Show Notes

• 00:00 – Intro: This Week on the YMYW Podcast
• 00:50 – What About the Guardrails Withdrawal Strategy? (Bill, YouTube)
• 04:13 – I’m 69 with $5.7 Million Saved. What’s the Max I Can Spend in Retirement? (Joe at the Beach)
• 15:12 – 63 and 58 With $1.85M Saved. How Much Can We Spend from 67 Until Social Security at 70? (Joe Ko, VA)
• 21:30 – We’re 61 and 69 with $7.6 million. Can We Increase Our Retirement Spending? How Should We Do Roth Conversions? (“Harold and Maude”, Durango, CO)
• 33:49 – 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: Today on Your Money, Your Wealth® podcast number 549, a listener comment on one of our YouTube videos sparks a dialog between Joe and Big Al on the 4% rule vs the “guardrails” withdrawal strategy. Joe at the Beach is managing his portfolio on his own, but wants the fellas’ take on his upper limit for yearly spending, so he can keep drinking his old-fashioneds. Can Joe Ko in Virginia afford to bridge the gap between retiring at 67 and taking Social Security at age 70? Plus, Joe and Big Al spitball on whether “Harold and Maude” should accelerate Roth conversions into high tax brackets before moving from low-tax Colorado to high-tax California? And how much more than their current annual spend can they afford for family vacations and travel? I’m Executive Producer Andi Last, and here are the hosts of Your Money, Your Wealth®, Joe Anderson, CFP® and Big Al Clopine, CPA.

What About the Guardrails Withdrawal Strategy? (Bill, YouTube)

Joe: Aloha, Big Al.

Al: Aloha. It’s as usual, it’s wonderful out here. It’s summer. It’s a little warm, but the water is great.

Joe: Our listeners do. You don’t, Andy cares.

Andi: I care. I’ve got rain here in Australia. It’s raining and cold and it’s also tomorrow, so. And I know nobody cares about that either.

Joe: All over the world. Right here, broadcasting.

Al: Yeah. But see, I care about that, Andi, so we’ll just leave Joe out. Let’s just have a chat, you and me.

Andi: Perfect.

Joe: All right. We’re answering your money questions from across the globe here today. We got Bill, he put a comment in on one of our YouTube videos. He goes, “analyze your budget and spending, instead of trying to live off of 4% a year, no one spends 4% plus inflation every year. The 4% rule is a rule of thumb, not a financial plan.” I don’t think we ever said it was a financial plan, and I think every time I’ve ever talked about the 4% rule, we said it’s a rule of thumb to determine how much money that you should have from a ballpark perspective, I think we’ve, it’s not a withdrawal strategy.

Al: I think we’ve said that every single time. And if it’s your withdrawal strategy, it’s a poor one because all it is, it’s a rule of thumb to see how much you need to save. That’s really what this is all about.

Joe: Because, and here’s another example is that sometimes people retire with a certain dollar. And they spend way too much because they don’t really understand, Hey, the market does 10% a year, so of course I could probably spend seven, 8%, 10%, 12% even, you know, in the, it’s the sequence of return risk. That really is a giant risk in retirement as you’re taking distributions from your portfolio. So yeah, you probably don’t wanna take more than 4%, but some years you could take a heck of a lot more. Some years you probably want to take. Less. It depends on your age, depends on what your investments are. It depends on a lot of different things. So I agree with him. it’s not a great financial strategy and if it is your financial strategy, you should probably change it. he goes on to say guardrails. Oh boy.

Al: Yeah, I like guardrails guard. I love guardrails. Yeah. Especially when I’m bowling, it’s much more helpful,

Joe: seems to be getting some traction. It’s much more efficient. It leads to a higher withdrawal rate, especially early with, in retirement in the infamous go-go years. Do you think Bill’s in the business?

Al: I would say so.

Andi: Bill comments a lot on our YouTube channel.

Al: Yeah, Anyway, I like the guardrail system. Basically what it’s saying is, have an upper and a lower limit maybe. 4% is kind of the baseline. Maybe you spend as much as five or as low as three. If you can’t necessarily spend 5% every year unless the market is zooming every year, then go for it, right?

