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How to Beat the "Fire Hydrant" of Future Taxes: YMYW Best of 2025 - 563
01:02:56
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- [00:00]
A
YMYW friends, welcome to 2026. Today on youn Money, you, Wealth podcast number 563, we're revisiting your favorite topics of 2025 as Joe and Big Al spitball on when not to do Roth conversions. Roth conversions versus 0% capital gains tax rates and how much is enough for retirement. Plus, Al talks Social Security, pensions and Roths with a couple of special guests. I'm executive producer Andi Last with the hosts of youf Money, you, Wealth, Joe Anderson, CFP and Big Al Clopine. We'll kick off the best of 2025 with the single YMYW episode that was the most downloaded all year across all podcast platforms, as well as having the most listeners and the most plays all year in Apple podcasts. Big Al dishing on why Roth IRAs are the greatest account ever with the Roth IRA guru, Ed Slot, cpa.
- [00:53]
B
You know, we were just talking about how when we have a tax issue, we're much more likely to go to your website than the IRS website because your answers are written in English, clear and concise. Understandable. And the IRS is not quite so much that way.
- [01:10]
C
Well, they're rigid. They have to stick to the, you know, this is code section 40189 and this and that, and it's regs and this.
- [01:17]
B
Yeah.
- [01:17]
C
And some people just want to know, can I do this or not?
- [01:20]
B
Right? Right. Yeah. So let's talk about. You and I have talked about Roth IRAs, Roth conversions. I know you're very big proponent in that. But let's talk about, let's talk about what they are, what a Roth IRA is and why. Why do people want to get money.
- [01:36]
C
In the Roth Roth IRA is a miracle. It's the greatest account ever created. Because everything it is, there's no question it's the greatest account to have because everything in there grows income tax free for the rest of your life. And even under the new rules under the Secure Act, 10 years beyond to your beneficiaries. Imagine getting a statement in the MA and saying, this is my Roth IRA balance and it's all mine. I don't have to share it with the government. I don't have to share it with Uncle Sam. I mean, it's unbelievable. So it's a great account. The only question is how much are you willing to pay to get it?
- [02:15]
B
Right. Right. Because, I mean, that's the catch. That's the catch. And I think it was 1997 where it first came into play from Senator Roth. Yes.
- [02:24]
C
And you know, 8-5-97.
- [02:26]
B
Oh, well, see, there you go.
- [02:28]
C
Happened to be my birthday. I wasn't born that day, but that was.
- [02:31]
B
That was your birthday, so. Yeah. So thinking about Roth, I mean, you could do Roth.
- [02:35]
C
I actually have the plaque up in my office, the Wall Street Journal. I happened to be in the article that day. It was passed, but not because of the Roth. Most people didn't even know that was in there until it came out. It was some homeowner provision that they made. Tax benefit.
- [02:48]
B
Right, right, right. Oh, that's great. So thinking about the Roth ira, I mean, you can do Roth contributions, which is kind of a smaller amount, or you can do a Roth Provision in a 401 or 403, if your company or organization has it, you can get more. But a Roth conversion, that's the big one. That's the big one. That's where you take money that you've already. You haven't paid tax on yet. You got a tax deduction, you know, 401k IRA, and you convert it. And I think a lot of people don't realize there's no limitations on conversions. There's limits on how much you can contribute to an IRA or a 401k Roth conversion. You can convert any amount you want. You don't have to be working. It's just what makes sense for you.
- [03:28]
C
Right. The only limitation is your own pain threshold for how much tax you're willing to pay in one year.
- [03:35]
B
Right, right. Yeah, I think that's. That's well said. So let's talk about. How should people be thinking about Roth conversions and tax brackets, and how do you think about that?
- [03:44]
C
Well, what you just hit is the fundamental principle to always paying the least amount in taxes, which is what everybody wants to do. And I call it one of my core always rules. And it's so simple to save money in taxes, always pay taxes at the lowest rates.
- [04:02]
B
That's it.
- [04:02]
C
If you can always get your money out, like out of your ira, tax deferred accounts at the lowest rate, you'll always end up with more. And that's what this is. Moving money from an ira, a taxable tax deferred account.
- [04:15]
B
Yeah.
- [04:15]
C
And paying tax. If you can get the money out at the low rates and convert to a Roth, you'll be a winner in almost every case. But you have to use the brackets, and the brackets are great. Now we have the lowest rates historically in history, and giant brackets, 12%, 22, 24%. Hundreds of thousands of dollars can pass through those brackets and still be in these unbelievably low historic rates. Everybody complains about taxes, but these are the good old days. Because I think taxes are going to go up. I mean, I don't see any way they'll ever go down.
- [04:52]
B
Right. And I think that's right. I mean, the past several years with the Tax Cut and Jobs act, we've had these lower rates and they're set to sunset this year.
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C
I don't think that's gonna happen.
- [05:02]
B
Yes, I wanted to ask you about that.
- [05:04]
C
No, I think.
- [05:04]
B
Tell me why.
- [05:05]
C
Well, because the Congress, the Senate, House, Senate, the administration, they're all, they're all Republican. So it's gonna pass and that's great. They'll extend the tax cuts probably for a few more years. I don't know how many more years. But every year they extend these tax cuts. That's more years. You can use these low brackets and take advantage of. Start bringing down this taxable IRA and bringing up tax free accounts, tax free savings in your Roth plus to leave a Roth to beneficiaries. Imagine beneficiaries getting it and they don't have to pay tax on it for 10 years after death.
