Don’t Let Money Anxiety Ruin Your Retirement - 552

Summary

Your Money, Your Wealth: Don’t Let Money Anxiety Ruin Your Retirement (Episode 552)

Hosts: Joe Anderson, CFP® & Alan “Big Al” Clopine, CPA
Date: October 21, 2025

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Episode Overview

In this episode, Joe and Big Al dig into the surprising persistence of financial anxiety—even among savers who appear well set for retirement. Through their signature blend of humor and expert advice, they analyze real listener scenarios with millions in savings questioning their readiness to retire, contribution and conversion strategies for high-income earners, and how best to transfer wealth to future generations. The episode focuses on cutting through emotional hang-ups about spending, optimizing tax strategies, and handling legacy planning—all while keeping things approachable and fun.

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Key Discussion Points & Insights

1. Barbie & Ken in the Midwest: Can They Retire Early?

[00:49–07:14]

Situation:

• Barbie (56) and Ken (70) have over $3.3M saved; Ken receives a $127K pension (with COLA) and $61K Social Security; Barbie will get her own pensions and Social Security later.
• They want to spend $18K–$22K—possibly per month (though initially stated as annual)—after tax in retirement.
• No mortgage, comprehensive investment accounts, and substantial fixed income.

Highlights:

• Immediate Reaction:

  • Joe Anderson [02:46]: “Waving right in, you’re fine.”
  • Both hosts conclude Barbie can retire comfortably, regardless of whether the spending number is monthly or yearly.

• Discussion on Financial Anxiety:

  • Andi Last [04:48]: “Is this another one of those situations where we’ve got a couple with a big wallet who is having financial anxiety even though they are fine for it because they’re not used to the idea of spending without earning?”
  • Big Al Clopine [05:05]: “That’s not all that uncommon, really…once they turn off the paycheck, they freak out, even though they got plenty.”

• Soft Side of Retirement:

  • Joe Anderson [05:52]: “A lot of people that have done really good savings have a hard time spending… there’s anxiety around it, there’s guilt around it… But there’s a lot more, I guess, the softer side of money.”

• Roth Conversion Strategy:

  • Hosts suggest converting at least up to the 22% or 24% tax bracket, especially considering future “widow’s tax” issues due to age difference.

Quote:

• Joe Anderson [04:30]: “Thank you for spitballing my Barbie dream. I guarantee Barbie spends more than $20,000 on the Barbie Corvette, the Barbie beach house...”

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2. Dan in West Palm Beach: Roth 401(k) Contributions vs. Future Conversions for High Earners

[08:58–17:16]

Situation:

• Dan (58) earns ~$680K/year, in the 35% tax bracket, and puts over $200K/year away. Nearly $1.3M already in Roths.
• Interested in whether to continue Roth 401(k) contributions or focus on pre-tax now and convert later.

Highlights:

• Analysis of Current and Future Tax Rate:

  • Big Al Clopine [14:19]: “Inflating assets with savings… I get a 2.6% distribution rate. Looking great.”
  • Joe Anderson [15:17]: “He’s going to be in a lower tax bracket when he retires… Because he doesn’t have that giant 401(k), it’s all in Roth.”

• Roth vs. Pre-tax Psychology:

  • Joe Anderson [15:33]: “I would not do conversions today, no. I would do the contributions to the Roth… this is all psych, you know, the site play.”
  • Big Al Clopine [16:05]: “It’s a pretty low fixed income. Anyway, I think I certainly agree with you on the Roth conversions. I would not do that till he retires.”

• Decision Framework:

  • Continue Roth 401(k) contributions given his already high pre-tax savings and future lower tax rates post-retirement.
  • Defer Roth conversions until after retirement when income is lower.
  • Use SEP Roth for side income if possible.

Quote:

• Big Al Clopine [17:04]: “As an accountant, it pains me to not do regular 401(k) contributions when you’re in the 35% bracket. So, you could argue what I just said.”

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3. "Fired Up" in Chicago: Roth vs. Pre-tax for High-Income Earners With Legacy Planning Focus

[17:16–29:04]

Situation:

• Early 50s, $3.3M in 401(k), $500K in Roth, $2.5M in brokerage; currently earning $800K but expects to reduce income to $300K in 5 years.
• Wants advice on maximizing estate transfer to high-income children, especially minimizing inherited pre-tax IRA taxes.

Highlights:

• Switching to Roth Contributions:

  • Joe Anderson [21:26]: “I would definitely switch to Roth for sure.”
  • Emphasizes ease of mega backdoor Roth contributions via 401(k), especially in light of already large pre-tax balances.

• Forecasting Future RMDs & Tax Rates:

  • Joe Anderson [23:30]: “That thing could be at $10M at least... He’s gonna be in the 35 or 37% tax bracket at RMD age.”
  • The risk of growing pre-tax accounts into much higher RMDs and correspondingly higher taxes—possibly at higher rates than current.

• Psychological Benefits of Roth Saving:

  • Joe Anderson [25:19]: “If he goes after-tax, it’s the same as a conversion, but he just doesn’t have to write the check. It’s easier.”

• Estate-Planning Twist:

  • Joe Anderson [26:12]: “If he really wants to leverage wealth for the kids, why wouldn’t he buy a life insurance contract?”
  • Life insurance suggested for efficient wealth transfer (using irrevocable trust) rather than relying solely on retirement accounts.

