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Jill Schlesinger (2:21)

Mark will get in touch with you. Will Set it all up. And while you're on the website, don't forget there's all sorts of stuff there. There is our subscription service. It's called Jill on Money Live. That is where for 45 bucks for the next 12 months, Mark's not even.

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Going to raise the fee.

Jill Schlesinger (2:37)

For next year, you will have access to quarterly live webinars, the entire back catalog of those webinars, as well as bonus audio and video content. Hey, Mark, when can I make the announcement about the changes to Jill on Money Live?

Mark Tularcio (2:51)

You are free to do that now.

Jill Schlesinger (2:52)

Okay. Mark had this idea that there are some people who just want to kind of dunk in for one webinar at a time. Like they might say, oh, I really want to just buy this one webinar. And Mark, can you do it in the aftermath also that one webinar? Or is it ahead of time? Like, how do you, how do people do that?

Mark Tularcio (3:13)

So say webinar is on Wednesday. You know, come Wednesday night or Thursday, it'll be available.

Jill Schlesinger (3:20)

Okay, so, and so you can join it. Can you join it live or do you have to, can you all watch it? In retrospect, no.

Mark Tularcio (3:27)

You will purchase it after the fact.

Jill Schlesinger (3:29)

Okay, so if you think like, oh, I can't do it live and I really want to hear this important webinar to me, whatever that is to you, then you can just do that by buying that one webinar. Here's the catch. You know, I said 45 bucks for the next 12 months for the service Jill on Money Live. But if you want just one of those webinars going to cost you $50, Mark wanted to do it like a cheaper price. I said no way. 15 bucks. That's it. Let's see if any of you take it on. But you know, 15 bucks is pretty cheap. If you're doing like year end financial planning and you get to watch a webinar with a certified financial planner answering questions in real time, that's pretty much worth 15 bucks, I've got to say. So if that's you and you just like want one webinar at a time, no sweat. So that's the big change that we are putting into place because we heard from some of you who are like, oh, I just like wanted just dip in for that one webinar about blank, whatever that is. So I think it's an experiment. We try experimentation all the time. Okay, let's be done with the experimentation right now. Let's go talk to listener Rich, who joins us from Montana. Hello, Rich. What's going on.

Rich (Listener) (4:42)

Hi there. How you doing?

Jill Schlesinger (4:43)

Great. What can we do for you, sir?

Rich (Listener) (4:45)

Well, let me give you a little background. I'm retired. Let's do it. My wife is retired and I'm looking into collecting Social Security. I've just come of full retirement age. My big question is really about converting my existing IRAs, traditional IRAs, into Roths. I've read the Ed slot book and it resonates with me and have heard some of your programming on that. And it seems like it would be a good vehicle for me to pass on money to my kids in a tax deferred manner for them.

Jill Schlesinger (5:28)

Well, that sounds actually amazing. So let's just do some of the numbers here. So you are how old? 66, 67.

Rich (Listener) (5:36)

Yeah, I'll be 67 in another month.

Jill Schlesinger (5:38)

Okay. And how old is your wife?

Rich (Listener) (5:40)

She's 70 years old.

Jill Schlesinger (5:42)

Okay. Married an older woman. Okay, you go, baby. And so let's talk a little bit about what's happening right now. Is your wife claiming Social Security already?

Rich (Listener) (5:52)

Yeah, she started collecting when she reached full retirement age, which was about four years ago.

Jill Schlesinger (5:59)

Okay. How much money does she get from Social Security?

Rich (Listener) (6:04)

So it's annually. It's about 26k a year. And that's gross.

Jill Schlesinger (6:11)

Okay, no problem. And are you, Are either of you entitled to a pension?

Rich (Listener) (6:16)

I do have a pension.

Sponsor/Ad Voice (6:18)

Hmm.

Jill Schlesinger (6:19)

How much?

Rich (Listener) (6:20)

It's about 43,000 gross.

Jill Schlesinger (6:23)

Okay. So right now the income you have is your $43,000 pension. Her $26,000 Social Security you have not claimed yet. But what is the Social Security benefit for you if you claim now, what would it be at 70?