- [05:45]
B
Have you ever heard this question or this statement from people which is, I don't want to put money in a Roth IRA because they're just going to tax it later someday just like Social Security. They told us they weren't going to tax it, now they tax it.
- [05:59]
C
Yeah, I've heard it. But not as nice as you've said. That's the number one question I get at all these consumer programs. I do them around the country and they don't say it as nice as you. But mostly the version is I talk about the Roth just like we're talking. Somebody will always stand up and say, but can I trust the government to keep their word that they won't tax it in the future? And these are people, just like you said, that can't let the whole Social Security thing go from 30 or 40 years ago. They said that would never be taxed and they lied. I don't trust them.
- [06:31]
B
Right, right.
- [06:32]
C
So the question is, can I trust the government to keep its word that Roth IRAs will always be income tax free? And the answer is absolutely not. You can't trust the government as far as you can throw them. And as a cpa, we have an old saying, tax laws are written in pencil and they change. But I'm going to tell you a secret here, just between us. You know what Benjamin Franklin said about secrets? Let's hear three people can keep A secret if two of them are dead.
- [07:02]
B
Got it.
- [07:02]
C
Here's the secret. Lucky for all of us. I'll say it quietly.
- [07:05]
B
Okay.
- [07:06]
C
Lucky for all of us. Congress are the worst financial planners on earth. They're so short sighted and that works to our favor, they secretly don't say it too loud. Love, love, love. Addicted to love. Roth IRAs. Why? Because they're so short sighted, they only look at the money that comes in up front.
- [07:28]
B
They look at what they can see.
- [07:30]
C
Budgets, the ten years, the two year budget cycles. The only money that can get into a Roth is already taxed money. And that's why since the Roths were created and the big shift started in 2010, if you remember, before 2010, you couldn't convert to a Roth IRA if your income exceeded $100,000.
- [07:50]
B
That's great.
- [07:51]
C
Back then, just like now, Congress needed money and they eliminated that provision. And that brought in the floodgates of money, including mine. I converted everything then because they gave people the deal of the century. Remember that deal?
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B
Yeah. You could pay the tax every four years.
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C
No, two years. That was the original.
- [08:10]
B
Oh, that was the original deal.
- [08:11]
C
I converted everything. A matter of fact, just in the session to the American College here a few hours ago, I said to the group of advisors, I guess I didn't remember. I said, I converted everything. I begged you guys to take that deal. When you were at my seminars. I took my own advice. I converted everything in 2010. And I threw out to the group, how much tax did I pay? And some people say, well, you didn't tell us the rates. And this, I paid nothing. Zero. It was a deal of the century. And they're thinking, how did I miss this? The deal was you paid nothing in 2010. Half in 11 and half in 12.
- [08:46]
B
That's right.
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C
But in essence, the government gave everyone an interest free loan to build a tax free savings account.
- [08:53]
B
Right.
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C
It was unbelievable. So, and obviously I didn't know about. Can you imagine the growth in that Roth from 2010 to where we are now?
- [09:02]
B
Right, right. 15 years later?
- [09:03]
C
So Congress saw the boatload of money that came in and they said, ooh, this is good. Not realizing, you know, they're not getting any of that revenue ever again.
- [09:11]
B
Yeah.
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C
So then they kept expanding Roth 401ks and then in secure 2.0 they went Rothamania crazy sep. Roth IRAs, simple Roth IRAs 529 to Roth matching contributions. Roth catch up, contrib. Roth, Roth, Roth, Roth. Because they wanted the money up front. They love Roth IRAs because they're so short sighted. So I would say don't worry about it because Congress, they may trim around the edges, but if they do anything that kills the golden goose, there goes their revenue source that they're counting on to fund every tax bill.
- [09:45]
B
Do you think someday some Congress down the road will figure this out and realize we're in trouble?
- [09:50]
C
No, they keep kicking the can down the road and I still believe they have to because as a, as a CPA and accountant, I have to believe in math. And I look at these deficit and debt levels, I don't even know what the debt is. It was last I saw 38, 39 trillion. All I know is if you have to round up to the nearest trillion, that's a problem.
- [10:10]
B
It's a problem, right? Yeah.
- [10:12]
C
So we have the highest debt levels ever, the lowest revenue from taxes ever.
- [10:17]
B
Yeah.
- [10:17]
C
I don't know how long this can go on before they're going to lower the boom in taxes. People are money in their IRAs. I think tax deferred accounts IRAs, 401ks are sitting ducks for future tax increases. They're the low hanging fruit for Congress. And I don't want to have a large IRA when the music stops on this stuff.
- [10:38]
B
You know, you think about money in an IRA, 401k and it hasn't been taxed yet. And you think about the Roth ira, which they've already paid taxes on it. But then, but then it's like what's going to happen in the future? And the way things are going eventually I would tend to agree with you. Eventually it seems like tax rates have to come up because how do we afford everything we're trying to pay for?
- [11:04]
C
How it's possible. And if tax rates do go up, you're a big winner with the Roth.
- [11:09]
B
Right.
- [11:09]
C
Even if they stay the same. So then it's a wash.