• Conversion Timing:

  • Big Al Clopine [27:29]: “When you go down to $300,000, you can convert in the 24% bracket... then when you retire fully, I’d do even bigger conversions.”

Quotes:

• Joe Anderson [24:18]: “You’re going to forget that savings money the next day and you’re going to be happy you have this big chunk of change sitting in your Roth.”
• Big Al Clopine [28:16]: “That’s how I would think about it. Yes, it will benefit your kids, but I don’t know… that’s in the back of your mind.”

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4. Listener Comments: Social Security Clarification & Family Updates

[29:56–34:44]

Notable Listener Moment:

• Cindy’s Social Security Tip:
  • Cindy writes in to correct/clarify a previous Social Security spousal benefit explanation, recommending listeners always proactively apply for spousal benefits as SSA likely will not do so automatically.
  • Joe Anderson [32:22]: "Absolutely… sometimes there’s errors, sometimes you assume… contact Social Security Administration to make sure you’re getting all the benefits that you’re entitled to.”

Lighthearted Feedback:

• Lucas from Minnesota checks in to confirm he does love his “pretty all right kids” after ribbing from Joe and Al.
• Big Al [34:30]: “There you go, Andy.” (for producer Andi Last getting a well-earned shoutout.)

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Timestamps for Important Segments

• [00:49–07:14] Barbie & Ken’s Retirement Fears and Plan
• [08:58–17:16] Dan's High-Income Roth Decision Analysis
• [17:16–29:04] Tax-Smart Legacy Planning and Mega Backdoor Roth Tactics
• [29:56–34:44] Listener Corrections and Family Updates

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Notable Quotes & Memorable Moments

“A lot of people that have done really good savings have a hard time spending. And I get it, there’s anxiety around it, there’s guilt around it…. There’s a lot more, I guess, the softer side of money.”
— Joe Anderson [05:52]

“If you can see you’ve got millions when you pass away… and if you want to start giving while you’re living, which feels better, and you get a tax break, that can be a great way to do it.”
— Big Al Clopine [06:25]

“This is all psych, you know, the site play. Because I’m not going to miss the taxes in 10 years. When I go on my cruises, I’d much rather not pay a bunch of tax then.”
— Joe Anderson [15:48]

“If he really wants to leverage wealth for the kids, why wouldn’t he buy a life insurance contract? Set up an irrevocable trust and have the kids buy several million dollars on both you and the spouse’s life.”
— Joe Anderson [26:12]

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Episode Tone and Takeaways

The hosts maintain their trademark playful and irreverent tone while tackling serious financial concerns. They emphasize that money anxiety can persist regardless of account size, but most fears can be relieved by running the numbers and understanding both the mathematical and psychological components of retirement planning. They repeatedly encourage listeners to consider not just tax rates but also personal comfort with spending, strategies for legacy planning (including insurance and Roth optimization), and always double-checking on government benefits.

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For More Resources

• Download the Emotionless Investing Guide (link from episode description)
• Watch related episodes and access free planning tools at YourMoneyYourWealth.com

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Summary prepared for listeners who want to skip straight to the wisdom (with none of the financial anxiety).

Transcript

[Andi Last]

Joe and Big Al tackled the fears that mess with even the best laid financial plans today on youn Money, you, wealth podcast number 552, Big Wallet. Barbie and Ken from the Midwest have saved millions. But Barbie's still worried about retiring early, buying a new house and converting to Roth. Is she second guessing her plans? The fellow spitball for Dan from Florida, who's flying high in the 35% tax bracket and trying to decide between Roth 401k contributions and future conversions. They also float a surprising idea, one that's rare on ymyw for a listener from Chicago who's fired up about Roth versus pre tax and making a tax smart wealth transfer. We'll wrap up with a couple of your comments. 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]

All right, let's go to Barbie in the Midwest, Barbie Mattel. All right. Okay, Joe, Big Al, Andy, I love your show. I would appreciate a spitball in my scenario if you think I can retire at age 57.

[Big Al Clopine]

All right.

[Joe Anderson]

I'm 56 and I'm still working. My husband Ken and I live in the Midwest. All right. He drives a BMW X3 and I drive a Volvo XC40. What's the X3? Is that a SUV?

[Big Al Clopine]

Probably.

[Andi Last]

It's a small crossover SUV, yes.

[Big Al Clopine]

Oh, smaller. Okay. All right.

[Joe Anderson]

All right. He likes red wine. I like Moscow. He likes red wine and Moscow meals.

[Andi Last]

What, together?

[Joe Anderson]

Maybe I enjoy white wine and little gin martinis. Ken just retired at age 70 with $127,000 annual pension with a COLA of 50%. He also just started Social Security of 61,000 and is now on Medicare. Looks like Ken is roughing it.

[Big Al Clopine]

Yeah, right.

[Joe Anderson]

He's got about $200,000 of fixed income here. I Barbie in 56, I max out my 401 contributions and plan to take my pension of $21,000, no COLA at age 57, and retire. I'll take my Social Security at 62 of about $28,000 and another smaller pension, around $3,000 annually at that time. In retirement, we'd like to spend $18,000 to $22,000 after tax. Annually.

[Big Al Clopine]

You buy that?

[Joe Anderson]

18 to 22,000 dollars after tax.

[Big Al Clopine]

So wait a minute.

[Joe Anderson]

Or monthly, do you think? That's what I was wondering.

