ABOUT HOSTS

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
ABOUT Alan

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 [...]

ABOUT Andi

Andi Last brings over 30 years of broadcasting, media, and marketing experience to Pure Financial Advisors. She is the producer of the Your Money, Your Wealth® podcast, radio show, and TV show, and moderator for the firm's digital events. Prior to joining Pure, Andi was Media Operations Manager for a San Diego-based financial services firm [...]

Published On
February 6, 2024

What does retirement at age 60 look like for Allison in Northern Virginia, or for YMYW listeners Jimmy and Rosalynn in Georgia, who are using our free retirement calculator at EASIretirement.com? Ingrid is using the EASIretirement.com calculator too – is she able to contribute more than her annual income to her 403(b) and her Roth? Perry and his wife in Winston-Salem also have 403(b) plans, and they wonder if they should take the lifetime annuity or the managed payout in retirement. Finally, should Brad in Sarasota, Florida reserve his health savings account money for long-term care insurance?

Follow the YMYW podcast Subscribe to the YMYW newsletter

Show Notes

  • (00:48) What Does Retirement at 60 Look Like for Me? (Allison from Northern Virginia)
  • (09:59) Late Starters. EASIretirement.com Says We’re OK. Are We Being Realistic About Retirement? (Jimmy & Rosalynn, GA)
  • (16:07) Earnings vs. Contributions When Using EASIretirement.com (Ingrid)
  • (22:37) Lifetime Annuities or Managed Payouts from Our 403(b)s in Retirement? (Perry, Winston-Salem, NC)
  • (28:54) Should I Reserve Health Savings Account (HSA) Money for Long Term Care? (Brad, Sarasota, FL)
  • (34:11) The Derails

Free financial resources:

Download this week’s special offer – for a limited time only!Retirement Rescue Guide - free download

Retirement Rescue Plan - Your Money, Your Wealth® TV - S9 | E9
EASIRetirement.com: FREE Retirement Calculator – try it out and send us your feedback!EASIRetirement free retirement calculator

Free Financial Assessment

Listen to today’s podcast episode on YouTube:

Transcription

Andi: What does retirement at age 60 look like for Allison in Northern Virginia? The EASIretirement.com calculator says Jimmy and Rosalynn in Georgia are on track to reach their retirement goals, even though they’re late starters – but are they being realistic? Ingrid used the free EASIretirement.com calculator too, but is she able to contribute more than her annual income to her 403(b) and her Roth? That’s today on Your Money, Your Wealth® podcast number 467. Plus, Perry and his wife in Winston-Salem also have 403(b) plans and they wonder if they should take the lifetime annuity or the managed payout in retirement? Finally, should Brad in Sarasota, Florida reserve his health savings account money for long-term care insurance? I’m producer Andi Last, and here are the hosts of Your Money, Your Wealth®, Joe Anderson, CFP® and Big Al Clopine, CPA.

What Does Retirement at 60 Look Like for Me? (Allison from Northern Virginia)

Joe: We got, “Hey guys, and Andi, this is Allison from Northern Virginia.  In my last question-” well, you know what we got to do, Andi, here?

Andi: Uh oh.

Joe: We got to sort this stuff out. We got double dippers and triple dippers here, and we got first-time callers that we’re-

Al: And we got 45 pages.

Joe: And we got, we’re just kind of pushing them out. So, hey, we love the multiple questions. Some of you are taking advantage.  There’s like, hey-

Al: And here’s a full page-

Joe: Here’s another rebuttal.

Al: -full page question.

Joe: From my 15 questions that I’ve asked over the last 15 days.  Here’s my portfolio. Can you please take a look for me?

Andi: So in other words, you want to prioritize people who’ve never written in before?

Joe: Yes, I think that’s, I think that’s the right thing to do.

Al: I think that’s fair.

Andi: Okay. Which means that all of our core listeners are going to completely make up their names from now on.

Joe: That’s alright.

Andi: “First-time listener….”

Al: Well, I’ll tell you what, we’ll still answer them, but it might be on an email. How about that?

Joe: Well, we’ll get to them. Allison.  Now back to Allison. “In my last question, I asked if I should do a Roth conversion with my rollover IRA because I would have over $45,000 in a charitable donation in 2023 due to a situation with an inheritance. You said I should.” Wait. Okay. Wait a minute.  We were just talking. We’re not giving advice on this show, folks.  We were- we might’ve been just having a conversation. She’s like accusing, “you said we should”. Something probably blew up here with Allison. Just wait for it.

