Change of Roth Plans for the New Senior Tax Bonus? Tax-Loss Wins? - 554

Summary

Podcast Summary: Your Money, Your Wealth — Episode 554

Title: Change of Roth Plans for the New Senior Tax Bonus? Tax-Loss Wins?
Date: November 4, 2025
Hosts: Joe Anderson, CFP® & Big Al Clopine, CPA
Description:
Joe and Big Al dissect the latest tax code wrinkles and spitball retirement planning questions with their signature blend of humor and technical savvy. This episode covers how the new temporary senior tax deduction impacts Roth conversion strategies, the real value of tax-loss harvesting, brokerage cost basis conundrums, and how to approach retirement (even in the face of health challenges).

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Main Theme & Purpose

Main Theme:
The episode centers on new tax laws—especially the temporary "Senior Bonus Deduction"—and their implications for Roth conversions, tax-loss harvesting, and overall retirement planning. The hosts answer listener questions, clarify nuances in tax planning, and weigh strategies for maximizing after-tax wealth, particularly for retirees.

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Key Discussion Points & Insights

1. The New Temporary Senior Bonus Tax Deduction and Roth Conversion Strategies

[00:56–07:25]

• Listener Question (Chris from Maple Grove, MN):
  How does the new $6,000 per person senior deduction, which phases out between $150,000–$250,000 taxable income for married couples, affect Roth conversion planning for retirees seeking to build tax-free legacy wealth for heirs and reduce RMDs?

• Rules and Math:

  • The Senior Bonus Deduction is a new, temporary deduction for those aged 65+ (2025–2028):
    "It's the senior bonus deduction... four years, $6,000 if you're 65 and older. Doesn't matter whether you itemize or not." — Big Al, [03:17]
  • Phase-out thresholds:
    • Single: $75,000–$175,000
    • Married: $150,000–$250,000
      "For every dollar of extra income, you would lose 6 cents on this deduction..." — Big Al, [03:39]
  • For every $1 over the start of the phase-out, you lose 6% of the deduction.

• Strategic Takeaways:

  • Try to keep taxable income below $150,000 (married) to maintain full deduction.
  • Impact is temporary; the deduction is only certain for 2025 & 2026 (due to lookback rules for IRMAA/Medicare premiums). "If you're trying to preserve the whole $6,000 deduction, you might want to stay under as a married, $150,000... but that's only going to help you for 2025 and 2026." — Big Al, [04:12]
  • Given the listener's situation (large Roth balance, modest RMDs coming up, strong pension/Social Security), excess conversions that push them above the deduction may not provide enough tax benefit to offset the lost deduction.

• Joe & Al’s Conclusion:
  Stay under the $150k threshold if possible and keep Roth conversions modest:
  "I would stay under the $150,000 as well... I think he's done already a phenomenal job of getting a lot of money over to the Roth IRA." — Joe, [06:53]

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2. Cost Basis Lost in Mutual Fund Transfers

[07:40–09:21]

• Listener Question (Wendy Chicago, Chino Hills, CA):
  Did an in-kind mutual fund transfer to Vanguard, and cost basis info didn't transfer. Will this affect 1099 tax reporting?

• Big Al’s Guidance:

  • Contact Vanguard and provide your cost basis; they typically can update it.
  • If basis is missing, the 1099 may show only proceeds, and you must report cost basis yourself—"income taxes are on the honor system."
  • The IRS allows flexibility, but keeping good records is crucial.
    "At any rate... if it doesn't get in the brokerage company, you just enter it on the tax return yourself." — Big Al, [08:19]

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3. Tax-Loss Harvesting: How Much Is Too Much?

[10:21–17:51]

• Listener Question (Terry from Salt Lake City):
  Broker has generated $60K in losses on a $1.1M account via tax-loss harvesting. Is there a point where there are too many losses? Am I missing opportunities?

• Discussion Points:

  • Strategic harvesting is beneficial as long as you remain invested:
    "You need to buy something very similar so you're still in the market... When the market comes back... you'll enjoy that increase. But in the meantime, you've created a tax loss." — Big Al, [12:06]
  • Losses aren't wasted—they carry forward indefinitely and offset future capital gains of any sort (even real estate).
  • You can also deduct $3,000/year against ordinary income if no gains are realized, but big losses are most valuable when future gains are expected.
  • A red flag only if the portfolio is constantly generating big losses in an up market, which could signal poor investment choices rather than effective tax management. "If they're harvesting a bunch of losses in UP markets, what's the investment strategy? You don't want to buy dogs to take advantage of taxes." — Joe, [13:51]

• Bottom Line:
  Loss carryforwards are valuable, especially for those with large taxable assets. Focus on good investing, then harvest losses as opportunities arise—but monitor the quality of investments to avoid the "tail wagging the dog."

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4. Retirement Planning Amid Major Health Challenges

[18:48–32:45]

• Listener Question (Larry & Sally from Michigan):
  High income, high savings, many accounts, but facing a significant health challenge (incurable brain disease). Can they afford to bridge the Medicare gap, enjoy “bucket list” spending, and cover long-term care costs if necessary? How should they use their brokerage account to optimize ACA subsidies for healthcare prior to Medicare?