But you’re gonna have years where the market’s gonna pull back, and maybe you wanna spend a little bit less than that year. So it’s, no, I like the guardrail strategy just fine. I think it’s, I think it’s more achievable than trying to say 4% in the year of retirement plus inflation. and that’s it.

I don’t think that’s a good strategy at all. No.

Joe: Alright, cool.

I’m 69 With $5.7M Saved. What’s the Max I Can Spend in Retirement? (Joe at the Beach)

Joe: Let’s move on to Joe at the beach. Let’s see. Hey Andi, Big Al and Joe. This is Joe at the beach. I love the podcast and listen to you or read the transcripts of you guys regularly. I’m a past Oure client.

Andi: That’s actually a typo on my part because this was originally a voice message, which I didn’t have queued up to play for you guys. And when I pulled the transcript of it, I changed that to O instead of P. So it’s Pure, I’m a past Pure client.

Joe: Okay. I got an assessment six years ago, but now I manage my own investments and my question is. what is my upper limit of yearly spend given my current investments? I don’t know. Joe, you left. You’re at the beach. You’re managing your own stuff. You should have realized that before you left me. of course I’ve run the numbers. Got multiple spreadsheets, but wanna check what the experts, my wife and I are 69. I recently left my job not by my own choice. Oh, imagine that. Oh, probably had a telling your boss you could do your, do his job a lot better.

Al: I think he ran the numbers and realized he could retire and just, he didn’t, have the same energy anymore.

Joe: he says, not by my choice, but that’s the way it goes. And now looking at being fully retired and maybe some consulting on the side, but I’m not counting on it. I’m waiting until next February to start Social Security.

My wife is taking Social Security now, but I wanna roll her into my spousal benefits so that this would provide me with the fixed income that we’re going to need forward, which I estimate to be about $80,000 per year. so here are the numbers. I’ve got two and a half million dollars in a brokerage account, and it’s about 90% equities and low cost ETFs, $500,000 in a taxable bond account, completely composed of municipal bonds.

400 K in my Roth, and I’m actively doing Roth IRA conversions and staying in that 24% tax bracket, 2 million bucks in an IRA. But 400,000 of that is in bonds, and I have an inherited annuity with 265,000 from which I’m already taking RMDs. We have two homes, both in North Carolina in my beach house, still have $800,000 mortgage, so about 20 more years to go on that mortgage.

Finally, my wife and I enjoy a good bourbon, a bourbon old fashioned, and I love a good merlott. Many thanks. Okay, the guy’s got a ton of cash. He does. And $80,000 is, going to cover his living expenses, it sounds like. And so he’s looking at how much can he spend from this portfolio at age 70.

Al: Yeah. So to me, and I’ll use the 4% rule, but again, it’s a guideline. This is not a financial plan, it’s a guideline, right? So you take 4% of your liquid assets, which is about 5.7 million, 4% of that’s 225,000 add your social security. 300, 5,000. So somewhere around 300,000 was probably the, number.

Can you spend that each and every year? No. It depends upon the market and your own situation, circumstance, what’s going on. But, 300,000 I would say, Joe is roughly the max spend, roughly the number that you wanna think about.

Joe: Yep.

Al: I actually you could probably spend more in a couple year, a few years, You know, using that guardrail strategy that we just talked about. Maybe you could do 5% one year and 3% another, but I would wanna be somewhere around 300,000 or, preferably below. I always like to be below spending limits just to give myself a cushion. That’s how I think about it.

Joe: Yeah, I don’t know.

Is that, I, think you do things maybe a little bit differently as you approach retirement. Al, not saying that you are approaching retirement. I’m, are you looking to find out what is the maximum amount of dollars that you can spend from your portfolio or. Is it like, what do I really wanna do?

What, is my goals? How much money do I wanna spend on the things that I want to do to have the lifestyle that I want? And then you start there. I think that’s what I would do, because it’s a wide open slate. I think when you we’re working, we’re, constrained to certain budgets depending on what our paycheck is.

