Show Notes

• 00:00 – Intro: This Week on the YMYW Podcast
• 00:54 – Should We Convert All of Our Retirement to Roth? What About Selling Our Rental Property and Capital Gains? (Eeyore and Nurse Kathi, Orlando, FL)
• 14:56 – We’ve Lived Off Our Brokerage for 2 Years. Are We Crazy? When Should We Claim Social Security Benefits? (Harry & Sally, NY)
• 31:02 – Single, 62, $820K: Does My 2029 Retirement Plan Hold Up? When Should I Collect Social Security? (“When Can I Say Goodbye to 12 Hour Days?”, Virginia)
• 37:27 – Outro: Next Week on the YMYW Podcast
• 39:15 – The Derails: Winnie the Pooh and Eeyore, Smirnoff Ice, Childhood Stuffed Animals

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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 595, Eeyore and Nurse Kathi are 65, retired in Orlando, and they swear they’ve never heard this one on the show before: should you convert your retirement accounts to Roth all the way, or is there a point where you should stop? Harry and Sally have been living off their brokerage for two years in New York, potentially moving to Florida, and Sally is getting nervous. Are they crazy? When should they claim Social Security? And “When Can I Retire From 12 Hour Days” in Virginia is 62, single, and faced with the same decision: Claim Social Security benefits at full retirement age, or hold out for the bigger check at 70? Fill out our podcast survey and download all the free financial resources you can handle – you’ll find allll the links you could possibly need right in the description of this episode. I’m Executive Producer Andi Last, and here are the hosts of Your Money, Your Wealth®, Joe Anderson, CFP® and Big Al Clopine, CPA.

Should We Convert All of Our Retirement to Roth? What About Selling Our Rental Property and Capital Gains? (Eeyore and Nurse Kathi, Orlando, FL)

Joe: We got, oh, boy. “Hi, team. This is Eeyore.” Is that right?

Al: Yeah, that’s- Eeyore … that’s right.

Andi: Yeah, like from-

Al: Winnie The-

Andi: Winnie The Pooh character

Al: … Winnie The Pooh.

Joe: So Eeyore.

Al: Eeyore.

Joe: And Nurse, K- Kathi?

Al: Kathi, yep.

Joe: I’ve never seen Kathi spelled with an I.

Al: Right.

Joe: K-A-T-H-I. they live in Orlando, Florida.

Al: Okay.

Joe: Nurse Kathi, is that, Is she really Kathi and she’s a nurse, and do you think this person’s real name is Eeyore?

Andi: If I Google Nurse Kathi, nothing famous comes up- Nothing pops up … so I have a feeling- that’s probably- Love it … the reality. No. And I would guess that Eeyore is named such because he’s probably very pessimistic.

Al: That, would be my guess.

Andi: Because that’s, the characteristic.

Joe: “I started listening to your podcast about a month ago.”

Al: Okay.

Joe: I bet he’s not listening today.

Al: Yeah, that was a while ago.

Joe: “I walk four miles every day. I walk four miles every day and listen then.”

Al: Okay, nice.

Joe: Okay. “I like to drink a little Fresca with vodka.”

Al: I- ”

Joe: I call it a poor man’s Smirnoff Ice.” No, that’s a rich man’s Smirnoff Ice. Okay. NK. All right. Who’s NK? NK likes a little…

Oh.

Al: That’s the Nurse Kathi. Nurse Kathi.

Joe: Nurse Kathi.

Al: Yeah.

Joe: Oh, he’s got nicknames, called NK. NK. I love it.

Al: Yep.

Joe: “NK likes a sweet white wine. I drive a 2025 GMC Canyon, and NK drives a 2021 Nissan Rogue. Both are paid for. We also have a 2024 36-foot Class A RV.” 36-footer. That’s like a two and a half bed, four bath.

Al: And a, pool

Joe: Why not have a pool on top? “We take that thing out in the summer and get out of the Florida heat, with our two Australian Shepherds named Bandit and Bailey.”

We’re both 65 years old and retired. At age 62 we took Social Security then. We thought it would make sense then, but have changed our minds after looking at the RMDs we face in the future.

Our asset breakdown is this. House is paid for and worth $600,000.” I wonder how much do you think that 65-footer RV costs, or 36-footer?

Al: Well-

Joe: That’s probably a couple hundred grand …

Al: I wouldn’t be surprised …

Joe: “Rental property’s paid for, worth 400. we would like to sell that in 2027, but we would face about $160,000 in capital gains.

$2.1 million in a 401just inherited an IRA of 230. Roth IRA of 125,000. Just started conversion in fiscal year 2025.” Oh, boy. FY 2025. What do you think Eeyore did for a living?

Al: Great question. I couldn’t, I don’t know. Maybe there’ll be more clues here … ”

Joe: We got a brokerage account of 550,000, T-bills of 90, and throw them a key in a utility stock company I worked for.”

Oh, look at that. Oh, there you go.

Al: Just worked there.

