded about $100,000 for the two middle school kids. Annual expenses are about $80,000 HHI, Household income I’m guessing, average is about $350,000, and we’ve been saving 50% of after-tax income for 7 years.”  That’s very very impressive.

Al: Yes, we like you to get to 20%. So 50% is good.

Joe: 50%. Not a lot of people can save 50% of their-

Well, yeah, that’s crazy amount after-tax at $350,000.  He’s in a very high tax bracket, right? So, all right Well-

Al: Yeah, that is good. “Only fixed income in retirement would be Social Security approximately $3500 a month for me and $1800 from my wife. We think we spend about $8000 monthly in retirement, mostly on travel and property taxes. We plan to bridge the retirement pre-Social Security with distributions dividends from our growing taxable brokerage account. Can we coast for the next decade, maybe saving $25,000 to $50,000 per year and still reach the promised land at 2035?  If I take a new job that pays less, should we start doing Roth conversions next year? Thanks. You all are a joy for me and many others.”  Oh, Brad.

Al: That’s very nice.

Joe: Very nice of you. Thank you.  You’re a joy for me too.

Al: It’s mutual. Except on Mondays.

Joe: Just every day is like Friday for Big Al.

Al: They’re all good.

Joe: Everyone just can’t be as lucky as you there, Ned Flanders.

Al: Well, I did a little math for you, Joe.

Joe: Okay, let’s see what, can Brad coast? So he’s got a stressful job. He’s got $350,000 of income. He’s saving half of it. He’s like, man, this is too much.  Let’s coast. I don’t want to save that much.

Al: Yeah, yeah, yeah. So I, here’s what I did. So he’s got, they got about $2,000,000 to start. So that’s a great amount to start with.

Joe: $2,000,000 at 42 years old?

Al: Mm hmm.

Joe: Okay.

Al: Yep. And they want to retire in their early 50s. So, anyway, so here’s what I did. I said, okay, you got, you got $2,000,000. I just said, now, what if you say $40,000 a year for 10 years? That’s 6%. What does that look like? And then they get to $4,100,000.  They’re spending $96,000 a year. 3% inflation rate gets to about $130,000. So distribution rate would be 3.2%. In the early 50s, that would be kind of right at the margin of what we might say. But Joe if they get a 7% rate of return, then they’re- they got $4,500,000, distribution rate’s 2.9%. I’m feeling a little bit better about that.

Joe: How about if they get a 0%?

Al: Well, then they’re not retiring, right? They’re, they’re working. So I think, I think Brad, I think this does work as far as whether you can actually retire in your early 50s.  You’re, you’re close. That’s what I would say. Yeah. I don’t know. The guy’s- what 40-year-old has a couple million dollars? What percentage of people in their 40s have $2,000,000?

Al: It’s, it’s in the 1%.

Joe: I would say less than that.  I think Brad’s gonna be just fine.  You know, yeah.  He’s a, he’s a grinder. He saves half of his income.  I’m sure he’s-

Al: Well, and, and the thing Joe is, I mean, like, let’s say my numbers are right and he ends up with $4,000,000.

You can live on $4,000,000. Like what if you don’t spend $130,000. What if you spend $122,000?

Joe: Or $127,000.

Al: Or whatever.

Joe: Right.

Al: You can make a work.

Joe: It’s so stupid. Yeah. Brad, you’re doing fine. Keep doing what you’re doing. If you want to coast for the next couple of years, I mean, you deserve it.  I don’t know if you deserve it, but I don’t know you, but the money does is-

Al: It looks pretty good.

Joe: The money looks right.  So yes, you are good to go, my friend. Hopefully this brings you a little bit more joy.

Watch How to Avoid Wealth Busters on YMYW TV, download the Wealth Busters to Avoid Guide

Andi: Even if you’ve done a great job of saving over your entire working life, there are “Wealth Busters” that can destroy your joy, and your financial plan for retirement – like funding your adult children, tapping your retirement funds early, or not having a retirement withdrawal strategy. Learn about these and more Wealth Busters to Avoid as you make your way toward retirement, this week on Your Money, Your Wealth® TV with Joe Anderson, CFP®, and Big Al Clopine, CPA. Download the companion Wealth Busters guide for strategies that’ll help you avoid blowing up your entire financial future. Find links to both the Wealth Busters to Avoid episode of YMYW TV, and the Wealth Busters guide in the episode description.

We’ve Got $10M Liquid: Roth Contributions & Conversions Now or Wait Until Retirement? (N&N, SF Bay area)

Joe: We got N and N, N and N.

Al: N and N.

Joe: “Hi, Andi. Al, Joe, I’ve been listening to your podcast for the past 3 months. I’ve gone through about 60 to 70 episodes while walking the dog or driving to work.”  60 to 70, Big Al. That’s a lot in 3 months.

Al: It is.

Joe: He loves it. “Loves the entertaining but educational discussions. You guys have great on-air chemistry. My wife and I are 52, live in the San Francisco Bay Area. And I have two high schoolers and a rescue sheepwiller.” Sheep willer?

Andi: I think it’s Shepwiler.

Joe: Shep, Shepwiler.  “We drive old cars. I drive a 2006 Mercedes convertible-“ Oh, look at you.

Al: I like it. Why sell it? Right? Once you got that.

Joe: Yeah. Every time I think of a 2006 Mercedes convertible, I think of the movie Roadhouse.

Al: You do, huh?

Joe: I do.  All right. “Wifey, what does she drive? A little 2013 BMW sedan.  Both purchased new, we buy and hold our cars, I’m partial to drinking good red wines, and she loves a good old fashioned.” Wow, that’s kind of reversed.

Al: You’re right about that.

Joe: “Or simply a little whiskey or bourbon on the rocks. You know, so, both! Our partial at a well made margarita and gin and tonics usually reserved for date nights. We both went to bartending school when we were single, so we also experiment with other drinks from time to time.” Oh, isn’t that fancy?

Andi: Didn’t you bartend, Joe?

Joe: I did. I did bartend for several years.

Al: You experiment with the drinks sometimes?

Andi: Did you do the Tom Cruise thing?

Joe: No, no. Uhuh. I would make a bunch of stuff that would- I don’t like the foo foo stuff.

Al: Yeah. Yeah.

Joe: Not really.

Al: Yeah. You haven’t been to Hawaii enough to like Mai Tais.

Joe: No, I did. Yeah. I got, I was there on my honeymoon and then I had, I went to the first Mai Tai place.  I had a couple of those.

Al: Like Dukes or one of those?

Joe: No, it wasn’t Dukes. It was right on the water. It’s really nice. But I had like maybe two of Mai Tais.

Al: Yeah.

Joe: Nope.  Nope.

Al: They can be pretty sweet.

Joe: Yeah. That was the little first fight of our marriage life. That was fun.

Al: Yeah. Okay.

Andi: On the honeymoon.

Joe: Yeah. They were pretty strong, I’ll tell you that. Yep.  anyway. Thanks for that. Thanks for that fun.

Al: You’re very welcome. I didn’t mean to poke the bear there.

Joe: Well, let’s see what, N and N are up to. “They’ve got high incomes, about $800,000 to $1,000,000 a year.” All right. Good for you guys. “Max out our retirement incomes between our contributions and employer match with, this is currently about $110,000 a year. All of this amount to pre-tax given our high tax bracket at the 37% and 11.3%.  We currently have $10,000,000 in liquid assets.” Jeez. How old is he?

Al: They’re in their-

Joe: 52.

Al: 52.

Joe: Oh, good for them.  “$5,000,000 in diversified equities in a brokerage account.”  $5,000,000 in a brokerage account.” They must, probably RSUs, stock options.

Al: Yeah, Bay Area, I’m gonna say, yeah, RSUs, restricted stock units, stock options, something like that.

Joe: Yeah, “$4.500,000 in pre-retirement accounts and $150,000 in a Roth, $350,000 in cash. We have significant mortgage payments for our primary residence and a couple of our rental properties, $200,000 plus a year, but most of that should be paid off when we retire. Our rentals should generate sufficient cash flow to cover our housing expenses in retirement, taxes, insurance, maintenance, etc. Once the mortgages are paid, our current spend, including housing, excluding housing is $120,000, but I estimate that will probably be around $200,000 once we retire. Have more time for long trips and other hobbies. So my question is, should we consider making Roth 401(k), 403(b) contributions or even conversions at this point, I feel that there is time to fill the tax brackets once the salary ends and before RMDs begin to pull dollars from our pre-tax accounts, since we will probably work until the age 60, but you guys are the Roth conversion experts. So you let me know what you think. Thanks for your spitball on the question, and I look forward to hearing it on a future podcast. P. S. You can call us N and N or Andi, make up something more creative.”

Andi: I thought N and N was good.

Al: Guess you didn’t, Andi. It’s N and N.

Joe: Andi’s being lazy.

Andi: Other than that, it’s going to be Fat Wallets from San Francisco Bay.

Joe: Oh, Fat Wallets.

Al: Okay.

Joe: $10,000,000.

Al: Yeah.

Joe: And liquid.

Al: And so about half of that is IRAs, 401(k)s, 403(b)s.

Joe: At 52.

Al: Yep.

Joe: $5,000,000.

Al: So it’s going to roughly double and twice maybe and by, by the time of RMDs- So could, if they don’t do anything, they’ll probably have close to $20,000,000 in retirement accounts.  Maybe that’s, maybe. $17,000,000, $18,000,000. So that’s a pretty big RMD.

Joe: Yeah, okay, so he’s 52, they’re 52 years old, $4,500.000. Yeah. They make $1,000,000 a year.  I would, I would go Roth all day, every day, and even convert some.

Al: Would you?

Joe: I would.  They’re going to be in a giant tax bracket forever.

Al: I know.

Joe: I don’t know. I mean, so it’s, it’s looking at, here’s the gamble.  He’s gonna have a giant RMD. I mean, yeah, kick the can down the road, I don’t care.  But you look at tax rates today, they’re pretty low, historically, right? What was the highest tax rate ever?

Al: I think it was World War II, but even, even in my career-

Joe: In your era.

Al:- in my era, I’ll put it that way, I think the highest rates were 70%.

Joe: 70%?

Al: Yeah.

Joe: And then it went to 55% or something, right? In the 80s?

Al: Went to 50%.

Joe: 50%.

Al: And that, that seemed like a good deal at the time.

Joe: We’re at 37%.

Al: That’s right. Yeah.

Joe: It could go to 50%. I don’t know. I might be scaring N and N here. I’m not trying to do any fear-mongering.  But-

Andi: I just Googled and the top individual rate reached a high of 94% in ‘44 and ‘45.

Joe: 94%.

Al: Yeah, World War II.  Now, to be fair, that was for people that made like over $10,000,000, which was a lot of money even now, but during World War II.

Joe: So that’s the billionaires.

Al: That was, yeah, that was a lot. Yep.

Joe: Well, so he- Yeah, that’s what I would do. He’s not gonna miss the tax and I think he would like to have some-  It’s just it’s a gamble on tax rates.

Al: I know. Yeah.

Joe: That’s all it is. So-

Al: This is a hard one. Here’s what I might do. I I like the idea of going all Roth on current contributions. Because why not? At least get it started. And let’s see. They’re 52. They want to retire around-

Joe: 8 years.

Al: – 60. Would I wait to do Roth conversions until then? Maybe, probably, probably I would wait just because I don’t like paying at the highest rate, but it’s an excellent point. I mean, taxes are lower compared to they have been. And if their IRAs, 401(k)s are $20,000,000, that’s an $800,000 RMD in year one. And it goes up from there. And that’s the same as what they’re making right now. So, you could argue that, you know, they’re not going to be in a lower tax bracket, and then they got all this other income, too.

Joe: And assuming tax rates stay the same.

Al: Stay the same.

Joe: I think you take a look, for individuals that have wealth like this, unfortunately, half of it is in a retirement account.

Al: Yeah. I know.

Joe: It’s, it’s gonna, I think-

Al: It’s a lot.

Joe: It’s gonna hurt. Here, here’s one other thing I might say.

Al: And at 50, he’s young enough to get the compounding to make up potentially, you know, take more risk in the Roth. Right, so when you convert, let’s say if you pay at a higher rate, and then you just take a lot more risk and go Roth IRA over the next 10 15 years. And then you can run some math.

Al: And have the growth there. Yeah, yeah, no, I get that.

Joe: That could help make up for the higher tax.

Al: Yeah, another factor would be where do they want to live when they retire? They’re in California, a pretty high tax state. If they want to move to Washington State with no income tax, maybe you wait till you’re 60 and you do a bunch then.

Joe: Yeah, if conversions are still around in 10 years.

Al: Yeah, true. I mean, a lot of unknowns, right?

Joe: I mean, it’s a gamble, right? You’re trying to predict the future tax rates and future you know regulation.

Al: I just-

Joe: If you play the status quo and say, you know what? I don’t think any changes are going to happen, well, then potentially could kick the can down the road and maybe you change your contributions like you said, right maybe to get a little bit more diversification-

Al: Yeah, that I would-

Joe: -and then just kind of wait and see to see what happens take a little bit more risk in the Roth IRA. I think that’s a really good start. Do you convert at the 37%, when he could be at a little bit higher rate. 37% is still not awful.

Al: I know.

Joe: It’s going to go to 39.6% in a few years.

Al: I know, but California, he’s paying half in tax.

Joe: No, I understand. I live in California too.

Al: I have a hard, I’d have a hard time doing that myself.

Joe: All right. Well, good luck. Well, congratulations. I mean, he’s got really hard problems here.

Al: Amazing. These are the kinds of problems that everyone would like to have.

Joe: I feel bad for him.

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Seems Weird That Our Money is in Taxable Accounts. Is That Good or Bad? (Elizabeth, CT)

We got Elizabeth from Connecticut. “I’m a 54-year-old woman who lives overseas for 30 years.  My 56 year old foreign born husband-“ foreign born,  all right.

Andi: She says she’s American and he’s foreign born.

Joe: Foreign born.  “- and I earn well, lived frugally.”

Al: Or frugally?

Joe: Yep thank you, frugally. “And invested a lot of our income, mostly in US-based index funds. The power of compound returns meant that we had a $5,000,000 nest egg when we accepted early retirement last year.” What is going on?

Al: Wow. This is, we got the one percenters today.

Joe: Big bank.

Al: Yeah.

Joe: “We moved to the US to be close to my family. We’re happily living in a paid off home with total expenditures of $140,000 a year. We don’t think we’ll need to return to work.” Well, Elizabeth, I tend to agree with you.

Al: Yeah, I do too.

Joe: “I’m writing because after listening to your podcast, it seems weird that only $50,000 of our money is in an IRA, and $150,000 is in a Roth, and we don’t have anything in 529 for our two teenagers. This happened because of issues with overseas living and probably ignorance. The vast majority of our nest egg, $4,800,000, is in taxable stocks and mutual funds. I should note that for decades, we faithfully paid all necessary US taxes. Is that situation good or bad?”  What, the fact that you faithfully paid all necessary US taxes?

Al: It’s important and it’s the right thing to do.

Joe: I think that’s good.  It was probably bad because it was probably a lot, but I think she’s asking if it’s good or bad to have all of the money in a brokerage account.

Al: Yeah.

Joe: Or should she be looking at tax advantage accounts, or would that be like a little drops in a bucket?

Al: Right.

Joe: “I have a 2012- 2012 Honda CRV, but my husband and I ride bicycles more often than not.”

Al: Wow, I like it.

Joe: All right. You have a bicycle, Big Al.

Al: I do. I don’t ride it too much.

Joe: “I enjoy margaritas. Well, my wife still drinks slits-

Andi: I think it’s Slivovitz?

Al: Yeah, that’s a hard one, Joe.

Joe: Slivovitz.

Al: Slivovitz.

Joe: Slivovitz.

Andi: It appears to be Eastern European plum brandy.

Joe: Oh, I wonder if that’s like Aquavit? Or- that doesn’t look very tasty. Liqueur in a very fancy bottle. Yeah. Okay.  How do you pronounce it? Did I do it?

Andi: I think it’s Slivovitz.

Joe: Slivovitz.

Al: Slivovitz.

Andi: And it’s a fruit spirit or fruit brandy made from damson plums, often referred to as plum spirit or plum brandy.

Joe: And it’s from Sweden?

Andi: It’s from Central, Eastern, and Southern Europe. So Bosnia, Herzegovina, Bulgaria, Croatia, Cheche, Greece, Hungary, North Macedonia, etc., etc.

Joe: It’s his home country spirit.

Al: Yes.

Joe: “Thank you for your fantastic advice to everyone.  You’ve got two faithful fans in our household.” Awesome. Well, I’m gonna start drinking some Slivovitz.

Al: First, you gotta be able to pronounce it.

Joe: I’m going to, you got-

Joe: Take a bottle of it and just try to say Slivovitz.

Al: I want, I want you to go to a liquor store and say, I’d like some Slivovitz.

Joe: They’ll be like, sir, have you been drinking?  Not yet. Not until I get some Slivovitz.

Al: And they’ll say, what are you talking about?

Joe: Well, I’m going to show them that picture that Andi just put up.

Al: Yeah. Okay.

Joe: All right. Well, no, Elizabeth, great job.  $5,000,000 live within, $150,000 into $5,000,000 is what?

Al: It’s a 2.8%.

Joe: All right. So you got 3%?

Al: Yeah, don’t need to work. I would agree with that.

Joe: Yep. 56 years old. You got many years at three and a half.  No, I think it’s great. The only issue that you have with all that money in a, in a brokerage account, you just-  We just want to make sure that you’re tax managing it, that’s because interest and dividends, instead of growing tax-deferred in a retirement account, is going to be taxable each and every year. But that’s such a benefit because you can control the taxes a lot easier. And then when you sell the stock, it’s going to be at a capital gains rate versus ordinary income if it’s in a retirement account.

Al: Yeah, I would personally much rather have-

Joe: – prefer-

Al: – prefer-

Joe: Slivo-

Al: You’ve already had some, haven’t you? I personally would prefer to have money in a brokerage account as opposed to a retirement account if I’m, if I’m picking.

Joe: Yes.

Al: Because I can manage that. I can do tax-free interests. I can, you know, municipal bonds, right? I can, I can have lower dividend paying type stocks. Right. I can, I can loss harvest. I can do all kinds of stuff. So yeah, no, this is, this is what people would like to do. That, I mean, people are envious of this.

Joe: The big hoopla about Warren Buffett pays a lower tax than secretary-

Al: Because this is his situation.

Joe: His money’s all in a brokerage account. He doesn’t pay less tax than his secretary. He probably pays a lower tax rate.

Al: Because of the capital gain rate. He pays a lot more taxes than the secretary. I’ll tell you that.

Joe: Because she gets paid W2 ordinary income, but his income is coming from investment, like yours, which is going to be taxed at a capital gains rate, which you can tax manage quite effectively. Yeah, it’s all after-tax money. So you probably paid a bunch of tax to get $5,000,000 sitting in a brokerage account.

Al: But now you’re in a great spot.

Joe: 56 years old drinking some Slivovitz.

Al: You’ve got to say that word.

Joe: I love it. I just can’t wait to go to the liquor store.

Al: Are you going to do that tonight?

Joe: Yeah. All right we’ll see you next time. Show’s called Your Money, Your Wealth®.

Outro: Next Week on the YMYW Podcast

Andi: Jack and Swan in Florida, Jennifer in Colorado, and Skipper in Texas, listen for answers to your money questions next week in episode 503. Click Ask Joe and Big Al On Air in the episode description to get your Retirement Spitball Anlysis, leave your honest reviews, comments, and ratings for Your Money, Your Wealth on YouTube, Apple Podcasts, Spotify, and all the other apps that let you do that, and share the show with your friends, family, neighbors and colleagues.

Can you believe we’re coming up on the end of the year?! Time flies, and you only have a few weeks left to make changes that will lower your 2024 tax bill. Pure Financial Advisors can help. Schedule a free and comprehensive Financial Assessment with one of the experienced professionals on Joe and Big Al’s team to see what strategies you can implement now so you pay less taxes come April. Don’t wait – the calendar is filling up fast! Click the Free Assessment link in the episode description or call 888-994-6257 to schedule your free financial assessment today and meet with our team in person or online.

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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