Al: Well, we, here’s what we- here’s what we probably said. We probably said, yeah, I would probably do that, I might do that.

Joe: Makes sense. I don’t know.

Al: Yeah, probably would.

Joe: If it was me, I would- I’m not saying Allison do this. We’re not saying that.

Al: You didn’t say that?

Joe: No. We did not say that.

Al: Allison, here, here’s your advice- No, he didn’t say that.

Joe: So, I’m just waiting for the, the shoe to drop here.

Al: Okay, here we go.

Joe: “You said I should. I executed that rollover in late Spring of this year. I’m estimating that I will owe between $1000 and $2000 in federal taxes in April due to the rollover and some RMDs I had to take due to my inheritance.  My family member’s estate is almost done. I should get about $4000 more from the estate, which I will likely put on my brokerage account. With my inheritance and what I will continue to save in through 2029, I think I can retire in June of 2028.  Would you do a retirement spit ball for me?” No!  We’re done!  Move on! Next question. Who do we got? We got Claire from Colorado. I’m kidding.

Al: Wow. That’s getting pretty hardcore.

Joe: Okay. Let’s see what our stats are. A little 55-year-old single female with no kids. Federal government worker. “I want to retire in June 2028, 60. I’ll receive $3000 a month in pension gross with small COLAs. I will have a monthly supplement of $1100 a month from FERS until I’m 62.  I will keep my federal subsidized health insurance. My Social Security will be about $3000 at full retirement, 67, or $4000 at age 70. Keeping score here, Al?

Al: Got it. Yep.

Joe: All right. Hold on. Excuse me.  “I want to spend approximately $7000 to $7500 in today’s dollars at retirement.” How much does she have in fixed income with just the numbers I read out? Most of that, right?

Al: She, well, if she’s got $3000 pension plus Social Security, so yeah, pretty close.

Joe: $6000 and then plus some FERS through 62 and-

Al: Yeah, yeah.

Joe: All right.  “Home is now paid off. But I may move in retirement and may need to take on a mortgage of about $200,000 to get the property I want.  I’m currently maxing out my TSP and catch-up contributions. Contributions are about one half traditional/one half Roth.  I did not do any Roth IRA contributions in 2023 as my income with the IRA rollover and RMBs was too high.”  IRA rollover, why would that- or is she talking about the conversion?

Al: I think so.

Joe: A Roth conversion does not impact your ability to do a Roth contribution, so-

Al: A lot of people don’t know that.

Joe: Just FYI. Well, that’s why we’re here.

Al: Yeah, because it’s a modified adjusted gross income for a Roth contribution.

Joe: So I think you’re still good. Allison, if you want to do a Roth contribution, just take out that conversion and look at your adjusted gross income.  Okay. Where am I at with this? “I decided not to do a backdoor contributions.” So not to do anything.

Al: Yeah, didn’t want to.

Joe: Yeah, just like-  but I told her to do that conversion.

Al: You said it.

Joe: You said so. “Not sure what I’ll do for 2024. No debt. I’ll take home approximately $6000 a month right now after deductions, asset total $1,100,000.  What does retirement at 60 look for me? Since my last question, I purchased a new silver Toyota Camry Hybrid, which I love.”  Did I tell you to do that too?

Al: You said she could afford it.

Joe: Yeah, go ahead.

Al: And you said get the silver one, not the white one.

Andi: And go hybrid.

Joe: “I listen to the podcast on Tuesdays during my commute or on a walk around my office area since my agency has given us a few wellness hours each pay period to exercise.” Well, wellness-

Al: – and learning at the same time.

Joe: Wow. “My drink of choice is still a little Diet Coke and a hard cider if I have an adult beverage. Thanks for the podcast and spitball information you could give.”

Andi: See, she didn’t accuse you of anything. She just thinks that you give, like, the best advice.

Joe; Yes, I don’t give advice.

Andi: I know.

Joe: Shootin the s-

Andi: Shootin’ the breeze.

Joe: Shootin the stuff, yeah. Yeah, you’re fine, Allison. You got, well, hold on.

Al: Yeah, yeah, she’s fine.

Joe: This is not advice, Allison.

Al: Okay, I think she’s fine.