- [11:12]
B
Right.
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C
And the odds of tax rates going down are nil. So the Roth is just a big bet on where we are today, tax rates today versus tax rates in the future. And I think that's a pretty good bet. Imagine you were making a bet like in Las Vegas or something at blackjack and the dealer showed you all his cards.
- [11:32]
B
That's a pretty good bet. Yeah, that's a pretty good bet. So, okay, so let's pivot a little bit. Let's talk about the Secure Act, Secure 2.0 and the death of the Stretch IRA for most people. I mean there's a 10 year period and a few people can still do it, but most can't so they've got to get the money out within 10 years. And what are, how do you think about that? What strategies or how do you tell people to plan for that?
- [11:59]
C
That was a game changer because the plans people had before that and when I was doing programs all over the country before the SECURE Act, I said, oh, the stretch IRA. IRAs are great because they could go out 30, 40, 50 years and you're talking about a massive deferral. That all ended. Why Congress needed money. Here's a little something, another secret about Congress. After studying tax law for over 40 years, one thing I've noticed is constant. Whenever Congress names a tax law, you can almost bet, almost always bet that whatever they name it, it will do exactly the opposite. So when I heard the SECURE act is coming, I said to myself, hold on to your wallets. And sure enough, it was a money grab. They needed revenue. So they said, nope, we're not waiting 30, 40, 50 years, we'll wait 10 years at most. So now they've closed the window. They pushed in the window when all this buildup in tax deferred IRAs and 401ks have to come out and it's going to come out like a fire hydrant and massive tax increases for people. So that's what made IRAs and 401 s tax deferred accounts that downgraded those as a vehicle for wealth transfer or estate planning, especially to the beneficiaries who are going to get hit by the end of the 10th year after death. So the stretch IRA for most people, beneficiaries is no more. So that means if you're listening to this or watching this, and you had a plan before 2020 when the Secure act took effect, that plan probably doesn't work anymore. It behooves you to look at your plan, work with an advisor, a financial advisor that has a specialized knowledge, because you need an advisor that knows how to navigate this and make the changes and let you know where the problems are, why your current plan doesn't work and what alternatives are available. And the alternatives, we've talked about things like Roth IRAs bringing down the IRA balance while tax rates are on sale in effect.
- [13:58]
B
Good point.
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C
And moving to other tax free vehicles like life insurance. That's a good choice. Anything will be better than the taxable ira.
- [14:07]
B
Yeah. Because it's, you got to pay the tax on it one way or another. No way around it. Yeah. You know, and I think a lot of people don't realize the Roth IRA, it still follows that 10 year rule. You got to have the money out in 10 years, but it's tax free. It's not pushing kids up into higher brackets.
- [14:23]
C
Right. And when we talk about, we always say with the kids, but the inheritors, the beneficiaries, they're in their 50s.
- [14:30]
B
Yeah. Right.
- [14:30]
C
And they may be in their own highest earnings year. Last thing they need to inherit. Not like it's a horrible thing, oh, I inherited money. I worked so hard for it.
- [14:40]
B
Right, right, right.
- [14:41]
C
But still, the worst thing could be is to inherit a taxable account that gets blasted with taxes in that 10th year after death. With a Roth, they don't have to touch it to the end of the last day of the 10th year after death. Growing, accumulating and compounding income tax free for them.
- [14:59]
B
Yeah, I want to pivot just a little bit for your ira.
- [15:02]
C
That's the second pivot. That's two pivots.
- [15:03]
B
Okay. I get two per interview. Right.
- [15:05]
C
So.
- [15:08]
B
Let'S talk about beneficiary designations. A lot of people like to name their trust, which isn't necessarily a great idea.
- [15:17]
C
Well, no, there is a reason to name a trust, you know, and that's question I get. I got it at the last seminar. Just did here.
- [15:23]
B
Yeah.
- [15:24]
C
Advisors always want to know because their clients want to know, when should I name a trust as my IRA beneficiary? My answer is, when do you name a trust when you don't trust. Because if you trusted them, you wouldn't need a trust. They should have called it a don't trust. That's when you name a trust when you don't trust, when you want post death control. And that's a big issue for a lot of clients I've dealt with over the years. They have of a lot large IRA, 2 million, 3 million. I remember a client telling me years ago, I've got 3 million in an IRA, I don't even need it. I want my kids to get it and my grandkids, but I don't want them blowing it. I work too hard for this money. I want to control this after death so they don't squander it. They're always worried about what the kids will do. Bankruptcy lawsuits, divorce. They're worried about managing money. Everything. But the number one fear I used to get from clients, they would say, it's not my kids I worry about, it's the ones they marry. And that was a big concern. I had all this money and it may end up going to some daughter in law or son in law I never even met and they name a trust. But now, because of the Secure Act, I would never leave an IRA to a trust because it's such a horrible asset. Trust tax rates are the highest in the land.
- [16:35]
B
Sure.
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C
The better option, you still may need a trust if you want that trust. So I'm not saying trusts are bad. Trusts have a use. It's just IRAs are now a horrible asset to a disaster to leave to a trust. Better option, if you have a large IRA and you're in that situation, I just said, and you want control after death. Better option is bite the bullet. Convert that IRA to a Roth IRA and leave the Roth to the trust. That eliminates all the trust taxes and you can get the boats, death control and protection that you want.