Joe at the beach has done a pH phenomenal job. of saving money. And I think it was all because of Buzz, helping him get on the right track. But then he fired us six years ago, so

Al: it was that original assessment got him on the right path. So

Joe: it’s, so here’s what I would do, Joe. It’s like, all right, here, I have a beach house and I have a regular house. I live in North Carolina. I like to play golf. I like to go to the beach. I like to do this, I like to do that. I want to travel more. I wanna do whatever. And they just start, you and your spouse and wife, just think about all, what do we wanna do? And they kind of put a budget around it. I’m sure he is got spreadsheets.

I’m sure he is. Got all sorts of things he says he does. Takes the time to really map out what your retirement life. Is going to be, what do you want that to look like? And then from there, you back it out and say, all right, how much is that gonna cost us? He’s 69 years old. Maybe over the next 10 years. You really want to do a lot of different things.

And so your budget might be a little bit higher, but then when you get into your eighties, you might slow down a little bit. I dunno, then you gotta plan for healthcare, you gotta plan for this and that, whatever. I mean, that’s what I would do in versus like, what’s the maximum amount of money that I can spend and let me just redline the hell outta my portfolio and just make me, you know, he’s 90% equities, he’s got a few bonds and you know, you’re, I think you’re doing this a little bit differently than what we would advise clients or how we would spitball this.

Al: Yeah, so that makes sense to a point. So I’m closer to retirement than you. And I think, there’s a, peace of mind in knowing what’s that Max? Not that I’m gonna go there, right? But what, if my plan calls for couple trips to Hawaii and one trip over to Europe? And oh, there’s,

Joe: that’s not you Al. You have six trips to Europe and you’re going to Hawaii every other week.

Al: Speak speaking hypothetically, but what if that was my goal, just as you said, allegedly and I worked out the budget. Yeah. And it’s like, oh, I could do a third trip to Hawaii. I could even, Ooh, I could do a second trip to Europe. Maybe I’ll do it this year. But it’s not that I’m gonna spend that every year. It’s just nice. I think there’s a peace of mind comfort in knowing what you’re kind of, what the max spend is. Not that you’re gonna do it every year. I think. I think you’re right. I don’t think you start from there. I think you do exactly what you said, but I don’t, I think it, it’s actually just fine to know, you know, I better not go over this, otherwise I could be causing some trouble later on.

Andi: Do you take into account, like at the start of it, when you’re creating that financial plan, what if I do get fired? You know, not of my own desire, I end up quitting work. Or what if I have a healthcare issue in retirement? Does that get built into the financial plan or you know, do you hope for the best? Do you spend as little financial as possible?

Joe: There’s no plan. It’s, planning, it’s a process. It’s not a product, you know, and I think that’s where people get confused. I mean, you could run all sorts of different what ifs, what if this, what if that, what if this then, you know, all of that is, is worthless because you really don’t know what’s gonna happen.

It could give you a peace of mind of saying, you know, what, if I die in 92 and I’m 68, I’m gonna be golden. You know, it doesn’t matter. I mean, there, there’s so many things that you need to be taking a look at each and every year given taxes, given, you know, the markets, given spending, given goals, you know, so then it’s just kind of updating and, going through it ongoing versus putting together like one thing with all these different scenarios.

I think it’s a, good starting point to, to start the process if you wanna look at all of those things to give you some peace of mind. Sure. I think people get confused of what planning is and what a, I mean, the last two questions came in, it’s like, that’s not a financial plan.

I don’t even know what a financial plan is. I know what financial planning is, but not necessarily a product because the day you print it. Or the day you plug the numbers into your spreadsheet or whatever it, the numbers are wrong, guaranteed because you can only use straight line assumptions in regards to rate of return inflation and so on.

And, we know for a fact that those numbers are gonna be wrong. it gives you a guideline, but that’s why you wanna update and review it on an ongoing basis because you don’t, we can’t tell the future.

Al: I think that’s right and I think that’s a good point, Andi. ’cause we really don’t know. And, I think, by and large, you, have your plan, you have backup plans, plan B, plan C for these kinds of things.

But I think as a general rule. we look at expenses, what we’re spending now, and many people wanna keep their same lifestyle, in some cases, increase their lifestyle. Can they do that based upon their assets? Maybe yes, maybe no. Depending upon how much they’ve saved. They get to their eighties. Maybe they don’t spend as much traveling, but maybe they spend more in healthcare.