Joe: Man, it, they always pop up.

Al: They, it pops up. And I love it.

Joe: Yeah. Man.

Al: You just ask a-

Joe: Feel like I get curious …

Al: you ask the ques-

Joe: I ask-

Al: You ask the question, it pops up … just gotta ask the universe.

Joe: And then it appears somehow. It appears.

Al: Yep.

Joe: Tony Robbins was not lying.

“We have $70,000 in income between Social Security and a small pension. We need about $130,000 to live off of, perhaps a little bit more when we, bag those big trips.” Okay. “We started saving for retirement at age 40. Feel pretty good about what we have amassed considering we made $225,000 a year. We both had two kids from previous marriage and never thought our RMDs while we saved.

We’re trying to figure out how much to convert to Roths per year to minimize our tax burden. We believe we have plenty of assets to live off of. Would like to give money to the four kids once our numbers come up tax-free, but wanting to put them into a higher tax bracket. We have been living off our savings since we have been retired.

I’m thinking of converting to the top of the 24% tax bracket. Not sure if that’s the way to go. I’m also wondering the best way to handle selling the rental property. Not sure on how the tax law around capital gains are doing, and doing conversions will affect each other. One last question, should we try to convert it all, or at some point stop due, to hopefully lessen the RMD to acceptable level?

Thanks for the spit ball. Keep up the good work.” Okay, ER and Nurse Kathy. Interesting question. Never heard of this before, Roth conversion strategy.

Al: Yeah,

Joe: Probably have to go deep in the archives to try to figure this one out.

Al: We gotta listen to one of our prior episodes.

Joe: Yes. All right, so they got about $3 million of total liquid assets.

Yeah. $2.5 million in the retirement account, $680,000 in non-qualified. All right. They wanna spend $130,000 or maybe a little bit more. Their fixed income is 70.

Okay? So their shortfall is what, $70,000?

Al: Well, it’s about 60, but I a- With taxes? I added… Well, no. I, 130 minus 70. but I added another 20 grand for travel, so- Okay

I’m gonna say shortfall is 80 grand, which is a 2.6% distribution rate, so check there. That, looks just fine.

Joe: All right, so they’re both 65.

Al: Yep,

Joe: They got a 10-year timeframe. They’re trying to get money out of the retirement account into the Roth account.

and-

Al: They got $680,000 in brokerage.

Joe: Okay.

And, if they were retirement age right today, so that’s a good, sense of, like, what tax bracket they might be in the future. So let’s take, 4% of $2.5 million, right? So that’d be 100 right there, plus the pension, of 70, 170, and a little bit of income from the brokerage account, you know, 180.

Take away the, t- take away the standard deduction, I think they’re in the 22% bracket, and I think because of that, that’s the bracket they convert to. and by my quick calculation of the current pension Social Security interest, dividends, in- inherited IRA, money, I think they could convert about 150-ish.

Ish, okay. And stay in the, stay in, the 22% bracket. Maybe a little bit more into the 24, not much, but that keeps him under the Medicare premium.

So $150,000 is what you’re gonna convert out- of to three.

Al: Yeah.

Joe: Okay, so you’re gonna convert 6.5% out of the retirement account.

So what’s gonna happen is he’s gonna get about a million and a half in the Roth-

of conversion dollars.

And his retirement balance at 75 is gonna probably be the same.

Al: Could be, yep.

Joe: Yep. So his- But if it’s,

Al: it’s the same-

Joe: But then it’s still at 22%. He got it out at 22%. He’s got more money into the Roth, takes a little bit more risk in the Roth.

Al: Yeah, and then-

Joe: I mean-

any additional… Yeah, I like that strategy a lot.

Al: Yeah, I think I would do that e- except on a down year. I might

Joe: go to

the

24. Maybe go a little bit rich?

Al: Yeah, I think I might do that.

Joe: What do you think the odds that the 22% tax bracket will be 22% in 10 years?

Al: it-

Joe: High? Low?

Al: I, would-

Joe: If you’re a gambling man.

Al: I, would say more likely than not it’ll be higher.

Joe: Yep, me too.

Al: Yeah.

Joe: So yeah, I think in down years then you go to the 24. I don’t know if you go to the 24 right out the gates, but- I- … he’s got time and he doesn’t need the money. He’s not gonna spend- Yeah … anywhere near the dollars, and he wants the money to go to his 4 kids.

Al: Yeah.

Joe: He doesn’t want the kids to pay the tax. I don’t hate the 24% tax bracket.

Al: Yeah, no, it’s only 2% more. Not the end of the world. I just don’t think he needs to.

Joe: Is IRMAA… should we talk about Aunt IRMAA? That might go up a little bit on him.

Al: It might.

anyway, the $150,000 included, actually to the cliff for the Medicare premium- Oh, okay

of 200- $218,000. ‘Cause I, think taxable income right now is about 60 grand-ish.

