Are These Millennials Saving Enough to Retire Before 60? - 541

Summary

Podcast Summary: Your Money, Your Wealth Episode 541
Title: Are These Millennials Saving Enough to Retire Before 60?
Release Date: August 5, 2025

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Introduction

In Episode 541 of the "Your Money, Your Wealth" podcast, hosts Joe Anderson, CFP®, and Alan "Big Al" Clopine, CPA from Pure Financial Advisors delve into the pressing question: Are millennials saving enough to retire before 60? The episode features real-life scenarios from listeners Pam and Jim, Matt and his wife, Will and Jane, and Juan's mother, providing tailored financial insights and strategies to address their retirement goals.

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Listener Case Study 1: Pam and Jim from Phoenix, AZ

Overview:
Pam (38) and Jim (41) aim to retire at ages 59 and 62, respectively. With a household income of $260,000, they have diligently saved $600,000 by age 40 through various retirement accounts and maintain a mortgage of $210,000 at a low interest rate of 2.75%.

Key Financial Details:

• Savings Breakdown:

  • $350,000 in retirement accounts
  • $30,000 in HSA
  • $260,000 in cash reserves (including emergency funds and funds for home renovations and vehicle purchases)

• Current Expenses:

  • Annual retirement spend target: $144,000 (net in today's dollars)

Discussion Points:

• Savings Rate and Growth:
  Big Al noted, “$600,000 saved at roughly age 40. That's amazing, right?” [06:09].

• Investment Strategy:
  With a conservative 3% return on half of their savings held in cash, Joe projected their retirement portfolio to potentially reach $3 million, generating approximately $118,000 annually at a 4% withdrawal rate [07:00].

• Recommendations:

  • Diversification: While their current strategy is robust, incorporating some pre-tax accounts could yield tax savings. Joe suggested, “having some dollars pre-tax while they're in a high tax bracket today” [08:10].
  • Emergency Fund Management: Pam's extensive cash reserves were commended as a prudent measure to ensure financial stability [05:21].

Notable Quote:

“If you got a certain amount of savings at certain age, which you do, and you're saving at least 20% of your income, which you are actually saving more than that, you should be fine.” — Big Al Clopine [07:50]

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Listener Case Study 2: Matt and His Wife from Pennsylvania

Overview:
Matt (39) and his wife plan to retire at 57. They boast significant savings, including $600,000 in retirement accounts and substantial contributions to their daughters' 529 plans.

Key Financial Details:

• Savings Breakdown:

  • $600,000 in retirement accounts
  • $30,000 in Roth IRAs
  • $130,000 in brokerage accounts
  • $80,000 in savings
  • $529,000 in 529 plans for three daughters

• Current Expenses:

  • Annual retirement spend target: $160,000 (in today's dollars)

Discussion Points:

• Retirement Goal Assessment:
  Joe introduced a simple formula: “$160,000 divided by 3% gives a target of approximately $5.3 million” [15:07].

• Inflation Adjustment:
  Adjusting for 3.5% inflation over 18 years, the target increases to around $7 million [16:08].

• Pension and Social Security Integration:
  Incorporating pensions and anticipated Social Security benefits could bridge the gap, potentially reducing the required portfolio size to around $5 million [17:16].

• Liquidity and Investment Strategy:
  Emphasized the importance of maintaining liquidity for potential early retirement expenses and leveraging long-term growth investments to achieve the $5 million target [09:42].

Notable Quote:

“I mean, what we say is if you got a certain amount of savings at certain age, which you do... you should be fine. Can you retire early? Probably.” — Big Al Clopine [07:50]

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Listener Case Study 3: Will and Jane from New York

Overview:
Will (57) and Jane (58) plan to retire in two years, coinciding with their youngest child's college graduation. They have a combined income of $315,000 and substantial retirement savings, including pensions and brokerage accounts.

Key Financial Details:

• Savings Breakdown:

  • $1,080,000 in pre-tax retirement accounts
  • $40,000 in Roth IRAs
  • $40,000 inherited IRA
  • $700,000 in after-tax brokerage accounts
  • Social Security: Approximately $45,000 each at full retirement
  • Pensions: $100,000 each annually

• Current Expenses:

  • Estimated living expenses: $10,000 to $12,000 monthly

Discussion Points:

• Roth Conversions:
  Given their high income, Joe and Big Al discussed the benefits of gradual Roth conversions to stay within the 24% tax bracket, recommending converting up to $100,000 annually without exceeding their current tax bracket [28:08].

• Pension Options:
  They evaluated various survivor pension options, concluding that opting for a 100% single-life pension with minimal reduction is advantageous for maintaining substantial fixed income [34:13].

• Investment Strategy:
  With pensions serving as the bond portion, they recommended maintaining a high allocation in equities (85-95%) to maximize growth, given the substantial fixed income [30:37].

• Liquidity Management:
  Suggested using brokerage accounts to pay taxes on Roth conversions or considering a mortgage for additional home purchases to preserve retirement account liquidity [35:30].

Notable Quote:

“Roth conversions are very important... I don't think I'd go past the 24% bracket.” — Big Al Clopine [28:52]

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Listener Case Study 4: Juan's Mother from Florida

Overview:
At 57, Juan's mother and her wife plan to retire in two years. With a combined income of $315,000 and significant pensions, they seek advice on Roth conversions and capital gains tax implications.

Key Financial Details:

• Savings Breakdown:

  • $1,080,000 pre-tax retirement accounts
  • $40,000 in Roth IRAs
  • $40,000 inherited IRA
  • $700,000 in after-tax brokerage accounts
  • Pensions: $100,000 each annually

• Current Income:

  • Ordinary income: $350,000
  • Long-term capital gains: $300,000 (from an installment sale)

Discussion Points:

• Capital Gains Taxation:
  Clarified that capital gains are tiered. Most of Juan's mother’s gains would be taxed at 15%, with the additional $20,000 crossing into the 20% capital gains rate and subject to a 3.8% net investment income tax, totaling up to 23.8% [46:18].

• Tax Strategy:
  Advised cautious Roth conversions to stay within the favorable tax brackets, emphasizing the importance of not exceeding the 24% bracket to optimize tax efficiency [47:13].

Notable Quote:

“Most of it will be taxed at 15% plus the net investment income tax at 3.8%. If you're... $20,000 extra capital gain that'll be taxed at 20% plus 3.8%.” — Big Al Clopine [47:24]

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Additional Highlights

• Humorous Banter:
  The hosts engage in light-hearted conversations about alcohol preferences and quirky car troubles, adding a personable touch to the financial discussions.

• Engagement with Audience:
  Andi Last, the executive producer, encourages listeners to participate in the 8th annual YMYW podcast survey for a chance to win a $100 Amazon e-gift card, fostering community interaction [23:53].

• Promotional Content:
  The episode concludes with promotions for free financial resources, personalized financial assessments with Pure Financial Advisors, and disclaimers regarding investment advice.

Notable Quote:

“You have to be happy to start with.” — Big Al Clopine [22:27]

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Conclusion

Episode 541 of "Your Money, Your Wealth" provides comprehensive, real-world financial advice tailored to listeners' unique retirement scenarios. Joe Anderson and Big Al Clopine offer actionable insights on saving strategies, investment diversification, tax optimization, and retirement planning, all while maintaining an engaging and relatable dialogue. Whether you're a millennial contemplating early retirement or approaching retirement age with specific financial questions, this episode delivers valuable guidance to help ensure a secure and enjoyable retirement.