It’s impossible to predict that. But I sometimes you hear people say, by the time I’m 80. I’m gonna be spending a lot less so I can spend a lot more now. that may be true, but maybe you’ll spend just as much, if not more, because of medical. So I don’t really like to do that. Spend a whole bunch of my go-go years.

’cause I’m not gonna spend anything later. I think that’s a, little bit shortsighted.

Andi: Look at Joe. go ears and the eyes just roll back in his head.

Al: I’m just, quoting our, just

Andi: quoting Joe at the beach. Yeah. Or no, that was Bill. I guess

Al: That was  Bill. That was Bill. I’m, carrying bills on. What’s wrong with Go-go slow go and no, go.

Joe: Alan, are you spending more money on medical nowadays?

Al: no, but I’m,

Andi: He’s spending more on mai tais.

Al: I’m spending more on travel. I’ll tell you that.

Andi: Feeling a little stressed after hearing the talk about sequence of return risk, and why the 4% rule might not cut it for you? You need a plan, not just a rule of thumb. Our Withdrawal Strategy Guide will walk you through the variables that determine a sustainable spending plan that can adapt when the market gets choppy, as well how to pull from the right accounts – be it your 401(k), Roth, or brokerage – in the right order to make your bridge to retirement spending as sturdy as possible. Learn how to create a flexible plan that works for your unique life. Grab your free copy of the Withdrawal Strategy Guide by clicking or tapping the link in the episode description.

63 and 58 With $1.85M Saved. How Much Can We Spend from 67 Until Social Security at 70? (Joe Ko, VA)

Joe: This is another withdrawal rate question, I’m guessing, right?

Andi: Correct.

Joe: Joe Ko in Virginia, but will retire to Florida. I’m 63 wife’s 58 drink cabs in the winter and vodka tonics in the summer. You don’t think he has got any desire to have a vodka tonic in the winter?

Al: apparently not. It’s kind of black and white, one or the other,

Joe: or like a cab at dinner in the summer.

Al: I’m sure he’s done it, but this is his preference. This is plan. Got it. This is plan A. Got it. Plan B is got it is to, in the winter,

Andi: it’s a flexible thing. He has to review it every year

Al: or every month,

Joe: whatever. Dear wife drinks, of choices, little white wine and, or a margarita. alright, Joco, he’s looking to retire in four years at age 67, but not take Social Security until age 70.

Alright. Retirement spend will be approximately a hundred thousand dollars. Current savings is 1.6 million in a traditional 401k, a hundred thousand dollars in a Roth, a hundred thousand in a brokerage. He’s got $50,000 in cash at 70. We should have Social Security in a small pension total. $60,000 a year Question.

Can we safely withdraw money from retirement accounts from age 67 to 70 to cover the gap between spend and fixed income? Also, should the next four years put savings in a brokerage account instead of the retirement account. Thank you. Enjoy the podcast. so he wants to spend a hundred thousand dollars.

He’s gonna retire at 67. Yep. So he’s got age 67, 68, 69. what’s the wife’s age? he’s 63 and she’s 58. Correct. So we gotta bridge the gap, for to age 70. His age 70 is 60,000. Is that yeah. All in. it says that

Andi: 60,000 is including their Social Security and their small pension totaling 60,000.

Yeah. But is that both of their

Joe: Social Security, because she’s several years younger than him,

Andi: that’s what it looks like at age 70. We should have Social Security and a small pendulum totaling 60,000 a year in fixed income. So it sounds like they’re not gonna have that 60 KA year until she’s 50. Until she’s 70. So 12 years.

Joe: So then he is 75 years of age.

Al: unless she takes it, the spousal early. I, think that’s what he’s thinking. She’ll probably start when he starts collecting his, that’s so when he turns

Joe: age 60 at, his age, 70, he’s gonna claim his benefit. She’s gonna claim hers at whatever age he is at that point.

Yeah. And it works at total. And then that’s gonna total 60.

Al: That’s how I, that’s how I read it.

Joe: Sure. Okay, so they’re gonna be $40,000 short. At, his age, 70, right? He’s got $2 million roughly total liquid assets.

Al: Yeah, one, 1.6 million. I went four years, 6%. I dunno how much he’s adding. I just said 20 K ends up about 2.1 million.