I add $150,000 to that, I end up, then, we get to 210, which is below the $218,000. So that’s where I got that figure.

Joe: Okay. So you’re in the 22, will be in the 22 if s- tax rates stay the same. You could gamble and say tax rates are gonna go up, then you go to 24.

I don’t hate the 24 to get a good jumpstart. He’s only got 125. So if you look at 125,000 into 3.2 million, that’s a p- pretty small percent. What is that? Yeah. 5%?

Al: Yeah,

Joe: I s- Of his total liq- liquid net worth is in- Yeah.

Al: I think it’s worth the consideration. I’m, I don’t necessarily disagree. I’m just-

Joe: Yep

Al: I’m thinking, he’s gonna be in the 22% bracket, so that’s why I’d probably convert to that.

Joe: Well, okay, so he’s got a $160,000 of capital gains tax, or do you think it’s $160,000 gain in the reno? Because the reno’s only worth 400 grand.

Al: Well, if it’s-

Joe: Did he depreciate it down to zero and the- Well-

400,000’s full gain?

Al: I- if that’s the tax, it’s wrong probably.

Joe: Yeah.

Al: Especially ’cause they live in Florida with no state tax.

So the highest the tax could be is 24%, right? Now, there could be some depreciation recapture, so it actually could be a little bit higher, but, you know, t- a 25% tax on 400,000, if there’s zero base- 100 grand

it’s 100. Yeah. So maybe that’s the gain part. I- maybe that’s what it is. Maybe that’s the gain part.

Joe: So if the gain is $160,000, let’s just use 25%. 160,000, 25 is 40,000. Yeah. So it’s a $40,000 tax. So what strategy do we wanna be thinking about here? I- Just pay the tax, it’s 40 grand, and call it good and walk away with your 360,000?

Al: Yeah, I think that, you got tax-loss harvesting potential. He’s got money in the brokerage account.

Joe: Yeah, you got 680 in a brokerage account, but it’s in T-bills.

Al: Well-

Joe: And he’s got his own company stock. Well- He owns a utility company. He’s just- I understand … riding that, that utility company till the- Well,

Al: true, but it says brokerage plus T-bill plus company stock.

Joe: How much I bet he’s hid? I bet most of that’s in his company stock.

Al: Probably. Anyway, tax-loss harvesting is one. I probably, if I sell the, if I sell the rental, I’m probably not doing a Roth conversion that year. I think that would kill-

Joe: Would you just blow it out and pay the tax?

Al: Yeah.

Joe: So y- yeah, you could try to do some tax loss harvesting with a brokerage account to offset some of the gain.

You could do a 1031 exchange. Would that be worth it to save $40,000 in tax? Maybe you could go into a DST.

Al: you could. I wouldn’t. I- Not, enough to bother with.

Joe: Yeah, I know, 400… If it was, like, 1.4, maybe.

Al: I mean, but there’s people out there that don’t wanna- Pay any tax … any more than they, they have to, and if, you’re that kind of person, go for it.

Me personally, I would pay the tax and move on, I think.

Joe: So no, I’m just trying to get, throw out some strategies. So he could exchange the property, not pay tax- Okay … and he could put it into, like, a diversified type of fund that would give him income. I don’t know if that’s a great idea. You gotta be careful, do a lot of due diligence.

I’m not selling that.

Al: Yeah.

Joe: you could go into a tenant in common arrangement. Ooh. Remember we used to talk about those quite a bit- Yeah, back in the day.

you could do a charitable trust. Yeah. But that doesn’t make a ton of sense to save 40,000 in taxes. The, the,

Al: Too much effort to save that, that-

Joe: Yeah, totally.

Yeah. I mean, the, the trust itself might cost him 10 grand to, to establish.

Al: I agree.

Joe: let’s see. We could do some oil and gas. Get some tax credits to offset.

Al: No, don’t do that.

Joe: Low income entities.

Al: But you, but you could. You could.

Joe: Opportunity zones?

Al: I, don’t think they do that anymore.

Joe: Are, we done with opportunity zones?

Al: I think.

Joe: Oh, man. Oh, we didn’t do much of those.

Al: No, we didn’t, ’cause they, didn’t really pencil out that well.

Joe: They didn’t pencil out at all.

Al: Yeah.

Joe: They were, like-

Al: And the- … 50/50 … low income housing credit, that didn’t pencil out either.

Joe: I know. okay. So yeah, maybe you just bite the bullet and pay the tax outright.

But there are strategies if you wanna get creative. In most of the cases, you really wanna do a lot of work and due diligence to figure out what is the appropriate strategy. There’s always ways to kind of avoid the tax, but you give up control.

Al: Yeah, I sort of like just paying the tax. If you end up with 360,000 more, now you’re, over a million.

Joe: Yeah

Al: In non-qual?

Joe: In non-qual.

Al: Very flexible, right? Now you got plenty of money to do conversions, pay the tax, and to live off it, you know? So-

Joe: $680,000 in a taxable account. He could do a long short direct index.