Rich (Listener) (6:42)

For me, it's going to be about 43,000 if I start claiming in January.

Jill Schlesinger (6:49)

And do you know the 70 number at age 70?

Rich (Listener) (6:52)

At 70 monthly, it's going to be 3900 roughly.

Jill Schlesinger (6:58)

Okay, tell us about the money that you have accumulated that we're talking about potentially converting. So let's do this kind of methodically. How much money do you have in traditional retirement assets?

Rich (Listener) (7:11)

Right now it's about a million.

Jill Schlesinger (7:13)

Okay, great. And do you have a bunch of money that is available to pay the tax when we start converting?

Rich (Listener) (7:24)

I do.

Jill Schlesinger (7:25)

Tell me more.

Rich (Listener) (7:26)

I have my wife and I have an account that's almost $900,000.

Jill Schlesinger (7:33)

So a plain old brokerage account, right?

Rich (Listener) (7:35)

Correct.

Jill Schlesinger (7:36)

Okay. Do you already have a Roth account or not?

Rich (Listener) (7:41)

I do.

Jill Schlesinger (7:42)

What's in there?

Rich (Listener) (7:44)

My roth is about three, a little like 320, something like that.

Jill Schlesinger (7:49)

Okay, and does she have a Roth as well?

Rich (Listener) (7:51)

She does. She has about 240.

Jill Schlesinger (7:55)

Okay, great. Any other money that we need to know about, just in terms of money that you have invested or, you know, rental property or anything like that?

Rich (Listener) (8:07)

Yeah, my total net worth, if you add the Roths, the joint tenant account that we have, everything all told is about 2.5 million.

Jill Schlesinger (8:17)

Okay, great. And you guys live in your own home, no other property?

Rich (Listener) (8:21)

That's correct.

Jill Schlesinger (8:22)

How much is your house worth?

Rich (Listener) (8:24)

A little over 600k.

Jill Schlesinger (8:26)

Is there a mortgage on it?

Rich (Listener) (8:28)

There is not.

Jill Schlesinger (8:29)

Okay. And big question. Are you ready for this? Rich from Montana, how much money do.

Rich (Listener) (8:34)

You guys spend over the last 4 months? It's been about 72k annually, if you prorate it.

Jill Schlesinger (8:45)

Okay. And there's no big amount of money that's coming up like you have. You said you have kids. Are they launched? Is there money that you need to help them out with anything in that. In that vein?

Rich (Listener) (8:57)

Yeah, they are launched. You know, aside from, like, my daughter's getting married in the spring, so we're gonna throw them some money.

Jill Schlesinger (9:06)

How much?

Rich (Listener) (9:07)

Probably 35k.

Sponsor/Ad Voice (9:08)

What?

Jill Schlesinger (9:09)

That's so cheap. How lucky for you. That's amazing. Amazing. I'm getting married again in. Actually, Mark and I both had the cheapest weddings possible. We both got married at city hall. Okay, so you'll need 35,000. Do you have just a plain old checking or high yield savings account?

Rich (Listener) (9:26)

We do.

Jill Schlesinger (9:27)

How much? About 20.

Rich (Listener) (9:30)

About 20.

Jill Schlesinger (9:30)

Oh, there's the wife. There's Mrs. Rich.

Rich (Listener) (9:33)

That's my bookkeeper.

Jill Schlesinger (9:35)

Thank you. She's your CFO. You said how much? 25,000.

Rich (Listener) (9:39)

About 20.

Jill Schlesinger (9:40)

Okay, 20. Got it. And there's nothing big coming up beyond the wedding, right?

Rich (Listener) (9:46)

Not that I'm aware of.

Jill Schlesinger (9:47)

Okay, so for the, you know, for right now, if we look at where you are, you have a spend of 72. What is your inclination? Is your inclination to be like the pension? I want to claim Social Security right now. I want to have all this income. Like, what do you want to happen right now?