[Andi Last]

I was wondering if they intended monthly. And I actually started putting it in as monthly. I was multiplying it by 12 and then I was like, wait a minute. No, it says 18 to 22 annually.

[Big Al Clopine]

Well, if it's annually.

[Joe Anderson]

Waving right in, you're fine. You just.

[Big Al Clopine]

Yeah, let's say it's monthly. Let's say.

[Joe Anderson]

Yeah. Why would she even take Social Security at 62? Why don't you push your pension out? I mean, retire tomorrow.

[Big Al Clopine]

You should have retired 10 years ago.

[Joe Anderson]

Yeah, 18,000 a year. Where in the Midwest do you live, Barbie?

[Big Al Clopine]

Anyway, let's pretend it's $20,000 a month, so that'd be $240,000.

[Joe Anderson]

Okay. Yeah. And you're still fine.

[Big Al Clopine]

Yeah, yeah. Because what's the fixed income? 188,000 right now and gonna add another 55 later. Yeah, you're good.

[Joe Anderson]

Yeah.

[Big Al Clopine]

The numbers work out with another 3.3 million that you hardly need. Yeah.

[Joe Anderson]

Own a home, no mortgage. Okay. It's worth 640,000. We have $1,600,000 in Ken, $401,000,000 in mine, 156,000 in another 401. 450,000 in company stock, $235,000 in a brokerage, $106,000 in a Roth, $200,000 in CDS and cash. I have some E stocks and mutual funds worth $48,000 and HSA worth $20,000. We both have long term care insurance. Ken has a life policy of $500,000.

[Big Al Clopine]

Yeah, you're good. Check.

[Joe Anderson]

Can I retire at 57? Enjoy life with Ken? Yes. And if so, can we spend what we would like to spend in retirement while also doing Roth conversions? If it's 20,000 a year, yeah, do what the hell you want. Thank you for spitballing my Barbie dream. I guarantee Barbie spends more than 20,000 on the Barbie Corvette. The Barbie beach house in the Barbie.

[Big Al Clopine]

I think so.

[Joe Anderson]

What else does Barbie have?

[Big Al Clopine]

I'm thinking she meant monthly. But even monthly, this looks just fine.

[Joe Anderson]

Isn't Barbie right? From Malibu?

[Andi Last]

Yes.

[Big Al Clopine]

Yeah. Yeah.

[Joe Anderson]

I think they pay $20,000 in house insurance a month in Malibu.

[Andi Last]

Well, she's planning to move to the Midwest for retirement, so. Is this another one of those situations where we've got a couple with a big wallet who is having financial anxiety even though they are fine for it because they're not used to the idea of spending without earning?

[Joe Anderson]

Well, they've done a hell of a job saving.

[Big Al Clopine]

They have.

[Andi Last]

Yeah.

[Big Al Clopine]

And I think you're right, Andy. And that's not all that uncommon, really. Which is a couple has a lot of money, but they're used to a paycheck. And once they turn that off, they freak out, even though they got plenty that could Be what's exactly. What's going on?

[Joe Anderson]

I mean, there's RSUs. So there. Someone had been some sort of an executive of some sort or higher. Higher level management.

[Andi Last]

She was top level management at Mattel.

[Big Al Clopine]

Yep. Maybe at Mattel, or maybe she's thinking she's only 56 and she thought she was going to work till 65. Right. And so now something feels wrong. Maybe. I don't know. But yeah. No, this looks, based upon what you said, whether it's annual or monthly, 20 grand, you're fine either way.

[Joe Anderson]

Yeah. What other tidbits here? Yeah, I mean, I think you map it out, though. I think that relieves some of the anxiety. A lot of people that have done really good savings have a hard time spending. And I get it, there's anxiety around it, there's guilt around it. There's all sorts of different things that people have with their relationship with money. We're just kind of spitballing at the back of the napkin with math. But there's a lot more, I guess, the softer side of money and how you think about it and what you wanted, what money can actually do. So we can go deeper, but we don't know anything about money.

[Big Al Clopine]

We don't. Yes. Sometimes, Joe, what we've seen, people that have a lot of money will run cash flow forecasts out to age 90, 95, whatever. Right. And it shows how much they end up with based upon kind of a reasonable rate of return and their spending, even add money for spending, and they, in some cases, they end up with a lot of money. They're charitably inclined, but they don't want to give any money till they pass away because they might need it. Well, I get that feeling. But if you can see you've got millions when you pass away and, and you're charitable, and if you want to start giving while you're living, which feels better, and you get a tax break, that can be a great way to do. But having cash flow forecasts in a case where you've got money and you're just having anxiety is a good way to show you that you're probably okay.

[Joe Anderson]

How much would you convert? I think you convert to the top of the 22% tax bracket.

[Big Al Clopine]

I'd go 24.

[Joe Anderson]

Yeah, 24. He's got $127,000 pension.

[Big Al Clopine]

Yeah. And he's got Social Security and she'll have pension. So I think. And given how much they have in a tax Deferred of about 2.8 million.

[Joe Anderson]

Yeah. Not to be morbid, that there's going to be a widow tax.

[Big Al Clopine]

Well, yeah, yeah, that's.

[Joe Anderson]

She's 50, 60, 70. So men usually die before women.

[Big Al Clopine]

Yeah.

[Joe Anderson]

He's a little bit older than her.

[Big Al Clopine]

Right.

[Joe Anderson]

So there's still a ton of money in that retirement account. If he were to pass prematurely. She still has several years to live, and she's going to be at a single tax bracket unless she finds another Ken.