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Relevant Resources:

• Retirement Plan Spitball Analysis: YourMoneyYourWealth.com
• 8th Annual YMYW Podcast Survey: Participate for a chance to win a $100 Amazon e-gift card.
• Free Financial Assessment: Schedule a meeting with Pure Financial Advisors via Zoom or in person.
  • Link: Financial Assessment
  • Phone: [phone]

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Disclaimer: The information presented in this summary is for informational purposes only and does not constitute personalized investment advice. Consult with a financial advisor for advice tailored to your individual circumstances.

Transcript

[Andi Last]

Pam and Jim in Phoenix are 38 and 41 and want to retire at 59 and 62. Matt and his wife in Pennsylvania are both 39 and want to retire at 57. Are these millennials on the right financial path, or have they brunched and YOLO'd away their retirement dreams? That's today on youn Money, you, Wealth Podcast541. Plus, do Roth conversions make sense for Will and Jane in New York? Given their high income and high tax bracket, which pension option is best for their circumstances? Finally, the fellows spitball on how capital gains will be taxed for Juan's mother in Florida. Who's Juan? Who knows? I'm executive producer Andi Last. And here are the hosts of youf Money, you, Wealth, Joe Anderson, cfp, and Big Al Clopine, cpa.

[Joe Anderson]

We got Pam and Jim in Phoenix, Arizona.

[Big Al Clopine]

Damn.

[Andi Last]

As my office.

[Joe Anderson]

Oh, Pam and Jim.

[Big Al Clopine]

Oh, yeah, yeah, from the office. You're right. It is. Yeah.

[Joe Anderson]

All right, as millennials, we have YOLO'd.

[Andi Last]

You only live once.

[Joe Anderson]

You only live once.

[Andi Last]

Okay, so in other words, spend the money now.

[Big Al Clopine]

That's what they're implying.

[Joe Anderson]

Yolo'd.

[Andi Last]

I haven't heard it as a verb before. An action verb. We yoloed.

[Big Al Clopine]

Why not? There.

[Joe Anderson]

I've heard of, like, fomo. What's fomo?

[Big Al Clopine]

Like fear of missing out. Yeah, yeah.

[Joe Anderson]

Never no fear. I haven't used the yolo. Yeah, but you only live once.

[Juan's Mother]

Mig.

[Joe Anderson]

Al.

[Big Al Clopine]

Yeah. My, my. I have a friend Wendy that says ammo. She has. She doesn't have fomo. She has ammo. Afraid of missing out. Oh, afraid everyone else has fomo, but she has ammo.

[Joe Anderson]

Got it. All right. And brunched our way out of our retirement dreams.

[Big Al Clopine]

So they're wondering if they. They've done that. Okay, well, we'll find out.

[Joe Anderson]

Brunched. So what, they like to go Sunday.

[Big Al Clopine]

Brunch, and they're spending their money now? They only live once, and they're having a lot of brunches.

[Joe Anderson]

Got it. All right. We're 38. Pam and Jim is 41. We're avid listeners of the podcast and excited to hear your spitball take on our situation. Our biggest concern. We might be stuck working until we're fossiled. You'd like to hang out with. I would be so confused. Fossilized.

[Big Al Clopine]

Fossilized.

[Joe Anderson]

All right, I'll pick up some.

[Big Al Clopine]

You'll get some new words.

[Joe Anderson]

I would love it.

[Andi Last]

Get some millennial language.

[Big Al Clopine]

India.

[Joe Anderson]

Philosophized. Philosophized. Since we're only now decided to get serious about saving for retirement. Better late than ever, right? Let's start with the fun stuff. Jim is a bourbon enthusiast. Well, I'm all about the gin. Nothing like a gold rush in bees knees to wash down our essential dread.

[Andi Last]

Existential. Dread.

[Joe Anderson]

Existential is different than essential, but I'm just killing it. Today Jim rolls around in style with his 2024 Tesla while I cruise in my trusty 2010 Ford. Because nothing says living the dream like an older car that has seen some serious mileage.

[Big Al Clopine]

Okay, that's great.

[Joe Anderson]

All right, our grand plan is to retire at 59 and 62 with an annual retirement spend of $144,000 net in today's dollars. But we're well aware that one or both of us might be slinging side gigs until Jim hits 65. Jim's career does offer some decent part time or contract work. I think maybe 50,000 or $100,000 a year. The dream is to save enough cash to bail on our full time jobs at 59 and 62. Particular if our work environments become as toxic as the leftover sushi we ate last Friday.

[Big Al Clopine]

So they kept it in their fridge. It didn't work out too well.

[Joe Anderson]

Oh boy. Seriously, who needs that drama? Not me. Now let's talk pensions, because Jim's got a couple of golden keys ready to hatch at 65. Small military pension, National Guard. They'll net $2,500 a month co adjusted and a lump sum payout from his current gig that is Conservatively estimated about $750,000 if he stays until 62. Here's the current details. Household income is 260,000. Tax bracket 24%. 2.5% in the state of Arizona, annual spend is $120,000. Annual savings. Retirement 100% goes to Roth, is $70,000. We both max our employer plan of $23,500 and IRAs of $7,000. Plus we max out our HSA at 8,000 retirement savings today we got $350,000. 403 Roth 110, 401K, Roth $105,000. Roth IRA $70,000 and $15,000. TSP, Roth $50,000. All right, so $350,000 total and they got $30,000 in HSA. They got some cash of $260,000. $60,000 emergency fund, 100,000 is for home renovations and $30,000 is for a new vehicle. For Pam, $70,000. Miscellaneous, various buckets, Vacation annual premiums, annual employment expenses, holidays, birthdays. However, in all honesty, Pam likes her emergency Fund to have an emergency fund to hoard cash.

[Andi Last]

Her emergency fund has an emergency fund. I like that.

[Big Al Clopine]

I like it.

[Joe Anderson]

All right. We got $210,000 mortgage on the home at 2.75%. Home is worth $425,000. We have no other debt. We put down the avocado toast in our early 30s, got serious about our finances, and paid off $250,000 of student loans. Okay, thanks. So here we are trying to figure it out if we are trading our future for mimosas in Instagram likes. Any advice or snarky comments you've got, we can handle. All right.

[Big Al Clopine]

Okay.

[Andi Last]

So Pam and Jim are expecting you to Dave Ramsey this and tell them that they've screwed up.

[Big Al Clopine]

Well, first of all, I would say 600,000 saved at roughly age 40. That's amazing, right?

[Joe Anderson]

Even $70,000 a year.

[Big Al Clopine]

They want to retire in 2062 for Jim.

[Joe Anderson]

Okay.

[Big Al Clopine]

Yeah. Over 20 years. Right. So at any rate, I think the amount of savings is great. The amount they have. I mean, the. The income's 268. I can't remember what the Fidelity table, I think it said you needed two times your income at 40. Something like that. And they're there. Plus they're saving a ton.

[Joe Anderson]

I don't know. Let's go. Let's say you got $600,000.

[Big Al Clopine]

Yeah. Start with that. Go. Let's just say 20 years.

[Joe Anderson]

20 years. And you're saving $70,000 a year.

[Big Al Clopine]

Yeah, 7%.