• Hosts’ Analysis:

  • With $2.8M–$3M in savings, 30% savings rate, and prudent spending, they have strong prospects even before Social Security kicks in.
  • Large after-tax (brokerage) assets allow flexible, tax-efficient income to maximize ACA healthcare subsidies.
    "They're not going to look that you have 400 different accounts... they're going to look at how much income is drawn... that lands on the 1040." — Joe, [27:18]
  • With careful spending and healthy asset allocation, their withdrawal rate (~3.5%) is sustainable.
  • The main risk is the cost of long-term care; they should run varied scenarios, but the financial outlook is sound. "I would retire if two years is the mark. Go on those bucket trips, have a blast. Because I think he's got a lot of really good things covered." — Joe, [32:09]
  • Emotional emphasis: Seize the opportunity for experience, given health uncertainty. "Drink that wine, drink that scotch. Have a great time." — Big Al, [32:21]

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Notable Quotes & Memorable Moments

• On the Senior Deduction:
  "It's a deduction, not a credit... For every dollar of extra income, you would lose 6 cents on this deduction."
  — Big Al, [03:41]

• On the temporary nature of the deduction:
  "It's only going to help you for 2025 and 2026, unless they extend it... It's temporary."
  — Big Al, [04:12]

• On tax-loss harvesting:
  "When you've got these losses, they're capital losses. They can be used against any capital gain... These losses are pretty valuable."
  — Big Al, [15:56]

• On retirement amid illness:
  "Make sure you certainly enjoy the time you have. Hopefully it's a lot of time, but make sure you enjoy it as soon as you can."
  — Big Al, [29:54]

• Fun banter about account statements:
  "This guy loves mail... You place a transaction in any of these things, it just gets flooded."
  — Joe, [24:14]

• On the importance of the right investment strategy (regarding tax-loss harvesting):
  "You don't want to buy dogs to take advantage of taxes."
  — Joe, [13:51]

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Timestamps for Key Segments

• [00:56] – Maple Grove, MN: Roth conversions & new senior deduction
• [03:17] – Explanation and phaseout math for senior deduction
• [07:40] – Handling missing cost basis after mutual fund transfer
• [10:21] – Salt Lake City: Evaluating the value and risks of tax-loss harvesting
• [15:56] – How capital losses can be used against future gains (including real estate)
• [18:48] – Michigan couple: Retirement analysis with health challenges, Medicare gap, ACA optimization
• [29:54] – The necessity of enjoying life amid health uncertainty
• [32:21] – Hosts urge: Enjoy the wine and scotch—you’ve earned it!

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Tone and Style

Reflecting the podcast’s signature style, the hosts blend technical expertise with lighthearted conversation. The pace is brisk yet approachable, with humor about acronyms, nostalgia, and friendly teasing about “mail-lovers” and TV/movie trivia. Technical concepts are broken down with relatable analogies and clear examples, making the information digestible for listeners at all knowledge levels.

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Summary Takeaways

• Temporary tax laws—like the new senior deduction—require a nimble approach to Roth conversion strategies.
• Tax-loss harvesting, when executed thoughtfully, remains a potent tool for wealthy retirees with large taxable accounts.
• Cost basis errors in transfers can be corrected; ultimately, it’s your recordkeeping (and integrity) that matters most.
• Retirement plan robustness depends on both the numbers and the lived experiences—especially when life’s uncertainties (like health) are at play.
• Direct, empathetic advice: Do the math, act prudently, but don’t forget to “double-fist” the Cabernet and scotch if that’s what makes retirement sweet.

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For further personalized spitballing, visit: YourMoneyYourWealth.com

Transcript

[Andi Last]

Should the new temporary senior tax deduction change your Roth conversion strategy? Joe and Big Al, spitball for Chris in Maple Grove, Minnesota, who wonders whether to keep converting to Roth now that the $6,000 senior bonus deduction phases out with higher income. That's today on youn Money, you, wealth podcast number 554. Terry from Salt Lake City's broker has amassed $60,000 of losses in Terry's $1.1 million account due to tax loss harvesting. When is enough enough? Wendy Chicago in Chino Hills, California wonders what to do about their cost basis vanishing after transferring mutual funds to Vanguard. And Larry and Sally from Michigan are planning for retirement while facing significant health challenges. Can they afford to bridge the healthcare gap and still retire safely? I'm Executive Producer Andi Last, and here are the hosts of youf Money, you, wealth, the other 2/3 of Java, Joe Anderson, CFP, and Big Al Clopine, CPA.

[Joe Anderson]

Now let's kick it off, Big Al. Okay, love to you in Maple Grove, Minnesota. You know Maple Grove is where Ruthie lives.

[Big Al Clopine]

Oh, is that right? Okay, that's correct. So this is kind of near and dear to your heart then.