[Big Al Clopine]

True. Which could.

[Joe Anderson]

Isn't there another candidate?

[Andi Last]

I was just thinking that. I can't remember. There was another character, but I can't remember his name.

[Joe Anderson]

Eric, you probably know you played with Biff. Biff? Was it Biff? Okay, here you go. She'll find Biff.

[Big Al Clopine]

There you go.

[Andi Last]

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[Joe Anderson]

We got Dan from West Palm beach writes in. He's like, yeah, I'm looking for a little quick spitball. Cool. Roth 401 contributions. Should I do Roth 401k contributions or not? Should I start converting IRAs or 401ks money? These seem like pretty basic questions. Yep.

[Big Al Clopine]

Yep.

[Joe Anderson]

I think we should be able to handle.

[Big Al Clopine]

Yep.

[Joe Anderson]

So he's married. Wonderful wife, 32 years. Okay, so the wife is 32 years old or they've been married for 32 years.

[Big Al Clopine]

I'm going to say married 32 years.

[Joe Anderson]

Got it.

[Andi Last]

That's my guess.

[Joe Anderson]

With an annual income of $680,000, 35% tax bracket effective rate. 20. 24 is 27. Oh, he's got effective rate.

[Big Al Clopine]

Effective, yeah.

[Joe Anderson]

Big Dan.

[Big Al Clopine]

Right?

[Joe Anderson]

Look at the big brain on Dan. Income. All me. All right. 550,000 or 550 or so. W2 income. 120,000. 1099 income side hustle. This is an estimate. Could be a little higher. 50,000 plus or minus $50,000. I'm 58. She's 54. Two adult kids launch mostly with jobs. Okay, finances $1.8 million in retirement accounts, $1.3 million in Roths joint brokerage account of 1,100,000. So they got what, four?

[Big Al Clopine]

Got about 4.2.

[Joe Anderson]

Okay. No, brokerage account is $350,000 inherited IRA taken. All right, so the brokerage account in an inherited IRA are two totally separate things. Maybe the inherited IRA is in a brokerage account is what he's trying to say.

[Big Al Clopine]

I think that's what he's trying to say.

[Joe Anderson]

Got it. So brokerage account has $350,000 inherited IRA taking around $70,000 a year. Trying to stay in the 35% tax bracket, received in 20,000 DOL 2022, able to put around $200,000 annually into brokerage account. Just extra income making maximum 401 contributions. IRA 401 IRA contributions annually from each $77,000. My employer puts in 18% of my annual income into the 401. Regardless of what I put in. I put in $31,000 into the Roth 401 and my employer puts the maximum 465 into my 401. It just pays me the money. Once I've reached the limit. They may offer a deferred option next year. Oh, that's a hell of an employer.

[Big Al Clopine]

Yeah, it is.

[Joe Anderson]

That's legit.

[Big Al Clopine]

I've never had that.

[Joe Anderson]

I put around $15,000 annually into a SEP IRA from 1099 income. Wow, this guy is overfunding.

[Big Al Clopine]

It's loaded.

[Joe Anderson]

It seems. Okay, all money is invested in ETFs. Military retirement income starts in 2027. 36,000 annually. Both eligible for Social Security starting at age 70 or whatever. The maximum limit is around $55,000 annually is projected. We got no debt. Health Savings account of 15,000 kids have graduated college with remaining 529 balances Transfer to him to do what they wish. Enjoyed the podcast and would like your thoughts. You can email me if you want more information. Dan, we got two other pieces of information here.

[Big Al Clopine]

Okay.

[Joe Anderson]

I currently have mandatory retirement at age 65. Must be a little pilot maybe. No. There's no mandatory retirement in doctors, is there?

[Big Al Clopine]

Some of them, yeah. Brain surgeon, would you want a 75 year old?

[Joe Anderson]

Absolutely. I would have you. Come on, let's crack this brain open. I'll have you.

[Big Al Clopine]

You might not want me to have.

[Joe Anderson]

Your brain up a knife in. All right. We'll likely start some side hustle. $120,000, $60,000 or so annually after 2032. We currently spend about $12,000, $15,000 a month or 100,008. $180,000 annually in retirement. Let's plan on 15,000 to $20,000 or $250,000 in case we want to travel. I also have an excellent airline travel package. Oh, ding, ding, ding. Got it. And we have traveled extensive.

[Andi Last]

I knew Dan was a pilot, so, interestingly, other professions. Military has mandatory retirement at the age of 62, with the exception of general and flag officers at age 64. And air traffic controllers have a mandatory retirement age of 56, with exceptions up to 61.

[Big Al Clopine]

Okay.

[Andi Last]

Why aren't you controlling planes either?

[Joe Anderson]

Yeah, my uncle was an aircraft controller.

[Big Al Clopine]

He was 60.

[Joe Anderson]

I thought it was 60, but it was probably younger.

[Big Al Clopine]

Oh, boy, that's a. That'd be a tough job, wouldn't it?

[Joe Anderson]

Remember when they went on strike or something?

[Big Al Clopine]

Yeah, yeah, I remember. Well, you were. I mean, they probably have. I mean, I remember under Reagan, you weren't even hardly born.

[Joe Anderson]

I wasn't.

[Big Al Clopine]

But they. Yeah, they went on strike and Reagan said, heck with that, you're fired. And that was it for them. Wow.

[Joe Anderson]

Well, maybe he's part of that. Maybe that was like some. Maybe some whiskey talk around the family, get together.

[Big Al Clopine]

Could be, yeah.

[Joe Anderson]

All right, cool. So he's got a lot of things going on here. So first of all, congratulations. Thank you for your service, and thank you for flying the friendly skies. Secondly, he's thinking Roth or not. He's got a lot of money. What's the actual question?

[Andi Last]

Should I do Roth 401 contributions or not? And when should I start converting IRAs and 401 money?

[Big Al Clopine]

But before we even answer that, I just did a little bit of math and inflating assets with savings. I get a 2.6% distribution rate. Looking great. Yeah, looking.

[Joe Anderson]

Yeah. $250,000 of savings.

[Big Al Clopine]

Even. Even. Even at 250,000 of savings, I think. I think they're just fine. So. So let's get that out of the way.

[Joe Anderson]

Okay. When is he. When is he 65?

[Big Al Clopine]

So he's got.

[Joe Anderson]

He's got seven years, got mandatory retirement. 65 is 58.

[Andi Last]

Yeah.

[Joe Anderson]

All right, so he. They make a ton of money. 550W2 income, 120, 10, 99 income. So he's putting money into a SEP in the 401. The company matches a bunch of money.

[Big Al Clopine]

And he's already got 1.3 million in tax free. That's amazing.

[Joe Anderson]

I know. I don't know how he got that much money into the tax free already.

[Big Al Clopine]

Maybe he's already doing 401 contributions in the Roth I don't know.

[Joe Anderson]

He's got $2 million. He's going to be in a lower tax bracket when he retires.

[Big Al Clopine]

Yeah, yeah.

[Joe Anderson]

Because he doesn't have that giant 401. It's all in the Roth. Right. So if I was Dan, I would definitely go Roth, but.

[Big Al Clopine]

Well, I know you would. Would you do Roth conversions?

[Joe Anderson]

I would not do conversions today, no. I would do the contributions of the Roth. Maybe my sep. I would do a SEP Roth, because I'm just cutting a check anyway into the sep, and then I just wouldn't take the tax deduction on my return. So I. I mean, this is all psych, you know, the site play.

[Big Al Clopine]

Yeah, yeah. Right, right, yeah, yeah.

[Joe Anderson]

Because I'm not going to miss the taxes in 10 years. He's going to have a lot of money. And when I go on my cruises and when I would much rather not pay a bunch of tax, then I.

[Big Al Clopine]

Understand, I think, because I feel the pinch.

[Joe Anderson]

Right. I'm on a fixed income.

[Big Al Clopine]

Yeah. It's a pretty low fixed income. Anyway, I think I certainly agree with you on the Roth conversions. I would not do that till he retires. That's at age 65. Then there's 10 years to get as much converted as possible in lower brackets. I think that makes a lot of sense whether you do the current contributions. I think I'm. Even though it goes against my accounting and tax rates. I might agree with you. Only because there's a lot of other money getting put into the regular.

[Joe Anderson]

I mean, there's almost $100,000 going into deferred.

[Big Al Clopine]

I know.

[Joe Anderson]

Over the next 10 years.

[Big Al Clopine]

Yeah. It just makes this problem worse. So I think I'm going to agree with you.

[Joe Anderson]

All right.

[Big Al Clopine]

Yeah. Yeah.

[Joe Anderson]

There's a lot of money still going in deferred. The math, I don't know. You would have to run the numbers we're making hypotheticals of. All right, well, where are tax rates going to be? What is the growth rate on the accounts and everything else? So.

[Big Al Clopine]

But I will say, as an account, it pains me to not do regular Roth contributions when.

[Joe Anderson]

Regular 401 contributions.

[Big Al Clopine]

Yeah, sorry, 401 contributions when you're in the 35% bracket. So you could argue what I just said.

[Joe Anderson]

For sure you could. Yeah. Someone would write in and like, oh, what do you guys do? Let's talk about Roth Brothers. Whatever. All right. We got fired up in Chicago. Hey, Joe, Allen, Andy. Really enjoy your podcast, which I discovered while researching my question.

[Big Al Clopine]

All right.

[Joe Anderson]

Tax efficient withdrawal transfer. Should we contribute to pre tax or Roth 401. Now, given a high tax bracket, what if he went a little chatgpt? It'd be. We owe $3.3 million in 401 s, $500,000 in a Roth, and $2.5 million in brokerage accounts. Our combined income is 800,000. $800,000 for the next four to five years. Then we'll choose to slow down to $300,000 for another five. That's slowing down now. You know, that's, that's like low gear. Making $300,000 almost no go. I'm barely working, but making 300. We consider ourselves financially independent. Yeah, I consider you financially independent too. Choosing recreational employment for its meaning and enjoyment. Oh, that sounds wonderful.

[Big Al Clopine]

Yeah.

[Joe Anderson]

We have no pension and expect a combined 9 to $10,000 in Social Security monthly, which we plan to purchase till age 70. As a debt free couple in her early 50s with grown college paid for children. Our question is about funding our $15,000 a month retirement.

[Andi Last]

Isn't about funding our 15k a month retirement.

[Joe Anderson]

Oh, it isn't? It isn't.

[Big Al Clopine]

They feel like they're good.

[Joe Anderson]

He's just checking the boxes. Well, my question is not about this and it's not about that and it's not about this.

[Andi Last]

It's not the things you're usually answering.

[Joe Anderson]

Just wait for it, Wait for it. I'm pretty fired up here. Instead, we're seeking advice on tax efficient wealth transfer to our high earner children. Specifically minimizing pre tax 401 inheritance under the 10 year rule. Okay, so he's 50 and he's thinking about wealth transfer.

[Big Al Clopine]

Yes.

[Joe Anderson]

Okay.

[Big Al Clopine]

That's what he seems to be wanting to know about.

[Joe Anderson]

All right. We're currently maximizing Both pre tax 401 s and Megadore backed Roth IRA in plan conversion contributions. So our main dilemma is whether to shift pretax 401 contributions to Roth 401. In other words, how to balance our 35 37% tax bracket against $3.3 million pre tax 401, which could complicate future Roth conversions. We plan to defer roth conversions for 10 years completing them. And in the eight years after we retire before we claim Social Security at 70, you seem reasonable. All right. Okay. We don't know how much fired up spends.

[Big Al Clopine]

Yeah, he spends about.

[Joe Anderson]

Or no. $15,000 a month. That's what he wants to spend. But he doesn't need any information on that.

[Big Al Clopine]

No, we're not, we're not going there.

[Joe Anderson]

But I think you need to.

[Big Al Clopine]

All right, so well, he's got, between all his assets, got about 6.3 million in liquid assets currently. And he'll be saving full bore for another five years and maybe even a little bit less for another five. For another three years. Sorry.

[Joe Anderson]

All right, so he's going to make $300,000 for five years. He's spending.

[Big Al Clopine]

Oh, he's making $800,000 for another four or five years.

[Joe Anderson]

Four or five years. He's going to max out the 401.

[Big Al Clopine]

Yeah, yeah, yeah, yeah.

[Joe Anderson]

And then from there he's going to make $300,000 as he slows way down. All right, so the question, does he do conversions in this 35%, 37% tax bracket or does he switch to Roth contributions? I know what I would do.

[Big Al Clopine]

Yeah, I know what you. But go ahead and say it.

[Joe Anderson]

I would definitely switch to Roth for sure.

[Big Al Clopine]

Would you do current conversions or just do the. For the 401k? Do a Roth?

[Joe Anderson]

I would, yeah, I would just do all Roth. Do the Mega backdoor. So what's the Mega backdoor? So a lot of people have now after tax ability in their 401 plans and still they just don't know that they have that option. So if you're listening, double check, triple check to see if you have the ability to put after tax dollars in your 401. So you can max out the 401 pre tax or after tax Roth and put additional dollars into the plan and do an in plan conversion. So you're taking the after tax dollars that you put in the plan and you're moving them directly into a Roth with no tax effects. It's an awesome, awesome strategy that people still kind of leave that on the table.

[Big Al Clopine]

Yeah. And I guess to put some numbers of this. So if you're over 50, you can put about $30,000 into a 401. But you can then in certain plans, many plans now you can put after tax dollars. You don't get a tax deduction after tax dollars to Joe. Somewhere around 65,000. Right. So another 35,000. Ish.

[Joe Anderson]

Or up to 70.

[Big Al Clopine]

Up to 70, whatever the number is. Right. So you put extra money in after tax and you're allowed to convert those dollars into the Roth. And depending upon the plan, you can often do that every single year.

[Joe Anderson]

Yeah, you could do it with every single contribution.

[Big Al Clopine]

Yeah.

[Joe Anderson]

Every paycheck if you wanted to. Okay, Yeah, I would do Roth. It's not gonna hurt you. I get it. You're in the 35 or 37% tax bracket. You're making $800,000 a year. But you have so much money already in your early 50s. $3.5 million in a tax deferred account. He's gonna be in that bracket.

[Big Al Clopine]

Yeah.

[Joe Anderson]

And who knows what. I mean, here's the bet, here's the gamble, right? The gamble is that you believe that tax rates will go down. And I don't know if that's the right bet.

[Big Al Clopine]

Right.

[Joe Anderson]

Because that three and a half million at early 50s, by the time he reaches RMD age, what do you think.

[Big Al Clopine]

That thing could be at 10 at least.

[Joe Anderson]

Right. So then that's four Hyundai plus whatever interest. I mean, he's gonna be in the 35 or 37% tax bracket, I think at RMD age. But that's 20 years from now, 25 years from now. I have no idea what tax rates are going to be in 25 years from now. We could have a flat tax, we could have a consumption tax, we could have no tax. You know, who knows? But if it were me, I would want to continue to build up the tax free account. You only have 500,000 there. You're doing the after tax, the 35% that you're going to pay in tax to put the money into the Roth. You're going to forget that savings money. Yeah. The next day and you're going to be happy that you have this big chunk of change sitting in your Roth.

[Big Al Clopine]

Yeah. So I will say this. The accountant answer would be go ahead and get the tax deduction now while you're in the highest bracket. Right. But continue the after tax monies going into the 401 and continue converting those to Roth as often as you can. But there's a certain amount of just psychological benefit of just getting it done, not even worrying about it, not even thinking about it, because what you already have, have and deferred is just going to keep growing. Now, I would not do any Roth conversions right now because the income's too high. But when you go down to $300,000, you can convert in the 24% bracket, which is right now over $400,000. So I'd be converting then. And then when you retire fully, I would do even bigger conversions because you don't have the 300,000. So there's a huge Roth conversion strategies over time. Right now at least I wouldn't do any conversions currently because you're in the bracket, but whether you want to go pre tax.

[Joe Anderson]

But if he goes after tax, it's the same as a conversion, but he just doesn't have to Write the check.

[Big Al Clopine]

To pay the time. It's easy. It's easy.

[Joe Anderson]

It's a lot easier just to switch the button and say, roth contribution.

[Big Al Clopine]

And then you don't think about it.

[Joe Anderson]

Yeah. Then you convert. April comes around. Then you got to write a check to the irs. That's a pain.

[Big Al Clopine]

There's. There's some logic.

[Joe Anderson]

There's psychological issues there. It's the same tax. It's this.

[Big Al Clopine]

Yeah, no, I got it.

[Joe Anderson]

So if we're saying, hey, you're too high tax bracket to convert, but you're in perfect. You're in a perfect bracket to do Roth contributions.

[Big Al Clopine]

I know, it's more of a. I'm just going on yours, which is kind of more of a psychological play. It's not the cpa. Textbook answer.

[Joe Anderson]

I agree. Let's see. Would you consider. So his main goal is that he wants to leverage the estate for the kids.

[Big Al Clopine]

Right.

[Joe Anderson]

What, and he's got 6 million. This thing is. I don't know, I'm almost thinking, if he really wants to leverage wealth for the kids, why wouldn't he buy a life insurance contract?

[Big Al Clopine]

Yeah. Set up an irrevocable life.

[Joe Anderson]

I don't think he's. He might have an estate issue at some point. At 50, depending on his life expectancy.

[Big Al Clopine]

Yeah.

[Joe Anderson]

Maybe he doesn't spend a ton and he still has another 10, 12 years before he spends. And someone that makes 800,000 and says, we're going to slow down and make 300,000. I mean, I bet his slowdown or their slowdown, his or her. I don't know who's writing this is probably like full speed for a lot of people.

[Big Al Clopine]

I would think so, too.

[Joe Anderson]

Right. And so for them to fully stop working and having zero income coming in, taking the assets and spending their hell of a. You know, they save a ton. I don't know. That would be interesting because at age 50 or the cost of insurance is going to be a lot cheaper, then that's really leveraging. You put an irrevocable trust and have the kids buy several million dollars on both you and the spouse's life.

[Big Al Clopine]

Yeah, yeah.

[Joe Anderson]

I'm not a life insurance agent. We don't sell insurance. But if that was my true goal and I had this situation, I would consider that.

[Big Al Clopine]

Yeah. I think the way I might think about it is not so much a wealth transfer yet in your early 50s, although that's in the back of your mind. I would think about the Roth conversions and getting money to the Roth actually is going to help you. Right. Because what we're trying to suggest to you is you're going to be in a super high tax bracket when the required minimum distributions come in, which is at age 75 currently. Right. So when that happens, you're going to be in this giant tax bracket. So you're going to have periods of time, maybe when you work a little bit less and have less income, and then after that you want to get as much converted as you can and that's going to benefit you because it'll keep you out of higher brackets later. Yes, it will benefit your kids, but I don't know, I think in your early 50s. That's how I would think about it. Yeah.

[Joe Anderson]

No, and I think he's probably run the numbers and they're like, all right, well we're spending $15,000 a month and.

[Big Al Clopine]

We gotta be fine.

[Joe Anderson]

Yeah, we have six and a half million dollars now and I'm in my 50s. We're still gonna work another 10 years or maybe a little bit more. We're not including Social Security here, fully funding these plans that easily could be double that or, you know, maybe even more. It could be $20 million in 10 years.

[Big Al Clopine]

It could be.

[Joe Anderson]

Right. Yeah, he saves. They got a lot of non qualified dollars. So I'm guessing he probably has, I don't know, maybe some other type of stock plan or non qualified options, ISOs, maybe company stock, who knows? But yeah, great position. It's a tough problem to have. Woe is me.

[Andi Last]

Financial anxiety can hit any of us, no matter the size of our wallets. We love having money, but we hate talking about it. And a lot of the time our emotions can totally wreck our finances. Learn the truth about your love hate relationship with money. On this week's brand new episode of youf Money, you, Wealth tv, Joe and Big Al will dig into why our feelings about money often hold us back and how we can fix our money mindset once and for all. They'll unpack the hidden biases that trip us up, the four money personalities that could be controlling our investing choices. And they'll show us how to turn our toxic money habits into healthy wealth behavior. Click or tap the links in the episode description to watch YMYW TV and to download that companion Emotionless Investing Guide. It's all free, all yours, courtesy of your money, your wealth and pure financial advisors. And hey, don't hoard all this good stuff for yourself. Tell a friend.

[Joe Anderson]

Okay, we got, we got.

[Andi Last]

The next two are just comments, okay? One of them is about Social Security. Yep, that was the episode you weren't there for.

[Joe Anderson]

Okay, let's go to Cindy then. Hi. Regarding the response to the second question from Sherilyn.

[Big Al Clopine]

Sherilyn.

[Joe Anderson]

Remember that?

[Big Al Clopine]

Well, that was the episode that I did with Susan.

[Joe Anderson]

I guess the second response.

[Big Al Clopine]

No, I don't remember that.

[Joe Anderson]

But how would we ever know this?

[Andi Last]

This was in response to the actual email newsletter that had that episode in it. So that was months ago.

[Joe Anderson]

So this is ever going to understand. So what? So why do we want to read? Let's. Well, I guess I'll keep reading.