- [17:07]
B
That's great advice. Now, would you do that through your living trust or would this be a separate IRA trust?
- [17:13]
C
No, it doesn't. Well, with the Roth, it could be a separate IRA trust, but what's even better than. And it's easy with the Roth because there's almost no rules. All that has to happen. Remember, there's no income tax and there's no RMDs in the years one through nine of the ten year term. So all that you have to know is that at the end of the 10 years, the money either stays in the trust, it's not taxed.
- [17:37]
B
Yes.
- [17:37]
C
Or it goes out to the beneficiary, or it's doled out according to how you want your beneficiaries to get it. So it's very easy to name a trust as a Roth IRA beneficiary. It's very complicated. It was before with the IRAs, but we put up with that because we had the stretch ira. Now the IRA has no more redeeming qualities, so we don't need that anymore.
- [18:00]
B
Right.
- [18:00]
C
It's like in baseball. Starting baseball season now, you can have a guy that hits a lot of home runs and all at the right time. You know, in the World Series playoffs, you love that guy. Except nobody likes him. He's a problem. He's in every scandal. But you put up with him because he hits home runs. If he stopped hitting home runs, you get rid of him. Yeah, that's an Iraq. There's no more redeeming qualities. It used to work, now it doesn't. So let's move on. But probably the best asset to leave to a trust when you want that control is life insurance, because it doesn't even have the rules that Roth IRAs do. You can customize your own plan so you could Take money down out of your IRA, pay the tax. Now. I wouldn't do this before 59 and a half because there's a penalty situation. Pay the tax, get it out at low rates. Remember, always pay taxes at the lowest rate. So you're getting rid of this problem, the ira, putting the money, and I'm talking about permanent cash value, life insurance and tax free. And that's the best asset if you still need to control it for your kids. You can have any provision you want. You don't even have to worry about income taxes. You don't have to worry who the beneficiaries are, what categories there, who are the remainder beneficiaries. There's no tax rules. You can actually get the plan you want. You don't have to go through all these tax landmines and an obstacle course of rules, right?
- [19:26]
B
Wow, you are a wealth of information as always. You've given us a lot to think about. Ed, I really oh great to be here. Appreciate chatting with you and you taking the time.
- [19:36]
C
Okay, thanks.
- [19:37]
B
Awesome. Thank you.
- [19:38]
A
Kiplinger agrees with Ed and Joe and Big al on Roth IRAs. They say that investing in a Roth account is one of the smartest money moves a young person can make. However, there are rules, so make sure that you know them before you go jamming all your money into a Roth and end up paying a bunch of penalties. Download the complete Roth Papers package to understand how Roth accounts work so you can take full advantage of their lifetime tax free growth. This bundle of Roth guides is packed with valuable information about Roth contributions and conversions, the backdoor Roth strategy for when you make too much money to contribute to directly to a Roth, and the rules for taking money out of your Roth ira. Plus you'll learn the differences and the pros and cons of saving in our traditional IRA versus a Roth IRA versus a 401k and much, much more. Click or tap the link in the episode description and download the complete Roth Papers package for free. Next up in 2025 one question got the most views, watch time and subscribers on our YouTube channel and our highest number of engaged listeners all year long in Apple podcasts. And the question is, is there a point where Roth no longer make sense?
- [20:46]
D
Hello Andy, Joe, Big Al, this is Jerry from Phoenix looking for a little spitball response and whether there is a logical point where no additional Roth conversion makes sense. Actually this is really my attempt to see if Joe would ever come to the conclusion. Yes, you come to that conclusion all the time.
- [21:08]
B
I've heard it on the show.
- [21:12]
D
I drive a 2021 BMW 430i, but my backup is a 1997 Tacoma. I used to take the dog to the dog park and go hiking in South Mountain park in Phoenix. You ever been to South Mountain Park?
- [21:27]
B
I don't believe so. I'm not sure I know where it is.
- [21:30]
D
I've never heard of it. My wife and I both retired about five years ago, and we are 67. Our current balances are about $7 million after tax. Oh, boy. Way to go, Big chair.
- [21:41]
B
Here we go.
- [21:42]
D
$3,500,000 in an IRA, $950,000 in a Roth. While I'm not concerned about having enough assets to live on, I'm trying to make sure I maximize our lifetime tax bill and minimizing the taxable IRA balances so that our two sons that will inherit will get killed in taxes. I started doing roth conversions about four years ago and plan to continue converting about $200,000 a year for the next six years until my RMDs begin for 2025. I've already done $90,000 in conversions. I've heard several financial podcasts refer to and sort of endorse a software package for financial tax planning called Bolden, formerly New Retirement.
- [22:28]
B
Well, yeah, we know about New Retirement. Yep. I met Steve Chen years ago.
- [22:32]
D
Love the guy. Great company.
- [22:34]
B
Yeah.
- [22:35]
D
I've acquired this software, and for the past three weeks, I've updated the software to include all assets, income sources, planned expenditures assumed 2017, tax rates, et cetera. After reviewing the results and recommendations, I have to admit I am very surprised by the results. Per this software, the advice is to do no further Roth conversions. The software believes this approach will minimize my lifetime tax bill, federal and state, and provide the largest estate value. Obviously, the software doesn't know the tax brackets of my heirs and what the future tax rates will be. I was just expecting the no additional Roth recommendation. What do you say?