Al: He could.

Joe: That could create some losses for him.

Al: He could.

Joe: I’m just getting

creative here …

Al: maybe an option on his company stock.

Joe: We could do that.

Al: He’ll lock in-

Joe: Yeah,

Al: lock in those-

Joe: Collar that thing up.

Al: Yep, yeah.

Joe: He could put a little, capital gain budget on there.

Al: Yeah, Sell off a little bit each year, stay a lower bracket.

Joe: Yeah.

Andi: Now, how many people do you think could actually do any of these strategies on their own?

Joe: All of them.

Andi: All of them, okay.

Joe: Super easy. If I can do it, I can’t even pronounce Eeyore.

Al: The answer is no, not too many.

Joe: Yeah. I would s- I would probably seek some professional advice, for some of those strategies.

Al: for, yeah, for some of those.

Andi: Eeyore said he’d never heard his question covered on the show before, and the 9th annual YMYW Podcast Survey is the place to tell us what you want to see and hear and what you think this show should be. The survey is open right now, but as of the day this episode was released, you have less than 2 weeks left to answer it. Jump on it now for your chance to win a $100 Amazon e-gift card. What would make Your Money, Your Wealth your favorite retirement podcast. Find the survey link in the episode description and use the password ymyw, all lower case, to access it. US residents, complete all 16 questions by 5pm Pacific on August 31st, no purchase necessary. One $100 Amazon e-gift card winner will be chosen at the close of the survey and announced on the podcast on September 1st. Good luck!

We’ve Lived Off Our Brokerage for 2 Years. Are We Crazy? When Should We Claim Social Security Benefits? (Harry & Sally, NY)

Joe: Okay. “Hey, Joe, Big Al, Andi. Been listening to your podcast for about three years now, and would love to spitball. My name is Harry, and my wife is Sally.” Oh.

Al: Yeah.

Joe: So cute.

Al: When Harry met Sally.

Joe: “I’m 57.” Oh, you wanna… Oh, yes. We-

Al: Oh, yeah, we know that one.

Andi: Is that your favorite movie, Joe?

Joe: Oh,

Andi: Top of the list?

Joe: it’s up there, sure.

Al: It’s up there,

Joe: I’m 57 and comfortably retired for two years.” All right. “Sally’s 55 and is still working and earning about $60,000 a year, mainly for the medical benefits.

Her medical benefits will be free for life in three years, but I’ll have to pay about $500 a month. We spend $16,000 a month and are living entirely off her, off our investments. I pick and choose when and how much to sell based on the market and the tax ramifications. We have one of three left in college for only two more years, and then that is fully funded.

Here’s our assets. We got a brokerage account, $4.4 million, all in VOO, generating about $48,000 a year in taxable dividends, which we reinvest. Cash savings, 250. Primary home, 1.6, paid off in New York. Vacation home, 400,000, Florida, paid off. My retirement accounts is 400,000 in a Roth, 215 in a traditional IRA, rollover eligible.

Sally’s retirement account, 180,000 in a Roth, 537 in a traditional.” 262 is a rollover eligible. “We both max out our Roth contributions each year. In addition, Sally’s $60,000 income first goes to her Roth 457, then her traditional 403. Again, we only live off of what we sell out of the brokerage account each year.

We’ve considered only fully funding the Roth and keeping the rest of our income. Our combined Social Security will fall around $4400 a month at 62, $5900 a month at 67, $7300 a month at 70. Sally also has a small pension of $1000 beginning at 65. There is longevity in both our families, all parents alive and well, in, in their 80s, and we are pretty decent shape for slaving for the man over 30 years.

In about five years, we plan on downsizing our New York home. We will most likely become Florida residents, but we will keep a home in New York to have a place to visit family. I drive a 2025 Kia Carnival.” Wow, that just sounds like a great time- … just driving that thing.

Al: It’s a hybrid.

Joe: Yeah, perfect. “Sally drives a 2022 Tesla Model Y.

I really like a smoked Old Fashioned, and Sally likes Coronas on the beach. Our main questions are, number one, is it viable plan that we’ve been operating with s- Is this a viable plan that we’ve been operating with successfully for the last two years with minimal taxes? Sally is very nervous about it.

Number two, what Roth conversions should we be doing out of the traditional IRA and SEP IRA, and to what amount? When should we claim Social Security, since we really have no income for some time? Thank you very much, Harry Burns.” Is that the guy,

Andi: That is the name of the character in Har- When Harry Met Sally.

Al: Oh, okay. Very good.

Joe: Oh. I thought Harry Burns was in The Simpsons.

Al: Okay. Well, first of all, is it viable? and the answer is yes.

Joe: So th- his numbers don’t make…

Al: What, What doesn’t make sense about them?

Joe: The balance sheet.

Al: In what way?

Joe: The balance sheet is-

Al: Well, it’s, all non-qual.

Joe: What, So yeah, that is very unusual.