[Joe Anderson]

Well, 3%, because half of that is in cash. So they got $3 million.

[Big Al Clopine]

Which allows.

[Joe Anderson]

4% of that is $118,000.

[Big Al Clopine]

But I don't think what they're saving will be in cash. I think the cash stays the same.

[Joe Anderson]

Well, even at 3% is pretty conservative.

[Big Al Clopine]

Yeah, very conservative.

[Joe Anderson]

So let's say it's anywhere from $118,000 on the low side, maybe to $160,000 on the high.

[Big Al Clopine]

Yeah. Or even a couple hundred thousand more rate of return. I think that.

[Joe Anderson]

Yeah.

[Big Al Clopine]

Will you have to work a little bit maybe at this spending level. But the thing is, it's way too early to predict what you want your retirement to look. I mean, what we say is if you got a certain amount of savings at certain age, which you do, and you're saving at least 20% of your income, which you are actually saving more than that, you should be fine. Can you retire early? Probably. Do you have to work a little part time at this spending rate? Maybe. But I think, Joe, I think they're on a really good Track here.

[Joe Anderson]

What would you change given their situation?

[Big Al Clopine]

What would I change?

[Joe Anderson]

They got $260,000 of household income. I don't know. And they're doing 100% Roth in most cases. I would say that's great. But I think they could get some tax savings if they put a little bit into a pre tax account because they're going to give up the standard deduction and maybe the 10% tax bracket in retirement, which are really low rates. So having some dollars pre tax while they're in a high tax bracket today, they're going to be in a very low tax bracket in the future because there'll be very little income tax because everything is going to come out tax free.

[Big Al Clopine]

Yeah, no, I agree, but yet you got to account for. They have $30,000 of pension. So that's. Then the Social Security will sit on top of that. I guess the RMDs. I mean based. Probably you're guessing just a little bit. You know, you wouldn't put a lot, maybe 25% in pre tax, something like that.

[Joe Anderson]

I mean you could save a couple of bucks and leverage the tax rates today at 260 and then they're going to be in a lot lower tax bracket in retirement. So.

[Big Al Clopine]

Yeah, I agreed. And then the way you think about it, assuming the tax laws are similar then at retirement 21 years from now, then you're in lower bracket. You start converting in a lower bracket what you have in pre tax. So that, yeah, that does make a difference.

[Joe Anderson]

You could save 22% in tax today and you could convert it out in the 10 if tax rates were exactly the same.

[Big Al Clopine]

Yeah, but yeah, I like that. I don't know how the retirement savings is invested, but that should be probably more stock based than bonds and safety. Cash is fine, you got a lot of cash, but there's nothing wrong with a lot of cash. But the extra savings I would put into your retirement accounts and get that invested.

[Joe Anderson]

I agree. I think a lot of advisors, you know, in, in some of our advisors too, it's like they see $260,000 in cash and they're like, oh my God, that's a lot of cash. Yeah, like well, have you ever had cash before? You feel comfortable with a little bit of cash, you know. Yeah, you have some flexibility and they have plenty of dollars that are invested and they're saving 70,000 as long as the 70,000 is going into long term growth investments.

[Big Al Clopine]

Plus they've got, they got some designations, house remodel.

[Joe Anderson]

And I like the cash reserve on the Cash reserve.

[Big Al Clopine]

Yeah. That is nice, huh?

[Joe Anderson]

Yeah.

[Big Al Clopine]

Yeah. So. So you're saying you've got some cash.

[Joe Anderson]

So if it feels good, Yeah, I got 50 bucks. So.

[Big Al Clopine]

Wait a minute. Are we getting a big wallet on Joe?

[Joe Anderson]

No, no, not even close. But yeah, it's gonna take quite some time for that.

[Big Al Clopine]

Yeah, I. I honestly, I think. I think they're doing great. I don't. I wouldn't change too much here.

[Joe Anderson]

Yeah. Except for some of the verbiage that you're using. The bees. Knees, philosophied, whatever.

[Big Al Clopine]

Yeah. I mean, the only. I'm not a fan of bourbon or gin, but that's just me. I like beer.

[Joe Anderson]

Oh, I love. I don't love. I like bourbon.

[Big Al Clopine]

You like bourbon?

[Joe Anderson]

Yeah.

[Big Al Clopine]

Yep.

[Joe Anderson]

Jen, I'm not. I can't tell you the last time I even saw Jen.

[Big Al Clopine]

I will. I actually. I don't drink straight alcohol anymore, but I do like margaritas, so I guess I like tequila a little bit.

[Joe Anderson]

You mean just like.

[Big Al Clopine]

I don't do vodka on the rock versus seven on the rock? I don't. Yeah.

[Joe Anderson]

Shots.

[Big Al Clopine]

No, I'm not. That's. That's not for.

[Joe Anderson]

Line up the shots with Big Al.

[Big Al Clopine]

Just line them up and you'll watch them. Sit there.

[Joe Anderson]

Oh, when is the last time you've done a shot?

[Big Al Clopine]

Oh, probably on vacation. I mean, probably two weeks. Yeah, it was a new shot. It was terrible. Unless you like licorice. Oh, no, I mean, I. I can't say I don't. I mean, I did. I probably had two or three shots on our five week vacation, so I will do it. It's just not. Not my preferred drink.

[Joe Anderson]

Three shots in five weeks.

[Big Al Clopine]

That's a lot, right?

[Joe Anderson]

That's pretty aggressive.

[Big Al Clopine]

That's. That's pretty. You know, you get to my age.

[Joe Anderson]

That'S a day, you know, at a.

[Big Al Clopine]

Five week, one stop, might be the end of you.

[Joe Anderson]

All right, so. Yeah, very good. Thanks, Pam and Jim. We'll move on here. We're cruising on to Matt and Pa. Hey, Andy, Joe, Big Al. Looking for a little retirement spitball? My wife and I are both 39 and we would like to retire around 57. Here's our current situation. We got $600,000 in retirement accounts, $30,000 in Roth, $130,000 in a brokerage, $80,000 in savings, and $50,000 and $529,000 plans for our three daughters, ages 12, 10 and 8. I max out my 403 each year, and my wife owns her own dental practice and contributes $65,000 to her 401. We set aside $1,500 a month in the 529 plans, $5,000 into our brokerage account, and then we max out the backdoor Roths every year. So what question could he have?

[Big Al Clopine]

Well, keep going.

[Joe Anderson]

I mean, like, the wife got a dental practice. They're saving an obscene amount of money.

[Big Al Clopine]

They already got 800,000 bucks, and he's 39, and they're saving a fortune.

[Joe Anderson]

I don't know if. How can I help you? We like to spend $160,000 in today's dollars when we retire. Are we on track? Other details. I drive a 2017 Toyota Highlander, and I enjoy a good bourbon. Oh, two bourbons in a row here.

[Big Al Clopine]

You're right.

[Joe Anderson]

Double it up. Or a craft beer.

[Big Al Clopine]

Now that's for me.

[Joe Anderson]

Oh, can't stand.

[Big Al Clopine]

I know, I know. You don't like craft.

[Joe Anderson]

No way.

[Big Al Clopine]

Nope.

[Joe Anderson]

I think I'd rather have an Uzo.

[Big Al Clopine]

That's saying something.

[Joe Anderson]

Craft beer just sucks.

[Big Al Clopine]

Have you had one? Have you had one lately?