Rich (Listener) (10:06)

My gut is that I should claim Social Security because if I'm going to be converting trad IRAs into Roths, I'm going to need some income to pay for that. And I was thinking of using Social Security to pay for that. That was my gut. So what's.

Jill Schlesinger (10:25)

Tell me about the tax rate in the state of Montana.

Rich (Listener) (10:29)

It's a. I think it's around 6%, but I honestly, I haven't been here that long, so.

Jill Schlesinger (10:39)

Okay, because I'm looking. I want you to think about it two different ways. I hear what you're saying, on the other hand, I might look at it as. Right. Now, we know you're going to get pension money. You're 43,000. We've got your wife's Social Security, so that's $69,000. Because you are converting, you're going to have a taxable. You know, you're going to have taxable income. So I'm wondering whether it makes sense to do some of the converting over the next few years before you claim Social Security so that we have less income, that we can keep you in a tax bracket that is maybe a little bit more reasonable. So that's another way to think about it. It's not a definite. I'm just saying that's another way to think about where you are. Because if we're going to do a conversion, right, you don't have to obviously do nine, you know, a million dollars at once, but it's certainly possible. Like, what a dollar amount were you thinking about on an annualized basis?

Rich (Listener) (11:35)

Well, I thought the best strategy would be to do portions of it over the next four years before I start taking RMDs, so I could. I really don't need RMDs or necessarily want them, and I want to put as much money into the Roth as possible.

Jill Schlesinger (11:52)

I mean, that's interesting. Mark, do you think that they should maybe delay the actual Social Security and convert, you know, whatever 150 grand a year or so? Maybe a hundred. I don't know. What was. How much did you guys make? Like, what are you used to paying, tax bracket wise?

Rich (Listener) (12:11)

Probably around 130 between.

Jill Schlesinger (12:15)

Okay, so you're a 22% kind of folks. Okay, so if we have $69,000 of income, right, your pension, your wife's Social Security, and then you did like 125 grand a year of RMDs, right? We would keep you in the 22% bracket, and we could do that for some group of years, you know, until we at least whittle it down. Are you guys charitably inclined?

Rich (Listener) (12:48)

We are, but nothing extravagant.

Jill Schlesinger (12:52)

Mark, do you want them? I know what you want to do. Can you. Can you tell them what you want to do? Because I think. I bet you want to convert more of their money up front and pop them into a 24% bracket, is that right?

Mark Tularcio (13:03)

I mean, I would. And obviously the only reason why we're telling him to convert, you know, he's really gung ho on leaving this money to his kids, so that's why he wants to do this, which I'M fine. Do that. But I don't think I would use the Social Security income to pay the taxes on the.

Jill Schlesinger (13:16)

I wouldn't either.

Mark Tularcio (13:16)

I would rather use the brokerage and pay capital gains to do it.

Jill Schlesinger (13:19)

Me too. I would rather you limit the amount of income you receive unless. Are you in good health? I neglected to ask that. Are you. Is there anything like. Are you. Like, you're gonna. How's your life expectancy and like your gene pool?

Rich (Listener) (13:32)

My gene pool is probably not as good as my health is right now. Both my parents died at an early age. 65, 59. I am in good health. I'm very active, and I'd like to think that I'll have a good run, but, you know, you never know.

Jill Schlesinger (13:51)

Right. Of course. Well, I think then I would like to at least consider this, that you delay your Social Security and you use the money from your brokerage account to pay the taxes and, you know, you pay your capital gains on your brokerage account. You have the money available to not just pay for the conversions, but you're going to need some money to Pay for your $72,000 annual spend and use some of that brokerage account. I wouldn't go crazy, honestly. Like, if you got the traditional assets down to, I don't know, let's call it five or six hundred grand, I think it's pretty reasonable at that point. And, you know, you can, then you can certainly, you know, continue to convert after that, but you'll have done quite a bit, paid for it, and your kids have a great asset. And at the end of the day, if you wanted to do more, if the brokerage account's doing really well, if you don't spend as much money, then great, keep doing that. But, you know, I think that it's worth it for you guys because as you said, inheriting a Roth asset is incredible, right? And you look at once your Social Security starts, boy, you. You know, that cash flow is going to be big. And so it may be that once that starts, you can't convert as much without popping yourself up into another tax bracket. We'll have to see what the tax brackets are in a few years. Right? That may happen for you. Do you guys work with an accountant?