To have $787,000 in a tax-deferred account and f- $5 million in a-

Al: Well-

Joe: His parents are still alive. Yeah. So it’s… Selling a business? Do you think he was self-employed?

Al: I think he w-

Joe: Do you think he-

Al: I think he worked for a tech company. Executive stock options maybe.

Andi: He did mention- And so- … something about a SEP IRA, didn’t he?

That would be-

Al: There was a SEP

Andi: … from self-employed

work.

Al: Yeah. Well, I think that’s hers maybe.

Joe: No.

$1.6 million home paid off Plus another four, so that’s $2 million in equity there.

Al: Yep.

Joe: Plus another five. that’s just a lot of assets outside of retirement account compared to the retirement account.

Al: True, I agree.

Joe: So I like to play detective here, Al. I’m just trying to understand-

Al: So, so the-

Joe: … how it came to be

Al: so the ways it could be is inheritance, but parents are still alive.

Joe: It can, yeah. They’re-

Al: Maybe grandparents. Maybe.

Andi: But interestingly, that que- the SEP IRA is only mentioned in the questions. He doesn’t actually say anything about if there is money in the SEP IRA. He doesn’t tell us what that is.

Al: True.

Joe: So she’s got the 457. Sally’s retirement accounts is $180,000 in a Roth and 537,000 in traditional. All right, and then he’s got f- $250,000 in a traditional IRA.

Al: Yeah, so there’s, to, to me, well, p- if, the most likely scenario is he owned a business and he was rolling all his profits into the business to grow the business, so he didn’t put much into retirement, and then he sold

it.

And then sold the business.

Joe: Yep. For- Yeah … $7 million and paid the tax- Paid the tax … netted four and a half- Yeah, and paid off his house.

Al: Yeah. That would be, that’d be my best guess. It also could be, stock options or restricted stock or something like that. But usually to, get those, Joe, you have a pretty high salary, so you’re lo-

Joe: $6000 a month combined Social Security of 67.

Al: Yeah, so you’re loading up your retirement accounts. So th- this would, to me, indicate it’s more likely he was a business owner- Yeah … and sold it. Don’t you think?

Joe: I, it has to be, because she’s still working.

Al: Yep.

Joe: 6,000 a month split Social Security, so his Social Security’s probably 4,000 a month.

Al: Plus the, the, other thing is-

Joe: Is that even maxed?

Close

Al: … close. The other thing too is she’s really worried, so they probably haven’t had this money that long.

Joe: Could be.

Al: They’re used to spending a lot less.

Joe: And s- and he retired young.

Al: yeah.

Joe: Like he retired at 55.

So I’m guessing they got the windfall-

a couple years ago.

Al: Yeah, Yep.

Joe: So he’s been, “You know what, Sally? Why don’t you save most of your money into the, you know, we get your healthcare.”

Al: Yeah,

Joe: She makes 60,000 a year. You’re going into the Roth and then the standard. I’m gonna s- sell the investments.

Al: Yeah. Just live off of that.

Joe: Put it ready to live off of.

Al: yep. All right.

Joe: I would be nervous, yeah.

Andi: Could she be worried about the fact that it’s all in VOO, and that’s part of the issue, the, brokerage?

Joe: Well-

Al: That’s Vanguard …

Andi: concentration risk?

Al: Does that tell stock market?

Joe: Yeah.

Al: Yeah.

Joe: There’s no concentration risk there, but it’s all equities.

Al: Yeah.

Joe: So-

Al: Might wanna have some in bonds, but yeah, it’s a g- you know, good place as any to have the money.

I’ll start out with distribution rate right now would be 3.2%.

Joe: Yep, 57, 55.

Al: Yeah. With, their spending, compared to their assets, and that’s before Social Security and a little pension. So I think it works

Joe: Yeah. What’s the conversion strategy?

Al: well, I would go to the-

Joe: The 12?

Al: … top of the 22. I f- I- if they’re in the 12, well-

Joe: Well, he’s creating his own income from the brokerage accounts though.

It depends on what he’s selling, but he’s, creating dividends and interest of 45. That’s all tax-free.

Al: And she’s making 60 currently, although-

Joe: 60, but she’s- … she’s got some going into retirement … she’s building it up,

Al: yeah.

Joe: I’m guessing that they’re in the 12.

Al: Could be.

Joe: I would wanna look at maybe some capital gain planning first in the 0%, just to get enough- That a good point

maybe liquidity there- yeah … that they can live off of for the next couple years, and then maybe- do some conversions.

Al: Yep

Yeah, because cash is 250K and the brokerage is 4.4 million, so might wanna start thinking about that.

Joe: Yeah, replenishing some cash for an emergency

Al: Or, yeah, like you say, just take advantage of the zero tax bracket for capital gains when you’re in the 12% bracket.

So that, that’s not a bad idea.

Joe: Yep.

Al: That’s actually more important than the Roth conversions, I would say.