[Joe Anderson]

Night long before. I have an ipa.

[Big Al Clopine]

Actually, Anne and Ryan and I got one in Mykonos at lunch, and Ryan went like that, and Ann took a sip and put it down, and I drank it. But little. One little sip of it. That stuff's nasty.

[Joe Anderson]

All right, so what is wife drive? Little Subaru.

[Big Al Clopine]

Okay.

[Joe Anderson]

They from Seattle? No, Pennsylvania. All right. Impressive. And she likes a little rose.

[Big Al Clopine]

Okay.

[Joe Anderson]

Thanks in advance for your spitball. First of all, Matty doing a phenomenal job.

[Big Al Clopine]

Yeah. Are they on track?

[Joe Anderson]

Yeah. I don't even have to get the calculator out. I don't think so. What? They want to retire at what age?

[Big Al Clopine]

57.

[Joe Anderson]

57. They want to spend $160,000 a year.

[Big Al Clopine]

Yeah. So let's call it 18 years.

[Joe Anderson]

So they need 5 million bucks.

[Big Al Clopine]

Yep. So they got $840,000, and they're saving. Let's call it 90 grand.

[Joe Anderson]

$840,000. All right, so what did I do? First of all, is that. Here's a little trick you guys can do at home, right? He wants to spend $160,000 a year. So you put $160,000 in the old calculator, and then at 57, you. You probably don't want to take more than 3% out of the portfolio if you're just kind of thinking a ballpark of how much money that that nest egg should be to be sustainable for the rest of their lives. So at $160,000, I divide that by 3% and I get 5.3 million. So that's my target. So a lot of times people want to know, what's the number? Right. Hey, I want to strive for something. I want to get to a certain number and then I feel that, all right, then I can work towards that goal where Matt is going to work for this goal for the next 18, 20 years, let's say.

[Big Al Clopine]

Yeah, but the 160 is in today's dollars, so you got to inflate that.

[Joe Anderson]

Okay, well, we're in the same ballpark. This is minor.

[Big Al Clopine]

Minor.

[Joe Anderson]

It's a spitball. Minor.

[Big Al Clopine]

Minor Details.

[Joe Anderson]

All right, fine. Okay, let's do it. Let's just say right this day in the house wants to get super technical. All right, so let's use 3.5% inflation over 18 years, you're going to get probably 200.

[Big Al Clopine]

210. 220.

[Joe Anderson]

No, 160. All right, we got 3.5 is. Then we got 18 years. Future value of that is. Let's call it 297. That seems high.

[Big Al Clopine]

No, that's not right.

[Joe Anderson]

I know this calculator is not good. Where's yours? Let me use yours.

[Big Al Clopine]

Yeah, I'll do it. So. So 1, 160 at 3% for 18 years is. 272,000. That's higher than we thought.

[Joe Anderson]

Yeah. So I was pretty close then.

[Big Al Clopine]

You're pretty close.

[Joe Anderson]

All right, so $840,000. They're saving $90,000 a year, assuming. All right, yeah.

[Big Al Clopine]

So I'm going to say 3.5% distribution rate. So they need, let's see, 272.

[Joe Anderson]

It's going to give them three.

[Big Al Clopine]

Yeah. So they need about 7 million.

[Joe Anderson]

Yeah, but. But then you have to calculate Social Security. You got a bridge.

[Big Al Clopine]

I know.

[Joe Anderson]

I would say they need around five. Five and a half is.

[Big Al Clopine]

Yeah, I get 7.7. But I agree that's not including Social.

[Joe Anderson]

Security and that's not including increased savings as they are increased, you know, income and things like that.

[Big Al Clopine]

Correct.

[Joe Anderson]

Let's say a spitball. Five million is what they need. If they keep saving what they're saving, they're going to get close. So they need to save a little bit more if they want to spend $160,000 a year. But that's the toggle.

[Big Al Clopine]

But here's the funny thing is you can probably work two more years and do what you're doing and be fine. So sometimes just adding a year or two or three, or working part time for a couple of years. Right. To. To maintain and preserve the portfolio can make all the difference. So we're just giving you a quick spitball. I think. I think I would basically say you're on track. You're on track. Could you make a few little changes maybe? Can you retire at 57 with the numbers you said it might be just a tad tight, but there's so many variables, and that's such a long period of time.

[Joe Anderson]

All right, so there's. She owns her dental practice. There's got to be equity within the.

[Big Al Clopine]

You would think you could sell it. Yeah, that's right.

[Joe Anderson]

Right.

[Big Al Clopine]

That's right.

[Joe Anderson]

So there's other assets here that we're probably not including.

[Big Al Clopine]

Yeah. And Jim will hit 50 at some point if you want to save more.

[Joe Anderson]

It's Matt. His name is Matt.

[Big Al Clopine]

Oh, Matt.

[Andi Last]

Pam And Jim was the previous ones.

[Big Al Clopine]

Oh, I'm looking at the wrong one. Okay. Sorry. Matt, Which I know isn't your name anyway, so it doesn't really matter.

[Joe Anderson]

Yeah, 39. I mean, you're doing everything. What would you change? Would you change anything here?

[Big Al Clopine]

No, I like it.

[Joe Anderson]

So they're fully funding 401 and 403B plans. They're doing backdoor Roths, and then they're saving into a brokerage account.

[Big Al Clopine]

I don't know what the income is. I might want to get some. A little bit more in a. Tax free. I might do that.

[Joe Anderson]

Yeah. I don't know what the income is either. I don't know what percentage of income that they're saving, but they're saving a ton of money. I know, but I get spending 160.

[Big Al Clopine]

If they're in the 24% bracket. I would. I would get some into the. Into the Roth. The Roth. The Roth.

[Joe Anderson]

Well, they're doing backdoor Roths.

[Big Al Clopine]

I know they're doing some. It just depends on the bracket.

[Joe Anderson]

Yeah, but.

[Big Al Clopine]

Yeah, I can't think of too much.

[Joe Anderson]

I don't know what is. We could get really nitpicky. What's the debt?

[Big Al Clopine]

Wait. Yeah. Do you have a disability policy umbrella? Do you have an estate plan?

[Joe Anderson]

They're probably gonna. I don't know. But their house and everything else. They probably got a couple million dollars of assets. I would imagine their house is close to it. A million dollars. He's a dentist and.

[Big Al Clopine]

Yeah. With the dental practice.

[Joe Anderson]

With the dental practice.

[Big Al Clopine]

Yeah. Could be.

[Joe Anderson]

All right, but. Yeah, I think you're doing great. But spending $160,000, you need a lot more liquid capital than you think.

[Big Al Clopine]

Yeah, I think that's probably the key. Right. And. But once. But you add in Social Security, so you're talking about a bridge period. So maybe that works out just fine.

[Joe Anderson]

Yeah. What they got to figure out is they're retiring at 57. So the bridge from 57 to it's like 67 years.

[Big Al Clopine]

Yeah.

[Joe Anderson]

Or more that's going to come.

[Big Al Clopine]

Yeah.

[Joe Anderson]

They probably are both high income earners, so their security is going to be pretty healthy.

[Big Al Clopine]

Right.