[Big Al Clopine]

You already started.

[Joe Anderson]

Well, most of Al's response was correct that the husband would be able to get spousal benefit based on the wife's Social Security benefit. I believe he made a mistake near the end. He made an assumption that the husband's revised benefit already included the spousal benefit. Is it possible that the revised benefit was only based on the husband's personal work history? He probably needs to apply for his spousal benefits. When people were told years ago that they weren't eligible for a benefit, they often didn't apply. The Social Security Administration won't do the spousal automatically. My husband and sister were both affected by WEP and gpo, so I'm pretty sure I know about this stuff. Hope this makes sense. Maybe you can contact Sherrilyn and let her know her husband should submit his application. Look at Cindy. Yeah, she's good for you. Watchdog.

[Andi Last]

So she. Apparently Sherilyn had emailed us and said my husband got this retroactive check. You know, do we need to do anything? And so that's. That's what she's responding to.

[Joe Anderson]

Well, the sponsor benefit is two benefits. It's not one.

[Big Al Clopine]

Yeah, and I. I don't really remember the question. It was a while ago.

[Joe Anderson]

Remember what you had for lunch yesterday?

[Big Al Clopine]

No. It's probably a salad, but I couldn't tell you for sure. But I. But I do think that. I mean, there are retroactive checks that were given. I think that's. I think if you're getting a retroactive check, it seems like maybe you're already been enrolled in this. But it's a good point. I mean, don't trust it. Check with Social Security Administration to make sure you're getting all the benefits that you're entitled to.

[Joe Anderson]

Absolutely. If you're applying for a spousal benefit. And what? A spousal benefit is half of your spouse's benefit or yours, whichever's higher. Right. So in this case, the husband's benefit was lower than half of the wife's benefit. So let's say the wife's benefit is $40,000. The husband's benefit on his own record could have been $10,000. The spousal benefit would have paid him $20,000, which is half of the wife's. But he's getting this check of $10,000. Fill the application in. Then it's going to shore up that benefit to add another $10,000 to get to that $20,000 mark. So the spousal benefit is apply. And I agree with Cindy 100%, because sometimes there's errors, sometimes you assume. I mean, I just saw a case this week. One spouse had a $48,000 benefit. The other one was $6,000.

[Big Al Clopine]

Right.

[Joe Anderson]

I was like, this doesn't make sense.

[Big Al Clopine]

Right. Right. Yeah. No, I think it's a great comment, especially with the change in the. The WEP and the gpo. If you're. If you're part of that. Yeah. Contact Social Security Administration. Make sure you're getting as much benefit as you can. And y. We don't really know whether he's on spousal or not, but it's worth checking.

[Joe Anderson]

There you go.

[Big Al Clopine]

Yeah. So I agree with that.

[Joe Anderson]

All right, we got Lucas. He writes it. He goes, hey, there, it's the guy from Minnesota with pretty. All right, kids. I wanted to follow up and let you all know we do indeed love our kids.

[Andi Last]

You busted his chops about him saying that his kids were pretty all right.

[Joe Anderson]

Yeah, they're pretty all right.

[Big Al Clopine]

Yeah. Well, that's. You're just reading it.

[Joe Anderson]

Yeah, yeah, they're pretty great. Chaotic little creatures. We bring them with us everywhere we go. Very much enjoy showing them the world.

[Big Al Clopine]

Wow.

[Joe Anderson]

Anyways, thanks for the spitball. Gave me a lot of confidence. And continue continuing exactly what we are doing. Sounds like we just need to have a taxable sense withdrawal strategy when the time comes. Great show with great spitballs. Very much enjoy listening to it. Also, big shout out to the real hero, Andy.

[Andi Last]

Okay.

[Big Al Clopine]

There you go, Andy.

[Andi Last]

Thank you, Lucas.

[Joe Anderson]

What about Aaron?

[Big Al Clopine]

Oh, no. Aaron shout out. No shout out.

[Andi Last]

Well, Lucas says that he listens, so he doesn't even realize what Aaron does.

[Joe Anderson]

All right, he's gonna go have an old Fashioned now. Yeah.

[Big Al Clopine]

Okay.

[Andi Last]

By the way, Aaron Townsend is the technical director for the video version of the YMYW podcast, and he runs the ymyw TV show. Next week on ymyw podcast, James in Texas asks whether to invest in his high fee 457 or in his brokerage account. Lois and Clark Kent in Florida want to balance Roth conversions growth and a home purchase. Ray Charles in Chicago wonders if he can quit corporate life at 55 and gun and rose in Louisiana. Ask if borrowing from a 403 again for home repairs is a good idea. If you love Ymywood, please don't keep it to yourself. Share us with a friend, a co worker, or that guy who keeps asking you for investing tips. The more the Merrier. Subscribe on YouTube, join the fun in the comments and leave your honest reviews and ratings for your money, you, wealth in Apple podcasts or any other app that accepts them. And if you're ready to stop letting money anxiety run your life, go beyond the spitball and get a real plan. Schedule a no Cost, no Obligation Comprehensive Financial assessment with Joe and Big Al's team of experienced professionals at Pure Financial Advisors. Click or tap the free financial Assessment link in the episode description or call 888-994-6257 to meet in person at any of our nationwide offices or online from the comfort of your own home. They'll help you map out a detailed plan tailored for your goals, your taxes and your peace of mind in retirement. 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.