Joe: I think so. but we don’t know what the basis is on that. Yeah. But I’m guessing the basis is probably pretty high, because I think he probably just got the money a couple years ago.

Al: Well, that’d be my

Joe: guess too.

‘Cause that, that triggered the retirement- Yeah … that triggered him taking money out.

Al: That’s what it would seem like.

Joe: And that triggered her anxiety attacks.

Al: Yeah. And I guess, going back to our premise, typically if he were an executive with stock options and restricted stock, he’d be paying, highly paid and have a lot of money going into retirement.

Joe: But he’s opposite. He, built his- Yeah … business and sold it. Built it. And I’d much rather have the $4.5 million outside of retirement than- Yeah … in a retirement account.

Al: 100%.

Joe: I’m not judging. I’m just trying to-

Al: Yeah …

Joe: just understand the profile a little bit.

because he could basically be in very low tax brackets for the rest of his life- Correct

if he manages this correctly. Because even at l- like a three and a half distribution rate, there’s very little tax going on here. But I wouldn’t wanna leave the $800,000 in a tax-deferred account. I would wanna manage that a little bit. It, he doesn’t have to do giant conversions.

Al: No.

Joe: But if he doesn’t touch it, you know, it could grow where- Yeah

the RMD could be a little bit troublesome, where it would maybe make his Social Security taxed at 85% of it taxed. Could be. Maybe- yeah.

Al: Yeah, yeah, e- exactly. Yeah, so I think the fact that y- y- you know, you would think about 12% hit conversion is a no-brainer, unless you’re doing, tax gain harvesting on your stocks.

and at 22% is possible.

Joe: But I think he’s missing a huge opportunity here. He’s only in one fund.

Al: Yeah.

Joe: So-

Al: There’s no tax loss harvesting.

Joe: There’s no tax loss harvesting. he needs to have way more positions-

not to be diversified, because, here, look up VOO and tell me how many holdings are in that, that, that ETF.

I’m guessing there’s- hundreds of positions

Al: Yeah, I would guess 500 or more

Joe: probably Or more

Al: Yep

Andi: 518 to 520 individual stocks Yeah

Joe: Okay. So VOO is 520 individual stocks. Out of the 520 individual stocks in VOO, so let’s say this year, or last year was up 10%.

How many stocks in VOO… d- what was the rate of return of VOO last year?

You probably have it right there in Y- Yahoo Finance or something. But out of the 520 stocks, how many of those were positive and how many of those were negative?

Al: Don’t know, but for sure some were positive and some were negative.

Joe: I would say a third of the stocks in that ETF had a loss.

Al: Could be.

Yep

Joe: And so, okay, I can’t read that But

Andi: that’s- let’s see … 24%. 17.82% for the full calendar year of 2025, and for the trailing 12-month period, it’s 23.65%.

Joe: All right, not bad. Yeah. He’s, he made 18%. Yeah.

But all the stocks weren’t positive. There were stocks in there that were negative.

Al: Yep.

Joe: And so if you have this much money in a non-qualified account, you wanna take advantage of tax strategy- to make sure that the income that comes off of this won’t be taxed.

And so when you’re all in one ETF, you can’t tax loss harvest. And what that means is, in, in… You’re, basically delaying the tax, but if I sell a position at a loss, I can harvest that loss on my tax return and offset that loss with a gain- of another stock to zero out the tax as I’m creating income.

If it’s in one ETF, you’re up 17%, there’s no loss because everything is bundled in the p- the, product of the ETF. Not saying that’s a bad thing.

But if you have that much money in a non-qualified taxable account, you probably are missing maybe some tax benefits.

Al: Yeah. I agree with that. And then I guess just to elaborate, so what that means is you have more than one, mutual fund or index fund or ETF. So some might be invested in large company US stocks, some might be value stocks, some might be growth stocks. You might have some small company stocks. You might have some foreign company stocks, emerging markets.

All of these kinds of stocks tend to go up and down at slightly different times. So at any one given point, you may have, if you have multiple ETFs, you might have one that went down and several that went up. And if you have that, you could actually sell one, you have to wait 30 days to get back in, or you buy something, you know, kinda similar to stay in the market, right?

But then you harvest that loss, it c- you can use against any other capital gain. If you got one ETF, Joe, nothing you can do. Is that right? It’s all, in one.

Joe: Yeah.

Al: Yeah.

Joe: He’s diversified.

Al: Agreed.

Joe: It’s all in equities. It’s cheap.

Al: Yep.

Joe: But I don’t know, probably could use a little bit of tax strategy.

Al: Agreed. Yep.

Joe: Or don’t. It doesn’t, I mean, right? It’s not gonna break it, b- break the bank.

Al: Yeah. So all right. Well, how about Social Security? What do you think there?

Joe: I would wait. Take it at 70.

Yeah. I would say, well, it depends though on the markets, I guess, when he gets there, and what his distribution strategy, how it’s working from now until 62.

The 62, if you take it at 62, maybe y- the wife takes it at 62 and he waits until 70, at least gets some income in there. Or she can take it maybe at 67.

Because her benefit is gonna be lower than his it sounds like anyway.

Al: Yeah, I would agree with that. I think the, to me, the biggest key is the one that has the higher benefit- Wait

which is probably him, waits till 70. The one with the lower benefit, it doesn’t matter.

Joe: Probably doesn’t.

Al: it’s a personal choice. 62 is great, 65, 60, whatever. Yeah, it doesn’t matter.

Joe: Yeah, if you take it early, you, just get a permanent discount, but you’re also taking less from the portfolio.

Al: I think that’s the mental part of it, right?

Joe: Exactly.

Al: Yeah, ’cause then you don’t feel like you’re, you-

Joe: You’re, taking too much from your nest egg.

Al: Yeah,

Joe: But Harry and Sally doing a good job there. Cruising in the Kia Carnival. I think that’s what Aaron drives.

Al: No.

Joe: He’s just, you drive like you’re at a carnival. Is that- Got it.

Andi: Harry and Sally are wrestling with the biggest question in retirement income, when to turn on your Social Security. Claim too early and you could lock in a smaller check for the rest of your life. Wait too long and you might leave money on the table you could have enjoyed while you were healthy enough to spend it. Getting the timing right can be worth a small fortune over a full retirement. This week’s YMYW TV episode is all about claiming Social Security and how to weigh the tradeoffs in your own situation. To go with it, we’re giving away our 2026 Social Security Handbook. It’s a comprehensive guide on when to claim, the real tradeoffs of taking benefits early versus late, spousal and survivor benefits, how your Social Security gets taxed, and much more – and it’s free. Watch this week’s show and download the Social Security Handbook at the links in the episode description. When you get that Social Security Handbook, do me a favor and choose “podcast” in the “how did you hear about us” dropdown.

Single, 62, $820K: Does My 2029 Retirement Plan Hold Up? When Should I Claim Social Security? (“When Can I Say Goodbye to 12 Hour Days?”, Virginia)

Joe: All right, we’ll keep rolling here. We got, “Hey, Andi, Joe, Al. Been listening on Apple Podcast for about six months. Thanks for the great show. Your spitball analysis has honestly opened my eyes to the possibility that we’re might be a light at the end of the tunnel. You can call me when can I say goodbye to the 12-hour days?” That’s what we call him?

Andi: That is what this, emailer has decided he wants to be called, yes. He or she.

Joe: “When can I say goodbye to the 12-hour days?” All right. “I drive a 2019 Honda Accord. My favorite beverage is Earl Grey tea.” Never heard of Earl Grey tea.

Andi: What?

Al: We have it in the office.

Joe: Huh? You-

Al: we have it in the office.

Andi: It’s, like, probably one of the most common varieties of tea that exists.

Al: It’s actually, one of the few teas I, like.

Joe: Oh, is it a green tea?

Al: No, it’s a black tea.

Andi: Yeah, it’s

a black tea.

Joe: It’s a black tea. But it’s Earl Grey.

Al: Yes.

Joe: That’s a name brand.

Al: that’s the brand name.

Joe: Got it. Okay.

Al: If you see me in here drinking a cup of tea-

Joe: Drinking tea, that’s an Earl Grey …

Al: pro- probably.

Joe: Got it. All right. Good to know.

Al: Yeah,

Joe: All right. “62, single, live in Virginia, consider myself financially literate, and an average income in solid retirement savings.

I’m trying to figure out when I can secure re- c- when can I securely retire. I earn $96,000 a year and contribute 10% of my money into the Roth 401with a 4% employer match that goes into the tax deferral account. My employer currently covers 100% of my healthcare premiums. I spend about 60, $65,000 per year.

I’d like to maintain the same spending level in retirement. I also own a vacation property, but I don’t include it in my net worth since it may well pass to the family at my death.” All right, well, you still include that in your net worth-

Al: Well, he-

Joe: … if it passes to your family

Al: … he figures he, he can’t sell it to create any-

Joe: Oh, he doesn’t wanna use it as a li-

Al: Yeah

okay.

Yeah.

Joe: “My Social Security at full retirement age is gonna be $3,600 a month. My savings are $100,000 in the Roth, $600,000 in an IRA, 60,000 in inherited IRA, 60,000 in taxable brokerage. My tentative plan is to retire in January 2029, withdraw from my inherited IRA and roll over IR- IRA into the top of the 12% tax bracket, and supplement with my brokerage withdrawals if needed, while delaying my Social Security until age 70.

My questions are: Does this retirement withdrawal strategy make sense? How and when should I adjust my asset allocation to manage market risk as I approach retirement? Is there anything else I should be thinking about that I might be missing?” Okay. When can I say goodbye to the 12-hour days?

Al: So here’s a little math for you, Joe.

Joe: He’s doing pretty good.

Al: He, is.

Joe: He doesn’t spend any money.

Al: That, well, that’s what makes this work.