[Joe Anderson]

Oh, I bet they're neighbors.

[Big Al Clopine]

Yeah, probably. Probably. Yeah.

[Joe Anderson]

Right around the same age.

[Big Al Clopine]

They sure are.

[Joe Anderson]

All right, let's see what they got here.

[Big Al Clopine]

Okay. All right.

[Joe Anderson]

I'm 73, wife's 70. This is my first year of RMDs. I have been doing Roth conversions up to the first IRMAA bracket for many years. This now turns out to be higher than the $150,000 income limit the OBBB placed. You know what that stands for?

[Big Al Clopine]

Obbb, I believe.

[Andy]

That's one big beautiful bill.

[Joe Anderson]

That is one big beautiful bill.

[Big Al Clopine]

Okay, There you go. I didn't know that. So learn something today.

[Joe Anderson]

Okay. I'm looking for guidance on how to evaluate the benefit of doing a Roth conversion up to the first IRMAA tier versus stopping the Roth conversion at the initial OBB limit. I realize the $6,000 per person exemption decreases from 150 to 250,000. Our main reason to do Roth conversion is to give our children and grandchildren tax free inheritance and make sure our future RMDs of a solo survivor won't be too high. For reference, my current ira is roughly 900,000 and my wife's tax 260,000. Our current Roth IRAs combined are $1,400,000. Our pensions and Social Security provide about $10,000 per month which cover our expenses. It puts us in the 22% tax bracket before the RMDs hope this gives you basic information you need to help me evaluate this new wrinkle in the tax code. Thank you. Hi, Andy. In regards to our other assets, we have about $200,000 in a brokerage account, $100,000 in cash. Our house is paid for, worth $950,000. If you have any other questions, feel free. All right, so he's looking at the $6,000 credit that will kick in with $150,000 to $250,000 of income. So it's putting a little wrinkle in his arm or in his conversion strategy. So if he goes too high, he's going to phase out of the, I guess, personal exemption.

[Big Al Clopine]

Yeah. So maybe let's explain what it is. It's the senior bonus deduction and it's for 2025 through 2028. So it's for the next four years, $6,000 if you're 65 and older. And Joe, it doesn't matter whether you itemize or not, you still get to take that $6,000 if your income is low enough.

[Joe Anderson]

So it's a deduction, not a credit.

[Big Al Clopine]

It's a deduction, not a credit. That's right. Deduction. And so if you're single, it starts phasing out at $75,000 of taxable income and fully phases out at 175,000. For married, it's $150,000 to $250,000. So in either case, Joe, it's about $100,000 phase out. It works out to about. For every dollar of extra income, you would lose 6 cents on this deduction is maybe a way to think about it.

[Joe Anderson]

Yeah. Or another way to think of it and tell me if I'm right or wrong here. So let's say 150 to 250. So if he had $200,000 of taxable income, he would only receive 3,000 of the exemption. That's lose half of it.

[Big Al Clopine]

He'd lose half. So in terms of a percentage, that's a 6% percentage. Right. So if you're trying to think about what, what's the extra tax, it's 6% if you're in that phase out range. But I will say there's another wrinkle that makes this even more complicated and that is for the IRMAA, for 2025, it's your income in 2023. Right. Which already happened. And for 2026, it's your IRMAA in 2024, which already happened. So if you're really talking about Planning, you only have two years that this makes any difference at all. 2025, 2026. So if you're trying to, to preserve the whole $6,000 of deduction, you might want to stay under as a married, $150,000 single, $75,000. But like I say, that's totally going to help you for 2027 and 2028, unless they extend it, which they could, but that's how the law is written right now. It's temporary. It goes away at the end of 2028.

[Joe Anderson]

But. All right, looking at his asset base, I mean, he's already got a ton of money in Roth.

[Big Al Clopine]

Yeah.

[Joe Anderson]

So let's call it $1,200,000. His RMD is going to be $45,000, $50,000.

[Big Al Clopine]

Yeah, it's about right. Yep.

[Joe Anderson]

So $50,000. His taxable income is $120,000 roughly. It's probably less than that. So his gross income, he said $10,000 a month with Social Security and his pension.

[Big Al Clopine]

Yep.

[Joe Anderson]

So that's $120,000 minus 30. So I don't know. He's at $90,000 roughly, of taxable income. So he could still do a conversion.

[Big Al Clopine]

He could, but I think he. I think he hits. I think he's 73. So his RMD probably will hit this year.

[Joe Anderson]

Oh, yeah, yeah, yeah, yeah. So his RMD is going to hit at $900,000. So 30,000 is going to be his RMD. He still has about $20,000 of room to stay below that 150, potentially.

[Big Al Clopine]

I agree there's a little bit of room, but just. Yeah, if it were me, Joe, I would try to stay under the 150 because that's a, That's a pretty good deduction that, that $6,000.

[Joe Anderson]

Yeah, for sure. And I don't think he's ever going to be higher than the 22% tax unless the 22 goes back to 25.

[Big Al Clopine]

Sure, sure.