[Joe Anderson]

So their distribution rate, you know, could be a little bit lower from there. So it's that bridge period is the real planning is how he's going to bridge, save as much as you can. Right. Right now and make sure that you're prudent in your investment strategy, rebalance, tax, manage. Just constantly kind of look at little things that you can tweak each year. But where I think the real planning is going to come into is that, all right, now you have to spend the money and you have a big bridge period from 57 to 67 or 57 to 70 or whenever that they decided to take Social Security and that's a long time from now. There's a lot of talk. Social Security is not going to be there.

[Big Al Clopine]

Well, there is talk. We'll see.

[Joe Anderson]

I would imagine there's going to be.

[Big Al Clopine]

I don't think it's going away.

[Andi Last]

You know, that brings up an interesting point because we have a lot of people that say, you know, why don't you do spitballs for normal people? Why is it always people that have 7 million or $10 million that are, you know, asking whether or not they can afford to retire? And I think what this points out is the fact that everybody has anxiety about retirement and whether or not they can get there. And you have to be able to know if you know what your spending is going to be in retirement, how you save to get there, and whether or not you have enough to get there.

[Big Al Clopine]

Right.

[Joe Anderson]

Yeah. And it's funny. You need to have targets. Right. And it doesn't have to like a spitball is just in the back of the envelope. All right, well, here we need to get to a certain dollar figure in the next 20 years. If that's $5 million or if that's $500,000 or if it's 100 grand, it doesn't necessarily matter. I think the first step that people need to figure out is just like, okay, well, what do we need to do? And then do we have the resources to get there?

[Big Al Clopine]

Right.

[Joe Anderson]

And if we don't have the resources to get there, then that's where you have to pivot. It's like, all right, now I have to work a little bit longer, I'm going to have to spend a little bit less or we're going to have to do part time work or downsize or rent out a room that's.

[Big Al Clopine]

You got. How many rooms do you have? Got a match?

[Joe Anderson]

No, not even. Not even close.

[Big Al Clopine]

Well, yeah, bedrooms. I mean, I think that your point is well taken, Andy. I mean, the principles work at any income level, any savings level, any spending target. Honestly, I think some of the most successful retirees that I have seen in my entire career are teachers that have saved a couple hundred thousand dollars. Right. And they're spending 40,000 and their pension is 60. They're doing great. Right. But the principles are the same and I think that's the important thing.

[Joe Anderson]

You think money buys happiness, Al?

[Big Al Clopine]

I don't think it buys happiness, but it does make life more comfortable and you can do more fun things. So I think you have to be happy to start with.

[Joe Anderson]

Well, you would know.

[Big Al Clopine]

I would know. Yeah.

[Joe Anderson]

Big money, Al.

[Big Al Clopine]

Big, big wallet. Yeah. I showed you my wallet. It's very tiny.

[Joe Anderson]

It's like George Costanza.

[Big Al Clopine]

It's been a while since you've seen it. It's. Here it is.

[Joe Anderson]

Oh, wow.

[Big Al Clopine]

I mean, it's like it's a pretty small wallet.

[Joe Anderson]

That's a wallet within the wallet.

[Andi Last]

I've always said you money, you, wealth is your podcast. So which financial topics are the most important to you today? What are your favorite things about ymyw and what would make it even better for you? You've got until August 31st to answer these and 15 other questions for your chance at a $100Amazon e gift card. See all those links to the free financial resources in the description of today's episode. Click or tap the one for the 8th annual YMYW podcast survey. Use the secret password YMYW and weigh in with your thoughts. Help us make your money, you, wealth. Your favorite retirement and personal finance podcast. US Residents only. No purchase necessary. Survey and giveaway clothes and winner chosen at 5pm Pacific Time on August 31, 2025. Now, if you've got money questions or you want to get a retirement spitball analysis of your own, click or tap ask Joe and Big Al in the episode description and send us an email or a voice message like this one.

[Juan's Mother]

Hello, Al, Joe and Andy. A friend of mine turned me on to the show about two years ago and I've listened ever since. I even get my wife to listen on those long road trips. Although somewhat of a captive audience. I'm 57. My wife is 58. We plan on retiring in two years when our third and last child graduates from college. Our combined income is about 315. My wife drives a 2016 GMC SUV. I finally caved in and retired my 2009 Honda Odyssey with a quarter million miles on it squeaking out every mile for that third kid's college. Our drink of choice is a margarita for me and maybe an occasional glass of white wine for my wife with our 7 year old Cavapoo dog. We always drove used cars and from our early 20s we just kept contributing money to 403B. 30 years later it's now $1,080,000 pre tax $40,000 in Roth $40,000 of inherited IRA. An after tax brokerage account of about 700 Social Security will be around $45,000 each at full retirement. My wife and I are each entitled to $100,000 pension, so a little over $200,000 combined. No COLA but no state tax. If we reside in our current state, New York. Do Roth conversions make sense given our high income and tax bracket? And what's the reasonable joint survivor pension option? Estimating our current expenses of around 10 to 12,000 for living expenses in retirement could be a little more with travel and a possible snowbird home. We plan on treating our pension as the bond portion of our portfolio, still remaining about 85 to 95% in equities even in retirement with plans of waiting out those down market years. I know it sounds easier said than done, although we will not need to withdraw from the 403 living expenses. Should we withdraw with tax implications for the second home purchase or just take out a mortgage? Interestingly, our employer reimburses for IRMAA costs. I always hear you speak of IRMAA penalties, but the fact that we get it reimbursed, does that tip the scale for doing Roth conversions earlier? Some conversion software model that I've looked at suggests converting the 1.8 early in retirement the first 56 years or should be limited to the 24% tax bracket or just rip the band aid off. Those models suggest that should someone be lucky enough to live into their 90s, that could be a tax savings of about 600,000. Do we use our after tax brokerage to pay the Roth tax on that? Or can we use that for our snowbird down payment? Or should we just rent somewhere for those years that we want to go? Also, could you give us an idea of your spitball on some pension options? We don't have any significant known health issues. I know the conventional thinking is maybe we each take our single life max pension because their surviving spouse will have their own. However, the more I think about it, the option of maximizing overall family income for the last man standing and the kid's inheritance, could the cost of a lower pension survivor option be worth it? Thanks for taking the time to answer these questions. All the best, Will and Jane from New York.

[Andi Last]

And then he included his pension options healthfully. So those are below there for you.

[Joe Anderson]

Very cool. All right, well, thank you, Will and Jane. So a couple things. He's got hell of a pension there.

[Big Al Clopine]

Yeah, he does. I mean, a couple hundred thousand before Social Security and the spending is $144,000. So right off the bat, check looks good.

[Joe Anderson]

So there's a lot of Roth calculators out there today. And so he's like, you know, he's running it through the calculator and he's like, well, if I do this, it looks like I'm going to have $600,000 extra if I live until 90s.

[Big Al Clopine]

Right.

[Joe Anderson]

That is based on assumptions.

[Big Al Clopine]

A lot of assumptions.

[Joe Anderson]

A lot of assumptions. So you got to be careful with that because the net benefit to you could be several million dollars or it could be negative 600,000 really. Depending on what you're using as assumptions in tax rates, what you're using as assumptions for the rate of return on the overall Roth dollars as well.

[Big Al Clopine]

A lot to do with it.

[Joe Anderson]

So does it make sense to do conversions in high tax rates? I believe the answer is yes, but I would not want to rip the mandate off here. I think I go to the top of the 24% tax bracket and I call it good there.