So your two is probably about right. And if he’s spending a hundred thousand,

Joe: well, hold on. He’s got 1.6 in the traditional 401(k) and IRA he’s got another a hundred thousand in Roth, so that’s 1.7. It’s got a hundred in brokerage, that’s 1.8 plus 50,000 in cash, so that’s 1.85.

Al: Oh, you’re right. Okay, then let’s make it 2.3.

We will make it 2.3. So, but his distri, if he wants to take a hundred grand out with inflation, probably, it’s probably about a 5%, 5.1, 5.2% distribution rate. I’m okay with that for three years because then the Social Security comes in, I think he’ll, they’ll be just fine. But, yeah, I hate answering a question.

Can we safely withdraw money? it depends upon the market and a lot of other factors. Yeah. How are you invested in all likelihood you can. but it depends on various factors, like what the market’s doing and if you can stay within this spending limit, you retire and all of a sudden now you wanna spend more, you know, health.

All kinds of things can factor into this, but based upon just the straight numbers, I think, Joe, this is probably okay.

Joe: Yeah, no, I’m with you. I mean, let’s say if he doesn’t invest another dime and then he just keeps everything in cash, I think I’m still feel pretty good about. him taking $300,000 onto the portfolio over those three years, and then he’s 70, 40,000.

It’s still a fairly low distribution rate. Yeah, but it’s close. I mean, the, a lot of things can factor here, so, but yeah, if you would run this through a financial planning software. Monte Carlo, I mean, all of that. I think it, it would give him a pretty high probability of success, given all sorts of different ranges of returns and depending on how he’s invested.

So, yeah. Yeah. I think he’s done a great job savings. I don’t think they spend, outlandishly, they’re gonna have 60% of their living expenses covered by Social Security. They just gotta bridge that gap for three years. yeah, I would just want to look at how. You can’t be a hundred percent equities, you know, you need to start toning that portfolio down ready to create the income that you need.

So, but yeah, I’m with you Al. I think Joe Ko is okay.

Al: Joe Ko. Yep.

We’re 61 and 69 with $7.6M. Can We Increase our Retirement Spending? How Should We Do Roth Conversions? (“Harold and Maude”, Durango, CO)

Joe: So let’s, we got Harold and Maude. Oh, okay.

Al: Movie.

Andi: You know that reference, right?

Joe: No.

Al: That’s a movie from the seventies.

Andi: 1971. He’s like 20 years old. She’s 79 years old and they fall in love.

Joe: One more time.

Andi: He’s 20, she’s 79 and they fall in love.

Joe: Huh.

Andi: And he apparently is obsessed with death and she helps him to see that, you know, life is worth living. And the only reason I know about that is ’cause I went through a Cat Stevens phase where I really loved his music and he did the soundtrack for the movie.

Al: Oh, he did? Okay.

Joe: Yeah. Nope. Never. Yeah, never heard of it.

Al: Now you wanna watch it?

Joe: No.

Al: Sounds great, doesn’t it?

Joe: No I do not. It’s not gonna be on my re-watchable list. Okay.

Andi: I have a feeling that Maude’s not gonna be very happy about this. ’cause Harold is only 61. In this case of this emailer and Maude is 69. So there’s only an eight year difference between them as opposed to 60 years in the movie.

Joe: 60 years. That’s,

Al: that’s a lot, right?

Joe: That’s, yep. All right.

Al: That’s, that’d be more than ev I’ve ever heard of.

Joe: Yeah. All right. So they’re both currently retired. Okay. Currently residing in Durango. Nice. Colorado.

Al: I like You’ve been to Durango?

Joe: Nope. Never been.

Al: It’s a lovely city.

Joe: It was it by Boulder?

Al: Is it by? no, it’s by Denver. It’s by four Corners. It’s right on the southern south, southwestern edge of Colorado.

Joe: Got it. Four corners.

Al: That’s where four states. you can stand in four states with two arms and two legs. it’s quite the thing.

Joe: You got a picture of that though?

Al: Oh, yeah. Somewhere.

Andi: I do too.

Al: You just act like a spider, you know?

Joe: Got it.

Al: One, one limb in each state.

Joe: Let’s see, what is Maude drive? She drives a 2021 Lexus RX three 30. Yeah. Drinks a little Pinot Grigio and has a cocker spaniel named Joe. Joe. Okay. AKA Joe Cocker. All right, love it. Yep.

Harold drives a 2020 Schwinn median Tricycle Meridian.

Al: Meridian.

Joe: What the hell?

Al: I think that’s like a three wheel bike maybe he’s

Joe: got Alright, that’s cool. He buys his silver bullets by the 30 pack, puts them on the back of the tricycle, maybe. You got it. And has a well trained pet goldfish named Frank.

Yeah. Very trained. Yeah. Love it. I don’t know how you train a goldfish.

Al: I don’t think you do. I, we had goldfish is when I was younger. Yeah. And the only thing found the toilet faster than. They don’t last long. They do not. And what’s weird is, when the, mother wants to, has the babies, the, she starts eating them.

Joe: I’ve never had a goldfish that long to see a pregnant goldfish.

Al: There’s this little thing, plastic thing you put in the tank so the little babies can swim at the bottom and the mother can’t get ’em. It’s the weirdest thing.

Joe: Okay. Wow. Learned something.

Andi: See, I was just gonna say, not the kind thing I expect to learn from Big Al.

Joe:  Yeah. There we go.

Al: And I goldfish baby safety lesson 1 0 1. I would say. Yeah, you can’t train them as far as I know.

Joe: All right. Okay. We’d love a little spitball insight on our situation here. The numbers to assist you. Financial holdings, brokerage account about $2.8 million. Alright, now we’re talking big dollar.

Yeah. Wow. Traditional IRA account holdings four mil. Oh boy. Okay. Harold’s got two and a half Maude’s got 1.6 Roth HSA accounts totaling $800,000. Yeah. Okay. Overall, 75 25. Stock bonds split with, stock bonds split with equities consisting primary of low cost mutual funds, ETFs, bonds are, got a little treasury CDs and some bond funds.

Okay. They got a real estate primary residence in Durango, Colorado, 750,000 with no mortgage. Second residence in San Marcos, California. Oh. It’s just right up the road here from Big Bus. Yeah. Yep. I valued at 1.5 with no mortgage. Real estate holdings are our backup plan for long-term care should the need arise.

Okay. We got a few revenue streams Maude currently draws Social Security. However, these funds are reserved for grandchildren and other discretionary items not included in the family budget. Interesting. Okay, so mine’s like, this is my money. I’m gonna do what I’m with it. Don’t touch it. I’ll put it into my own account for the kids.

Andi: Yeah. I’m spoiling the grandkids.

Joe: And Harold don’t even worry about it.

Al: Yeah, don’t even think about it. Yeah, I’ve seen this before.

Joe:  I have too, actually. Yeah. Harold is projected to draw Social Security of $45,000 annually at 67 or 56 if deferred until age 70. In addition, there is an income stream from a personal loan of $50,000 a year for the next seven years acting as a bridge.

All right, annual spending. Currently annual spending is $160,000 pre-tax and projected to increase 4% annually. Currently, a GI is approximately one 30 now and for the projected near future before any Roth conversions, capital gains and possible aren’t MDs C number three, below. Legacy plans, none. Let them grind it out for themselves.

Okay. Alright. That’s

Andi: why Maude is keeping her Social Security to hand it off to the grandkids. ’cause Mo Harold’s like, no,

Al: she’s got her own plan.

Joe: Think it’s Harold or Maude? let’s see. I feel like it’s Maude writing

Al: this. I’m gonna say Maude too.

Joe: Yeah, but it’s not exactly clear. Yeah, because she kind of switches from Harold and maybe they’re both doing it.

Put it together. Maybe a joint thing. Yeah, A joint email. Yeah. okay. All right. So let me understand. They wanna spend one 60, but their EGI is one 30. The one 30 comes from $50,000 a year. Where’s the other income coming from? Because Maude is not

Al: they’ve got, brokerage accounts, 2.8 million, probably dividends, but that EGI

Joe: one 30 is

Al: including Maude’s Social Security.

Oh, sure. Yeah. But. and, the whatever interest in dividends they have and,

Joe: okay. Alright. Yeah. Sounds good. Just trying to see what they’re, how we got there. Yeah. What they’re pulling to, to take the additional dollar. Yeah. And maybe

Al: she’s taken some from the IRA, I don’t know.