- [23:18]
A
I was not expecting.
- [23:19]
D
Yeah, okay. Jerry's 67 years old, so we're missing a few important facts here. Jerry, I don't know what your income is. If you're doing $200,000 conversions, I have no idea what bracket you're getting yourself into.
- [23:38]
B
Right? Yeah. We don't know how much your fixed income is, what your tax bracket is. See, that would be helpful to know, because whether you do a Roth conversion or not is dependent upon your age, how much you have, and how much you're spending, not only how much you have, how much you have in an IRA 401, how much you have in A Roth. How much do you have in a non retire account? Then we can sort of decide or help you with whether that's a good decision or not.
- [24:02]
D
Yeah, here's what you have to look at. Sometimes that those. You have to be very, very careful. And no offense to new retirement or Bolden. We use that. We offer that software for free to our listeners.
- [24:16]
B
It's a good program.
- [24:18]
D
Easy Retirement dot com. Yeah, ESI E A S I. That's why no one ever went to the website.
- [24:26]
B
We don't know how to spell it.
- [24:27]
D
It's not. It's like, yeah, I went to easy.
- [24:30]
B
Well, no, there's nothing there.
- [24:31]
D
There's nothing there.
- [24:33]
B
It says you can have this website if you want it.
- [24:36]
D
It's eas.com.
- [24:39]
A
Yeah, easiretirement.com.
- [24:42]
D
Yeah. Okay. I don't even know what the hell.
- [24:44]
A
You don't even know the website.
- [24:45]
D
Yeah, we get four visitors a year by accident.
- [24:49]
B
Just listen to Annie. He knows the website.
- [24:51]
D
And so I don't even know what I was talking. Okay. No financial planning software.
- [24:57]
A
Why don't you pay attention to easiretirement.com?
- [24:59]
D
You got to be careful with financial planning software. We use it every day. It's looking at a snapshot and time that day. I can guarantee you this, Jerry. Everything else that you see in the future is wrong. You have no idea what markets are going to do. You have no idea what inflation is going to do. We have no idea what tax rates are going to do. We have no idea what your life is going to bring. Right. So when you're like, here, let me plan this out from age 67 to 97 or to age 100, and then you look at the tax savings number and that computer software is going to be like, yep. No, no confused, no conversions. You're like, all right, I'm done. No, you don't want to necessarily do that. You have to take a look at this stuff every single year. And also the rate of return that you're running on the investments, you're using a hypothetical, let's say, 6% growth rate. Well, if you do a straight line 6% growth rate, it's going to be apples. Apples. It's really hard to really make decisions long term if you're looking at that way. You have to look at it and make decisions every year and update the numbers every single year.
- [26:07]
B
Yeah, because one of the things that happens here is when you have these programs, they'll generally have a fixed tax rate. And so that's why it doesn't necessarily make sense because you're going to be in different tax brackets. You're in a higher tax bracket. Often when you're working, you retire before your RMDs, before Social Security, you're in a much lower bracket. You want to do Roth conversions to take advantage of that. Maybe you're already receiving Social Security, but it's ahead of required minimum distributions. Right now the tax rates are pretty low, so it may make sense to go ahead and do a conversion. Also, these programs assume that you're both going to live forever. One of you will probably outlive the other and you get into the single rates and it's completely different tax rates. So just be careful when you're kind of looking at a program, this is a good program, but you're looking at a program with only so many variables and you're making long term conclusions on that.
- [26:59]
D
Three and a half million dollars. He's got a retirement accounting 67 years old.
- [27:04]
B
Yeah, it's going to be 5 or 6 million at RMD age.
- [27:07]
D
Right.
- [27:08]
B
Well, he'll be, he'll be. I think he's 73.
- [27:13]
D
Okay.
- [27:14]
B
Yeah, so he get it, 70.
- [27:15]
D
So Scott, now let's say it's 4 million bucks. Yeah, just, just go for so $160,000 RMD. I don't know what his other fixed income sources are, so just kind of think of it that way. It's like, all right, well, what tax bracket am I going to be in when the RMD's hit? Am I going to be in the 24, the 22?
- [27:32]
B
And compare it to today.
- [27:34]
D
To today I would convert to the same bracket that I'm in today. So if I'm in the 24% tax bracket, because you have plenty of assets like he said, and he wants to maximize the amount of dollars that is going to go to his two kids. So what tax bracket are the kids in? Because once they inherit the retirement accounts, it's IRD income, respected the decedent. They have to take the money out and pay ordinary income tax on that.
- [27:56]
B
Yeah. Over 10 years. And they may be in a high bracket. And that would be a lot of money to take out in 10 years.
- [28:02]
D
Right. If it's in a Roth, it's 100% tax free. And there's no RMDs in a Roth IRA. Right. So it's like, all right, well here, can I continue to convert this thing that's going to reduce my rmd. If I pass before my spouse, the RMD for her is going to be the Same RMD that you're taking, roughly. But now it's at a single tax bracket, so there's all sorts of things to consider. At $3.5 million in retirement accounts with no need for the money at 67, I don't know. I just still, unless you've got a $200,000 pension, I don't know what's going.
- [28:34]
B
Yeah. Unless you're the highest bracket somehow.