[Big Al Clopine]

100% agree. So income is $315,000, Joe. The standard deduction is about $30,000. Right. And the top of the 24% bracket is like 395. So it's around 100,000 Roth conversion, give or take something in that range. And so $100,000 Roth conversion ish. Even right now keeps you in the 24% bracket. I would just keep doing that year in, year out and I wouldn't probably go over the 24% bracket. I think Roth conversions are very important, don't get me wrong. And the reason is because you have such high pensions, fixed income, you're going to have high ordinary Inc. Income your entire life. So you want to get as much converted as possible. But I don't think I go past the 24%.

[Joe Anderson]

So he's 57, 58. When did he want to retire and how much money is he putting into the plan?

[Big Al Clopine]

Well, he wants to retire in two years.

[Joe Anderson]

Okay.

[Big Al Clopine]

And as far as going into the plan.

[Joe Anderson]

Well, so two years, let's say he maxes.

[Big Al Clopine]

Yeah, yeah.

[Joe Anderson]

So he's got 1.8. Let's say it's worth a couple million bucks. $2 million at 58 or 60.

[Big Al Clopine]

Right.

[Joe Anderson]

When he retires, by the time he's 75, that 2 million, let's call it, let's say doubles, depending on how it's invested. But he wants to go 100% or 85% stocks because he's using his pension as a bond allocation for his overall portfolio, which I want to talk about in a second here, too. But that could be $4 million, maybe more by the time RMDs hit.

[Big Al Clopine]

Right.

[Joe Anderson]

So you're looking at $160,000 in an RMD at a minimum.

[Big Al Clopine]

Right.

[Joe Anderson]

Because there's no need for those dollars. $160,000 R&B plus he's got $200,000 of fixed income from the pensions. And then he has Social Security on top of that.

[Big Al Clopine]

Now when he retires, then his income goes from $315,000 to call it 205,205. Yeah. So he could add another $100,000, maybe do a couple hundred thousand dollars of Roth conversions and still stay in the 24% bracket and get a lot, a whole lot converted by the time you get to 75,000, doll.

[Joe Anderson]

To equalize the bracket here instead of spiking it. I'm glad he's thinking about it because most people wouldn't think about it. And then that retirement account will continue to grow. And then once RMDs hit right, it's going to spike them into a higher tax bracket. But if you do conversions to the top of the 24% tax bracket from now until RMDs, I don't think the RMD is going to kick them into a higher bracket.

[Big Al Clopine]

I would agree with that. Yep. Yep. It doesn't have to be the whole thing.

[Joe Anderson]

Right. What do you think? Do you agree with using the pensions as a bond allocation and just continued the retirement accounts, 100% equities. And so a lot of people think this way and there's no right or wrong answer here. Because he has fixed income of $200,000, he doesn't necessarily need any dollars from the portfolio. And a lot of advisors look at what is the distribution strategy of taking dollars from a retirement account. And it's usually what is the demand for the portfolio is going to determine how much money that you have in fixed income or safe money such as treasuries, CDs, cash, bonds, there's no need for the portfolio. So it makes sense to just say, all right, well, let's maximize this for growth, 100% equities. I'm totally on board on that.

[Big Al Clopine]

And I would agree. I don't have any problem with that. Because when the fixed income is so much greater than the expenses, then you kind of have a choice. Right. You could take, from the standpoint that I don't really need to take a lot of risk, so I can go pretty safe in my retirement portfolio. Certainly there's nothing wrong with that. But in this case, it sounds like the retirement dollars, Joe, will probably eventually be for the kids. Right. And if it's for the kids, then you've got 30 plus year time frame. Yeah. Go all in. Why not? And especially when you add Social Security on top of that. Right. It's, it's going to be a lot of income. And why not, why not invest it for the kids? Or, you know, another thing that happens is maybe you want to supplement your income substantially in retirement by travel or whatever else, and you have the resources to do that. So I, I'm happy either way, but I'm certainly happy with almost all equities based upon your circumstances because you have so much fixed income.

[Joe Anderson]

Yeah. And you can always pivot.

[Big Al Clopine]

Yeah. Anytime you want.

[Joe Anderson]

He's, he's young, 57. He's going to retire at 58. You know, let's say at 68.

[Big Al Clopine]

You know, it's like, I got enough. Let's stop the risk.

[Joe Anderson]

Yeah. Let's have risk. And you know, my, I don't like seeing the balance of my jump up into accounts, you know, jump all over the place.

[Big Al Clopine]

You know, it's, it's, it is easy to say I'm going all equities when we've had a 15 year bull market.

[Joe Anderson]

Exactly. But let's say that grows to $4 million, that 4 million drops to 2. He's not going to be super happy.

[Big Al Clopine]

He may not be. Yeah. Right, right, right.

[Joe Anderson]

So it, I think mathematically, and if you put this into a retirement scenario or a retirement plan.

[Big Al Clopine]

Yeah.

[Joe Anderson]

You know, it's, that's the recommendation. Do a conversion. Right. Rip the band aid off. And if it's all in equities and if you live to age 90, your net return is going to be a lot higher because all of those dollars are going to come to you tax free or the kids or the heirs. Tax free. But Like I said, I could guarantee one thing. That's the only thing that we can guarantee is that those things are wrong. They're wrong when they are the day they are printed. Because you're assuming a flatline rate of return of 6%, 8%, 3%, whatever that you're doing. The market just doesn't work that way unless you're going into a, a 30 year CD that's guaranteed. And I don't know, in my 30 years doing this, I don't think I've seen that either.

[Big Al Clopine]

That's pretty hard to find. What about the pensions? We've got different options. I'll summarize. So the pension is 105,000. That's with a single life. And then they could do 25% survivors. And then it's 103,000. 50% survivors of 100,000. I'll just say 100% is 97,000. To me, that's super easy. I do the 197. That's not much of a penalty for peace of mind that my spouse will be covered when I'm gone.

[Joe Anderson]

Yeah, you get a hundred thousand versus how much? What was the single life.

[Big Al Clopine]

Yeah, it's in 97 versus 105. Yeah, yeah, I would take that.

[Joe Anderson]

Talking a few thousand dollars, a couple.

[Big Al Clopine]

Hundred bucks a month, you know, when I. Joe, I don't know about you, but I'm on my deathbed thinking I'm kind of glad I did the 100%. Right, right.

[Joe Anderson]

Yeah. If there was a larger spread, I think the answer would be a little bit different. That spread is pretty small. $5,000 you take all in. Or if you die, your wife still gets $97,000. Almost $100,000.

[Big Al Clopine]

Yeah, I like that.

[Joe Anderson]

Yep. For sure. With the amount of fixed income that Will and Gene have in regards to their beach home or cottage or wherever they want to go.

[Big Al Clopine]

Snowbird home, summer.

[Joe Anderson]

Home, summer.

[Andi Last]

They want to do a snowbird home?

[Joe Anderson]

Well, I guess they live in New York, so they have a. Why would they have a summer. Wouldn't it be a winter home?

[Andi Last]

They call it a snowbird. So yes, they want to leave in the winter. If they're, if they're doing a snowbird thing, they want to go like Arizona or Florida or something.

[Big Al Clopine]

Arizona or Florida. Typical spots got.

[Joe Anderson]

Depends on how rich they want to go with the second home.

[Big Al Clopine]

It also depends upon how much they want to do in Roth conversions because that's a lot of what the brokerage account would be for to pay those tax.