Rich (Listener) (15:17)

We do.

Jill Schlesinger (15:19)

It might be worth it to just make sure that they know that you're planning to do this just so you can like, sort of articulate your game plan for the next few years. They often will be like, oh, don't do it. Who wants to pay taxes? But paying the tax now and locking it in. You have the money, you're going to have plenty of cash flow. I think this makes so much sense for you guys.

Rich (Listener) (15:39)

Great. Yeah. We have talked to our financial planner, and we also have about talked. Talked to our accountant about it.

Jill Schlesinger (15:46)

Oh, good.

Rich (Listener) (15:47)

And it's interesting because they're both less positive about it, and I really feel like this is a smart move down the road. Our financial planner was trying to entice me into life insurance.

Jill Schlesinger (16:03)

Oh, no. What kind of financial planner? I want to fire that dude. Sorry.

Rich (Listener) (16:08)

Yeah, I've honestly been contemplating that because I was like, if he's looking out for my interests, I don't feel like he's. He should be advocating for that.

Jill Schlesinger (16:18)

But can I just say that's a weird thing to. To actually put out there and. Okay, can I. Cynical Jill. I'm gonna just say cynical Jill is like, oh, yeah, of course. What he'd rather do is make sure you have the brokerage account intact so they can charge you a fee on it and keep that money. Like life insurance. That's a terrible. It's a. It's like, that makes no sense to me. You've got plenty of money. Why would I pay the fee for life insurance?

Sponsor/Ad Voice (16:43)

It's so dumb.

Jill Schlesinger (16:44)

Like. Like, I wouldn't want to get that. I wouldn't have. I definitely would not want to do that. That's.

Rich (Listener) (16:49)

Yeah, I told him no. And I was like, the. The fee for that, I was like, I'd rather put that money into taxes and get the benefit.

Jill Schlesinger (16:56)

Totally. I totally agree with you. And, you know, look, if the worst. The worst case. Case scenario is, like, I don't actually get to convert as much, so you can start taking money out, or you can do some smaller conversions over time, or you can say, I'll use some of the traditional money to do a qualified charitable distribution. There's a lot of things you can do to make that money go away, but I think once it's more like a half a million rather than a million, it feels like you have a little bit more control over it and you've got that tax liability that is locked in. So. Yeah, I think that's good. Isn't that funny? I. I know a lot of these folks, man. It's like the. The power of the Roth is. I know they understand it, but it is incredible to me. I. It really is. So I. I am fully supportive of this. And. Yes, go on.

Rich (Listener) (17:44)

One question, too, about the not getting Social Security and putting that off. What's the motivation for that versus spending?

Jill Schlesinger (17:53)

So just Keeping your tax taxable income down. We want the taxable income to come from the conversion. Yeah, right. And you have this $900,000 pot. You're not going to use the whole brokerage account, but you can use that pot of money to pay for the conversion, to pay for the taxes. And instead of having taxable income which is, you know, at the very least it's going to be 22% plus your state income tax as opposed to, you know, looking at, and you'll be able to convert more without the Social Security income popping you up into the 24% bracket. And I imagine that the brokerage account has a lot of, has a lot of gains in those in the holdings.

Rich (Listener) (18:32)

It's right now year to date, it's, it's only up about 9%, 10%, something like that.

Jill Schlesinger (18:39)

Yeah, but you got capital gains from way back. It has to, right?

Rich (Listener) (18:43)

Yeah, yeah. Actually we got nailed a of couple, couple of years ago because it was, it did really well.

Jill Schlesinger (18:50)

Yeah. So I mean I think that if you can, you know, again, if you're limiting your tax of again, if you're limiting your conversions and you can pay a 15% capital gains rate on your, and this is why I want you to talk to your accountant that like they'll be able to give you the actual dollar amount you want to sell. You know, you'll sell some of your brokerage account out. You pay a 15% capital gains rate rather than say 22 or 24% as a marginal tax bracket. That's all. It's like a tax arbitrage. It's not, you know, it's not like the most important thing, but it's, you know, if we're talking math here, it makes more sense.

Rich (Listener) (19:26)

Yeah. So instead of paying. Makes a lot of sense. Instead of paying 42k of 10 or 24%, I'm going to be doing 15. That makes a lot of sense.

Mark Tularcio (19:38)

Right. So Social Security will be taxed as ordinary income. Your brokerage account will be taxed at capital gains rates.

Rich (Listener) (19:43)

Yeah.

Jill Schlesinger (19:44)

And ideally we can keep you in that 15% tax bracket which married filing jointly as long as you keep that income. Again, this is another reason why not converting too much at once that we can keep you in that income bracket under 250. Because when you that there's this weird threshold thing that kicks in on your long term capital gains. So you know, you're again, your accountant can help you out with that. But I think that generally speaking I think it's a great idea. You don't spend A ton of money. You're gonna have all this income eventually. We're just talking about the next few years, really. That's all we're talking about. It's like a three year game plan where I think it's gonna really work. Okay. If you are like rich and the CFO and you've got some questions about a conversion strategy, get in touch with us. This is like Mark's wheelhouse. He loves this so much. And so do we. And so do I. And all of you as well. So just go to jillonmoney.com, click the contact us button, write us a note. Please let us know if you'd like to come on the air live with us. It's so awesome when you do that. Love it, love it, love it. And while you're on the website, don't forget to sign up for the free weekly newsletter, okay? You can subscribe to us on the Odyssey app or wherever you find your favorite podcast. It's Friday, so we do a big thank you to Joel Goodman, the composer of our music, and to Mark Tularcio, the executive producer and king of all things web. And to the lovely, wonderful people at Odyssey who distribute this program, we ask that you please do something nice for someone else. Change your work, change your wealth, change your life. Thank you for listening and we'll talk to you on Monday.

Sponsor/Ad Voice (21:28)

This message is from Jill on Money sponsor, Charles Schwab. Here's a question for you. What question should you ask before hiring a financial advisor?

Jill Schlesinger (21:35)

Think of it this way.

Sponsor/Ad Voice (21:37)

You're basically interviewing someone for the job of helping you manage your entire financial life. So let's get the interview right. Question one. Are you a fiduciary some of the time or all of the time? This is what sets independent registered investment advisors apart. As fiduciaries, RIAS must do what's in your best interest, not just some of the time. All of the time. Assuming the answer to question one is yes, here's a follow up. How will you guide me through financial decisions while keeping my larger goals in mind? You're looking for someone who connects your financial aspirations to your big picture. Someone who takes the time to get to know what's important to you and your family so they can offer advice that fits your values. The relationship should feel personal, not transactional. Question 3. How will I know my money is safe and in the right place? It's important to make sure you always know where your money is, where it's going, and why. Transparency is key, and that's where Rias excel as fiduciaries, they're legally required to do what's best for you and your situation, like helping you understand the whys behind their recommendations and having your money held by a third party custodian. And finally, what other services do you provide? All financial advisors can help manage your investment portfolio, but many RIAs also provide services like tax planning, education funding, business succession, and estate and trust planning to bring your broader picture into focus. It's the intersection of your money and your life where RIAs can make the biggest difference. These few short questions can have long lasting implications. Do your homework and discover the difference an independent RIA can make. Visit find your independent advisor.com what's Up World?

Von Miller (23:15)

It's Vaughn Miller, Super Bowl MVP, chicken farmer, and now host of Free Range. This is a show where I go off the field and off the script. We're talking what's hot in music, film, trending news and everything blowing up your feed. If you love football, you'll feel at home. But if you're here for the vibes, the Internet deep dives the conversation. This is your podcast. Join me every Wednesday. Follow and listen to Free Range with me, Von Miller everywhere. You get your podcast.