High Net Worth Pre-Retirees Share Their Biggest Fear (Here's How to Calm It) - 566

Summary

Podcast Summary: Your Money, Your Wealth, Ep. 566 – High Net Worth Pre-Retirees Share Their Biggest Fear (Here's How to Calm It)

Hosts: Joe Anderson, CFP® & Alan "Big Al" Clopine, CPA
Date: January 27, 2026

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Episode Overview

This episode explores a universal retirement fear: “Will I run out of money?”—no matter the size of one's nest egg. Joe and Big Al answer listener questions from pre-retirees and retirees across a broad wealth spectrum, highlighting that anxiety about running out of money isn’t about hitting a “magic number.” Instead, it’s deeply connected to the individual’s relationship with money, their spending patterns, and—most importantly—the need for a written, personalized plan. The hosts mix sharp financial insights with humor as they tackle cases ranging from “barely enough” to “more than enough,” examine strategies like Roth conversions, tax loss harvesting, and capital gains planning, and share memorable one-liners.

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Key Discussion Points & Insights

1. Everyone Worries About Running Out—Regardless of Wealth

• Case #1: Mr. & Mrs. Smith (Dallas, TX, Age 43, $850k+)
  • Despite strong savings habits and solid projections, Mr. Smith is deeply concerned about his retirement prospects, RMDs, and missing earlier opportunities.
  • Joe: "Dude's 40 and he's going to work until 65 and he's got, I don't know, close to a million dollars." (03:57)
  • Both hosts agree Mr. Smith is ahead of the game.
  • Big Al: "If you’re 40, you got $850,000 — good for you. Yes, that’s really good." (04:06)
  • They highlight how even high savers feel anxious due to uncertainty about future spending needs or because of their personality type.
  • Core Advice: Start small Roth conversions from his wife's IRA to the Roth ($10k/year), but avoid large conversions in the current 24% tax bracket. At his age, he can afford to smooth conversions over years.
  • Al: "Anyone saving as much as you, for as long as you’re saving and paying attention, is going to be in great shape." (08:11)

2. High Earners and Big Spenders: The Anxiety Grows with Lifestyle

• Case #2: Lucy & Desi (Jersey Shore, Age 58 & 64, ~$7M Net Worth, $35k Monthly Spend)
  • Despite having $6.6M in investments and property valued at $5-6M, the couple lies awake worrying whether that’s enough, especially with a $1.3M mortgage and $35k/month in expenses.
  • Joe: "It doesn't matter how much money people have… Everyone’s worried." (14:19)
  • Their spending is high—a $420k annual lifestyle, with only $50k/year expected from Social Security.
  • Big Al: "Distribution rate [from investments] of 5.6%. It's a little rich." (17:08)
  • Key Insight: It’s not about the raw dollar amount—it’s about the relationship between spending and assets.
  • Solution options include: cutting spending, working longer, or possibly selling a home to reduce debt.
  • Joe: "You got to be careful how this thing is invested. How are they going to take distributions? How do you manage the risk?" (21:04)

3. Comfortable, Yet Cautious: The Case for Written Strategy

• Case #3: Tony & Carmela (San Ramon, CA, Early 60s, ~$5M+, Conservative Alloc)
  • Tony wants to retire and has $5M liquid plus a paid-off $1.5M home, spent ~2.5% of the portfolio annually, yet still worries about running out.
  • Joe: "I would probably go to the 22[% bracket]... Your RMDs will put you into that bracket anyway." (27:44)
  • Suggests more aggressive Roth conversions up to the 22% tax bracket; 50/50 allocation is fine if it helps sleep at night.
  • Al: "If it can make you sleep at night with the amount of money you have, I am fine with 50/50." (27:17)
  • Lesson: Even “set” retirees benefit enormously from a clear written plan, not just rules of thumb.

4. The Role (and Limits) of Roth Conversions

• Small, slow Roth conversions while working in higher brackets (like Mr. & Mrs. Smith) can make sense for risk-averse savers, but paying large up-front taxes warrants caution.
• Large, recurring Roth conversions up to the 22% bracket may be better for high-balance, soon-to-be retirees (like Tony & Carmela) to manage future RMD/tax risk.
• Joe: “If the market drops 10%, 15%, 20%, that is the perfect time to do conversions.” (28:57)

5. Emotional Readiness vs. Financial Readiness

• The biggest retirement fear is rarely solved by math alone; it’s about aligning numbers with values and lifestyle.
• Joe: “If you’re concerned, you get stuff done. You buckle down and you figure it out.” (09:43)
• Big Al: “When you start throwing out big money like this… it almost doesn’t matter how much money you have. It’s the relationship with how much money you have versus how much you’re spending.” (18:14)
• Hosts urge listeners to create a written plan, not just rely on forecasts or online tools.

6. Technical Spitballs: Tax Strategies, Indexing, Work in Retirement

• Long/Short Direct Indexing and Tax-Loss Harvesting (Juicy Squeeze, 57, $4.5M, anticipated $1.5M capital gain) [~39:00]

  • Direct indexing helps harvest tax losses, but you only get those losses if the investments decline, which nobody should actively seek.
  • Win: Use direct indexing for ongoing tax efficiency—not just as a vehicle to “manufacture” losses to offset a big gain.
  • Big Al: “The whole strategy is based on you losing money.” (45:51)
  • Question fees: 1.5% is hefty unless justified by significant value-add.
  • Memorable quote: “Don’t buy an investment because you’re going to lose money to offset another investment that did very well.” —Joe (43:37)

• Work After Retirement (Wendy, 72, Artist) [47:15]

  • Discussed pros and cons of being an independent contractor vs. employee at 72—contractor pays higher self-employment taxes but has more flexibility; as an employee, payroll taxes are lower and paperwork is simpler.

• Retirement Timing Ambiguity (Jacques & Johanna, FL) [32:07]

  • One word—“it”—changed their spitball from “you’re fine!” (if pension is an income stream) to “keep working!” (if lump-sum).
  • Joe: “Two letters. Oh my God. Can make or break this guy’s retirement.” (36:44)

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Notable Quotes & Memorable Moments

On anxiety at every level:

• “It doesn't matter how much money people have… Everyone’s worried about their money. That’s why we have jobs, Al.” – Joe (14:37)

On spending vs. savings:

• “It almost doesn’t matter how much money you have. It’s the relationship with how much money you have versus how much you’re spending.” — Big Al (14:15; 18:14)

On handling market downturns in retirement:

• “If the market turns and that $7 million or $6.6 goes to $5M, it feels different.” – Joe (22:05)

On calm advice for the anxious:

• “Calm down, Mr. Smith, we’re here to help… It’s going to be OK.” — Joe (03:50–03:57)

On Roth conversions and taxes:

• “You won’t remember the taxes that you paid 10 years prior, and you’re going to be a lot happier that you have all that money in a Roth.” – Joe (28:20)
• “Tax loss harvesting is great, but the whole strategy is based upon you losing money.” – Big Al (45:51)

On the need for a written plan:

• “One major way to calm that fear is by creating a written financial plan that clearly defines your goals and the path to successfully get you through retirement.” – Andi Last (38:38)

On relatability:

• “How many times have we done little seminars and people come up to us and say, 'I'm 50 years old, I haven't saved a penny. Is it too late?' ... It’s not too late at 50. It’s not too late at 60… but at 40, with $800k? Wow.” – Big Al (09:05)