Joe: Okay. Number one, we would love the insight on Roth conversion strategy since we are planning on changing of residency from Colorado 4.4 to California.

Yeah. 13% here. Sometime around 2030. Okay. These guys are planners. Yeah. Given the difference in state tax, both in, exclude Social Security income, we believe we need to accelerate our conversions in the next five years. But by how much to the top of the 32% tax bracket? 35 higher. Also, what percent of us, our total IRA bucket, should we aim to convert?

75%, 80, 90%.

Al: Pretty good goal if you

Joe: get there. Yeah. That’s aggressive. Super aggressive. All right. We would like to also increase our annual spending to fund family vacation, tuition assistance, travel and gifts. Yeah. You really want them to grind it out? let’s all go. We’re gonna,

Al: we’re gonna spend it on you while we’re live and then there’s nothing left.

Joe: Yeah. Perfect. we believe there is headroom versus our current pre-tax budget of 160. How much headroom, Should we do Roth conversion from Maude’s IRA first, given the age differential, or reduce the postpone or RMDs while optimizing Roth conversions? If so, to what extent? Cheers. Thanks advance for the spitball and as well as the education entertainment. Have a great day. Cool.

Al: Oh, Okay. let’s, why don’t we tackle the first one. So they’re moving from. Colorado, which is a lower tax state than California. 13.3 is the highest rate in California. But if you, they won’t

Joe: touch that. No.

Al: See, here’s the thing. If your income is under 500,000, 9.3 is really the number, right?

So that’s kind of what you look at. So 9.3 to 4.4. So what’s that? That’s a 5% differential. Would I convert into the 32 to save 5% on state tax? No.

Joe: Yep.

Al: I would just stick to the 24.

Joe: I would agree with you a hundred percent.

Al: Yep.

Joe: So yeah, I would just convert to the top of the 24% tax bracket in whatever that You get out.

You get out.

Al: Yeah. Yeah, exactly. I, wouldn’t even look at a goal. Just do as much as you can.

Joe: Yep.

Al: Yeah.

Joe: it’s probably gonna be less than you want, but you got $4 million in tax deferred accounts, right? So there’s 62 in 69, 61, and 69. You start converting Maude’s. Because she’s gonna hit her RMD first.

Al: Yeah.

She’ll be, she’s got 1.6 million. Yeah. She, hers will be at 73, so that’s four years. his will be at 65, which is 1475. 14 years. He’s got 14 years. Yeah. 75, I mean. Yep.

Joe: Yep. So Maude, convert yours to the top of the 24, the 1.6 as much as you can get out there. Yep. He’s got 14 years for his.

Al: Yeah. Yeah. So that’s, kind of an easy one.

Joe: Yep.

Al: Then, yeah.

Joe: How much headroom

Al: do they have? You, can spend, just take your liquid assets. 7.6 million times 4%. Just a rough number. That’s about 300,000. So

Joe: I would say they could spend, because they have Social Security and everything else, I don’t know what. 308

Al: 70 could spend more thousand dollars.

His won’t kick in until later. So, you know, if you wanna be safe, two 50, but I’d be pretty comfortable with 300,000.

Joe: Yeah. Three 50.

Al: 300. Yeah. Yeah.

Joe: you’re at one 60, so you could double the amount of spending. About double. Yeah. And maybe they don’t, you know, they’re gonna go on the family trips, they’re gonna do this, they’re gonna do that.

You know, maybe you do that every couple of years. Yes. Not every year. You down the one 60 and then one year you do a big family trip. Go to Disney World. Or what’s it that you wanna do? Yeah. so yeah, it’s nothing too extravagant. Roth conversion. Don’t worry about the tax rates because you’re already in the 24 to go to the 32.

Al: Yeah, that’s an 8% increase. And you’re probably only gonna be in a 5% increase bracket in California. You’re gonna pay

Joe: way more tax there. yeah.

Al: I don’t do that.

Joe: Yep. 24% tax bracket you can spend. 300 plus. Yeah. Depends. Yeah, I don’t know. I think they’re, doing awesome. You’re doing great. Yep.