- [28:36]
D
Yeah. If you're, like, converting into 32% tax bracket or something.
- [28:39]
B
Yeah, I wouldn't do that. I wouldn't do that either.
- [28:40]
D
Right. But, yeah. Jerry, congratulations on the amount of wealth that you have. Congratulations on being an engineer and going to all these different. Trying to figure out the most optimal Roth conversion possible. But just like with anything, it's optimal. Each year the market's down 20%. I don't care what tax bracket that you're in. I'm doing it $3.5 million. I'm doing a conversion because the assets.
- [29:07]
B
Are going to recover in the Roth, and then it hardly matters what bracket you're in. In fact, one way to think about it is you look at what you ended up with in the Roth. By the time you have to pay the tax and compare it to the tax you paid, that'll actually be probably pretty low rate. If the market zooms right up, you.
- [29:24]
D
Look at asset location. Usually if you have a strategy, an investment management strategy, you have asset classes that have a higher expected rate of return in your Roth IRA because you'll never pay taxes on it. I don't want to have bonds and cash and CDs in my Roth.
- [29:40]
B
No, you don't get rewarded for that growth because there's no tax to pay in a Roth. So why wouldn't you want your stuff.
- [29:47]
D
Gas on there, right?
- [29:48]
B
Yeah. Load it up.
- [29:52]
D
Well, we want some firecrackers in there. And so if you look at that. All right, so now I have more stocks or stocks that have a higher expected rate of return in my Roth. So maybe they have an average rate of return that is higher than the s and P500 or a globally diversified portfolio. So there's so many other things that you have to consider. But here's the other thing that you don't want to do a Roth conversion on. If you don't have the cash to pay the tax, don't do it.
- [30:18]
B
Yeah.
- [30:18]
D
Let's say if you're going to now pay more tax on your Social Security, probably doesn't make sense where we've seen people that have very little tax on their Social Security because it's based on provisional income. And all of a sudden you do a Roth conversion, it's like, oh, now all of a sudden, more of my Social Security is subject to income tax. And. And it just pops them up into higher bracket. There's irmaa. Right. So if you're going to go into a higher irmaa, you might want to consider maybe not doing that. You have to run the numbers there. There could be credits that you're giving up.
- [30:56]
B
Yeah, yeah. Educational credits. You could be. You could own rental properties. Right. And you get a $25,000 deduction. But with that Roth conversion, that goes away. You converted $50,000, but all of a sudden you have to pay tax on 75,000 more dollars. That's not a good deal.
- [31:11]
D
Now, we saw someone wanted to get out of individual stocks, so they sold X amount of dollars out of the stock. Oh, and then they did a Roth conversion on top of that. And then now that capital gains is subject to net investment income tax. Probably don't want to do that. If I want to look at diversifying from a stock and be in that 0% capital gains rate, I probably don't want to do a conversion. See, Jerry, look at that. That's like 10 things that you don't want to do a Roth conversion. What else do I got for. How about the Affordable Care Act? Oh, I need my.
- [31:43]
B
Oh, boy. That's another. That's actually a pretty big one.
- [31:46]
A
This is starting to remind me of that scene from Roxanne where Steve Martin starts listing all of the insults for his having of a big nose. You know that scene that I'm talking about, right, Joe?
- [31:55]
B
Yeah. That is good. You're just.
- [31:57]
A
You're starting to reel off all the reasons that somebody should not do a Roth conversion. Because, dang it, that's what you're known for, is the Roths.
- [32:05]
D
All right.
- [32:06]
B
Damn.
- [32:06]
D
Well. But I still think Jerry should probably do it.
- [32:11]
B
I do, too, but we need a little more information.
- [32:14]
D
All right, we got Skipper. Hey, guys, this is Skipper. Wife, Ginger, both 65. Where's Gilligan?
- [32:23]
B
He didn't make the cut. Who's your favorite character, Marianne?
- [32:29]
D
Not the professor. Mr. Or Mrs. Howell I did like.
- [32:33]
B
Well, I mean, they were all fun.
- [32:36]
D
Gilligan.
- [32:37]
B
Yeah, I mean, goofy fun, though. Yep.
- [32:40]
A
I was gonna say that's from a different show. Goofy was not on Gilligan's Island.
- [32:43]
D
He was Goofy.
- [32:44]
B
He was Goofy.
- [32:46]
A
Joe, who's your favorite?
- [32:49]
D
I liked Gilligan. Yeah. Yeah.
- [32:54]
A
I was a fan of the Professor.
- [32:56]
D
Yeah. Very dapper. He was able to make brainy telephones out of coconuts, but they couldn't figure out a way to fix the boat. It's like, what the hell?
- [33:09]
B
It's funny how they always had, like, spare parts to build. Whatever.
- [33:12]
D
Just whatever, man.
- [33:13]
B
Except for a boat.
- [33:14]
D
I mean, he was building AI robots, but still stranded on that island.
- [33:21]
B
Yep.
- [33:22]
D
How'd they ever get off?
- [33:25]
B
I don't remember.
- [33:26]
D
Yeah, I don't know if I ever.
- [33:27]
B
Saw the finale because there was a. I think there was a movie where they'd gotten off, if I remember.
- [33:32]
D
Well, I don't know. Wasn't there, like.