Joe: Yep.

Al: So, in three years based upon adding 14,000 a year, that’s with the match, three years, 6%-

Joe: Million …

Al: he’ll add about a million, correct.

And then distribution rate, you know, spending at that point would be about 71,000.

Joe: He needs 20,000, million, 2%.

Al: Yeah. Yeah. So with, with- Close? With, yeah, w- with- without Social Security, that’s a 7.1% distribution rate. But, he would, be two years off of full retirement age. When he does that, it’s 2.2% distribution rate. So yeah. So the point is retire and have fun, ’cause you can. Yeah.

Joe: At $65,000 of spend, $43,000 of fixed income-

Al: Yep

Joe: it’s not gonna be a, a, a ton of demand for the portfolio.

Al: Nope, not really.

Joe: He wants to take, the tax deferred out. He’s got 660,000 in the tax-deferred account. take that to the top of the 12. Top of 12 as a single taxpayer is $50,000.

Al: Yeah.

Joe: Plus another 15, so he’s got $65,000 of room.

Al: Yeah, which is about what he needs.

Joe: 65. Yeah. Yep. Let’s see. I like that. I don’t know. I mean, I guess he’s got… no, I love that plan. I don’t know if I would do anything, any different. You could do a little bit of conversion, but why?

Al: Yeah. That’s, that was kinda what I thought too. I think you just go with what he said, ’cause fill up the 12% bracket.

I mean, if there’s still room, maybe he could do a little conversion, but he doesn’t really need to.

Joe: Yeah. I mean, I wouldn’t go higher than the 12. And then if there’s, more room in the 12% tax bracket, then convert to the top the 12. Yeah. Might be a couple of bucks.

Al: That’s, yeah, that’s how I would look at it.

Joe: The RMD, yeah, because he continues to blow that out. His RMDs are not gonna get him into trouble.

He’s got another 160. His fixed income’s gonna be good. I like the strategy. yeah, you, he doesn’t need to take on a ton of risk because his distribution rate, once his full, f- fixed income sources come in, it’s 2%.

Al: I sort of, feel like maybe he should consider taking Social Security at full retirement age, 67, because I feel like if he’s five years taking 7% out of his portfolio, that’s not gonna feel that good.

So I’m not saying he, he sh- 70% or 70 years of age is still, it’s still a great idea.

It’s just that if it becomes emotional that I’m using my portfolio too quickly, then take it earlier.

Joe: What is he doing for 12 hours a day? That’s a lot of- In Virginia … that’s

Al: a lot of hours. Yeah, it’s a lot. Yeah, a lot of hours. That’s a lot of hours. He’s probably supervising people and-

Joe: It’s probably stressful.

Yeah. I would get out.

Al: Yeah, me too.

Joe: Yep.

Al: Well, I like his idea of retiring at 65. I, think that makes sense.

Joe: 65, I like. I don’t know if I… Y- I would, I would delay a couple years with your Social Security and see how the portfolio holds up.

Al: I agree with that. Yeah. And then-

Joe: And if it holds up-

Al: Yeah

Joe: then keep it going.

Al: Keep it going.

Joe: If it doesn’t, then pull your Social Security.

Al: Yeah, at 67. Yep, I like that.

Joe: Or get a job where you work 30 hours-

Al: Yeah …

Joe: a week.

Al: Yeah, and you make, you know, whatever. And then you’re just- 40 grand a year.

Joe: Yeah.

Al: No stress.

Joe: Less than that, 25.

Al: Yeah, 25. Yep.

Outro: Next Week on the YMYW Podcast

Andi: Next week on YMYW the fellas get into protecting your money from everyone who wants a piece of it. Mr. Mojo Risin in Georgia is hunting for something that has gotten weirdly hard to find, a CPA who’ll do real tax planning instead of just filing a return. He also has a concentrated stock position and Joe and Big have some thoughts on that, you can be sure. BB and Shell bring the fellas an investment promising 15% a month, and Huggy Bear in New Hampshire is trying to decide whether to hold or cash out a whole life policy that’s worth a small pile.

Have you decided when to claim Social Security? Do you know how it ties in with all the other decisions you have to make about retirement income? A free assessment with Pure Financial Advisors can bring you clarity and confidence. It’s not only free, there’s also no obligation. It’s a two-meeting sit-down with one of the experienced professionals on Joe and Big Al’s team. They’ll look at your whole picture, your income, your taxes, your Social Security timing, your investments, your risk tolerance, and they’ll work with you to create a plan that fits your unique needs and goals. Meet online via Zoom from anywhere, or meet in person at one of our offices in San Diego, Seattle, Chicago, Denver, Salt Lake City, Nashville, Davis, Los Angeles, Irvine, Brea, or Phoenix. Click the free assessment link in the episode description or call 888-994-6257 to schedule yours now.

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.

The Derails: Winnie the Pooh and Eeyore, Smirnoff Ice, Childhood Stuffed Animals

Transcript

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