Joe: $1,100,000, your pensions are going to cover most of the fixed income that you have.  You can have another $3000 and some change from your portfolio, maybe even $4000 additional. Now you’re looking at $12,000 a month, you want to live off $7000, that’s going to cover your taxes.  Yeah. And your other little Toyota Camry hybrid in another 5 years that you want to buy-

Al: Could do that. So, yeah, so I actually did a little bit more analysis. So she’s got $1,100,000, wants to retire in about 5 years. I’m just assuming she’s adding about $30,000 a year. Future will be about $1,600,000 when she retires. Her expenses at that time for inflation will be about $104,000. So $104,000 minus Social Security of $36,000, that leaves $68,000. Not Social, I’m sorry, the pension. Without Social Security leaves $68,000 divided into $1,600,000 is 4.3% as a 60-year-old. Might be a little high if you didn’t have Social Security. Because you have Social Security, I’m fine with this.

Joe: Yeah, I think you’re right there, unless the market totally blows up In the next 5 years.

Al: Well, then you need to go back to work.

Joe: $1,500,000 is now $900,000. But, here again is my point. So, with these spitballs that we’re doing, this is a tenth of what people really need to be thinking about, right? So, we’re just seeing, alright, a real simple question is, hey, can you spitball this for me, am I on my track? Yes, you’re on track, but there’s multiple strategies that people should still look at. You know, from a Social Security claiming strategy, when should she take it, 62, 67, 70? She’s got this little bridge with FERS that will take her to 62, but realize there’s pros and cons of taking, you know, Social Security early. A lot of people love to take it early. We say take it early. Right? Because then, A) you have more fixed income, that’s less demand from the portfolio. I love to party in my 60s and I’m not gonna party in my 70s. Alright? Well then that, then take it at 60, but if she takes it at 70, her distribution rate is gonna be 6% for maybe 10 years. And if the market is volatile, that could definitely blow up her overall retirement strategy. So, there’s, there’s so many other things that people need to still consider. Because I know we’re going to get an email one of these days-

Al: You said-

Joe: – you said and now I’m broke.

Al: So probably a better way to say this is, is you’re in the ballpark. So there we go.

Joe: Okay. Thanks Allison.

Andi: With the money you have saved right now, will you be able to retire at age 60, like Allison? 65? 70? Never? What if the market does blow up? Doctors Joe and Big Al are in the house on Your Money, Your Wealth® TV with your Retirement Rescue Plan! Watch it in the podcast show notes, and make sure you download the free companion Retirement Rescue Guide – it’s only available for a limited time, so download it before this Friday. Revive your retirement and go from just barely surviving to thriving! Click the link in the description of today’s episode in your favorite podcast app to go to the show notes, you’ll see the TV show, the guide, and other free financial resources, right before the episode transcript. 

Late Starters. EASIretirement.com Says We’re OK. Are We Being Realistic About Retirement? (Jimmy & Rosalynn, GA)

Joe: “Hey, Andi, Big Al, Joe, love the show. I’ve been listening for a few years. Typically listen while on the treadmill or doing my commute to work. I’m writing to hopefully balance the normalcy of your content. I am not 35 years old with $6,000,000 in the bank, planning to work for another 20 years and wondering if I’ll be okay.”

Al: Yeah, we do get that sometimes.

Joe: Yeah, they usually start out, I have $8,000,000.

Al: Should I put money in a Roth IRA?

Joe: Yeah. “I drive a Mazda CX5, my husband drives an RDX. We have two bogey pups-“

Andi: Bougie, as in bourgeois.

Al: I would have said boogie.

Joe: Boogie. “My hubby doesn’t drink. But I enjoy a glass of wine, a Corona light, and an IPA all at the same time.” No, I’m kidding. She didn’t say that. But she only does that once or twice a week.

Al: Yeah. Okay.

Joe: “We got started a little late with being intentional-“ Is that right?

Andi: Yeah.

Joe: “-intentional about retirement. I’m 51. Husband’s 60. We’d like to retire when I’m 58. From my calculations, including what I’ve come up with, using your easy online tool, I think we’re okay. But I’d love to hear your spitball on whether our assumptions and goals are accurate and realistic.” So she’s using a little easy retirement tool.

Al: Yeah, how do we access that?

Joe: EASIretirement. That’s all you gotta do.