- [33:34]
B
But they really. They were in a studio in la, so it wasn't. They weren't exactly.
- [33:38]
D
Oh, come on. No, I think they were definitely shipwrecked.
- [33:42]
B
I can't believe you felt the need.
- [33:43]
A
To say that, Al.
- [33:44]
D
Yeah, well, you know, they were actually in the studio. Are you kidding me?
- [33:51]
B
So they. Well, you asked the question. How'd they get off? Every night they got off and went home.
- [33:54]
D
I don't think so. All right.
- [33:58]
B
They drove their cars home. No problem.
- [34:02]
D
First, the drinks. We both enjoy California red wines and I occasionally enjoy, like a Moscow Old Fashioned Mezcal. Mezcal? What's that? Tequila.
- [34:14]
A
I think it's related. I don't think it's exactly tequila, but I'm not really sure.
- [34:17]
D
All right, the question relates to Roth conversions versus taking advantage of the 0% capital gains rate. Oh, this is a juicy one here.
- [34:25]
B
Yeah, it could be. All right.
- [34:27]
D
Okay. We're both mostly retired. I do have some part time consulting income. After that fades away in 2025, our ordinary taxable income will be in the lower end of the 12% tax bracket, leaving room to harvest about $70,000 of long term capital gains each year at the 0% tax bracket until Social Security starts at age 70 and then RMDs at age 73. Of course, California will take their bite, as always, but we really want to do some significant Roth conversions. As I learned from Big Al in a prior episode, the first $70,000 of a Roth conversion in those years will have an effective federal tax rate hit of 27% with the loss of the 0% long term capital gains rate to 15%, plus an additional 12% ordinary income from the Roth conversion. Did you follow all that?
- [35:22]
B
Yeah, and I have said that, and that's a true statement.
- [35:26]
D
I've run an eight year projection. Okay, Skipper. Yeah, call the Gilligan up and actually call the Professor. Have some fun.
- [35:37]
B
He'll be able to tell you if.
- [35:38]
D
This is a good plan. Eight year projections and I'm thinking maybe try and optimize each year with some heavy long term capital gains and other years of heavy Roth conversions also while keeping an eye on Irma tiers. 3.8% net investment income tax plus cash flow to support our lifestyle and the tax on conversion. The dilemma is that we will make it difficult to reach the Roth conversion target of $800,000. And I really don't like missing out at the 0% cap gains rate. What do you suggest? What the hell is he talking about?
- [36:15]
B
Well, he's thinking from what I said, he needs to do one or the other in any given year.
- [36:21]
D
Was this the same guy that Skipper called in before or something?
- [36:25]
A
We've had a number of people that have been from Gilligan's island, so I'm.
- [36:28]
B
Not sure if he's Skipper.
- [36:30]
D
Okay, so here's his investments. He's got a taxable account of $1.6 million with 750,000 unrealized long term capital gains. He's got a retirement account of $2 million and he's got a couple of bucks in a Roth. Plus we have a rental house and a primary residence, both with solid equity. All right, thanks for looking forward to your ideas and the laughs. All right, well, this is the only time I think I ever need to know what is in the taxable account. Like some people give us like ticker symbols and everything else and just kind of ignore that. But is this individual stock? Is this just a couple mutual funds? Did it get lucky and bought Nvidia Apple? Was this a magnificent Seven Fangs?
- [37:26]
B
Well, you are right because it depends what the investments are, whether you need to reallocate.
- [37:33]
D
Right. There's a lot of concentrated risk you need to diversify. If it's diversified and they're in decent investments.
- [37:41]
B
Yeah. Then stick with it and do Roth conversions all day, all year, year after year after year.
- [37:45]
D
Yeah, don't worry about the long term unless you need the money to live off of. So the plan that you have to figure out is, all right, well how much money do I need to take from the overall portfolio? So in that case it's like, all right, well here maybe you take enough out of the non qualified and get that in to a high basis area where you can live off of that money for a couple of years while you're doing the conversions. And you don't necessarily have to worry about the tax. But there's a lot more analysis I think on this. But if you don't need the Non qualified and it's diversified and good investments.
- [38:19]
B
Roth conversions all day, 100% and plus. I mean, so we're talking at the moment, we're talking about $1.6 million taxable estate and less than half of its capital gains. What if that became 2 million or even 3 million to sell it? Yeah, you pay capital gains tax, but not on the whole thing. It's very tax efficient. But your problem is you got almost $2 million in a taxable retirement account. You got to get that over to Roth the best you can. That needs to be the priority. Unless, Joe, as you said, the portfolio is not correctly allocated. If you need to diversify, then maybe focus on capital gains for a couple years.
- [38:59]
D
Ye, that 1,600,000. Let's say if you have a concentrated position or it's not allocated, that 1,600,000 drops back down to $750,000. I don't know. I bet you'd been a lot happier to pay some tax than to look at your balance and say, oh, I got my basis back and I could sell it now and I don't have any tax. So you got to look at both here. I mean, you want to make sure that you have the appropriate diversified portfolio of the entire estate. So it's almost $4 million of liquid assets that you currently have. Your house is paid for, you got a rental house, you got ginger, you got the life. What you're worried about is, okay, some taxes and do you take advantage of the 0% capital gains rate because in a non qualified brokerage account, you can sell as long as you stay in the 12% tax bracket of taxable income and it's 0%. So he's really loving that 0% cap gains rate.
- [39:55]
B
Yeah. I think maybe a way to think about this is pick one or the other. Right. If you do want to diversify and you want to sell some of your assets, then sell enough not only to fill up the 12% bracket and pay no taxes on that, but then go higher. Right. Because you're only paying 15% taxes on that. Don't do Roth conversions that year. But then get your portfolio allocated properly over a couple of years then if, if you need to, and then switch to Roth conversions after that. That's the bigger problem I see. Unless you're not diversified.
- [40:25]
D
Yeah. Let's say he's got $2 million in a retirement account. His RMDs are roughly in 10 years, let's say that money doubles. Now it's at $4 million. That's $360,000 RMD, just the RMD alone is going to be taxed at, right? What, 36%? Well, 32%.
- [40:44]
B
Yeah, 32 as it stands right now. Yeah. Well, actually 24% as it stands right now. But we're supposed to be going back to the old rate, so. Yeah, we don't.
- [40:51]
D
And then he's going to have. Well, he'll have Social Security.
- [40:53]
B
Yeah, true. I mean, he may be approaching 32%. Yep, you're right.
- [40:58]
D
So I don't know, you might be thinking you're tripping over, you know, dollars to pick up pennies here, right? Oh, I want to take advantage of the 0% capital gains when you could pay 15% or you're going to pay 32% potentially, or a lot higher tax on the ordinary income when it's forced out. The worst thing that happens with very good savers is that they're forced to pay tax on income they don't need. And those RMDs are just forcing this out and putting all of that income on your tax return. And then all you're doing is putting it in your brokerage account anyway.
- [41:34]
B
Right.
- [41:34]
D
And so now you're getting interest in dividends and paying capital gains tax on the money that you just paid tax. So you're, it's, it's just this tax cycle. So get ahead of it. Now you're 65 conversions, I think is the right answer, but of course, that's just a spitball.
- [41:52]
A
Yep, that question from Skipper was from our most consumed podcast episode of 2025 on Apple Podcasts. Balancing conversions with that 0% capital gains tax strategy really matters to a lot of you who don't want to risk paying more taxes than you need to. There are so many other risks that can break your retirement plans. We what if you outlive your savings or spend too much? What if healthcare costs go sky high? What happens if you retire in a down market? This week, watch your Money you, Wealth TV as Joe and Big Al show you how to make it in retirement, not break it. Then calculate your likelihood of retirement success with a financial blueprint. Click or tap the Financial Blueprint link in the episode description. Input your details and our free tool will analyze your current cash flow, assets and your projected spending for retirement. Then it'll output a detailed report with three scenarios that'll help you determine your probability of retirement success, including future taxes and actionable steps you can take now to achieve your retirement goals. Click or tap the links in the episode description to watch YMYW TV and to get your free financial blueprint. Next up, a question from the YMYW episode with the longest view Duration on our YouTube channel. Include 2025 how to accomplish your retirement goals even without a fat wallet.
- [43:07]
D
Let's go to Mr. Buckeye. Got a lot of interesting names that come through now.
- [43:13]
B
Yeah.
- [43:15]
D
All right. He goes. Hey Joe, Big Al, Andy. Discovered the show a little bit over a year ago. Really enjoy listening to the new episodes while taking an evening walk in our small town in Ohio. Not only do you provide very useful advice, but your friendly banter makes it quite entertaining. Well, thank you, sir. I'm 42, wife's 41. We have an 11 year old daughter and nine year old son. We drive a 2006 Toyota Prius in 2009 Toyota Sienna van. Prius?
- [43:44]
B
Yes.
- [43:45]
D
Still make them?
- [43:46]
B
They do.
- [43:47]
D
All right. That was the first of the.
- [43:51]
B
It was the electric vehicles. Right. First of the hybrids.
- [43:53]
D
Got it. Okay, little drink of choice here. My wife is a white whiner or a margarita. I enjoy red wine and old fashioned. Okay, here's the specifics. My wife makes $80,000 a year. I make $85,000 a year. We have smaller salaries than most of your listeners but have saved consistently since college and are content to live below our means. All our retirement accounts are invested in low cost index funds and are combined to growth S&P 500 dividend international REITs and small amount of bonds. 401. Wife has $110,000. I have $200,000 this year and an option of start putting my portion of the 401 in the Roth. Employer contributes to the traditional 401 Roth IRA. Wife has $160,000. I have $220,000. Man HSA $18,000. I fully fund $4,300 annually to my HSA. All the money is invested and I don't plan on touching it. We currently use cash from our savings to pay all medical costs. Oh my God, this is long.
- [45:00]
B
Oh, you got a whole nother page.
- [45:02]
D
Okay, Mr. Buckeye, take a deep breath. This is a long ass walk.
- [45:09]
B
This. You may have to do it.
- [45:11]
D
You might have to do some stretches here. Brokerage $40,000. He's got a 529 plan of $53,000. He's going to contribute $2,500 per kid cash of $52,000. Our only debt is $82,000 on a mortgage at 4% which will be paid off in 10 years. Current value is $325,000. We both fully fund $7,000 into our Roth IRAs every year. For our 401, I contribute 6% and my employer matches 7%. While my wife both contributes to get the match to 6. