Show Notes

• 00:00 – Intro: This Week on the YMYW Podcast
• 01:07 – 62 and 64 with About $1M. Can I Retire at 65? Should Hubby Claim Social Security Early? (Bijou Plutus, MA)
• 11:52 – Can We Retire in Our 50s With Pensions and High Spending? (Dr. Jekyll & Mrs. Hyde, Twin Cities, MN)
• 29:53 – Social Security Break-Even at 77. Claim Early and Work Recreationally? (Diggler & Rollergirl, 57 & 58, Tennessee)
• 42:52 – Outro: Next Week on the YMYY 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: Joe and Big Al focus on Social Security claiming strategies as part of the retirement spitballs, today on Your Money, Your Wealth® podcast number 574. Bijou Plutus and her husband in Massachusetts are 62 and 64 with about a million dollars. Can she retire at 65, and should he claim Social Security early? Dr. Jekyll and Mrs. Hyde in the Twin Cities have about the same at 51 and 49, plus big pensions and high spending. Can they afford to retire early, and when should they claim Social Security? Diggler and Roller Girl in Tennessee are 57 and 58 with about $600K, and Diggler estimates his Social Security break-even is at age 77. Can he collect Social Security early and simply work recreationally? If you’re listening in Apple Podcasts right now, do us a favor and leave your honest rating and a review. If you’re listening on Amazon, Audible, Castbox, Goodpods, Pandora, PlayerFM, Podcast Addict, or Podchaser, you can rate us there too! It helps a lot when you do. I’m Executive Producer Andi Last, and here are the hosts of Your Money, Your Wealth®, Joe Anderson, CFP® and Big Al Clopine, CPA.

62 and 64 with About $1M. Can I Retire at 65? Should Hubby Claim Social Security Early? (Bijou Plutus, MA)

Joe: Hello, Joe, Big Al, and Andi, love your information and entertaining podcast. I know this sounds geeky, but I get a spark of joy when your money or wealth drops into my podcast queue each Tuesday.

Wow, geeky. That doesn’t sound

Andi: I do too. It means that something’s working.

Joe: Sounds lovely.

Al: Right.

Joe: All right. Hey, I wanted to re, request a spitball for some time, but have been embarrassed by buying modest numbers compared to most of your listeners. But here it goes. Oh, don’t worry about it.

Al: Yeah, don’t worry about it at all.

Andi: That’s, and this is from Bijou Plutus in Massachusetts and so I had to look that one up. Apparently it’s a type of pillow, but also Bijou is French for Jewel, and Plutus is the Greek God of wealth. So this is the jewel of wealth that has written into us.

Al: Okay.

Joe: But it’s also a pillow.

Andi: Yeah.

Al: Apparently. It could be a pillow.

It could be a pillow that wrote in.

Joe: Got it. Okay.

Al: I think Andi’s second description’s probably.

Joe: Got it. The latter. The latter. I’m 62 and I’ve worked for the same nonprofit for 30 years. Current salary is 87,000. My husband, age 64, retired a year ago. He has a $20,000 annual pension with a cola.

It does some part-time work that brings in about $50,000. He doesn’t plan to, he doesn’t plan to this side gig. okay. Hold on.

Andi: Turn this into a side gig. I think there might be some words missing there.

Joe: He doesn’t plan to turn this into a side gig, but might scale back as the years progress.

Al: Yeah, that, that sounds good.

Joe: All right. Husband, Social Security at 67, will be $25,000. Mine will be 31,000. Thank you for giving us the annual number there too, by the way. Yes. We appreciate that. Pillow.

Al: Pillow for short.

Joe: Yeah. alright. My 403(b) 4% with 4% match is $580,000. my husband’s self-employed 401(k), just started to contribute $24,000 a year, so that only has a thousand dollars in it.

Combined Roth IRAs are $260,000, always maxing out. High yield savings account is in some I bonds, and an emergency fund is 70,000. Got no brokerage account. We own our home outright worth about 500,000, no consumer debt and always try to live within our means. We seem to spend an average of about $84,000 a year.

I’m planning to retire at 65, mainly hanging on for the health insurance. If I could afford to pay for health insurance on my own, I might retire and scale back at around 63, but I can’t figure out. What those costs will be. I also wonder what impact would be retiring two years early. and do I have enough in my 403(b) in the other accounts?

Is my plan to retire at 65 even feasible, or should I hang on even longer? Would starting hubby’s Social Security early? Makes sense. Okay. Some good questions here.

Al: Great questions. Yep.

Joe: Yeah, I can already tell I think, they’re not bad. They’re not.

Al: Yeah. I’ve done some analysis in which I’ll get to in a minute.

Joe: Alright. Okay. I drive a 2021 Subaru Forester. Where are they from? Seattle. Oh no. Massachusetts.

Andi: Massachusetts.

Joe: All right. And my husband, drives a 2023 Toyota Highlander. He likes any type of light beer, as long as it’s cold, and I like an occasional glass of wine. We only have one kid fully launched in one.

Geriatric cat. Oh, killed that one. you nailed it nicely. Did. Was gonna hit it.

Al: I was thinking try even get ready to pronounce it.

Joe: Geriatric. Got it. thanks for any insights you might be able to share. Respectably yours? Bayou Plutus in Massachusetts.

Al: Yeah. I thought you were gonna say gerrick.

Joe: Oh, man.

Yeah. I looked at it and I was like, oh boy.

Al: Oh wait.

Joe: It could be tricky. It’d be done. Alright. So you, she want, they, wanna live off of $84,000 a year.

Al: Yep.

Joe: they’re 62. he’s 64. she would like to work until full retirement age or at least until Medicare comes in because she can’t figure out how to pay for that health insurance.

So 84,000 plus health insurance?

Al: Yeah,

Joe: probably close to a hundred grand if she wanted to, hang it up today.

Al: Yeah, probably so.

Joe: Alright. Yep. So let’s say you Big Al.

Al: Well, first of all, I would say, please don’t be embarrassed. These are great numbers.

Joe: Huge

Al: and I

Joe: million bucks looking assets.

It’s

Al: a million bucks a liquid, half a million in a, in home ownership. So here’s what I did. I took 961,000. That’s what they got currently. I went forward three years, 6%. I added about 48,000 a year based upon what they’re saving. And, I end up with 1.3 million. Then I look at the spend. 84,000, 3% inflation, three years.

It’s about 92,000. Subtract out fixed income, which is pension. Husband’s Social Security. I think husband should take it. A full retirement age, that’s 44,000. Shortfall is 48,000. And then the distribution rate Joe, at 65 is 3.7. That I, to me, that looks fantastic.

Joe: Yeah. That’s without her Social Security.

Al: That’s without her Social Security. Yes.

Joe: That’s just with his,

Al: so, and I didn’t run it. ’cause you can only run so many scenarios on a podcast, but, my guess is that they could probably retire a little bit earlier too.

Joe: Because you gotta just bridge the gap and you have a little bit higher, you know, burn rate in the beginning, but you’ll make up for it at the end because of the dual Social Security coming in.

Al: Yeah.

Joe: Plus the pension.

Al: I, I think if it were me, I’d probably work to 65 Joe, and then I would probably have my husband take Social Security at 67. He’s a couple years older. so simultaneous, so it doesn’t feel like there’s too much drain on the, account, then I would wait. I’d have her wait until full retirement age because it’s a bigger benefit.

And then you’re gonna be sitting pretty, I think,

Joe: yeah, right off the bat here, they can take around $40,000 outta the portfolio if they retire tomorrow.

Al: Yeah.

Joe: So $40,000, he’s gonna work his side gig for a little bit more. Yeah. So if he’s making $50,000 plus the pension, that’s 70 plus 40.

Al: I and I’m gonna say this, maybe work the side gig and tell Social Security

Joe: right.

Al: Then stop.

Joe: Yeah, exactly. That’s gonna cover any type of major shortfall, the larger burn rate from the portfolio.

Al: Correct.

Joe: As long as he doesn’t mind working the part-time work, you know? yeah. And then if she wants to, to hanging up earlier.

Al: Yeah.

Joe: I don’t know, can she get a side gig that pays 20 grand a year?

Al: You know, the, yeah. I, think the. The prognosis is really good depending upon, I mean, if you wanna work till 65, great. But you may not have to, but 65, it looks fantastic.

Joe: they are, I like how they’re diversified too from a tax free and a taxable perspective. 600,000 or six 50 roughly in, you know, pre-tax accounts, two 50 and a tax free.

Al: Yeah.

Joe: You know, from a percentage perspective, 25% of their liquid assets are in a Roth.

Al: Mm-hmm.

Joe: so that’s a pretty high percentage given a good,

Al: it’s a really good percentage,

Joe: you know.

Andi: So do you think they should put something in brokerage?

Joe: No, I don’t think they need to. I would put more money into the Roth if I was gonna do anything.

Al: Me, me too.

Joe: Or I would do conversions, you know, to get maybe a little bit more money into the Roth. So right now, what is her, she makes 87,000 plus. The 50 plus. so what do you think?

Al: Yeah, yeah. Well, she’s 401(k), she puts in 4%. So that’s about. Almost 4,000 and the match is about 4,000. He puts in 24,000 a year.

and he could do a Roth option on the, on the, 4 0 1, his personal 401(k).

Joe: Yep.

Al: Self-employed and then court.

Joe: Would you go pre-tax or would you go Roth?

Al: I go Roth.

Joe: I would too.

Al: Yeah. Why not? Because make it even better.

Joe: Mm-hmm. Yeah. So I would change his 401(k) contribution to the a solo Roth 401(k).

Al: Yeah. Especially Joe, because he retired, a few years ago and they’re in a lower income bracket. So yeah, I’d go Roth.

Joe: Yep. Yeah, that 50,000, they’re sheltering 24, 50 plus 90 is one 30 minus the standard deduction is a hundred thousand dollars, not including contributions. So most of the contribution’s gonna be in the 12% tax bracket.

Al: I know. So why wouldn’t you?

Joe: Yeah. Why wouldn’t you?

Yeah, for sure. So yeah, switch contributions to Roth. Keep growing that and if, if they would like to hang it, I mean, I think they, they can make work optional at this point.

Al: Yeah,

Joe: it’s a little tight, but I think they’re doing things appropriately by him having the side gig and if she wants to do a little bit, could maybe do a little side gig.

Al: I, I think, you know, most conservative you work to 65, but I agree with Joe. You don’t necessarily have to.

Joe: Yeah. So, and you know, tribes, you get a little nuts at the old office.

Al: Guess what, and you know, your husband retired and you want to, so maybe you should think about that earlier. And

Joe: Yeah.

Al: And there’s all kinds of insurance options, right?

Joe: So don’t, just knowing that sometimes it’s like, probably work would, is, you know, hey, at any moment I can just walk out the door and say Go pound sand.

Al: Yeah. Yeah. And, maybe you work till. 63 or 63 and a half and get two years or 18 months of Cobra, whatever it is right now. Yep.

Andi: So should you claim Social Security early, at full retirement age, or wait until age 70? The difference can mean thousands of dollars more in retirement income every year, or a permanent reduction you can never undo. And that decision does not exist in a vacuum: it has to fit your taxes, your spouse’s benefits, your longevity, and your overall retirement plan. Before you make one of the most consequential financial decisions of your life, make sure you understand all of your options. Download the Social Security Handbook. If you’re new to YMYW, this is one of the core resources you’ll want to grab immediately. You’ll learn who qualifies and how benefits are calculated, the real cost of claiming early versus the real upside of waiting, how working while collecting affects your check, spousal, ex-spousal, and survivor benefit strategies — including the 2025 changes that eliminated the WEP and GPO for those of you with pensions — and exactly how your Social Security income gets taxed. Click or tap the Social Security Handbook link in the description of today’s episode to download your free copy, courtesy of Your Money, Your Wealth and Pure Financial Advisors. When you download it choose “Podcast” in the “how did you hear about us” dropdown.

Can We Retire in Our 50s With Pensions and High Spending? (Dr. Jekyll & Mrs. Hyde, Twin Cities, MN)

Joe: Okay. let’s go to Dr. Jekyll, Mrs. Hyde. They’re in the Twin Cities. Oh, my hometown. Yeah. Good afternoon. good afternoon, YMYW team and happy Halloween.

Al: We’re on top of that.

Joe: Little bit behind here. I look forward to your show every week. I travel for work a few days, most weeks, and listen to your show in a car or while working from the home at the kitchen table.

Al: So he’s been listening every week for his question.

Joe: Just waiting, I guarantee you stop listening

Al: because that’s too long. yeah.

Joe: Yeah. we’re about four, four months late here. I would love a retirements football analysis for my wife and I. I enjoy sampling local beers while traveling for work, but before Col Coors line at home with my bros.

Al: Okay.

Joe: Alright. Coors latte with bro,

Al: sounds like you.

Joe: Yeah. Yeah. I’m probably one of his bros.

Andi: Probably down in the basement or in the garage.

Joe: Let’s go. Guaranteed. He’s got a, he’s, got a fridge in the garage. Garage fridge. Almost guaranteed.

Al: Yeah. Or maybe in the basement.

Joe: Did you get a garage fridge yet?

Al: No. I can fit it in the refrigerator.

Joe: I’m telling you, the garage fridge is where it’s at.

Al: That’s where it’s happening, huh?

Joe: Yep.

Al: All I’ll think about it.

Joe: That’s where all the beer goes.

Al: As soon as I move, I go through 20 boxes from my parents. I still gotta go through, which I’m gonna be adding to here shortly.

Joe: Got it. all right. Mrs. Hyde enjoys a cold Pinal grigio. I drive a company vehicle total, Toyota Camry, and the wife drives a 2012 Honda minivan for now, but will downsize most likely in the coming year, so we get it paid off before any thought of retirement. I work in the insurance industry and the wife is a teacher in the Twin Cities. Minnesota.

Al: Yeah. Yes. Twin Cities.

Joe: Yeah. It’s Minneapolis, St. Paul.

Al: Even I know that I’m not from there.

Joe: Yeah. That’s why the Minnesota twins are the Minnesota twins.

Al: Yeah.

Joe: Twin cities.

Al: Yeah. But that’s right.

Joe: Just in case you wanted to know that.

Al: Okay, well that’s helpful.

Joe: Alright. Thank you. Married 26 years, three awesome kids. Two launched and one finishing college tech school. Me. 51 years old. Salary and bonus of approximately $150 per $150,000 per year in growing 3% 401(k) match saving $23,000 plus match will, will add up to about $30,000 plus the match in 2026 and beyond $5,000 in HSA and will max it out each year until I retire.

I almost 28 years with my employer. Awesome company and fantastic coworkers. Very fulfilling career, but a lot of work stress. In retirement, I have access to health insurance of $600 a month through my employer. As of October 25, I have $800,000 in my 401(k). 2% of that is in Roth. I also have $1,500 in a Roth IRA for fun. I open up a brokerage account this year and have about $2,600 in stocks. Robotic quantum ai. Quantum ai.

Al: Oh yeah. Okay. Cutting edge.

Joe: But we’ll, switch to Maxi now back to Roth, $8,000 each instead, and throw some fun money at the brokerage in BTI or similar after the Roth and 401(k) are filled out. Wife turns 50 soon, her salary’s $115,000. She’s saving $5,000 a year to her four, three P for now, and then contributing seven or to 8% in her pension, hoping after one of our kids wedding hoping. After one of the kids’ wedding next year, she will increase that contribution. She has about $125,000 in her 403(b). She receives a small match of 20 cents up to 3%. If she retires at 55, her pension would be about $22,000 annually with a 1% cola starting at 65, or she works until 60. It’d be approximately $60,000 annually at retirement, plus a 1% cola starting at 65. She has a VEBA account.

Al: What is that?

Joe: I, God I know what that is.

Andi: Voluntary Employees Beneficiary Association Plan for medical expenses.

Al: Oh, yeah. Andi wrote that in the notes for us now. I see.

Joe: Yeah, so I guess

Andi: it’s like an HSA,

Joe: yeah.

Al: Yep. Yep, you’re

Joe: Yep. Yep, yep, odd. I haven’t seen those in years.

They’re not very common anymore.

Al: No, that’s, I’ve never heard of it.

Joe: School district,

Al: so maybe it’s something that they do. Sure, yeah.

Joe: yeah, instead of like an FSA, they probably,

Al: yeah. Yeah.

Joe: So approximately $25,000 and we’ll grow 2000, and grow 2000 each year until she retires. Okay. Good. Alright. Social Security looks like approximately $3,500 a month. Speech starting at 67. Should one of us take this early or wait till 70? The plan is for her to work as long as she can, but at least 55. Then do something else part-time. She’s a saint. This guy’s very nice. He loves everyone. He loves his coworkers, he loves his work, his wife, he’s got a perfect life. He does, but it’s stressful.

Andi: Yeah. Sounds like you.

Al: What? It’s,

Andi: wow. You wrote in Joe.

Joe: He’s my bro. We have some Coors lattes together in the Twin Cities,

Al: right?

Joe: She’s a saint and overworked, but I’m so proud of her and her career. Oh my God. This is like a. Love novel.

Andi: It’s a love letter.

Joe: Yes, it is. I’m sure she’s gotten her wings to heaven five times over already.

Andi: Wow.

Joe: Oh boy.

Andi: What is he buttering her up for?

Joe: Holy.

Al: He’s gonna, he’s gonna have her listen to this podcast. I guarantee it.

Joe: He get the rule of 60 30. Even if that means she works part-time, a few years at the end of her career, I’m 95% sure 60 is the route she’ll go in this bank’s retirement. Much more attainable.

Al: Okay.

Joe: Okay, I have a rule of 85 and a lump sum or annuity option if I retire at 56.5 if I can. Monthly pension option is gonna be a $6,000 a month, if not a bit more. A coworker who is 56 said his lump sum option is currently $1.3 million with a very similar salary in progression. Salary scale’s, knee. Both options are usually estimated 10% or so low I’ve heard, and of course based on interest rate, salary, and years of service, et cetera. So we’ll see where I end up. I’d get the lump sum at retirement most likely, but I’d invest it until age 59 and a half at least. I don’t wanna retire from work, but retire to something. I already have a few others when I retire. A few offers when I retire.

Al: okay.

Joe: It’s gonna do a little part-time work, maybe $40,000 a year until I don’t want to anymore. Maybe around 60 or 62. I’m not opposed to working a bit more if needed. just would like the freedom. Houses worth $600,000. We owe 210,000 with a 3.4% mortgage. Maybe have an inheritance of 300,000 in 10 years or so. But I don’t even plan on it. you’re planning on it if you wrote it down. I’m just saying.

Al: I think he is.

Joe: I guaranteed or else it wouldn’t even be in the letter. His love letter. But I love my parents so much. Yeah. They’re the best people ever. I hope they live 50 years.

Al: I never wanna see it.

Joe: I’m going, I’m gonna give it to my dad’s favorite charity. So no, he didn’t say that. He says this, we love to travel. We love Florida. And two trips to Maui in the last two years. Oh yeah. Big Al, that’s your nick.

Al: That is,

Joe: it will continue to do so until retirement. We love taking our kids and their significant others on the trip even, every few years as well. Heading to Marco Island with them this winter. Okay. Marco Island, that’s what Florida.

Andi: It’s off the west coast of Florida.

Joe: Yeah. Yep.

Andi: Beaches. When I look at the, when I do the Google search, it’s just pictures of beaches. That’s it.

Joe: Yeah. I heard Mark Wallace’s pretty cool. I was. you been?

Al: No, I’ve never been. I was going to go, but you know about it.

Joe: I do know about it. I do know about it when I lived there.

Al: Right.

Joe: but I never made it there. In retirement, we’d like to have $200,000 per year adjusted for inflation. Wow. That’s a health, healthy, income. If we’re a bit light on, on that until my wife retires at 60 and I’m part-time, that’s okay. We want the ability to travel, buy a car if needed, not get too worried about a few Amazon packages showing up. Just enjoying life and make work something that isn’t required after the age of 60, but it’s fun. Also, Minnesota is a higher tax state. Do I go pre-tax or Roth and what percentage do you think or wait and do Roth conversions with my part-time income and work in a little more post-retirement or maybe you, or maybe use interest income from inheritance for conversions.

Al: Ooh, okay. So he is got the inheritance in there.

Joe: Yeah. Twice. But it’s not accepted.

Andi: So from so much for not planning for it.

Joe: Yes.

Al: Yep.

Joe: Is this a good idea to throw more money into a brokerage account as a bridge until 59 and a half? Appreciate this football. Joe, if you’re in town, look me up and I’ll buy you a cold Coors Light.

Alright, thanks Dr. Jekyll. Mr. Hyde.

Andi: Mrs. Hyde.

Joe: Mrs. Hyde. Yeah. I’ll look you up. A couple Coors Lights Go Garage.

Andi: Can made say of his wife and his wonderful coworkers and his lovely parents.

Joe: Yeah, just, wow, I can’t believe you Don have. Heaven wings, angel wings, time’s over,

Al: you know, or, Dr. Jekyll could come to Hawaii.

We’ll get together, have a Coors latte, and, we’ll talk about how much we love our wives.

Joe: Yeah, that would be wonderful. You guys. Tell me all about it.

Al: I’ll, patch you in via Zoom.

Joe: Okay. Perfect.

Al: So you can contribute.

Joe: Yes. alright, so there’s a lot here. they got some pensions, they got monies, they wanna retire early, they wanna have a lot of fun.

They don’t.

Al: yeah. So let me set the baseline and then we can go from there.

Joe: Okay.

Al: So, they got about 900,000 right now and I just said. Five years, they’re saving about 50,000 into savings, 6% interest puts them at 1.5 million. Okay? And they wanna spend 200,000, Joe, and that with inflation, 3% gets to 232,000. So we gotta spend a 2 32. But we got pensions, of let’s see. We’ve got his pension at 72,000 and we’ve got. 72,000 wife’s salary would be about 133,000 at that point. So including her salary shortfall, 27,000, distribution rate 1.8%. And if he works, they’re actually saving. Now, I, didn’t do an a secondary analysis Joe, and the reason I didn’t is because there’s so many variables here. I think you recalculate in five years and see does my wife need to continue to work or so can she work part-time and see if this still works.

Joe: But I get it, now I understand what he’s doing here. It’s like, oh, my honey p should retire at 55.

Al: Oh, I get where you’re going.

Joe: And he’s got, she’s got the, angel rings, but I think she’s gonna work till 60.

Al: Yeah. 90% sure.

Joe: Yeah. No, but 98% share. She’s gonna work until 60.

Al: And I think,

Joe: and I’m not expecting this inheritance, but should I use it for

Al: Yeah.

Joe: Roth conversions.

Al: And I, do think if that happens, Joe, I think it looks really good.

Joe: Yeah. Yeah.

Al: I think you could recalculate.

Joe: I think, but he wants to take the lump sum, right? So let’s say he takes the lump sum at 1.3 of 55. He’s gonna work another five years. That 900,000 you said turns the 1.3. So that’s $2.6 million liquid assets that he has at age 55.

Al: Right.

Joe: So you take away that pension of 70,000. He’s got 2.6 million, let’s call it, you know? Yeah. He could probably spend maybe a hundred.

Al: Maybe a hundred. Yeah,

Joe: maybe a hundred mething, 3%.

Al: Yeah.

Joe: That, that can come outta the portfolio plus her income until they’re 60.

Al: And that’s not necessarily a bad strategy too.

Joe: So either way, I mean, I think you would wanna do a little bit more analysis. You get closer to take the lump sum or the pension.

Al: I, I think all of this needs to be reanalyze it in five years to see where they’re at.

Joe: Right.

Al: And of course, it depends upon the market too, Joe. We’ll have to, you know, no one knows.

Joe: Totally. Totally.

Andi: They’re their Social Security strategy.

Al: Social Security is way too early.

Joe: Again, you re it’s 50,

Al: you re

Joe: 51,

Al: you recalculate.

Joe: What’s your security strategy.

Andi: My, my plan is to take it as late as possible when that’ll be, we’ll see.

Al: Yeah. Yeah. You re you recalculate maybe in your sixties, you know? and see, excuse me. See where you’re at. I think, but as far as, contributions, they should be all Roth at this point got, 900,000 a tax deferred and almost nothing in a Roth.

Joe: Nothing Roth. And they’re gonna have a ton of fixed income that’s tax at ordinary income.

Al: Yeah. And I, know they’re in a higher tax bracket now with his job, but that’s still what I would do. Just for a little more balance, I think.

Joe: What are they about 200,000 minus their contributions? Minus the standard deduction.

They’re probably in the 22% tax bracket,

Al: probably. Yep. Yep.

Joe: Now two, some of it might be in the 24,

Al: but now you could Joe make an argument to go pre pre-tax and then do conversions after when you’re in a low bracket. So I wouldn’t be upset with that, but I would probably switch to Roth just because of the, it’s not balanced.

Joe: Yeah. So going through his questions, do I go pre-tax or Roth 401(k). So go Roth, a hundred percent Roth. Do I wait to do conversions? Yes. Do conversions as well? but you can’t do conversions with my part-time income. You can help pay the tax on the conversions with your part-time income. Mm-hmm. So a Roth conversion.

When you’re taking dollars from your retirement account and converting it into a Roth IRA, you will have to pay the tax on that. So it’s not, or you can make a, contribution with your part-time income, so you can convert as much as you want, whatever that dollar figure is. But a convert or a contribution is gonna be limited to how much money that you make is income.

Or what the contribution limits are when you are, part-time.

Al: Yeah, and I would say this, he’s got 800,000 in his 401(k). He’ll be retiring after 55, so that’s where you get your extra income needed. Is right from the 401(k). ’cause at 55 you can, if as long as you work until at least 55 and then retire with a 401(k), as long as it stays in the 401(k), you actually can pull money out without penalty.

it’s a different rule than an IRA.

Joe: Yeah. And then I think he’s confused on another thing. It’s like, maybe use the interest earned from my inheritance for conversions. So the inheritance is gonna be in a brokerage account that’s in a non-qualified account. It’s not in a retirement account, so that cannot be converted into a Roth. Only retirement accounts can convert to a Roth IRA. Why you wouldn’t want to do that is the Roth IRA grows 100% tax free. So the interest that you’re going to receive about the inheritance that you don’t plan on spending, but you mention a few times in this overall email, yeah. Is gonna be tax at ordinary income rates.

If it’s interest or if it’s capital gains, it’ll be taxed at that rate. You can take those dollars and use them to make a contribution into Roth IRAs as long as you have earned income. so if you, if he’s planning on working part-time or the wife is gonna continue to work at the school district, I mean, you’re good to go there.

Or you use some of those dollars to pay for the taxes again, you know, on the conversion.

Al: to me that would be, you would do that. That’s most important to, to pay the taxes on conversions with after tax dollars and then to be able to have extra money when you wanna do things like vacations or whatever.

Joe: Yep, yep,

Al: So I like that. Although that may not happen for 20 years.

Joe: Well, you know, then it’s like, is it a good idea to throw more money into a brokerage or bridge? I don’t, think that you need a bridge until 59 and a half. As long as you work until 55. Yeah. ’cause like you said, it’s the rule of 55.

You can take the money outta the 401(k) plan. Yeah. And there is no 10% penalty, so there’s no bridge that you would’ve to worry about as long as you do work until 55.

Al: Exactly. So I wouldn’t, yeah, I wouldn’t worry about that. The rule of 55 will be important in this particular case, but there’s so many different scenarios then, you just wanna rerun this in five years when you retire, and then,

Joe: yeah, you gotta rerun this all the time

Al: and then re rent it.

60 when she wants to retire or, if she wants to retire earlier than that, rerun it and see how it looks. So that’s, there’s a lot here, but it’s looking pretty good.

Joe: Very good. Okay, well, I’ll look you up next time. I’m in the Twin Cities and at that, take you up on that Coors Light

Al: and let me know when you’re in Hawaii again.

Joe: Alright.

Andi: To see how to turn your savings into income – and maybe pay zero tax while doing it – you need to watch this week’s Your Money, Your Wealth® TV called “How To Retire Tax-Free With A Smart Income Plan.” Joe and Big Al show you real examples of how couples can make $100,000 a year in retirement and pay zero in taxes by managing where that income comes from. They’ll show you how to balance withdrawals from your IRA, Roth, and brokerage accounts, and how strategies like Roth conversions, the home sale exclusion, and qualified charitable distributions help you keep more of what is yours. And download our brand-new companion Tax-Free Retirement Guide: it walks you through the tax brackets, capital gains thresholds, and proven moves that can help you build a retirement income plan with little to no tax bill. Click or tap the links in the episode description to watch “How To Retire Tax-Free With A Smart Income Plan” on YMYW TV and to download your free Tax-Free Retirement Guide. Tell a friend.

Social Security Break-Even at 77. Claim Early and Work Recreationally? (Diggler & Rollergirl, 57 & 58, Tennessee)

Joe: Alright, let’s, we’re moving on. Howdy from Diggler in Roller Girl. Well, Dick Dick Diggler,

Andi: Dirk Diggler, from the movie Boogie Nights?

Joe: yes.

Andi: Mark Wahlberg and Heather Graham.

Joe: Yep.

Al: Okay. Yeah.

Joe: Did you like that movie?

Andi: I never saw it.

Joe: You’ve never seen Boogie Nights?

Andi: No.

Al: Even I’ve seen that.

Andi: What did you think of it, Al?

Al: It was a little odd, but it was enter entertaining.

Joe: Okay. yeah, it, I, don’t know where I stand on Boogie Nights. I don’t know.

Al: It was, different. Do you remember that?

Joe: Yeah. I mean, it was like, there’s a lot of drugs and of course there’s a lot of sex and

Andi: Yeah, I read the little recap and basically the guy becomes a porn star and then he gets derailed by his drug addiction.

Joe: Yeah,

Al: something like that.

Andi: Sounds like a whole lot of fun.

Very uplifting movie.

Al: I think. I remember Roller Girl being. Kind of distinctive.

Joe: Yeah.

Al: In her, outfit.

Joe: Yeah. She’s attractive. a lot of really good actors, very good director. so there, there was parts of it. It was, you know, well written.

Al: Mm-hmm.

Joe: It was from that aspect of it, but I don’t know.

It’s not,

you

wouldn’t like it.

Again, I’m not a, I couldn’t that’s not a big,

Andi: not enough violence.

Al: Yeah.

Joe: No, I don’t like the drug movies. I love the violent movies. Like, you know, you see people all coked out and stuff. It just makes me nervous.

Al: Yeah.

Joe: It’s like this’ll be ign anxiety.

Al: Well, and I wouldn’t watch it either for probably the same reason.

Joe: Well, okay. I’m surprised you’ve seen this movie.

Al: I know. it’s

Joe: shocking. It is shocking. It is. it’s not a Hallmark movie. I guess.

Al: I wasn’t watching a Hallmark movie that night.

Joe: Yeah. Okay. My drink of choice is gin and tonic. Roller girl loves a dirty martini. I drive a Ford Bronco soft top, and she’s got a GLE three 50.

I’m planning on retiring at, next year at the age of 58. I’ll have a pension co adjusted to one oh of 1 0 2 and a in a second. At age 60 of 9,000. Alright. I’m currently earning $180,000. Roller girl will earn $62,000 and is currently 58. Her salary is $74,000, and we’ll have a co adjusted pension of 20,000.

Our annual spend is 90,000. My Social Security at FRA is 43,000. Hers is 20, okay. Your annual spend is 90 and there’s all sorts of different types of fixed income coming in. His cola adjusted pension’s a hundred too.

Al: If you, when you read carefully this, his spending’s, not 90

Joe: Okay.

Al: You’ll, come to that same conclusion.

Joe: All right. We have a traditional 401(k) with $200,000 today, and we have $80,000 in emergency fund in $300,000 in a brokerage account. Our debt is. One 90 with a two point a half percent mortgage or a mortgage on it. I plan to draw from the 401(k), we’ll look 55 to bridge to Social Security. My question is regarding Social Security.

It appears that my break even age from age 62 early draw is 77 and the Delta payment is 1400. Can’t I simply re, what is that word?

Al: Where are you

Andi: recreationally?

Al: Oh yeah. Recreationally. Yeah.

Joe: Oh, I thought it was re recreationally.

the lights in here are bright.

Al: Re can, I simply rere read?

Joe: Can I

Al: simply, it’s hard to say.

Andi: So can I simply recreationally work?

Al: Recreationally work.

Andi: So work for fun

Joe: simply recreationally work and earn $1,400 help to

Al: tongue twister. And I knew how to say it and even I couldn’t say it.

Joe: It’s like the combination of the three words

just kind of

blew me up there.

Al: it’s a tough combo.

Joe: It’s a

Al: simply recreationally work.

Joe: Can I simply recreationally work?

Andi: I see the more times you say it, the more confident you sound about it.

Joe: Yeah.

Al: Well, yeah. Yeah.

Joe: Oh man.

Al: Yeah. Let’s retape this part now, right?

Joe: I guess you can simply re recreationally work that. Yeah, it’s extra fun. And earn that $1,400 Delta. What are your thoughts on our chance of success?

okay, so there’s, a lot going on here.

Al: So lemme start with spending.

Joe: Okay.

Al: Okay. So they make, she, she makes, lemme find that he makes 180. She makes, 74.

Joe: So they 250,250

k and

their’s.

Al: And look at their savings. It’s 580,000 and they wanna spend 90.

Joe: Yep.

Al: What do you think?

Joe: Nope. Nope.

Al: Their current spending with monies going into 401(k)s, which isn’t a ton because that’s. Two, 200,000. I, it probably, they’re probably spending 200,000 Yep. Or more.

Joe: Mm-hmm.

Al: You know, I’m not sure what the taxes are in Tennessee, but they’re not, I don’t think they’re that high.

Joe: Yeah. It all depends on children.

I mean,

Al: do they have 10 children that they’re pay for it college and they’re all graduating?

Joe: Yeah. I don’t know. Same time.

Al: Yeah.

Joe: but yeah, no. How would, so the crux of this is. Is really fine tuning exactly what you’re spending. Correct. You’re spending it correct and you think that you can go, alright.

Most people wanna replicate their, paycheck as much as they can.

Al: Correct.

Joe: So if you think of it that way, you know they’re making 250,000, you take away some taxes, so call it, you know, you, you have roughly 200,000, maybe a little bit less. Mm-hmm. Let’s call it 180. And that you wanna spend half of what you’re currently spending today.

Yeah.

Al: People are saying, oh, I don’t need this.

Joe: I don’t need that, or whatever.

Al: So, okay. So you’re, you don’t need any We do this all the time. Oh, you don’t really need any clothes. Oh, you, your car’s never gonna break down. Oh, you’re never doing any trips.

Joe: Soft top.

Al: That’ll last forever.

Joe: The life expectancy on a Fod Bronco.

Al: Anyway, so here’s what we’re getting at, I guess, which is look at your net salary after 401(k) in taxes, right? Look at your wife and that. And that’s a number, right? That. That could be are you are, how? And then let’s say that’s 200,000. Just as an example. Income’s two 50, taxes, money going to 401(k), let’s say net is 200.

And I think I’m, being generous, but because I think it might be more. But anyway, you’re spending 200,000 and then you gotta evaluate. It’s like, because a lot of people have no idea what they’re spending. Then you gotta evaluate, okay, if I’m, spending, if I’m spending 200,000 now, can I really spend 90.

Am I really gonna cut my living expenses in more than half?

Joe: Right.

Al: Then most people would say no.

Joe: So I Do you want to

Al: Yeah.

Joe: It’s like you’re retired, you’re, it’s Saturday every day.

Al: Yeah.

Joe: You know, you wanna do different things. You want travel, you want to see the world or whatever. Take for Bronco out.

Al: Now on the other hand, I did compute what they could spin roughly. Okay. So I inflated their assets, with what they’re, I actually didn’t add any, ’cause it, I’m not sure what they’re saving, if any. but anyway, it becomes 700,000 in four years, and so that’s great. The fixed income would be about 136,000 at that point.

from pension, and actually two pensions. And then I, think, they could spend about 164,000 if you had those two together. yeah. and oh, and also with a 4% distribution rate, right?

Joe: They could probably do a 10% distribution rate, doesn’t matter because their pensions are giant and they’ll just learn to live off of 190,000 a year.

You know what I mean? They’ll slum it. because that’s not even including the,

Al: I know it’s not including Social Security, but there’s quite a bridge period there, and I think the spending is off so,

Joe: well, he’s 58. Social Security’s gonna come in 10 years. Let’s say they claim it at 60 80, he retires now they got $600,000.

Al: Yep.

Joe: I don’t know. Take 10% outta year. I don’t care. It doesn’t matter. They could draw it down to zero and like what my, my point is that it’d still be okay because of the giant pension that he has.

Al: Yeah.

Joe: He got a hundred, $2,000 pension if you equate that to liquid assets.

Al: Yeah, no,

Joe: I, several million dollars.

Al: I, I know, but he wants to spend 200 and then that’s gonna be inflated too. I don’t think the math works.

Joe: Got it. Well, yeah,

Al: and I know there’s Social Security. I get that. I, here’s what I think. I think he can spend $145,000 in today’s dollars taking the 1 64 without Social Security. So this is conservative.

I agree. And then you present value that back to today’s dollars. I think it’s about 140. call it one 50. I’ll be generous. So two hundred’s, not the right number in today’s dollars. One 50 might.

Joe: So I think he already knows he’s spending 200,000. It’s like, well, our annual spend today is 90,000, but we have a goal of $200,000 in retirement.

Al: Yeah, that’s, well, I think he’s got it backwards. I think his real spend is 200 and he wants to spend 90. Yeah. Anyway,

Andi: so what should their Social Security strategy be?

Joe: Well, he’s asking about the breakeven, well, he’s doing the math wrong. so he’s, looking at a breakeven. So he’s saying, alright, if I take six, if I take, Social Security at 62, early draw

Al: mm-hmm.

Joe: Is 77. The delta in payment is $1,400. So I don’t know what he’s saying. Is the delta in payment $1,400 from age 62 to age 70?

Al: Well, he’s saying that his full retirement age, Social Security is 43,000

up in the end of the first paragraph.

Joe: Okay.

Al: And hers is 20.

Joe: but he’s talking about like the break even in this 14.

Al: I know that makes no sense.

Joe: It doesn’t make any, that’s just a delta.

Al: We don’t even know what you’re, we need to know what the total payment is. Versus what it would be, then we can, but yeah, I would,

Joe: but he’s seeing his breakevens age 77.

So he has to live in, but I’ve never seen a break even at 77 before.

Al: Yeah, me neither. and I don’t really care about that. I think, he defers it as long as he can. He wants

Joe: to take it at 62.

Al: I know, I think she, ‘

Joe: cause he spends everything that comes in,

Al: I, I think she should take it at 62 ’cause it’s a smaller benefit.

He goes longer to get a bigger benefit for the family if he passes and she gets that same benefit. So that’s what I would do or want to do anyway.

Joe: Yeah.

Al: Now if they can’t afford it, they can’t afford it. they do it right. But yeah, I, you know,

Joe: they’re very fortunate to have these really large pensions.

Al: they are, and Social Security looks good too. So,

Joe: And it, this is a very common scenario that we see that people that have large pensions don’t necessarily have large 401(k) balances.

Al: Right.

Joe: Because they know they’re gonna have a large pension. So it’s like, well, why should I save it in the 401(k) when I already have the fixed income?

So let’s enjoy life now.

Al: Yeah. Yeah. And I, get it. Yeah. But, then you get used to that lifestyle. Exactly. It’s hard. It’s hard to cut it in half has been our experience.

Joe: Yeah. But you’re in great shape. Dirk

Al: Dirk.

Joe: Dirk Diggler.

Al: Dirk Diggler.

Joe: Yeah.

Al: Yep. What was Roller girl’s name?

Joe: Roller Girl.

Al: That was the only name she ever had assigned to her.

Joe: I don’t, yeah, I don’t

Al: think I, think you’re right.

Joe: I don’t think so. I don’t know. I don’t know if she

Andi: actually, her name was Brandy. That was the name of the character in the, film

Al: wasn’t Burt Reynolds was in that, right?

Joe: Yeah, he was,

Al: yeah.

Joe: Bur

Al: yes.

Joe: Love bur

Al: one of his classics. I’m sure

Joe: that was a comeback.

Al: It was. You’re right.

Joe: Put him back on the map.

Al: Yeah. Yeah.

Joe: yeah. You ever watch Smokey and the Bandit?

Al: Oh yeah. Yeah.

Joe: That’s a good one.

Al: All of them. Yep.

Joe: Mm-hmm. what’s that other race car movie he was in, I think with the chicken was the Cannonball Run. no. I love not Cannonball Run. It was like a, he was a NASCAR driver.

Al: Huh? I’m drawing a blank on that one.

I like Cannonball run too. That was a good one.

Joe: It was a chicken.

Al: Chicken.

Joe: Yeah.

Andi: Stroker Ace.

Joe: Yeah. There it is. Stroker Ace. What a great movie that is. that’s a re watchable 1983. There you go. Stroker Ace. I’m gonna watch that this weekend. I don’t, Burt Renolds was not in Cannonball Run, was he?

Oh yeah. Him and Dom DeLuise.

Al: Yeah. Valley Field, I think.

Joe: No, that’s not the Cannonball, that’s run, that’s Smoky and the Bandit.

Al: Wasn’t she in Cannonball Run too? Andi first, lets see,

Joe: Cannonball Run.

Andi: Let’s see.

Joe: Also, or the Cannonball Run too.

Al: Okay.

Andi: Cannonball Run was Bur Reynolds, Dom DeLuise, Roger Moore, Farrah Fawcett, Jackie Chan, Sammy Davis Jr.

Joe: Was super. That’s he was.

Al: That’s right.

Outro: Next Week on the YMYY Podcast

Andi: Next week on YMYW, parents Lloyd and Diane and John are planning for their kids. How can Lloyd and Diane retire early, spend a lot, and still leave an inheritance? Will John and his wife help their autistic daughters more if they sell the house and move to a lower cost state now, or wait and let the daughters inherit the house and sell it with the help of trusted advisors after they’re gone? The fellas spitball on those questions and more in episode 575. Follow us in your favorite podcast app or subscribe and turn on notifications on YouTube so you don’t miss a thing.

If you’re making decisions that impact your 30 or 40 year retirement, you can’t afford to screw it up. A spitball from Joe and Big Al is great, but it’s not a comprehensive review of your entire financial life. Big Al may run some quick numbers but he hasn’t seen your tax return. The fellas don’t know your whole situation. Joe is literally reading your question for the first time. Do not rely entirely on a spitball for your long term financial wellbeing. Instead, schedule a financial assessment with one of the experienced professionals on Joe and Big Al’s team at Pure Financial Advisors. Just like a spitball, it’s free. Unlike a spitball, a free assessment is detailed, personalized, and build around your specific retirement needs and goals. Find out how you can increase your tax-free retirement income, manage volatile markets while drawing down your portfolio, and avoid wasting any of the nest egg you’ve spent your entire career building. You can meet in person at one of Pure’s offices in San Diego, Woodland Hills, Irvine, Brea, Davis, Seattle, Phoenix, Denver, Salt Lake City, Chicago, or Nashville. Or meet with the Pure team online via Zoom from anywhere. Either way, don’t skip it. Make sure your retirement plan aligns with your retirement reality. Call 888-994-6257 to schedule your free financial assessment now, or click or tap the assessment link in the episode description.

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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