Andi: And it’s spelled E A S I retirement dot com.

Joe: Not that easy.

Al: E A S I retirement dot com.

Joe: You know what that stands for?

Al: Uh, no.

Joe: Education. Assessment. Strategy. Implementation.

Al: Of course, it always sounds for something cool.

Joe: That’s Mike Fenison right there.

Al: Hours and hours.

Joe: Two months, no, years and years. Love you, Mike, if you’re listening. “Retirement, got $700,000. Other assets, $250,000. They got $170,000 on a house, with a $450,000 value, tax value, but a $600,000 market value. They make $280,000 combined. They have $50,000 a year in the 401(k), and they do a little megatron Roth. I spend the last few years- Oh- our spend the last few years range from $90,000 to $110,000, and I don’t see that changing.”

Al: Okay. Good for you. Spending less than you’re making, that’s a recipe for success.

Joe: Yes. “Social Security. We plan to start, my husband’s when I retire and he’s 67. I’m hopeful- I’m hopefully put mine off until 70, and it is currently estimated to be $3300 a month if I stop working at age 58. We are working toward, and on track, to have $500,000 in that other category, see above. There’s a bridge account for expenses when I stop working to delay pulling from our retirement accounts. We also plan to double down on converting my husband’s IRA to a Roth when we don’t have income to battle future RMDs. We started that a couple of years ago, but then paused because of taxes. We are DINKs-“

Andi: Double income, no kids.

Joe: Got it. “- so we’re not trying to just live off of the interest in retirement. We’re fine if we need to pull from the principal. Thanks for the spitball. And the good and entertaining work all around. Jimmy and Rosalynn from Georgia.” Alright. They got- how many years, 7 years to go?

Al: 7 years to go.

Joe: Saving $50,000 a year?

Al: Yeah, I’m getting at 6%, 7 years, starting with $1,000,000. They probably will have about $2,000,000. $2,100,000, something like that.

Joe: Yep. Let’s say, 3, so that’s $60,000.

Al: Yeah, and let’s say spending by that time with 3% inflation would be about $136,000, minus Social Security shortfalls, $101,000. We divide that into $2,100,000. We get about a 4.8% distribution rate. So that’s a little rich.

Joe: A little rich.

Al: It’s close.

Joe: She wants to push hers out until 70. So that burn rate is going to be a little bit higher.

Al: It’s a little bit higher. That’s like 12 years of a high burn rate. Yeah. That’s I, that’s a little shy I would say.

Joe: 58. Well, her husband’s going to be able to claim. And what does he, what’s his Social- $2200 bucks.

Al: Yeah. So that’s $26,000. I factored that in.

Joe: Okay. $26,000, $2,000,000. She’s 58. Probably don’t want to pull out more than 3% from the portfolio. So that’s $60,000.

Al: You might be able to pull out 3.5% or even close to 4% just because her Social Security is coming. Right? I guess that’s what EasiRetirement said. But it’s a little bit tight for my liking.

Joe: Yeah, me too. I don’t, yeah, it all really depends on the assumptions of what the overall portfolio is going to do.

Al: That’s true.

Joe: You know what I mean? It’s going to make or break it. If, if, if the market does pretty well over the next 7 years, then okay, well now it’s not $2,000,000. It could be $2,500,000 with the amount of money that she’s saving. If the market’s flat or goes down, I mean, it could be $900,000 and she’s working another 5 or 6 years.

Al: Yeah, yeah. But you know, I did with $110,000 spending, what if it’s $90,000? Maybe this looks fine. So if you think about it that way, if you don’t want to work part time, then you make some sacrifices, you have a spouse that’s older, right? So you’d like to spend time with your spouse. So I could see it working, but maybe spending closer to the $90,000 than the $110,000.

Joe: All right. Very good. Thanks for the email.

Earnings vs. Contributions When Using EASIretirement.com (Ingrid)

Joe: Got Ingrid. Ingrid writes in. “Hey, I’m getting my EASIretirement.com data entered.” Ever heard of that EASI Retirement?

Al: Yeah, just talked about it.

Joe: Just throwing it out there.

Al: EASIretirement.com. Is that on our website? Or-

Joe: I dunno.

Al: Where do they find it, Andi?

Andi: They go to EASIRetirement.com.

Al: That’s easy enough.

Joe: Very easy. Everything’s easy here. “I’m 69, single, 3 children, not collecting Social Security until 70, and trying to do last minute tweaks and rollovers. Salary is very low now. Working part time, $50,000 a year. Still contributing $30,000 to the 403(b) this year, mainly for tax reasons so that I have less tax consequences when I sell some of my appreciated, but risky stock later this year. Income may end earlier in the year versus end of 2024. I can’t predict it. Say I contribute $30,000 to my 403(b) and get that in there. Do I have to earn gross $30,000 plus an additional $7500 in actual salary wages in order to contribute $7500 to a Roth? Or can I double tap my total wages to count towards both, contributions to the 403(b) and the Roth? Which essentially ends up being more than my actual wages in 2024. For example, if I make $32,000 this year, can I still contribute $30,000 to my 403(b) and $7500 to a Roth? Because technically, I’ve earned enough to contribute to the Roth. Even though most of the salary is going to the 403(b). I can’t seem to find the answer anywhere. Maybe it’s an unusual question. I have two more years to either sell the stock. It’s appreciated at 1100%-”

Al: It’s a big number.

Joe: It’s a pretty good.

Al: Is that, I think that’s 12 times. I think, I think that’s how you do that. Cause 100% is double. So 200% is triple. So I think that’s 12 times.

Joe: Good for her.

Al: 12 bagger.

Joe: Yeah, 12 bagger. Just put 12 of those in the bag and shake it up. “- or to do a Roth conversion. And I think I have to run out of time to do this in any reasonable way as the amounts are too large.” Okay, so she’s got a couple years to sell the stock. We don’t know how much the stock is worth, but it’s up a 12 bagger. She just likes to talk about, Hey, I got $40,000 in it, but I was up 11,000% because I started with 5 cents.

Al: Just get, just go 12 bagger. It’s easier to say and conceptualize.

Joe: Okay, so she wants it, “- or should I do a Roth conversion? I think I’ve run out of time to do this in any reasonable way as the amounts are too large. Sure wish I knew about all this 10 years prior to retirement versus 2. I hope not to take the RMDs until 73, 2027, and I will be forced to officially retire at the end of 2024 or earlier. Thank you for the guidance you can offer. You have a very excellent show and information. And it’s also organized and well done that it inspires a lot of trust and admiration.”

Andi: Dang.

Al: Wow.

Joe: What the?

Al: That’s-

Andi: Thanks, Ingrid. That’s awesome.

Joe: Oh my goodness. That’s the nicest compliment I think we’ve ever received on this show.

Al: It could be.

Andi: I think so.

Joe: A lot of trust and admiration.

Al: Yeah. Can’t get much bigger than that.

Andi: Well, you know, we do say we’re trustworthy by design.

Joe: The show’s designed by Andi. She’s my trustworthy- I don’t know what-

Al: The first question I can answer that- so no, you can’t double dip on that. So, so here’s how this works is you’ve got a salary. Let’s just say your salary- use your example of $32,000 and $30,000 went to the 403(b). So that’s a deduction. So that comes off of your salary. So your W2 is going to show $2000. So you can do a $2000 Roth IRA.

Joe: Easy enough.

Al: Easy enough on that one.

Joe: So congrats on the triple bagger and good luck on selling that.

Al: Yeah. And as far as selling the stock, I mean, ideally you do it before your RMDs, although you haven’t told us how much you have in there. So I don’t really know what those are.

Joe: Yeah. I don’t know what the value is of anything. So she’s all right, do I sell some of the stock that’s up 1200% over the next couple of years, while I’m in a low tax bracket and take advantage of the 0% capital gains rate? Maybe is that what she’s asking? Or do I do a Roth conversion? Because I don’t want to have a huge RMB. So dollar figures would-

Al: Yeah, would be super helpful. I mean, just without dollar figures, I would say, if you have a-

Joe: She’s got to get out of the stock up 12,000%.

Al: Right, if you have a highly appreciated stock that’s a meaningful part of your portfolio, that’s too risky. So start selling it. Do Roth conversions later.

Joe: Who cares about the tax, you’re up 12,000%!

Al: Well, 1100%, but 12 bagger.

Joe: You hit the lotto.

Al: But yeah, diversify. That’s going to be more important than Roth conversions. You can do your Roth conversions later. Even when you start taking RMDs, you can still do Roth conversions as long as it makes sense in your tax brackets.

Joe: Alright, congrats.

Andi: Jimmy and Rosalynn and Ingrid have all done their own spitballing at EASIretirement.com, now it’s your turn. Go to E-A-S-Iretirement dot com, create a login, then enter your income, savings, and expenses. If you take the quick path you’ll know in about 2 minutes whether you’re on the road to retirement wellness or disaster. The EASIretirement.com calculator is constantly improving: not only can you change your own numbers to see how it impacts your future retirement, you can also switch between optimistic, average, or pessimistic assumptions for inflation and returns, and you can test different budgeting scenarios and withdrawal strategies. Even if the EASIretirement.com calculator says your chance of success is high, schedule a one-on-one with an experienced human financial professional from right within the calculator, and get help creating even more sophisticated financial strategies to meet your retirement needs. Start calculating your retirement wellness now for free at EASIretirement.com – that’s E-A-S-I retirement dot com.

Lifetime Annuities or Managed Payouts from Our 403(b)s in Retirement? (Perry, Winston-Salem, NC)

Joe: Answering your money questions. Go to YourMoneyYourWealth.com, click on that icon.  How many people actually click that stupid button? Not many.

Andi: A bunch.

Joe: Do they just go to info or do they, or do they go to Big Al? Ask now.?

Andi: Actually, most people now are clicking on Ask Joe and Big Al. We’ve got, what is it? Like 45 pages worth of questions now. We’re just getting into the middle of November. So if you sent us an email in November, we might get to it here shortly. So yeah, the majority of them are Ask Joe and Al.

Joe: All right. We got Perry. He’s been sitting on the sidelines here from Winston, Salem, North Carolina. Is that where the-  something happened in Winston, Salem.

Al: No, that’s-

Andi: Are you thinking of the Salem witch trials?

Joe: Yeah. Right?

Andi: No, that was Massachusetts.

Al: Yeah.

Joe: Got it. Winston, Salem.

Al: Different Salem.

Joe: Is this where like Winston cigarettes came from?

Al: Probably. That’d be more likely.

Joe: Got it. “Hello from North Carolina. My wife and I are retired, age 68, 67. She drives a Lexus ES and I drive a little Lexus RX.” So Lexus family here, Big Al.

Al: Yeah, I see.

Joe: “I like iced tea, Duke basketball, and a day on the golf course.”

Al: Awesome.

Joe: I wonder what his handicap is.  I guess it doesn’t really matter.  You enjoy the game, I enjoy it.

Al: It really doesn’t matter, right? Just, if you have fun.

Joe: Right, I guess so.  “Here are the facts. We have about $855,000 in a rollover IRA, $650,000 in a Roth IRA, $750,000 in a brokerage account. We get around $55,000 in pensions and Social Security annually. Our expenses are about $100,000, no debt. We have $550,000 in our house, and we also have long term care insurance. We’ve been retired for 6 years and have completed our Roth conversions.” So you complete a Roth, I mean, you set it and now it’s done, you check the box.

Al: Sure, yep.

Joe: “In addition, we also have some 403(b) accounts with the same employer. Mine is around $500,000, my wife’s $400,000. We have not taken any distributions yet, but before age 73, we will have to convert each account to a lifetime annuity or a computerized managed payout plan.” Interesting. “The decision on each account is irrevocable.  The company is so large, it has its own pension and benefits agency.  It’s own propriety stock and bond funds, as well as its own annuity pool. The annuity they offer is 0%, 2%, 3%, 4%, or 5% COLA choices, as well as a joint 70%, 85%, and 100% survivor options. With their managed payout offering, each account would continue to be invested with monthly distributions programmed to last a lifetime with no guarantees. Distributions would be adjusted every year based on market conditions, inflation, and rebalancing. No personal account withdrawal would be allowed, but any balance at death could be left to the survivor or an heir. So, with our $900,000, my wife and I could choose two annuities, or two managed payouts, or one of each. I wish we could manage these accounts and distribute them on our own, but it’s not permitted.  We have some time between now and age 73, but any thoughts you have on a decision would be greatly appreciated.”

Al: Okay, so we’ve got a company pension plan, you pick a lifetime annuity or a managed payout. Lifetime annuity meaning that you get a payment plan for life, but then it stops.

Joe: It’s guaranteed for life.

Al: When you pass away, but there’s a survivor option. So, but when you both pass away, it’s gone, right? Managed payout plan is-what’s that?

Joe: Well, if they were to pass, it would still go to the heirs. So it’s not a- whatever’s they’re not annuitizing. They’re taking a look and saying, all right, well, here’s the overall payout. It’s still managed. So it could run out of money too. So the payments aren’t guaranteed. But basically they’re keeping the monies in the plan and they’re going to calculate a payment from the overall plan each year based on inflation and so on.

Al: So I would imagine that a lifetime annuity is probably a higher payment than the managed payout plan.

Joe: I think so.

Al: Would that be your guess?

Joe: That would be my guess. I don’t know. I want to see some numbers.

Al: Yeah. We wouldn’t know how to answer that.

Joe: There’s no way. Do one of each. That’s an easy way. I like the managed plan, but- it seems to me he’s got already $55,000. He needs $45,000 from the overall portfolio, and he has $2,000,000 roughly of liquid assets, not including this $900,000.

Al: Yeah, so it’s a 2% distribution rate just right there.

Joe: Right. He’s not going to need any of these other liquid assets.

Al: I agree with that.

Joe: This managed payment or the annuity is probably going to give him his living expenses. And so any added is going to come from his liquid portfolio. And so I would look at, well, what he feels more comfortable with, but just understand that if you annuitize, you get a little bit of a COLA. If you get the managed payout, you’re probably going to have more of an accelerated annuity payment, depending on how the market does.

Al: Right.

Joe: The market trends up, the payments are going to continue to rise on them.

Al: So, yeah, so we don’t, we don’t have near enough to answer this question, but just based upon what we know, I’m going to say I would, I would be more likely to favor the managed payout plan, only because I’m set otherwise with all my other assets.

Joe: That’s what I was thinking.

Al: Yeah, yeah.  But when you look at the numbers, I may change my mind.

Joe: I would need to look at the plan. I would need to look at the plan.  It’s like, what do you think? Well, I have no idea what the annuity payment’s going to be.  What kind of internal rate of return that you’re going to receive.

Al: Now if the lifetime annuity payment is way higher, I might say, oh, okay. I’m healthy.

Joe: It seems like they have their own benefits and they’re running their own- the company’s huge.

Al Yeah, right, right.

Joe: So they’re like, alright, well we’re going to annuitize this and pool the risk.  So it could be a lot higher payment than maybe another standard annuity, a commercial annuity, I don’t know.

Al: And somewhat dependent upon your feeling about life expectancy.

Joe: Yeah.  Sorry, Perry. Enjoy your time at the golf course.

Should I Reserve Health Savings Account (HSA) Money for Long-Term Care? (Brad, Sarasota, FL)

Joe: “Hello again, long time listener, second time-“

Al: poster.

Joe: Oh, poster. I thought it said poser at first.  “My wife and I are still driving that 2019 Ford Fusion Hybrid, and I still like my martinis very dry and stirred, never, ever shaken. This is Brad-“ buddy Brad “-from Sarasota, Florida. I’m 64 and my wife, she’s 65. We have $1,600,000 in traditional IRAs, $400,000 in the Roth IRA, $750,000 in savings and brokerage accounts, $100,000 in HSA.  My question concerns is on an HSA strategy.” health savings account, for those of you that are keeping score here. “And I’m hoping you can kick around for me. My wife and I are in good health, but we are concerned about the impact of long term care expenses in the future.  My goal is not to touch the HSA, but instead let it continue to grow as a reserve to help cover long term care expenses should either my wife or I need it. In the meantime, I’m saving all of our medical receipts. I understand that these medical receipts can be used to pull the money out of the HSA tax-free. And there’s no time limit on when I can use them. If we don’t end up using the HSA money for long term care, we can still get money out of the HSA tax-free using our banked medical receipts-” He’s banking them.

Al: It’s quite a strategy, you know, let’s see, 50 years ago, 40 years ago, 30 years ago-

Joe: I had a root canal. I used to receive-

Al: And I paid cash. I think I paid about $1800 a year.

Joe: “Does it make sense to reserve HSA money for long term care? Our goal is to spend down the entire HSA tax-free in our lifetimes. Thanks for spit balling this one for me.” Brad, wow, just clippin coupons for the HSA. Bought some toothpaste. I got an ace bandage.

Al: I got a, I got a toothpick.

Joe: I sprained my ankle when I was 16.

Al: I don’t think my parents paid.  I gotta pay now.

Joe: All right. So, okay, long term care.  Saving this $100,000 for a long term care stay.

Al: Yeah. So, well, first of all, a couple of things. So HSA, you put the money in, you get a tax deduction, you pull the money out for medical purposes, and then it’s tax-free. So you get a tax deduction, it grows tax-free, you never pay tax on it. So that’s a great deal, right? Do you want to use it for long term care? No, not really. Because long term care is usually deductible.

Joe: It’s super expensive because you can write it off on your Schedule A.

Al: Yeah, that’s right. So, I wouldn’t do it for that. And the other thing, too, is if you keep banking all these expenses, and you pass away, you both pass away, it goes to your kids, and they, they gotta pay taxes on this. So make sure, if you wanna bank them, I’m okay with that. But get those in before you pass. Don’t be together in a car.

Joe: Yeah, but when it comes to long term care, sometimes a retirement account might be a better use because let’s say you have to take $100,000 of an IRA. Well, it’s all taxable, but then it’s going to be over the threshold for health- your health expenses on your tax return. So a lot of that could be deductible.

Al: Yeah. And see, that’s the thing. A lot of people don’t realize you go to the long term care stay. Generally, most or all is tax deductible as a medical deduction. So you’re not going to pay tax on the IRA income anyway.

Joe: All right, Brad. Keep banking, keep saving those-

Al: But get that money paid back. And so you don’t lose out on this.

Joe: Man, love it. That’s it. I’m done. See you next time. Show’s called Your Money, Your Wealth®.

Andi: Joe’s playing hurt – again, Joe vs. martinis, bougie dogs, and a new song about the podcast in the Derails at the end of the episode, so stick around. 

This is Your Money, Your Wealth, your podcast! If you enjoy YMYW, tell your friends, family, coworkers, neighbors, the mailman, and that cute barista down the street about it, and help us reach more listeners like you. And don’t forget to leave your honest reviews and ratings for Your Money, Your Wealth in Apple Podcasts and all the other apps that let you do that like Amazon, Audible, Castbox, Goodpods, Pandora, PlayerFM, Pocket Casts, Podcast Addict, Podchaser, Podknife, and Spotify. We’re on all of ‘em!

Your Money, Your Wealth is presented by Pure Financial Advisors. To really learn how to make the most of your money and your wealth in retirement, you need more than a spitball: schedule a no-cost, no-obligation, comprehensive financial assessment with the experienced professionals on Joe and Big Al’s team at Pure. Click the Free Financial Assessment banner in the podcast show notes at YourMoneyYourWealth.com or call 888-994-6257 to book yours. Meet in person at any of our locations around the country, or online, right from your couch. No matter where you are, the Pure team will work with you to create a detailed plan tailored to meet your needs and goals in retirement.

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

The Derails

YMYW song lyrics:
Well, here we go, it’s time for the show
Joe and Big Al, they’re ready to go (oh yeah)
Talking ’bout your money, talking ’bout your wealth
Helping you retire in good health (oh yeah, alright)

Get your money groove on, don’t you wait around
Joe, Big Al, and Andi, they’re here to astound
They’re gonna break it down, give you the lowdown
Your Money, Your Wealth, it’s the hottest show in town
Let’s get funky, let’s get groovy, it’s time to get down! (ooh-yeah)

Yo, let me tell ya ’bout this little plan
To secure your future, yeah, that’s the man
Retirement, investments, taxes, oh my
We’ll have you savin’ the dough, reachin’ for the sky

(Ask Joe and Big Al) They know it all, my friend
Money questions? They’ll give you a hand
Tax planning, Social Security, Roth conversions too
YourMoneyYourWealth.com, that’s where you go to

Dollars and sense, makin’ money fun
Watch your wealth grow, yeah, we’re on the run
So if you wanna live your best life, be financially free
Check out YourMoneyYourWealth.com, they’ll show you the key

Andi: Human musician friends, we know you can do far better. If you’d like to hear your original song about YMYW on the podcast, email me an mp3! Send it to andi.last at purefinancial dot com. And here’s a tip: Joe’s partial to the upbeat Motown-style stuff that he can dance to… see you next week, friends!
_______

IMPORTANT DISCLOSURES:

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

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

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

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

• Past performance does not guarantee future results.

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

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

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

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

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

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