And that’s, I think that’s all we got for Harold and Maude. Appreciate everyone listening once again. Yeah. Great show. Good job, Jay. Yeah. Great job. Great job. Andi, how was your birthday? Thank

Andi: you very much. It was awesome. Had a great time. Thank you.

Joe: What did you do?

Andi: I went to the Adelaide Botanic Garden and I saw where all the bats in Adelaide roost. 50,000 bats. It was amazing. That’s my kind of day.

Joe: Are you speaking English? Bat Adelaide? What? What, are you talking where,

Andi: You know what bats are, right?

Joe: Oh, bat like bats. An animal.

Andi: Like the bats? Yes. That fly?

Joe: Yes. Okay.

Al: Flying rodents.

Andi: There’s a camp of 50,000 bats that lives in Adelaide, in the Adelaide Botanic Garden.

Joe: Adelaide.

Andi: Every sunset-

Joe: Adelaide?

Andi: Yeah. I live in the city of Adelaide.

Joe: Okay.

Andi: So yes, at the Botanic Garden here in Adelaide, the bats roost in the trees out in the park and at sunset every night. They all take off at the same time and it’s just an amazing natural spectacle.

Joe: Wow.

Andi: Probably right up your alley, Joe.

Joe: I think you’re getting an accent.

Andi: Might be.

Joe: Yeah, the batelaide and the (gibberish) beautiful.

Al: And you got such a good accent.

Joe: Okay. I’m gonna, I’m gonna, yeah. Books on tape. Gonna read audible in my, Australian accent.

Andi: Too right, mate.

Al: You better start practicing

Joe: a Let’s go. Alright, I’ll see you next week. Show’s called Your Money, Your Wealth.

Andi: If all this talk about guardrails, and market volatility, and tax brackets makes you feel like you’re drowning in a sea of uncertainty, you’re not alone. Retirement isn’t a “set it and forget it” destination; it’s a journey that you have to navigate, with proactive planning to keep you on course. This week on YMYW TV, Joe and Big Al show you how to grab the ship’s wheel and navigate the risks to keep your retirement plan afloat. Watch How to Cruise Into Your Retirement and download the free companion Cruising Into Retirement Checklist and Guide. This guide is only available for a limited time, so get yours before this Friday. Click the links in the episode description now to watch, and to download the checklist before this offer sails off into the sunset.

Outro: Next Week on the YMYW Podcast

Andi: Next week, Joe and Big Al spitball on:
– the timing for converting pre-tax money to Roth for tax-free gains for life for Barrie in New York, “Jerry and Elaine”, and Alex in Pennsylvania
– clarifying the age plus 20 rule for contributions, and
– Roth 401(k) rules for Lisa in San Diego.

Thanks so much for being a part of the Your Money, Your Wealth family! If you’d like to lend a hand, just spread the word: tell a friend or a family member about the show. Or that guy walking the opposite direction when you listen while you’re walking your dog. More listeners and viewers means more fun for everyone. Subscribe to us on YouTube to see us in all our glory (and goofiness), and join us in the conversation in the comments. Or leave your honest ratings and reviews on Apple Podcasts and other platforms that accept them. Those are a huge deal in helping the show get noticed, which means these fellas can keep delivering the financial wisdom and barstool chatter that you love.

Your Money, Your Wealth is presented by Pure Financial Advisors. Listening to or watching YMYW is a great way to stay up to date on financial strategies, and a spitball from Joe and Big Al is great to get a general idea if you’re on the right path, but let’s be real. It’s not enough. You’ve worked hard for your wealth, and you deserve a plan that’s as unique and sophisticated as your portfolio. The experienced pros at Pure Financial Advisors can help you with complex tax planning, generational wealth transfer, and investment strategies that go way beyond what you can learn on the podcast. It’s about moving from general knowledge to specific, actionable steps, designed to secure your future. And it’s super-convenient to meet with the Pure team face-to-face at one of our 13 nationwide offices, or from the comfort of your own home via Zoom. Don’t wait. Click or tap the free assessment link in the episode description or call 888-994-6257 to schedule your one-on-one financial assessment. Tell ’em you heard it on the Your Money, Your Wealth podcast.

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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