[Joe Anderson]

That's the only risk. And, you know, and that, that's. That's a speculation, so.

[Big Al Clopine]

Right.

[Joe Anderson]

I would stay under the $150,000 as well. I think he's done already a phenomenal job of getting a lot of money over to the Roth IRA. $900,000 is still a pretty good chunk of change of income that he doesn't necessarily need that he has to pay tax on. I do like the 22% tax bracket, but stay below the $150,000 or if he goes a little bit higher, it's not going to kill him, but. Yeah, but that's the obbb little wrinkle.

[Big Al Clopine]

One big beautiful bill. Okay, now I know it.

[Joe Anderson]

All right. Well, cool. All right. Maple Grove. Wonder whereabouts he lives. Maple Grove is pretty big city.

[Big Al Clopine]

Is it? Okay, I don't know it.

[Joe Anderson]

Yeah, it's nice, I'm sure. Very nice. Yeah.

[Big Al Clopine]

Especially in the summer, huh?

[Joe Anderson]

Yeah, it's very nice in the summer. All right, cool. Let's go to Windy Chicago. In what, Wendy? Chicago.

[Andy]

They're calling themselves Windy Chicago and they live in Chino Hills, California.

[Big Al Clopine]

Yeah. That's okay. Maybe they're from Chicago, but they live in Chino Hills. Correct? Yeah.

[Joe Anderson]

All right. I did an in kind transfer to Vanguard of some mutual funds that we owned for quite a while. However, the cost information wasn't transferred to Vanguard. Now when we look at the unrealized gain lost, there aren't any. Will this be reported on my 1099 when we sell these funds?

[Big Al Clopine]

Great question. So I guess the first thing you can do is you can contact Vanguard and send them your cost basis information. They will generally put that in for you. But if you don't want to or they don't do it for some reason, it's no big deal. There's lots of cases where your brokerage house doesn't know the cost basis and there's three choices on the 1099, Joe. The first choice is the brokerage house has the sales price and the cost basis. The second choice is they have the sales price but not the cost basis, which would be the case here. And the third case is they don't have either the sales price or the cost basis, but they're letting you know something happened. So at any rate, yeah, it's no big deal. You just, if they, if, if it doesn't get in the brokerage company, you just entered on the tax return yourself. And remember, income taxes are on the honor system, so.

[Joe Anderson]

Honor system.

[Big Al Clopine]

And I'm sure you all out there have high integrity, so I'm counting on you.

[Andi Last]

A retirement strategy is like a basketball game. You want every single shot you take to be nothing but net. But sometimes you need a retirement rebound. This week on youn Money, you, Wealth, T. Joe and Big Al show you how five plays can help you turn things around, get that rebound, and score a comeback. Click or tap the link in the episode description to watch it now. Plus, after a lifetime of saving, making the transition to retirement means facing a whole new set of challenges. How are you going to generate income in retirement? Download the Retirement Income Strategies guide for five questions you need to ask yourself before you Retire the sources of income available for you in retirement and how to maximize your Social Security benefits and how to develop a retirement income strategy that meets your needs. Click or tap the links in the episode description to watch retirement rebound on YMYW TV and to download the Retirement Income Strategies guide for free.

[Joe Anderson]

Let's go to Terry from Salt Lake City. My broker continues to amass losses due to tax loss harvesting. I struggle to see how this is a good thing. It just amasses losses. All right.

[Big Al Clopine]

Yeah, right.

[Joe Anderson]

At what point is this too much? Presently sitting at a $60,000 of loss on a $1.1 million account. What am I missing? He explains for future use. But I feel I'm missing current year opportunities. Any help explaining rationale would be appreciated. Ymyw. Duh. Best. All right, Terry. All right, let's see. She's got $2.2 million in tax deferred accounts. Tax free is about a million taxable account. 1.2 million. Pensions is $95,000 a year. Social Security is 105. I'm 66. Spouse is 65, retired, living expenses 72. Thanks for asking. Didn't think it was applicable, but I'll take whatever insight I can get. Beverage choice. Ice cold Corona.

[Andy]

That's another case where somebody replied to the email that they get after submitting a spitball request asking, are you sure that you gave us all the information needed for a spitball?

[Big Al Clopine]

Got it. Most importantly, what you're drinking. And you know what? An ice cold Corona sounds pretty good to me right now. Joe. I'm in Hawaii. It's 81 degrees. I would take one.

[Joe Anderson]

Yeah, you look like you got a little sun too.

[Big Al Clopine]

I got a little too much, so I'll try to tone it down next couple days.

[Joe Anderson]

All right. Tax loss harvesting. So presently sitting at $60,000 of loss on a $1.1 million account. Is this a good thing, Al?

[Big Al Clopine]

A great thing? Let me explain. I mean, if it's good and bad, in a sense, if they're doing it right, it's a good thing. I'll put it that way. So here's what I mean by that. So in your brokerage account, non retirement account, you're going to have certain mutual funds or stocks or ETFs that go up and certain ones that go down. And when they go down, it's a great strategy to sell them at a loss. But here's the caveat. You need to buy something very similar so you're still in the market. So you, you're not missing out on opportunities you're still in the market. When the market comes back for that asset class or that, that sector or whatever it may be, you will enjoy that increase. But in the meantime, you've created a tax loss which you can't necessarily use unless you have tax gains. But think about this. They never go away. They carry over year after year after year for the rest of your life. Which means in this particular case, terry, the first $60,000 of gains in your account is tax free. It's a great thing and probably, I don't know your advisor, but chances are they're buying something similar. So you're still in the market. So, yeah, I would like to have as many as I could. Yeah, I don't like to lose money, but that's the nature of investing. So that's what I was saying.

[Joe Anderson]

I wonder if this is like in the past year, the past month, the past week, $60,000. So if you take a look at the markets this year.

[Big Al Clopine]

I don't think it'd be this year.

[Joe Anderson]

Probably most of them are up.

[Big Al Clopine]

If it's this year, maybe you got the wrong investments. We'll put it that way.

[Joe Anderson]

Yeah, that's the point. It's like, well, if they're harvesting a bunch of losses in UP markets, what's the investment strategy? You don't want to buy dogs to take advantage of taxes.

[Big Al Clopine]

True. Well, that's a good point. I guess I should have prefaced with assuming you have the right portfolio for you. We'll start that way.

[Joe Anderson]

But you're right. Let's say if you have several different asset classes, small international, emerging markets, US whatever, they don't all move in the same direction every year. Some go up, some go a little bit down. That's the beauty of diversification. And so when you have dollars in a brokerage account, so we talk about asset location in asset location means. Well, you want to have certain asset classes in certain accounts depending on how they're taxed. So in her situation, they have $1.1 million in a brokerage account, they have a couple million dollars in a retirement account, that's tax deferred. And then they have another million dollars in a tax free account. So when you think about an, an overall asset allocation and asset location strategy, is that in the taxable account, the brokerage account, that's where you want to keep more stock or stock mutual funds or stock ETFs, your Roth account is where you want to keep more stocks and where you want to keep more safety like bonds, CDs, cash would be more in the tax deferred account. And the reason why you want to have more volatile asset classes in your taxable account is because of the tax loss harvesting. You can harvest the losses and create tax free income as you utilize this strategy appropriately. And also, if you have high flyers in there that make 10, 12, 20% gains, I'd much rather be taxed at a capital gains rate than I would be at ordinary income if they were sitting inside my ira. So it sounds like your broker is doing a great job. Unless she's buying or she's buying, I don't know what they're buying. If you're harvesting $60,000 a loss a month, that's probably not the best strategy.

[Big Al Clopine]

It may not be. So here's one more thing I want to say. When you've got these losses, they're capital losses. They can be used against any capital gain. I think a lot of people don't realize a stock loss, a capital loss that carries forward on your tax return, you can use that against a real estate gain. You sell your home, you have more gain than the exclusion. You can use it against a home sale gain or a rental property gain. These losses are pretty valuable. Yes, you want to have the right investment strategy, but assuming you do, if certain asset classes go down, you want to sell them, buy something similar, harvest those losses so you can use them against future gains. And that's super valuable, I would say.

[Joe Anderson]

Yep. I think some other confusion when it comes to capital losses is that if you don't have any capital gains to offset the loss, then you're able to write 3,000 of the $60,000 in that given year. So sometimes people will say, Well, I got $60,000 of losses and I can only write $3,000 off. It's going to take me several years, it's going to take my lifetime to utilize these losses. Isn't enough enough already?

[Big Al Clopine]

Yeah, that's a good point. Because a lot of people do think that I only get 3,000 a year. What's the point? Well, the point is you get to deduct your losses dollar for dollar against capital gains and take another $3,000 per year against ordinary income. So it's, it's, it's pretty helpful. Here's another misconception, Joe. I've got this capital asset short term, but my broker sold a long term gain. I can't use the two against each other. Yes, you can. Yes, you can. It's true that short term losses go against short term gains first. Long term, long term losses go against long term gains first, but then if there's still extra losses, they go against the other one that didn't have enough losses. So it's. Yeah, it's actually a good thing is presuming you've got the right investments strategy.

[Andi Last]

Get an idea of how long your money will last in retirement with our self guided financial blueprint tool. It provides personalized insights, identifies potential shortfalls and suggests actionable steps to help you secure your retirement future. Once you're armed with the information you need, consider meeting with the experienced professionals on Joe and Big Al's team at Pure Financial Advisors for a free financial assessment either in person or from the comfort the of of your own home via Zoom. The financial blueprint and the human assessment are both free with the goal of educating and empowering you. The Pure team will help you develop a thorough financial plan that goes beyond the basics, offering guidance that addresses both your unique immediate needs and your long term retirement vision. At the end of the assessment process, you can decide whether becoming a pure client can add value to your financial life and what those next steps look like. Get your financial blueprint and learn more about the free assessment process. Click or tap the links in the episode description to get started.

[Joe Anderson]

All right. Hey Joe. Al, Big Al. Or I guess that makes you folks, Jabba the Hut.

[Big Al Clopine]

Joe, Andy, Big Al, Java.

[Joe Anderson]

Oh, Jabba.

[Andy]

Well, the gas siphoner actually pointed that out a while back as well. So apparently Jabba is our. Is our acronym.

[Big Al Clopine]

Got it.

[Joe Anderson]

Okay. Yeah, Jabba.

[Big Al Clopine]

It's not. Not a super flattering reference, but that's okay.

[Joe Anderson]

Love, Java the Hut. Let's see. Okay, this is Larry and Sally Morgan from Michigan. Bonus points for getting the reference without using the Internet. Larry and Sally Morgan from Michigan. No clue.

[Andy]

I will admit I did actually use the Internet for this.

[Andi Last]

And Larry and Sally Morgan are the main characters in a book called Crossing Safety, a 1987 semi autobiographical novel by Pulitzer Prize winning author Wallace Stegner.

[Andy]

I don't think any of us would have gotten that without the Internet. I'm not sure how many of our listeners and viewers would have gotten that without the Internet.

[Joe Anderson]

Who's Wallace Stegner?

[Andy]

He want a Pulitzer Prize.

[Joe Anderson]

To safety.

[Big Al Clopine]

Yep. Yeah, I would say if it's going to be like a book reference of 40 years ago.

[Joe Anderson]

Charlie Brown.

[Big Al Clopine]

Well, maybe that one, but otherwise we got about a 1% chance of knowing what it is.

[Andy]

I think that's high.

[Big Al Clopine]

You're probably right.

[Joe Anderson]

Yeah, I don't know.

[Big Al Clopine]

I wouldn't know. Charlie Brown, Charles Schultz. I'd get that one.

[Joe Anderson]

Yeah. The only books I know is, like, Curious George.

[Big Al Clopine]

Yeah.

[Andy]

If it said Linus and Lucy or something, you'd get that.

[Big Al Clopine]

I got Dr. Seuss down. Theodore Geisel. I got that one.

[Joe Anderson]

All right. Or S.E. hutton. Who's that? Anyone?

[Big Al Clopine]

No, see, I. I'm not related to E.F. hutton. I only get. I only get one out of a hundred right on this.

[Joe Anderson]

Remember when we used to play. Play the theme songs to, like, 1980s and 90s TV shows?

[Big Al Clopine]

Yeah. Yeah. That was fun.

[Joe Anderson]

I think you got maybe 10% of them.

[Big Al Clopine]

Oh, I think 5%. Yeah. That's not my. I mean, you have to play, like, something. I know. Like Gilligan's island, for example.

[Joe Anderson]

That was it. I think those were the only ones. But we played, like, Taxi, Hill Street Blues. We had like.

[Big Al Clopine]

Well, and you probably.

[Joe Anderson]

Cheers.

[Big Al Clopine]

I knew Cheers. Yeah, of course I knew Cheers. But like Hill Street Blues, I would have known it, the song. But I may not have, in that moment, thought of it quickly enough.

[Joe Anderson]

Got it.

[Andy]

I have a hard time with anything that's an instrumental. I'll be like. Yes, I know that perfectly.

[Andi Last]

What is it?

[Andy]

I have no idea.

[Big Al Clopine]

We should start doing it and trying to stump Joe. Oh, I'm.

[Joe Anderson]

It would be pretty tough.

[Big Al Clopine]

We can.

[Joe Anderson]

If there's, like, movies, but like that. You know, the tnt, TBS days.

[Big Al Clopine]

Yeah.

[Joe Anderson]

So the ones that were just constantly on. Yeah. I would know him. Give me 10 seconds or 5 seconds, I would be able to know the movie. And before, like, even the credits were going.

[Big Al Clopine]

Okay. All right.

[Joe Anderson]

That's a little. Yeah. I'm embarrassed to admit. That's a talent of mine.

[Big Al Clopine]

So watch. Watch a lot of TV when you're younger.

[Joe Anderson]

I like movies, Alan. I'm a big movie guy.

[Big Al Clopine]

Got it. Okay.

[Joe Anderson]

So no.

[Big Al Clopine]

And you remember. And you remember them all.

[Joe Anderson]

Yeah, well, I didn't have h. You know.

[Big Al Clopine]

Yeah.

[Joe Anderson]

Back in the day. Yeah. If they were on normal cable, that. That was your hbo, that was your Cinemax, that was the show Times. So.

[Big Al Clopine]

So you. You. You watch a movie, you remember the name of the movie, who was in the movie, what the plot was, what some of the lines were, and I've already seen the movie. I can't remember if I saw it or not.

[Andi Last]

I'll see it in a half an hour after.

[Andy]

After it's over. I've forgotten everything. I just. That is just not necessary to keep in my brain. I've got too much other stuff up there.

[Big Al Clopine]

Yeah, I think I'm in that camp, Andy.

[Joe Anderson]

Yeah, I like. I like. I'm a big Movie guy.

[Big Al Clopine]

Yeah. That's good. You got a great, great memory, too. So keep it up.

[Joe Anderson]

Oh, sharp.

[Andy]

And you retain all that along with the Roth conversion information?

[Joe Anderson]

I do. It's getting too full lately. I can tell that it's. I gotta brush it up anyway. All right, we're looking for a spitball here. Analysis of our ability to retire. All right. Currently making about $300,000 per year, but that has only been for the last two years. Prior to that, our income was about $170,000. With our employer match, we save about 30% of our income into our retirement each year. Our current savings are $590,000 in a 403, $465,000 in employer contribution, supplemental tax, deferred account, 40 grand of 457,000. $152,000 in a Roth IRA, $102,000 in another Roth IRA. $110,000 in a brokerage account, $680,000 in a second brokerage account. My God, how many accounts do you have?

[Andy]

Wait, there's more?

[Joe Anderson]

Yes. $560,000 in a third brokerage account. This guy loves mail.

[Big Al Clopine]

He does.

[Joe Anderson]

How much stuff comes into his mailbox. Here's a brokerage account statement. Here's another one. You place a transaction in any of these things, it just gets flooded. Confirmat, yin yang.

[Big Al Clopine]

That's right. If you're trying to keep track, it's about $2,800,000.

[Joe Anderson]

He doesn't like consolidation. No, he likes to have lots of different accounts. Lots of different.

[Big Al Clopine]

He wants to see if I know how to add. So I think he's giving me a little test here.

[Joe Anderson]

All right. On top of that, we have about $100,000 in cash in CDs across all our accounts. We have about 13% guaranteed, 61% equities, 4% real estate, 21% bonds, and 1% in a money market. You think this guy has spreadsheets?

[Big Al Clopine]

I think so.

[Joe Anderson]

Oh, he's good.

[Andy]

I just realized, the recap that I give at the beginning, I started adding it all up, and then apparently, I just gave up. That's completely out of date.

[Big Al Clopine]

Yeah, you did. I noticed that. Well. And at least he rounds to the nearest thousand, so that's.

[Andi Last]

Goodness.

[Joe Anderson]

Yeah, we have no debt. House property worth about $700,000. That cabin worth $65,000. I drive a 20, 21 Jeep. A 2020 Explorer, and have a 20. You drive both. And a 2016 GMC pickup. That's a beater truck for things we take to the cabin. Our only source of Fixed income will be our Social Security which will be about $45,000 per year for me and about 26 and a half thousand for my wife at a full retirement age. We'd like to hold off on claim of Social Security until 70, which would put us to about $57,000 and are open as to when would be the best for my wife to start claiming. Our annual spending is about $95,000 currently and would like to keep it near that at our retirement. But we do want to have two to three bucket list vacations which will probably cost about $60,000 each in the next six years. My wife is 60 and I'm 58 and we're looking to retire in two years. That leaves us with a five year Medicare gap for me and a three year Medigap for my wife. I can use COBRA for the first 18 months of that gap but then would have to go head to the ACA. I'm assuming the 8.5% rule will last prior to my retirement. So going COBRA will cost us about 22, will cost us about $22,000 and $5,000 per year. This is not included in the above annual spend. While our silver plan California estimate is about $32,000 per year. One question I have is can I get our ACA costs down or increase the subsidy by drawing retirement spending prior to Medicare from our brokerage account and claiming capital gains to minimize the magi. Yes. That's all about retirement income strategy and planning. It's, you know, they're not going to look that you have 400 different accounts.

[Big Al Clopine]

Or that you have 2.8 million.

[Joe Anderson]

You should be penalized by having several hundred accounts. But no, you're not going to be penalized for how many accounts that you have and you're not going to be penalized for how many assets that you have. What they're going to look at is how much income is drawn from the overall accounts or how much is generated from the accounts that land on the 1040.

[Big Al Clopine]

That's all they look at. That's right.

[Joe Anderson]

So if you have a tax efficient strategy of pulling dollars. Yeah. You would have very large subsidies.

[Big Al Clopine]

Okay.

[Joe Anderson]

The other wrinkle in the plan is I have an incurable brain disease. Oh boy. Sorry to hear that. Which while not fatal progress at a random rate for each person making difficult to plan. All right. But it will likely remove my ability to eventually function on my own. And so that necessitates the long term care. Hence the timeframe for the bucket list trips. So the big question is can we cross safely into the retirement and enjoy drinking our California Cabernets and peated scotch on our deck two years from now? Yeah, let's see. Couple million dollars. You got to bridge the gap to Social Security. He wants to spend 100,000 dol. I think he's sitting in pretty good shape.

[Big Al Clopine]

He's in great shape. Let me go through the more formal math. So he's got $2,800,000. He's adding about $90,000 a year. He says 30% with the employer match on $300,000. So $90,000 a year. He wants to work two more years. I just did 6%. I get $3,150,000. Okay. He wants to go on 2 to 3 million bucket list trips, 60,000 each. So I, I said, well, how about two and a half? So that's $150,000. Let's end up with an even $3 million. What does that do at age 60 or 62? Whatever. I think 3.5% is a pretty safe distribution rate. In general. 3.5% of $3.5 million is $105,000. He needs $95,000. I know there might be a little extra for insurance, but that's before Social Security. Yeah. I'm thinking this looks fine. And I would definitely execute on that plan, particularly depending upon your disease. Make sure you certainly enjoy the time you have. Hopefully it's a lot of time, but yeah, make sure you enjoy it as soon as you can. That's what I would say. I think this looks fine, Joe.

[Joe Anderson]

Yeah, he's got a plan for long term care. He's going to be. And I'm not sure if he has insurance and he's probably uninsurable at this point.

[Big Al Clopine]

He'd probably be uninsurable. They've got the house and the cabin. I'm not saying that's first choice to sell those, but they've got those assets as well.

[Joe Anderson]

Yeah, I think he's sitting really good. He's done a really good job saving and he's plowing a lot of money into the overall accounts as well. At $100,000, you got to bridge six to eight year gap for Social Security. So let's say $100,000 over 10 years. I mean, he's still, let's say if he has zero growth in the overall accounts, it still looks really good.

[Big Al Clopine]

Yeah. When you add the Social Security on top of it. Yeah, I agree. Yep.

[Joe Anderson]

So, yeah. So 100,000 at 10. Let's say he just stayed in CDs. He's got $3,000,000. He spends 100. You take all the money out. He still has $2,000,000. At age 70, he's got roughly $60,000 of Social Security. He needs $50,000 to draw from. He needs 1,200,000, $1.3,000,000. At age seventy, he's going to have probably well over two, just depending on the growth of the overall accounts. It's a sequence of return risk. It gets a little dicey. The long term care stay of how much he really needs to be thinking about in regards to side cash to help pay for that care. Because basically if he needs around the clock care, his wife won't be able to do that. You know what I mean? And I'm sure he wouldn't want to put his wife through that. So you probably have to have some in home care, things like that. And that stuff isn't cheap. No, that's. That's adding another 95,000, $100,000 on top of the $100,000 living expense. So I would want to be running some of those different scenarios and different numbers just to make sure that you, you know, just kind of put a bow on this thing. And for best case, worst case type of scenarios. But, but I'm with you. I would retire if two years is the mark out. Punch, go on those bucket trips, have a blast. Because I think he's got a lot of really good things covered. So.

[Big Al Clopine]

Yeah, drink that wine, drink that scotch. Have a great time.

[Joe Anderson]

Oh, I would double fist every day.

[Big Al Clopine]

Oh, I know you would.

[Joe Anderson]

You said you don't already be on that deck. Be with them.

[Big Al Clopine]

Yeah.

[Joe Anderson]

Hanging out with Larry. Some scotch and some wine. I don't drink wine or scotch. But I would start.

[Big Al Clopine]

You'd start?

[Joe Anderson]

Sure. Hang out with lair.

[Big Al Clopine]

I'd hang out too. I'd do it too. Why not?

[Joe Anderson]

Yeah, show me his spreadsheets. He probably has just a stack of old statements from the 80s.

[Big Al Clopine]

Yeah, probably.

[Joe Anderson]

I could just see this guy's. I mean, he probably saves every document. He's got tax returns from when he was 12.

[Andi Last]

He can give you the CliffsNotes version.

[Andy]

Of the Pulitzer prize winning book that his name is from.

[Joe Anderson]

Yes. We could talk about really good books.

[Big Al Clopine]

Yeah, that's right. That'd be a short conversation.

[Joe Anderson]

Oh, my God. You would probably have to get wasted.

[Big Al Clopine]

Yeah, probably.

[Joe Anderson]

All right, cool, Al, enjoy your time in Hawaii. Cut this one a little short, but. Yeah, we got a few done, so call it a day.

[Big Al Clopine]

All right, sounds good. Thanks, guys.

[Joe Anderson]

All right, thank you, Andy. Thanks, Al. We'll see you guys next week. Show's called you'd Money, you Wealth.

[Andi Last]

Next week on youn Money, you, Wealth, Christine wants to know the best withdrawal strategy before claiming Social Security at age 62. Prickly Richard and Margarita Maggie from Tucson are trying to avoid an RMD avalanche by doing Roth conversions, and Michigan Queen and Mississippi Boy from Tennessee are deciding between saving for retirement at age 55 or saving for their kids future. Now if today's episode helped you to rethink your Roth plan or your tax moves, make sure you're subscribed to the youe Money, you, Wealth podcast and our YouTube channel so you don't miss what's next. Share the show with a friend or a family member who's navigating new tax rules. And don't forget to click or tap the free financial assessment link in the episode description to schedule that one on one comprehensive assessment with Pure Financial Advisors. They'll help you get your Roth conversion, your tax strategy, and your retirement plan all working together. 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.