[Joe Anderson]

I like liquidity.

[Big Al Clopine]

Yeah, me too.

[Joe Anderson]

So I would take a mortgage depending on where rates are for. Maybe you put 50% down, but maybe you hold a little bit of a note because they got plenty of fixed income to cover the note and RMDs are going to kick out and they're going to have extra income that they're either going to reinvest, but if they're taking dollars out of retirement accounts and paying the tax, you know, the tax is going to be a lot more expensive, I think, than the interest payments.

[Big Al Clopine]

Yeah. And I certainly, yeah, I, I would tend to agree with that. Yeah, I would do the loan too. And I don't know how much. It depends upon what, how much you want to borrow. Right. Because if it's, if it's 500,000, then yeah, I mean you could go either way. But I still would probably take the loan, maybe put a couple hundred thousand down, something like that, just to preserve your liquidity for whatever you want to spend money on and not pull money out of retirement accounts and, or for money to pay taxes on Roth conversions. If it's more expensive, then it's even doubly more so. I want to, I want to save my liquidity.

[Joe Anderson]

Yeah, you put that in a model, it's going to depend on what your interest rate is on the note and what you're going to assume as a rate of return on the investments.

[Big Al Clopine]

I think I would probably get, just being conservative account. I probably get a fixed rate and then look to refinance later hopefully if the rates go down.

[Joe Anderson]

Yeah, I think he's sitting in a really good spot. A lot of really good questions here. Yeah, Congratulations, Will and Jane.

[Andi Last]

Whether your retirement lifestyle will be bad or beautiful depends heavily on the financial decisions and assumptions you make today. Right now, perhaps your outdated, tired, set it and forget it Financial plan needs a complete money makeover. This week on the youe Money, you, Wealth TV show, Joe and Big Al show you how setting goals, revamping your portfolio and doing a total tax turnaround can give your plan for retirement the financial facelift it needs. Click or tap the links in the episode description to watch YMYW TV and to download the companion money Makeover guide for free. This guide is a limited time special offer, so get yours before this Friday. It won't be available again for, for several months.

[Joe Anderson]

Let's move on to Juan's mother.

[Andi Last]

We have no reference of who Juan is so.

[Big Al Clopine]

Well, we must have had, he must have asked a question at one point.

[Andi Last]

Well, we did have a Juan that used to write in quite frequently, but I Think he was in a completely different part of the country. So I'm not sure if there's a relationship here or not.

[Joe Anderson]

Didn't Juan, like, write in kind of goofy stuff as well?

[Andi Last]

Yes, that particular Juan, but there may.

[Big Al Clopine]

Be others that could be him. And she lives in Florida. He lives somewhere else.

[Joe Anderson]

Maybe not that one, but a different one.

[Andi Last]

Exactly.

[Joe Anderson]

Look at that.

[Big Al Clopine]

Wow.

[Joe Anderson]

Oh, gosh. All right, all right, here we go. Juan's mother in Florida. Hi, Andy. Joe and Big Al. Love the show. Listen to the show during my morning walks or while I'm driving in my LR Defender. Land Rover. Defender.

[Big Al Clopine]

I think so. Yeah. That'd be a big car, right?

[Joe Anderson]

Yeah.

[Andi Last]

For Juan's mother.

[Big Al Clopine]

Gotta be safe, right?

[Andi Last]

That's right.

[Joe Anderson]

So you know what happened to me? No. So I had a Land Rover.

[Big Al Clopine]

I do know that.

[Joe Anderson]

And had.

[Andi Last]

Past tense.

[Joe Anderson]

Yeah. So what happened was some rats got into my car. Inside the car, but, like, underneath.

[Big Al Clopine]

In the engine.

[Joe Anderson]

Like in the engine.

[Big Al Clopine]

Oh, that happened to Ann one time.

[Joe Anderson]

And then ate all the wires and they died.

[Big Al Clopine]

And it stung. Did you have that, too?

[Joe Anderson]

I don't know. I didn't look.

[Big Al Clopine]

You just traded it in.

[Joe Anderson]

I drove, right. I was like, maybe a half a mile from my house, and the car just stalled.

[Big Al Clopine]

Oh.

[Joe Anderson]

And I was like, well, it almost felt like I ran out of gas.

[Big Al Clopine]

Okay.

[Joe Anderson]

You know, it was like. And I was like, God, I haven't ran out of gas since, like, high school. So, like, this is weird. And I looked, okay, the gas gauge looks fine. I'm like, what is going on with this car?

[Big Al Clopine]

Right?

[Joe Anderson]

So luckily, I just. I was able to walk home. And then there's a guy now that has a little kind of shop, and then he sells different cars just down the street from where I live. So I call him up, and he picked up the car, and he's like, yeah, you got a rat problem and you got to fix all this stuff and blah, blah, blah. Yeah. I was like, okay, we'll just fix it. That car has been paid off for years. And I just drive it, like, you know, some of our listeners, 400,000 miles, right?

[Big Al Clopine]

Sure.

[Joe Anderson]

And he goes up, well, I really. I'll fix it, but I really want to buy your car.

[Big Al Clopine]

Really?

[Joe Anderson]

And I said, okay. And he's like, well, you know, if you. If you're ever thinking about selling it, let me know. It'd be a really good price. And of course, you know, my mind starts thinking. I was like, well, what the hell? Okay, maybe it's time for a new car. Give me a good Price for it, but I didn't have the title for it.

[Big Al Clopine]

How come?

[Joe Anderson]

I don't know. I don't know.

[Andi Last]

You couldn't find it, but you didn't have the title.

[Joe Anderson]

And then. So he's like, yeah, I need the title. So I. And it was a lease at first, and then I bought out the lease.

[Big Al Clopine]

Oh, yeah. Maybe you never got it or lost it or whatever.

[Joe Anderson]

I don't know.

[Big Al Clopine]

You could do it without the pink slip these days.

[Joe Anderson]

Well, that's what I did. He sold it, gave me cash, and on my merry way. And then. So this was a couple months ago, and he's like, hey, I need the title. And I was like, yeah, all right. Well, here. Then I called JP Morgan that I had the lease with, and I said, hey, can you resend me the title? They're like, no problem, but it takes 50 days. So he sold my Range Rover. Land Rover to someone else. To someone else.

[Big Al Clopine]

Oh. So he made a profit.

[Joe Anderson]

And he goes, hey, I need your title. And I was like, I told you, I don't have the title. But I called J.P. morgan, it said, it's going to be here in 40 some days. He goes, well, I sold the vehicle. I need the title. I'm like, I'm not a car guy. I don't know what the hell to do here. I go, I'm doing everything that I can. So then I get a message from him. He's got an accent. It's like, joseph. He goes, I need the title ASAP or I'm gonna drive that Land Rover into your driveway. Leave it there. I was like, that's fine. Just leave the check in there. Yeah, and then I'll sell it to someone else.

[Big Al Clopine]

Yeah, right.

[Joe Anderson]

But, God, he was aggressive.

[Big Al Clopine]

What? Yeah. Wow. And so what, do you keep your.

[Joe Anderson]

Titles, like, in a safe or something? I don't know. I. I guess I'm irresponsible on time.

[Andi Last]

I literally have the title for my vehicle in a filing cabinet right next to where I'm sitting right now. Yes, I have the title to my car right here.