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Timestamps for Key Discussions

| Segment | Topic/Case | Timestamp | |---------|------------|-----------| | Mr. & Mrs. Smith: Early Savers, Big Concerns | 01:01 – 11:26 | | Lucy & Desi: High Earners, High Spenders, Still Anxious | 11:26 – 23:28 | | Tony & Carmela: Conservative Investors, Comfortable yet Cautious | 23:35 – 30:26 | | Written Plans: Why They Matter | 30:38 (Andi’s summary) | | Jacques & Johanna: The “It” in Pension, and Retirement Ambiguity | 32:07 – 38:44 | | Juicy Squeeze: Direct Indexing, Tax Loss Harvesting, Fees | 38:44 – 46:52 | | Wendy: Work in Retirement - Payroll vs. 1099 | 47:15 – 51:01 |

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Style, Tone, and Closing Thoughts

The show stays on-brand: mixing deeply technical spitballing with humor—“He’s got the mega-back door, he’s got the regular back door, he’s got the garage door”—to keep finance approachable (06:00). The hosts reassure, challenge, and at times, gently tease listeners about their anxieties and quirks.

Final Lesson:
Retirement security isn’t about a portfolio size—it’s about math, emotion, and clarity. Build a written plan, understand your spending, and revisit the plan as reality shifts. Whether your biggest fear is the tax man, inflation, or just what to do with your time, write it down and get help if you need it.

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For further resources or your own “spitball” retirement analysis, visit Your Money, Your Wealth.

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“If this episode makes you think of someone who’s worried they might run out of money in retirement, do them a solid and share all these free financial resources with them.” – Andi Last (10:12)

Transcript

[Andi Last]

Mr. And Mrs. Smith have nearly $850,000 saved at age 43, but they're very concerned about retirement. Lucy and desi are 58 and 64 with nearly $7 million saved, but they still lie awake wondering if it's enough for their high expense life. Tony and Carmela are in a similar boat with millions saved at 61 and 59, but they're worried their asset allocation won't get them through their retirement. No matter the numbers, the fears sound exactly the same. Will we run out of money in retirement? Turns out overcoming that fear is not about hitting a magic number. We'll find out what it's all about today on youn Money, you, wealth podcast number 566. Joe and Big Al also spitball Roth conversions, Long short direct indexing, capital gains tax strategies for Juicy Squeeze, working after retirement for Wendy, and how one confusing word can completely change a retirement timing decision for Jacques and Johanna. 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]

Mr. And Mrs. Smith. Joanne. Love the podcast. Been listening for about a year and it's one of my regular rotations to listen to when I'm taking my morning three mile walk. Wow, three mile walk. How long does that take? An hour?

[Big Al Clopine]

Yeah, I think when I'm walking It's about. Yeah, three miles. 20 minute. Yeah, that's about an hour.

[Joe Anderson]

Is it? I drive a 2019 Chevy Traverse. Is that. That's the company car. My wife drives a 2020 Ford Fusion that will be giving to my daughter next year. Drink of choice? A local craft beer. I've never tried it before. Oh, a local craft beer I've never tried before.

[Big Al Clopine]

He likes new ones.

[Joe Anderson]

Oh, yeah. Preferable a ipa. Hazy or West Coast?

[Big Al Clopine]

Okay, I'll go. I'll go with the hazy.

[Joe Anderson]

Nope, not you. I also thoroughly enjoy a nice tequila to sip on. Or even a tequila Old Fashioned. All right, here's what we got going on. My wife and I are both 43, live in Dallas, Texas. Actually, suburb of Dallas. We have about $650,000 in the 400, one of which $128,000 is in Roth. We have Roth IRAs in the amount of $100,000, and my wife has a rollover IRA of $100,000. We have very little in our brokerage account because I've been focusing on building our Roth assets. I'm late to the game, but I've been doing backdoor Roth contributions for a couple of years for me but have not been contributing to my wife since hers is all pre tax. I contribute to my Roth 401 and also do mega backdoor Roth contributions via my 401. I try to contribute income by 20% between Roth 401 and after tax which I convert to the Roth but am inconsistent. I never drop below 10% contributions. My work matches dollar for dollar up to 5% and then a 3% match at the end of the year. My salary is around $200,000 and with bonus average around $250,000 to $280,000 the last couple of years. I'm kicking myself for not investing more seriously earlier. I love my job so plan on working until I'm 65, but you never know. My wife does a little part time work but not enough to make a difference. I also have a pension through work that is estimated to be about $2,200 of monthly income when I retire. So here's the question or concern? I am of course concerned about not saving enough for retirement. Running some projection. It looks like I could be okay, but I'm concerned. He's really concerned. He said concerned in a matter of a sentence and a half.

[Big Al Clopine]

That's why he wrote us, I think.

[Joe Anderson]

Calm down, Mr. Smith, we're here to help.

[Big Al Clopine]

That's the number one thing we want to tell you. It's going to be okay.

[Joe Anderson]

I'm really concerned. I am concerned. Dude's 40 and he's going to work until 65 and he's got, I don't know, close to a million dollars.

[Big Al Clopine]

Yeah, I got 850. Call it. I think. You know what, I'm just going to go on record as saying if you're 40, you got 850,000. Good for you. Yes, that's really good.

[Joe Anderson]

But he's running some projection. Looks like I could be okay, but I'm still concerned. Yeah, I have no idea what I want to spend when I retire. But my wife and I love to travel and we hope to have lots of grandkids to spoil.

[Andi Last]

He's saying this at 43.

[Joe Anderson]

At 43 years old, grandkids.

[Big Al Clopine]

Yeah, it could happen.

[Joe Anderson]

That's awesome. I'm like, there's no way I'm going to see grandkids. I'll be lucky to see my kids graduate high school.

[Big Al Clopine]

You're just going to have to hang on.

[Joe Anderson]

Oh man, I got to get back on the P90X. I think $175,000 per year is probably on the high end. But did I mention we like to travel. And did I mention I'm really concerned. I also started thinking about RMDs. You're thinking about RMDs? Dude, would it make sense to start converting some of my wife's IRA to Roth now and then move on to my pre tax 401 or wait until retirement when my income will be less? When projecting out retirement, my pre tax 401, like it could be a big number with significant RMDs. Thanks for the spitball.

[Andi Last]

You remember the movie Mr. And Mrs. Smith, right?

[Joe Anderson]

Yeah. That's Brad Pitt and Angelina Jolie.

[Big Al Clopine]

Yeah. Yeah.

[Joe Anderson]

I don't think Brad Pitt and Angelina Jolie were thinking about RMDs and concerned.

[Big Al Clopine]

When they fill that movie.

[Joe Anderson]

Okay.

[Big Al Clopine]

I don't think so either.

[Joe Anderson]

This guy's saving a ton of money.

[Big Al Clopine]

Yeah.

[Joe Anderson]

He's doing the conversions. He's got the mega back door. He's got the regular back door. He's got the garage door. He's got all that going for him. Should you Convert his wife's IRA now? She's got $100,000. They're in their 40s.

[Big Al Clopine]

Yeah.

[Joe Anderson]

He makes $280,000 a year. That's going to be in the $24,000. $24,000. He's got room to about $400,000 in the 24% tax bracket. Does it make sense at 43 to convert into $24,000 and have that to grow? You're going to pay $25,000 in tax to get the $100,000 into the Roth.

[Big Al Clopine]

Yeah. Would you do that?

[Joe Anderson]

He doesn't have a lot of non qualified because he's saving all the money into the Roth.

[Big Al Clopine]

Yeah. Right. That's the tricky part.

[Joe Anderson]

Small conversions. You know, he's only like. Right. They're in their 40s, do $10,000 a year.

[Big Al Clopine]

Yeah. That you can afford the tax.

[Joe Anderson]

Yeah. You can afford a couple thousand dollars of extra tax.

[Big Al Clopine]

Yeah. Right, right.

[Joe Anderson]

Yeah. I would, I would slowly convert some of that out in the 24. Pay a few. Few bucks extra in tax. Yeah, I like that. If you're truly worried about RMDs, that is going to happen in 40 years from now while you're playing with your.

[Big Al Clopine]

Grandkids 30, 32 years from now. And we what the rules will be at that point. But that's what it is right now.

[Joe Anderson]

Yeah.

[Big Al Clopine]

So the one question about. Am I okay. Well, it's a lot of. There's a lot of savings here. So I like that. And spending that can be variable depending upon how much you end up with. But I just ran some quick numbers for you. 43 years of age, you want to work 22 more years, that's a lot, right? And I use 6%. You could use 7%, you know, but 6%, and I assumed you're saving about 37,000 a year. The way I got that, I said your income is 250, 50 ish. You're saving between 10 and 20%. I said 15%, that's 37 grand. So at 6%, you end up with 4.6 million. At 7%, you end up with 5.5 million. So maybe you got 5 million. Let's just go with that. Right? So you want to spend 175,000 in today's dollars in future dollars, at a 3% inflation rate, that would be 335,000. So that's a lot, Right? Then you got a pension. I did a little inflation right around that. Maybe that's about 50 grand. Maybe your shortfall is about 285. I don't know what your Social Security will be. I just said 85. To do easy math. 200,000 into 5 million. 4%. Right. So I think you're, I think you're fine. Any, anyone that is saving as much as you for as long as you're saving and paying attention to this is going to be in great shape.

[Joe Anderson]

Yeah, I mean, he's dialed, I don't know, a ton of 40 year olds that are already doing forecasts on RMDs.

[Big Al Clopine]

I mean, how much?

[Joe Anderson]

And already buying, you know, baby clothes or grandkids.

[Big Al Clopine]

How many times have we done little seminars and people come up to us and said, say, you know what, I'm 50 years old, I haven't saved a penny. Is it too late?

[Joe Anderson]

Yeah, a ton.

[Big Al Clopine]

It would be better if you started sooner, but no, it's not too late at 50. It's not too late at 60. It'd be better to do at 40. And if you got 800,000 at 40, wow. Right? I think that's great.

[Joe Anderson]

You know how many 70 year olds have come up to us and says, what is an RMD that have millions in their retirement account? It's like, what that happens. Know that. So he's educated, he's motivated, he's in, he's in an awesome spot. I wouldn't be as nearly as concerned as he is.

[Big Al Clopine]

Yeah, I think we can cross out three concerns.

[Joe Anderson]

Yes.

[Big Al Clopine]

Within two sentences.

[Joe Anderson]

But I, I think that's, that's just part of his DNA. Right. If you're concerned, you get done.

[Big Al Clopine]

Yeah.

[Joe Anderson]

You buckle down and you figure it out. So I, I don't think it's a bad thing to be a little bit concerned, but if he's up. Yeah. Pacing at night about his RMDs, thinking.

[Big Al Clopine]

About can he afford grandchildren? Dollars for grandchildren.

[Joe Anderson]

Yeah. Yeah. Well, no. Congrats, Mr. And Mrs. Smith.

[Big Al Clopine]

Yeah.

[Joe Anderson]

Suburb of Dallas.

[Big Al Clopine]

Yeah, It's a great scenario. Keep it up.

[Andi Last]

Feeling a little bit like Mr. And Mrs. Smith doing all the right things, but still concerned it might not be enough. Take a step back and watch six signs. You truly have enough for retirement. This week on YMYW tv, Joe Big Al walk through how to tell the difference between being financially ready to retire and just emotionally ready to quit. Do you really know your retirement number? Do you have a withdrawal strategy that can hold up over decades? Is your Social Security timing optimized? Your healthcare planned for your budget realistic? And are you mentally ready to make that leap? You'll see how tax Planning, Portfolio Design, RMDs and your estate plan all fit together. Find the link to watch YMYW TV in the episode description and to pressure test yourself against all six signs, take the next step with our free financial Blueprint. It's a self guided tour through your savings, spending, taxes and withdrawals so you can see where you stand now and what you need to focus on next to get you where you want to be in the future. Click or tap the links in the episode description to watch YMYW TV and to calculate your free financial blueprint. And if this episode makes you think of someone who's worried they might run out of money in retirement, do them a solid and share all these free financial resources with them.

[Joe Anderson]

All right, cool. Let's go. We got Looking for a little spitball? We are Lucy and Desi. Desi Arnaz. Lucille Ball.

[Big Al Clopine]

You bet.

[Joe Anderson]

That's. That's your.

[Big Al Clopine]

That's my era.

[Joe Anderson]

Yeah, that's your era.

[Big Al Clopine]

I almost missed it. I had to watch reruns.

[Joe Anderson]

Oh, you did?

[Big Al Clopine]

Yeah, I'm. I'm not that old.

[Joe Anderson]

Writing in from the Jersey Shore, Lucy is fully retired at the age of 58, living her best life. She spends her time playing tennis, pickleball, bridge, sailing, paddling, cooking up big dinner parties for friends and family who are constant house guests. She's the happiest when our four grown kids all in their 20s and just start out coming home for a home cooked meal. Desi, 64 and still working in corporate America and plans to do so for the next couple of years. He's a high earner off it Upwards of a million dollars.

[Big Al Clopine]

Wow.

[Joe Anderson]

Okay. Due to RSUs that are granted over time.

[Big Al Clopine]

Got it.

[Joe Anderson]

Okay. We have a total of $6.6 million saved, comprised of two IRAs totaling $2.4 million in an active 401 of 1.5 and a taxable account of $2,800,000. It's a lot of millions there.

[Big Al Clopine]

Yep.

[Joe Anderson]

The IRA and tax bill account are being professionally managed. I'm sure it all sounds great, but there are two issues we are worried about. First, our $1,300,000 mortgage balance runs us $10,000 a month. Second, we live relatively expensive life here on the high coastal area. We are not big spenders. You just told us you are. But that's okay. We're not judging. We eat out occasionally and don't travel more than once or twice a week or no, once or twice a year. However, our expenses are high. Supporting two residents in New Jersey, a home in an apartment where property taxes are high. Currently spending about $35,000 a month, including a $10,000 mortgage. Our real estate is probably worth 5 to 6 million dollars total. Second, there is no income beyond Social Security after retirement. Also, unvested RSUs disappear upon retirement. Social Security will be maybe $35,000 to $4,000 a month, but we are going to put that off as long as we can. We are worried that we have not saved enough to get us through what we expect to be a long active retirement. Okay, this just proves it doesn't matter how much money people have.

[Big Al Clopine]

Right. It's the relationship between spending and money.

[Joe Anderson]

The individual that's 40, that's worried about his RMDs is worried. You know, you got the people that have a couple hundred thousand that are worried. You got Lucy and Desi here, they got $7 million plus millions in real estate.

[Big Al Clopine]

Yes.

[Joe Anderson]

Worried.

[Big Al Clopine]

They're worried.

[Joe Anderson]

Everyone's worried about. They're up at night, everyone's worried about their money. That's why we have jobs, Al. That's why we have jobs.

[Big Al Clopine]

I think you're right.

[Joe Anderson]

We also have weddings and other big expenses on the horizon as kids continue the launching process. We don't feel we need to leave them a lot at the end, but we want to help them earlier in life if we can. With down payments. Weddings, seed money for their kids, education. What is the number we need to feel comfortable with walking away from the paycheck. Should we pay down the mortgage again, it's $1.3 million. Can't imagine the spending will go down much, especially since Desi wants To start doing all of the things, too. So Lucy's writing in. She's living her best life. Pickleball, football, tennis, cooking, walks, retire a couple years. She's like, no, this guy's going to keep grinding.

[Big Al Clopine]

It's a million bucks a year.

[Joe Anderson]

A year?

[Big Al Clopine]

Come on. Work till 70.

[Joe Anderson]

You've got this. No, you can't have my fun yet. We both drive Volvos. Lucy bought hers in 2017. It's a XC90 Alpha lease. Desi bought a used 2019, low mileage XC60. What are XC 60s and XC 90s?

[Andi Last]

I will look them up. Hold on.

[Joe Anderson]

Just very safe, safe cars.

[Big Al Clopine]

Yeah, they would be safe, all right.

[Joe Anderson]

We've been known to order little dirty martinis from time to time, but we don't actually drink much. Much. Oh, yeah. And Desi wants to buy a motorboat. A motorboat?

[Big Al Clopine]

You know, a boat with a motor.

[Joe Anderson]

What's his motorboat? Just wants to buy a.

[Big Al Clopine]

The little putt. Putt.

[Joe Anderson]

Yes. It's not a sailboat. I guess he wants to buy a yacht.

[Big Al Clopine]

Yeah.

[Andi Last]

XC90 is basically. It's a SUV. And XC60 also looks like it's kind of an SUV.

[Big Al Clopine]

Yeah, just. Just a smaller one.

[Joe Anderson]

Okay. Okay. Love the show. Don't remember how I found it, but find it. It's inspiring. Love Lucy at the beach.

[Big Al Clopine]

You're right. Lucy read it.

[Joe Anderson]

Lucy did write this. All right.

[Big Al Clopine]

Well, how about that?

[Joe Anderson]

Okay, so they. They.

[Big Al Clopine]

She's thinking $420,000 a year and Social Security. What if it's about $50,000 a year?

[Joe Anderson]

He's 58. How old does he.

[Big Al Clopine]

64. He worked two more years. He'll be near full retirement age by that point. So let's just go with the spend of 420. Fixed income of 50. Shortfall, 370. They got 6.6 million in assets. I just did current value because he wanted to know, is that enough? It's a distribution rate of 5.6%. It's a little rich.

[Joe Anderson]

Yeah. Plus tax.

[Big Al Clopine]

Yeah. Yeah. So a 4% distribution rate would be. You'd have to have about 9.2 million at that spending. Right. Or with. With the money that you have, maybe you just spent a hundred thousand less. You know, 264, plus the fixed income. That. That would do it. Maybe you work a couple extra years. You know, there's a lot. I mean, when you have this much money, there's. There's a lot of options and a lot of choices, but when you start throwing out big moneys, like big money like this. And this is the points that I want to make to our viewers and listeners, which is it almost doesn't matter how much money you have. It's the relationship with how much money you have versus how much you're spending. Joe, we have teachers that have a couple hundred thousand and they've got more money than they know what to do with. And then we've got people that spend a lot and have a lot, but it's still not enough.

[Joe Anderson]

And that's totally fine. Yeah, I bet. You know, he wants to buy a boat. A motorboat. Motorboat.

[Big Al Clopine]

Oh, he does? Oh, he does want to buy it. Yeah.

[Joe Anderson]

Does he? I don't know. That's 500 grand. They want to spend $500,000 a.

[Big Al Clopine]

Now they could sell one of their homes. And would you. But would you pay up the mortgage?

[Joe Anderson]

That's what I was just.3 and a half percent.

[Big Al Clopine]

Yeah, I don't know, I don't think I would.

[Joe Anderson]

But it's like I feel what, what, what they're feeling in a sense of like do you want to have a million and a half over your head when you're retired and you're spending $40,000 a month?

[Big Al Clopine]

Right.

[Joe Anderson]

And you could get rid of 10 of that.

[Big Al Clopine]

Yeah. Right.

[Joe Anderson]

And it's like, okay, well we got weddings and we want to launch our kids and we down payments and this and that. You only, you know. Yeah, there's a lot of places where they want to put that money. Yeah, it's going to be tight given where their spending is and what they want to do because they want to live a rich retirement, which they deserve. The guy's grinding in corporate America, making a million bucks a year.

[Big Al Clopine]

I get it.

[Joe Anderson]

I guarantee that his job is.

[Big Al Clopine]

You think it's stressful?

[Joe Anderson]

A little bit. A little bit. I mean, guy 64, still grinding, making a million bucks a year. I mean, I'm sure he's, he's got a very high power job that has a ton of responsibility. I'm sure he wants to get on the motorboat.

[Big Al Clopine]

Yeah. Martini and I would if I were him too.

[Joe Anderson]

Yeah, so.

[Big Al Clopine]

So me personally, based upon what I know about the fact pattern, I might sell the second home and then I think this probably works fine. Maybe you pay down the mortgage or maybe you just have more assets.

[Joe Anderson]

They're not going to do that.

[Big Al Clopine]

Maybe.

[Joe Anderson]

But one's a condo and one's a house, one's a lake house and one's like in the city or something. You think?

[Big Al Clopine]

I don't know.

[Joe Anderson]

Yeah, I Don't know either. But then. Yeah, they live in Jersey. Property taxes and taxes alone.

[Big Al Clopine]

You know what happens though, Joe, and we've seen this a number of times, is people that make a lot of money, they get used to spending a certain level, and that's hard to go.

[Joe Anderson]

Backwards, actually, especially too. It's like, you want to enjoy it.

[Big Al Clopine]

Yeah, yeah.

[Joe Anderson]

He's not working 20 hour weeks.

[Big Al Clopine]

No, he's not.

[Joe Anderson]

And so I get in. So when he retires, when Desi retires, that's a lot more time that Desi has to spend money.

[Big Al Clopine]

Yes. The expenses may go up and then.

[Joe Anderson]

Hey, let's travel. Now that we don't. Yeah, the expenses may go up, actually.

[Big Al Clopine]

Yeah.

[Joe Anderson]

And then. All right. The kids need this. The grandkids come along. Oh, yeah.

[Big Al Clopine]

Got the weddings.

[Joe Anderson]

Got the weddings.

[Big Al Clopine]

Yeah.

[Joe Anderson]

And I think they could do it.

[Big Al Clopine]

No, they can. They totally do it.

[Joe Anderson]

The numbers will. But you got to be careful, too, how this thing is invested. How are they going to take the distributions? How are they going to get the income? What are they going to do with. You know, so there's a lot of moving parts where they, they have to map this out a little bit more with a little bit more sophistication.

[Big Al Clopine]

Yeah. I mean, the taxes alone on. On 4 million of deferred plus he's going to be adding to it. I mean, that's a lot, right?

[Joe Anderson]

They want to spend $400,000 a year. I mean, $400,000, depending on where they're going to pull that money from, they're going to be in pretty high tax bracket.

[Big Al Clopine]

I would agree. Yeah.

[Joe Anderson]

I don't know what interest in dividends are kicking onto the taxable account. So, yeah, there's, there's tax strategy, the investment, how to create the income, how do you manage the risk? Because they're, they're pulling a lot out of this thing. And if that market turns and that's 7 million or 6.6 goes to 5, it feels different. Oh, my gosh.

[Big Al Clopine]

Yeah. Yeah.

[Joe Anderson]

Right. So, yeah, I think if, if we've had markets like we've had over the last, you know, 20 years, you're. You're in golden shape. But the markets are going to turn at some point. Is it this year? Is it next year? I don't know. We haven't seen A, you know, 20, 22 was kind of a bad year, but we recovered fine. Covid was kind of a blip, but we recovered fine there, too. But now that Desi and Lucy are retired and they're taking those dollars out of the overall account. That's why people are such bad investors, because of the emotions. And they're worried. Where they got six point. They got $7 million in their worry.

[Big Al Clopine]

They're making a million a year.

[Joe Anderson]

Yeah, I'm making a million a year. And they're worried. Just wait until the million dollars a year goes away. They're spending a half a million dollars a year from the portfolio and the market turns. That's when you worry. But if you have a strategy in place and understand and write things out and it's funny, it seems like we haven't talked about that in so long, But I guarantee it's going to come. We're going to get. Oh, what do I do? Should I sell? Should I do this or that or whatever? No one's ever talking about that.

[Big Al Clopine]

No, because it's been a while.

[Joe Anderson]

Because it's been a while since we.

[Big Al Clopine]

Had an extended downturn.

[Joe Anderson]

It's going to happen sooner than we realize because we haven't talked about it in years.

[Big Al Clopine]

That is true.

[Joe Anderson]

People are getting complacent.

[Big Al Clopine]

Yep.

[Joe Anderson]

Yeah, we met a guy. Yeah. Let's plan at 800,000. Okay. We could do that.

[Big Al Clopine]

Yeah, why not, huh?

[Joe Anderson]

Why not? Let's see. Hey, Joe. Al, Andy. Love your podcast. It was the first one I started listening to and it's still my favorite. Wow. First one ever. He's listening to.

[Big Al Clopine]

That's pretty good.

[Joe Anderson]

Still. Still the favorite. I love the humor and above all, the humility.

[Big Al Clopine]

Okay.

[Joe Anderson]

The humility. All right. Some other podcasters are such blowhards. Yeah. No sh. This industry is full of them, man. I'm telling you. Ego everywhere. There's a couple just pompous. It doesn't have to be that way, big Al. It doesn't. It just doesn't.

[Big Al Clopine]

We try to change it.

[Joe Anderson]

Yeah, we're changing. Totally full of themselves. You are all super talented, yet you don't take yourselves too seriously. Nope, we certainly don't. My name is Tony and I'm 61 and married to Carmela. Oh, Soprano. Yeah. 59. That was a really good show. You just don't make TV like that anymore, Al. You probably loved that show, huh?

[Big Al Clopine]

I couldn't wait for the next episode. After I watched that, I got so depressed I didn't turn on hallmark.

[Joe Anderson]

I'd like to retire now. And when he's hoping for a spitball, we live in San ramon, California, with two grown and out of college kids. We drive whatever car will start and I drink hard liquor While Carmela is more of a wine gal. Here's some data about our combined financial situation. We got a traditional 401k, $2 million. Roth 401k, $200,000. We got brokerage cash bonds, $2.3 million. Estimated Social Security 67, $60,000 a year. Sitting pretty good there, Tony.

[Big Al Clopine]

You know, I'm liking the numbers.

[Joe Anderson]

Our investments are 50, equity, 50 fixed income with the equity split of 50 US 50, rest of the world. Our home is worth 1.5 million and we own it outright. Keep talking. We are planning on working part time until we take Social Security. So I think we will need to cover a shortfall. About $100,000 per year. $160,000 spending minus $60,000. Social Security or part time income. Some questions. Looking for spitballs. How does our retirement look? Not bad.

[Big Al Clopine]

I'm going to say amazing. Yep.

[Joe Anderson]

I'm planning on doing Roth conversions up to the top of the 12% tax bracket, but no higher. I expect I can do this for five or six years. What do you think? Would you do more? What has it got $2 million in a retirement account. He wants to spend. He needs $100,000. He's got roughly $5 million. When I do more. 12. Yeah, I would do. I would probably go to the 22.

[Big Al Clopine]

I would too. And it's because you got 2 million already in the retirement account. If we're a lower number, I might say, you know, that's, you know, you're okay, but that's a lot at age 61. That could double or more.

[Joe Anderson]

Yeah.

[Big Al Clopine]

Yep.

[Joe Anderson]

Is 50% equity, 50% fixed income too conservative? I sleep better at night with this allocation. So you just answered your question, Tony. But I don't want to run out of cash and go back to work and whack people. Thank you guys so much. Keep up the good work. No, I like the 50. 50. You could go 60. 40. It's not going to make that big of a difference. But if it can make you sleep at night with the amount of money.

[Big Al Clopine]

That you have, I am fine with 50. 50 with these numbers.

[Joe Anderson]

Yeah, totally.

[Big Al Clopine]

Yep.

[Joe Anderson]

Yeah, you're doing an awesome job. Yep. When does he want to retire though? 67.

[Andi Last]

No, I'm sorry, He says he wants to retire now.

[Big Al Clopine]

Oh, now he's going to work part time to cover the short.

[Joe Anderson]

Oh, the 60,000 shortfalls. The part time.

[Big Al Clopine]

He's not even going to be using, you know, a lot of his assets.

[Joe Anderson]

Well, $100,000 a year.

[Big Al Clopine]

I know, but that's what, That's a pretty low percentage. Two and a half percent or Less.

[Joe Anderson]

I would. Yeah. The only thing I would look at is probably converted the 22% tax bracket. If you got a lot of liquidity in the taxable account, the $2 million deferred can double your RMDs will put you into that 22% tax bracket anyway. And who knows what the 22 is going to be. If you think it's going to be 22 or higher, then you convert to the 22. If you don't want to pay the tax and you want to kick the can down the road and pay the tax later, well, then convert to the 12. But just know you're probably going to end up paying more tax long term. You're not going to remember the taxes that you paid 10 years prior, and you're going to be a lot happier that you have all that money in a Roth.

[Big Al Clopine]

There you go.

[Joe Anderson]

Yep, I get it. You know, here's another individual that's done a phenomenal job saving $5 million roughly of liquid assets. The home is paid for. And hey, I'm worried about running out of money. It doesn't matter how much money that you have. That's why you need to have a plan and strategy to figure out exactly, you know, how much that you can. What should the asset allocation be? You know, we're just spitballing here, back of the envelope.

[Big Al Clopine]

Right, right.

[Joe Anderson]

Just. But, but, but when things turn again, he's. This is where people make mistakes. They don't do the strategy that they laid themselves out to. If, if the market drops 10%, 15%, 20%, that is the perfect time to do conversions. And you would massively do larger conversions to the 22. Tony, on the other hand, I bet he wouldn't because he doesn't want. All right, well, here I don't want to spend any more money to pay the tax or I don't want. So you lay out a strategy given perfect markets, but you also have to lay out a strategy for bad markets. And sometimes attack strategies work way better in bad markets. And you have to be disciplined and true to the strategy and be committed to it because you know, when you get out on the other side, you're going to be so much better off. But doing that in those times is super challenging.

[Big Al Clopine]

It is, and you bring up a really good point, which is in a down market, like just a little example, you convert a hundred thousand dollars and it becomes a great market. Right. By the time you have to pay the tax, it goes up 50 grand. So now it's 150. Let's just say your tax was 30%, but it's going to feel like 20%, because really, you're paying that 30,000 on 150,000 because you got all that extra growth. Tax free is definitely the best time to do Roth conversions when the market's down. But you're right, Joe. People don't think that way unless they kind of have a plan and have this charted out.

[Joe Anderson]

Yep.

[Big Al Clopine]

Yep.

[Joe Anderson]

They get complacent. So. But no, you've done a great job. You're 61 years old. It's time to. Time to retire.

[Big Al Clopine]

Yeah. Time to have fun.

[Joe Anderson]

Yep.

[Andi Last]

We've been hearing some very different facts, but the same retirement fear over and over. Will your money last for your entire retirement? And if you haven't figured it out yet, one major way to calm that fear is by creating a written financial plan that clearly defines your goals and the path to successfully get you through retirement. Getting a spitball from Joe and Big Al is great for learning the concepts, but please do not base your entire future on a quick analysis from a podcast. When you sit down one on one with an experienced professional on Joe and Big Al's team at Pure Financial Advisors, they'll look at your entire financial picture. Your savings, your tax situation, your spending, your tolerance for risk, and your needs and goals. In retirement, you won't get a one size fits all answer. They'll help you craft a written plan tailored for you and your family's specific circumstances. You can meet in person at one of our offices in Seattle, Chicago, Denver, Phoenix, Salt Lake City, Nashville, Northern and Southern California, or online via Zoom. Right from the comfort of your own home. Learn your answers to all the questions we've been hearing in this episode. When should you really retire? How should you manage your taxes? How much can you safely spend? And what risks are you not seeing yet? Stop guessing or hoping for the best. Get clarity and confidence. Click or tap the link in the episode description or call 888-994-6257 to schedule your free financial assessment. Today we got.

[Joe Anderson]

Hey, Joe, Big Al, Andy, Jacques in Johanna from Florida.

[Andi Last]

It's just Jacques.

[Joe Anderson]

Oh, it is. It's not Jacques. Jacques Green. Jacques, Jacques and Johanna from Florida. Is that. Am I missing something there?

[Andi Last]

Not that I'm aware of.

[Joe Anderson]

Okay, maybe Jacques Cousteau.

[Big Al Clopine]

Yeah, I think that's. That's the right pronunciation, probably.

[Joe Anderson]

All right. Love the show and the spitballs. Everyone has such different situations in. Times are changing, so it's a lot of fun listening. We're in the mid-50s and would like to Continue and would like to retire early at the end of 2026 if possible. While Johanna would like to continue working maybe five years, but maybe a few less hours while keeping health benefits. I drive a 2019 Honda truck. It is a truck. Even though many F150 owners may disagree. It's a Honda.

[Big Al Clopine]

Yeah.

[Joe Anderson]

Can't call that a truck.

[Big Al Clopine]

Oh, so you're agreeing with him? Yeah. Or with the F150 owners.

[Joe Anderson]

I'm with the F150. You know what?

[Andi Last]

It turns out Jacques and Johanna may actually refer to a Formula one champion, Jacques Villeneuve and his wife Johanna. Or apparently there's also a movie called the Big Blue where the couple in it was Jacques and Johanna.

[Joe Anderson]

Okay.

[Andi Last]

Big Blue with Jean Marc Barr and Rosanna Arquette in 1988.

[Joe Anderson]

88.

[Big Al Clopine]

88.

[Joe Anderson]

Okay.

[Big Al Clopine]

Seriously.

[Joe Anderson]

Young laugh. All right. Okay. So Johanna wants work a couple less hours. He drives his 2019 Honda truck in a 2021 Subaru. He has a Honda truck in a Subaru?

[Big Al Clopine]

Yeah, sure.

[Joe Anderson]

He's not from Seattle. Portland, maybe. I enjoy good sweet tea while Johanna enjoys whatever tropical drink Jacques makes.

[Big Al Clopine]

Damn.

[Joe Anderson]

We currently spend him around $105,000 annually. And after those expenses, we have an extra $50,000 after taxes, with half going to taxable account and half going to some family debt and the last two years of our child's college. So the debt obligations should be minimal after two years. While Florida is a current state, we have some land in another state. Also no state tax to plan to build a smaller home. With the proceeds of our Florida home million dollars equity and mortgage of 100,000. We estimate our annual expenses will move and downsize to drop to $85,000 a year. But Johanna income should drop as well. All right, let's see. What do they got here? We got about $500,000 in our pre tax accounts. $20,000 tax free. I think I should put more of my contribution percentage into the Roth over my remaining time at work. We both contribute about 15% to our retirement accounts. We have $125,000 in a taxable account, $40,000 in a CD and a high yield savings account in my pension of $85,000 a year with a 1% COLA will start in January 2026. And I currently plan to roll my 457 when I leave employment there and use the rule of 55. Okay, hold on there, buddy. I can continue to work until 62 there, but would like to leave earlier. Much earlier.

[Big Al Clopine]

Okay.

[Joe Anderson]

Johanna thinks we both will probably need to work a few more Years before we end up moving. But I think otherwise we're open to Social Security at 62, 67, 70, or maybe taking one early, one late, depending on the sequence of returns. Thanks for any spitballing and we'll continue listening. Even you tell me Johanna is right. All right. He wants to retire at the end of the year. Estimated expenses are call it $100,000 a year.

[Big Al Clopine]

Yeah.

[Joe Anderson]

All right, good. His pension is going to give them $85,000 a year. He needs $15,000.

[Big Al Clopine]

Yeah, which is fine. I've got a question on that though, because he says my pension of $85,000 with a 1% COLA, which sounds like a payment stream.

[Joe Anderson]

Yeah.

[Big Al Clopine]

Will start in January 2026. And I currently plan to roll it to my 457. So is that a lump sum or is the payment. Oh, I was confused at that.

[Joe Anderson]

Oh, roll it. I didn't get the. It.

[Big Al Clopine]

It.

[Joe Anderson]

That changes everything, Al. Two letters. Two letters. Oh my God. Can make or break this guy's retirement.

[Big Al Clopine]

Yeah. So the answer is we don't. Never.

[Joe Anderson]

Yeah, we're clueless, Jock, because you said it.

[Andi Last]

What the meaning of the word it is.

[Joe Anderson]

Oh my God. I don't know. If it's $85,000 a year, I think you're good.

[Big Al Clopine]

Yeah, me too.

[Joe Anderson]

If it's $85,000, one time payment to roll.

[Big Al Clopine]

No, no, you're keep working.

[Joe Anderson]

You got to keep working for a while.

[Big Al Clopine]

I think that's our answer. If it's. If it's a payment stream, you're fine. If it's just a lump sum you're going to try to roll, it's not enough. You need to work longer.

[Joe Anderson]

Yeah. The pension is not going to have a 10. Can take it at $85,000. But if he's going to move to $85,000 and he wants to roll that into the $457,000. Well, the 457 plan is not a rule of 55. A 457 plan, you could take the money out without a 10% penalty anytime.

[Big Al Clopine]

Yeah. Could you even roll it to 457 if it were a lump sum?

[Joe Anderson]

I don't know. I would have to look at the plan down there.

[Big Al Clopine]

It seems kind of unlikely, but I don't know.

[Joe Anderson]

That's a plan. Yeah, right. What the hell does Jacques do again? Where does he work? He has to work for the government, the state.

[Big Al Clopine]

Let's see.

[Joe Anderson]

Because he's got a 457 plan and a pension.

[Big Al Clopine]

Yeah, you're right.

[Joe Anderson]

So I'm guessing He works for the state or.

[Big Al Clopine]

We also don't know what Joanna's salary is, so it's hard for us to say whether. Jacques, you can retire. We need to kind of know what she's making as well.

[Joe Anderson]

Yeah. They currently spent $100,000. After those expenses, we have 50,000 after taxes now. Yeah, this is a tough one. If he gets the pension, go for it. If it's a one time, keep working.

[Big Al Clopine]

Yeah, I think that's the answer.

[Joe Anderson]

Yeah.

[Big Al Clopine]

Yeah.

[Joe Anderson]

Because it's. It's all about it. It's all about it. All right, Joe and Big Al, Juicy Squeezy here.

[Andi Last]

Juicy Squeeze.

[Joe Anderson]

Juicy.

[Andi Last]

That's what he called himself.

[Big Al Clopine]

Yeah. Yeah.

[Joe Anderson]

All right. What the hell is Juicy Squeeze?

[Andi Last]

Get into the email. It'll make a little more sense.

[Joe Anderson]

Okay.

[Big Al Clopine]

Yeah, maybe we'll find out.

[Joe Anderson]

All right. Not a big fan of the word juicy.

[Andi Last]

It's up there with delicious.

[Joe Anderson]

Yeah, it's up. Delicious is.

[Big Al Clopine]

That's not a word you normally say. No, this is really juicy.

[Joe Anderson]

If someone said that would be like. It's just like a chalkboard. Neil's on a chalkboard.

[Big Al Clopine]

Yeah, I guess I have to agree with you on that. I can't recall ever using that.

[Joe Anderson]

I don't think I could hang out with someone that wouldn't use the word juicy.

[Big Al Clopine]

Same. So you haven't said it and I haven't said it. Hence, we're still together.

[Joe Anderson]

Yes. Oh, man. All right. I'm 57 years old, along with my wife, and we're both retired. We have $2.5 million saved in our taxable accounts, another $2 million saved in an IRA account. Fixed income is pretty much Social Security. About $50,000 a year, assuming that's still around and our spending is about $180,000 a year. Here's my money question for both of y'. All. It's regarding long short direct indexing strategies via lost harvesting programs.

[Big Al Clopine]

Oh, God.

[Joe Anderson]

He wants to do long, short direct indexing strategies there via tax loss harvesting programs you might be familiar with. I'm considering these strategies for a capital gains tax that I'm going to be anticipating in two years from a private investment. I'm in. We're looking to exit. I'm going to be about a million and a half at exit. My question is, are these long, short strategies true tax savings or are they merely tax deferral? I'm doing it again.

[Big Al Clopine]

No matter what your answer is, I'm doing it.

[Joe Anderson]

Don't even answer me, because I'm doing it. All right? For capital gains Tax to try to offset a huge tax hit. But my big question is, are there fees of about one and a half percent involved? And also if you were to exit, you know, say seven years in, there are potential winding down fees. And I'm wondering, with these fees, is the juice worth the squeeze?

[Big Al Clopine]

Okay, you said it twice now.

[Joe Anderson]

Oh, got it. Is the juice worth the squeeze?

[Big Al Clopine]

You didn't say juice either.

[Joe Anderson]

That's. Yeah, that's why he's juicy squeeze. Okay, looking forward to hearing what you guys have to say. In the meantime, I'll be going back to my favorite drink, which is tequila and lime in a squeeze. A little bit more lime on that tequila. Thanks, guys. Juicy squeeze. Part communion.

[Big Al Clopine]

Try to get past that.

[Joe Anderson]

Yeah. Okay, so he's got a big capital gain that's coming up from a private investor. Yeah, he said it's a million and a half gain. Right. So he wants to do an investment. And so I think he's getting pitched to say you could do a direct index. I don't know. If you have to do a long short, you have to lose money to get the tax benefit, which is not your first choice. Just FYI. Tax loss harvesting. To use any of these strategies to offset the tax hit because you made a lot of money, you have to lose money. So if someone's pitching a strategy to say here you're going to lose a lot of money to offset your gains, well, first of all, that's probably not the right move. Long short. So in, in tax loss harvesting, those are two totally different things. Tax loss harvesting or direct index. A direct index is that you're investing in individual securities that is mirroring an index versus just buying an index fund. To make it real simple. Like an index fund, let's say The S&P 500 has several different types of industries within the S&P 500. If you do a direct index that mirrors the S&P 500, some industries in the S&P 500 might be up. In some industries in The S and P 500 might be down. But if you own the index fund and let's say the gains are higher than the loss, the index fund is going to show a gain. But if you direct index it, you can actually tax loss, harvest the industries that are down. So you can kind of split up the S&P 500 or any other index for that matter and really narrow in. And so you can harvest the losses on whatever categories of stocks or, or the individual securities themselves to sell and buy something similar and harvest those losses to offset Future gains.

[Big Al Clopine]

Right.

[Joe Anderson]

So that's a direct index and that's tax loss harvesting. So does that make sense if you have a couple million dollars in a non retirement account? Sure. Yeah. Because if you're well diversified, you're going to have some industries or some stocks or some areas of the market that are going to be up and others are going to be down. Should I use a long short strategy? Is something completely different.

[Big Al Clopine]

Got it. And what's that?

[Joe Anderson]

It's enough alternative strategy that some of the positions are long so in some of the positions you're short selling.

[Big Al Clopine]

Got it.

[Joe Anderson]

So it's more complex for the average investor trying to be non correlated to the overall markets. Is it a place for a part of your portfolio? Sure, depending on what your risk tolerance is. The guy's got $4 million. Yeah. EQR is a really good company. But don't buy an investment because you're going to lose money to offset another investment that did very well.

[Big Al Clopine]

I think that's probably well said. Now I'll just add this. You can do tax less harvesting without direct index. And the way you do that, Instead of buying one index fund like the S&P 500, maybe you buy 10. Right. Or 15 different index funds that invest in different parts of the market. You could sort of stick with us and do large companies, small companies, value growth. You could go international. You could even do some sector funds if you wanted to do certain industries. And so you can do it yourself. You don't necessarily have to pay a percent and a half if that's I guess what the fees are. But the strategy is valid. And here's what happens is when you've got a loss, it shows up on your tax return. You can use that against any losses in the year that you create the loss. And you can take another $3,000 against ordinary income. Any extra losses carry over. And I think that's what you're interested in is your carryover losses to be able to offset your big gain later. But Joe, you're right. I mean the whole strategy is based upon you losing money.

[Joe Anderson]

So yeah, it's a way to tax manage a non qualified account. So I love the direct index idea. But to put everything into a long short, the reason why the fees one and a half percent because it's a long short fund. I mean it's technical.

[Big Al Clopine]

As I'll get out, they're doing some work.

[Joe Anderson]

Definitely doing some work. Really smart people that get paid a lot of money. Right. All right, so do you want to go into that specific strategy with $2 million of your non qualified accounts? I would say absolutely not. Just spitballing. But can you do a direct index and go into, you know, have a little bit into a long short versus have US growth, You have small company, you can still be totally diversified in a direct index that will give you a little bit higher opportunity to tax loss Harvest.

[Big Al Clopine]

Yeah, agreed. It's. It is more tax efficient that way.

[Joe Anderson]

Hopefully that helps. Is the juice worth the squeeze? Yeah, it can be.

[Big Al Clopine]

It can be. Depends on the losses.

[Joe Anderson]

It depends on the losses. If the market blows up, guess what? You won't pay any tax. Okay, we got Wendy. Hi. I'm 72 years old, collecting Social Security. I'll be working remotely doing artwork for a brewery company starting January 1st. So she already started?

[Big Al Clopine]

Yeah.

[Joe Anderson]

Should I refill my expired business license and work as an independent contractor with no taxes taken out or go on payroll? Will they take workman's comp in Social Security even though I don't need them. What do you recommend? Well, we don't recommend anything. Wendy give you some ideas?

[Big Al Clopine]

Yeah, we spitball a little bit.

[Joe Anderson]

Yeah. So she's going to do some artwork for a brewing company.

[Big Al Clopine]

I like it.

[Joe Anderson]

What's a brewing company? What do you think?

[Big Al Clopine]

Someone that makes beer?

[Andi Last]

It's a place that makes beer, Joe. I thought. I understand.

[Joe Anderson]

Which one? Which one?

[Big Al Clopine]

Oh, which one? You said what is a brewing company?

[Joe Anderson]

Maybe I did.

[Big Al Clopine]

That's what I heard.

[Joe Anderson]

To go to a brewing cummin.

[Big Al Clopine]

Yeah. I don't know which one. And we don't even know what city she's in. It makes it hard.

[Joe Anderson]

It does. So what do you think? Independent contractor, 1099?

[Big Al Clopine]

No, I'd go payroll.

[Joe Anderson]

Payroll?

[Big Al Clopine]

Yeah. And the reason, Joe, I mean, all things being equal with payroll, you do have your taxes withheld. So you're not surprised that you're in number one. Number two, yes, you have Social Security withheld. But if you're self employed, your Social Security is twice as expensive because you're paying your portion and the company portion that matches yours. So instead of 7.65% withheld on your paycheck, it would be 15%. 15.3 to be exact. As an independent contractor, so the taxes are cheaper. Plus you don't get surprised in April. Right? All things being equal, that's what I would do.

[Joe Anderson]

How much money do you think your Ms. Wendy's making with her artwork? Quite a bit or just a couple of bucks?

[Big Al Clopine]

I think. A couple bucks? Yeah.

[Joe Anderson]

I don't know.

[Andi Last]

I mean she has the option of choosing between whether she's an independent contractor or an employee. That might not even be something that is up to her. They may tell her, no, we're going to, you know, do this under a contract.

[Big Al Clopine]

It could be. And I would say this for those that are trying to decide if you, if they have a choice whether to be independent contractor or employee, then you, if you're going to be independent contractor, you should raise your rates a little bit because you're not getting any benefits, you're paying more self employment taxes. Your taxes are higher as an independent contractor. So just be aware of that. If you have your choice, all things being equal, you'd have a slightly higher, higher rate.

[Joe Anderson]

Yeah. But you also have a little bit of flexibility as an independent contractor in regards to write offs from a tax perspective.

[Big Al Clopine]

You can take more deductions, I can take more deductions.

[Joe Anderson]

You can be creative with your retirement plans. There's more options there.

[Big Al Clopine]

Yeah.

[Joe Anderson]

So I would you.

[Big Al Clopine]

I feel like.

[Joe Anderson]

Does it depend on how much money you make? You think is going to depend on.

[Big Al Clopine]

I think it depends on how much you have in expenses. And so you bring up a good point. Usually when you're doing some kind of service, you don't have a lot of expenses. Creating art. I don't know. I mean, what kind of art you got?

[Joe Anderson]

Niesel?

[Big Al Clopine]

Maybe it's computer generated. Maybe you write off some of your computer, so there could be some. Yeah, that's a good point. So I would say if it's just a small amount of income, maybe you just do independent. You don't need to have a business license to be an independent contractor.

[Joe Anderson]

When do you need a business license?

[Big Al Clopine]

Well, theoretically, when you start working in a city. But all I'm saying is no one tracks that when you're small. That's all I'm saying.

[Joe Anderson]

She's already got one. Just refile.

[Big Al Clopine]

Just to refile it.

[Joe Anderson]

Yeah, get it back.

[Andi Last]

Going on.

[Joe Anderson]

All right, well, good luck, Wendy, let us know what brewery so we can follow your artwork.

[Big Al Clopine]

That's important.

[Joe Anderson]

That's it. We got through them all.

[Andi Last]

Andy, thank you very much. I appreciate that.

[Joe Anderson]

Yeah. Have you seen Landman yet?

[Big Al Clopine]

Landman? No, I don't know what that is.

[Joe Anderson]

Come on. Billy Bob Thornton.

[Big Al Clopine]

I know Billy Bob Thornton.

[Joe Anderson]

Yeah. TV show.

[Big Al Clopine]

Yeah, I don't watch much tv. I watch Netflix stuff.

[Joe Anderson]

It's on. It's. Yeah, it's on Prime.

[Big Al Clopine]

Oh, well, I haven't seen it.

[Joe Anderson]

Do you have Prime?

[Big Al Clopine]

Yeah.

[Joe Anderson]

What do you watch on prime besides Hallmark?

[Big Al Clopine]

Ted Lasso.

[Joe Anderson]

Ted Lasso. Is that still a show? Is that still a thing?

[Big Al Clopine]

No. Oh, I'm just trying to remember what I watched on Prime. Some movies.

[Joe Anderson]

What are you watching on Netflix? What's the go to right now?

[Big Al Clopine]

I'm not gonna tell you. It's private. I'll leave it at that. And we're loving it.

[Joe Anderson]

Okay, good, good, good, good, good. All right, that's it for us. We'll see you next time. Show's gone.

[Andi Last]

Your money waffle next week on ymyw. Should Al and Peggy from Illinois go Roth late in their career or stick with saving pre tax? Should they take the pension, lump sum or lifetime income? Should Lana and Sterling in Nebraska do Roth conversions or realize capital gains before moving to a higher tax state? Should Tammy and Eric in Baton Rouge pay for college or protect their own retirement? And Eloise in Connecticut wonders if it's finally time to drop long term care insurance at age 70. If today's episode hit home, help someone else calm their retirement fear by telling a friend about the show. Make sure you're following or subscribed in your favorite podcast app and on YouTube so you don't ever miss an episode. And we want to hear from you too. If you've ever, ever felt anxious about running out of money, what finally helped you feel more confident? Was it a number, a strategy, or having a written financial plan? Drop your thoughts in the YouTube comments and join in the conversation. 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 as 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.