[Big Al Clopine]

I have it in my file cabinet. It's not in a safe, but no one would know where it is. So.

[Joe Anderson]

Yeah, I didn't even think twice. It was like, all right, well, here. Do you have to. I was like, oh, my gosh.

[Big Al Clopine]

But honestly, I mean, we just sold Ryan's car and we had the title, and they said, yeah, you don't really need it. We can do it through dmv. I mean, it makes it easier and quicker, but it wasn't 40 days. It might have been a few extra hours.

[Joe Anderson]

So that's just top of mind. Anyway, sorry. I digress.

[Big Al Clopine]

Yeah. Yeah. All right.

[Andi Last]

If you have to worry about whether or not somebody, you know, you get another car and the rats eat the wires on that one. I didn't even realize that was a problem.

[Big Al Clopine]

So our. Our rat story, not near as entertaining as yours. It just didn't chew anything. It just crawled in there and died. And the car stunk and we couldn't figure out where the smell was coming from. And she finally drove it to our mechanic, and he said, oh, yeah, you got a dead animal in there somewhere. And he. He just started pulling out stuff. Oh, there it is.

[Joe Anderson]

Oh, yeah. I don't think it was the animal, like, had lunch.

[Big Al Clopine]

Yeah.

[Joe Anderson]

With my wires.

[Big Al Clopine]

Right, right.

[Joe Anderson]

Is what happened.

[Big Al Clopine]

And I would have thought Ben would have died. Yeah, probably, but probably drank some gasoline or whatever.

[Joe Anderson]

Yeah.

[Andi Last]

Badass rat.

[Big Al Clopine]

Oh.

[Joe Anderson]

But anyway, okay.

[Andi Last]

Talk about a derail.

[Joe Anderson]

Yeah. If anyone can help me with this. I mean, what's a quick way to do this?

[Big Al Clopine]

I think you go to DMV and just get. Try to get the title.

[Joe Anderson]

When's the last time you've been to the deal?

[Big Al Clopine]

Well, actually, to get my real id.

[Joe Anderson]

Yeah, Real life.

[Big Al Clopine]

It wasn't as bad as I had remembered, actually. I mean, it still took two hours. Yeah.

[Joe Anderson]

Anyway. All right. Okay, so drink of choice. Here is Deep Eddie Cranberry. Deep Eddie.

[Big Al Clopine]

Okay.

[Joe Anderson]

All right. Never heard of that. What's Deep Eddie Cranberry? Is that like.

[Andi Last]

I don't know. I'll look it up.

[Joe Anderson]

Seltzer or something?

[Big Al Clopine]

That sounds like it.

[Joe Anderson]

Although it's hard to find in some places. Yeah, I don't think anyone's heard of it. That's why it's hard.

[Andi Last]

Deep Betty Cranberry vodka.

[Big Al Clopine]

Okay.

[Joe Anderson]

All right. I recently asked my son Juan a tax question, and he couldn't find the answer anywhere. I was hoping Big Al could help. I'm married. In 2025, I should have ordinary income of about $350,000. In addition, I should also have $300,000 in long term capital gains from an installment sale of my company. Understand that $350,000 of income will be tiered after the standard deduction. Next, $24,000 will be taxed at 10% and on up. My capital gains then will sit on top. Here's my question. Will the $300,000 in long term capital gains be taxed at 18.8% where I start or 23.8% where I end up? Or are they also layered like the ordinary income tax rates? In other words, will the first $250,000 in the cap gains be at 18.8 and the last $50,000 will be taxed at 23,000 800,000. Appreciate the help, Juan's mother. Okay, a couple things to digest there. She's got capital gains of $300,000, $350,000 of ordinary income. And she's married.

[Big Al Clopine]

Correct.

[Joe Anderson]

So what she's asking is, all right, $350,000 of ordinary income you take minus the standard deduction.

[Big Al Clopine]

Yeah. So let's just round it to $600,000 of income, make it easy.

[Joe Anderson]

So total of $600,000 of income. It's like, all right, well, if that's my total income, how much money am I going to pay in tax? Well, there's two taxes that she has to pay. One is ordinary income tax and the other is a capital gains tax. So what's taxed first is the ordinary income. So you look at the tax brackets and you minus the standard deduction. And some of it's going to be taxed at 10%, some of it's going to be taxed at 12, 22 and 24.

[Big Al Clopine]

Yeah. And it'll stop at 24,000.

[Joe Anderson]

Yep, it'll stop at $24,000. And then the other $300,000 sits on top of that. $300,000 or $350 of ordinary income.

[Big Al Clopine]

Correct.

[Joe Anderson]

So there's tiers when it comes to capital gains rates. There's a 0% rate, there's a 15% rate, and there's a 20% rate. And then there's also a net investment income tax that sits on top of that.

[Big Al Clopine]

Correct.

[Joe Anderson]

That's another 3.8% that will sit on top of the capital gains rates.

[Big Al Clopine]

That's right.

[Joe Anderson]

So she's asking is everything, because she's now in that 20% cap gains rate, plus she has to pay net investment income tax, is everything going to be taxed at that 20% capital gains rate plus another 3.8% of net income tax.

[Big Al Clopine]

Yeah. Net investment income.

[Joe Anderson]

And the answer is.

[Big Al Clopine]

That was a great summary. The answer is it's tiered.

[Joe Anderson]

Tiered.

[Big Al Clopine]

So very quickly, interestingly enough, and it depends upon your taxable income. So your taxable income, actually, if I, if I do the actual numbers, 30. So your taxable income, 620,000. And so 600,000 is the cutoff for married filing joint for that, for that 15% bracket. Right. So let me make sure as I say that that's right.

[Joe Anderson]

That is not right.

[Big Al Clopine]

That is right. Married filing joint yeah. If it falls below 600,000 is 1550%.

[Joe Anderson]

Oh, then the 20% rate goes at 600 above 600,000.

[Big Al Clopine]

So most of it will be taxed at 15% plus the net investment income tax at 3.8%. If you're if I have your numbers right, you got 20,000 extra capital gain that'll be taxed at 20% plus 3.8. So 23.8 as you mentioned. So it's tiered. Most of it sounds like we'll be taxed in that lower rate, so you don't have to worry too much about it.

[Joe Anderson]

All right. Juan's mother Remember when we used to.

[Andi Last]

Do the huge derails like that one we just heard at the end of the show back when we were audio only? Do you prefer that or do you like having the derails as the show happens? Let us know your thoughts about this and every other aspect of the show in the 8th annual YMYW podcast survey for your chance at that $100Amazon E gift card link in the episode description Your money, your wealth is pretty Presented by Pure Financial Advisors. If you're like Pam and Jim and Matt and Will and Jane wondering if your money will last throughout your entire retirement, don't base your financial well being on just getting a few minutes spitball from Joe and Big Al. Sit down face to face, either in person or online, with one of the experienced professionals on Joe and Big Al's team at Pure Financial Advisors. We've got offices all over the US and we're growing every day. But you can also take that meeting right from the comfort of your own home via Zoom. It's free, just like a spitball. But when you let the Pure Team take a personalized deep dive into where you are now and where you want to be in the future, they'll help you find smart ways to get you there. And they'll work with you to craft the retirement plan that fits your specific needs, goals and dreams. Click or tap the free Financial Assessment link in the episode description to book yours or call 888-994-6257. 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.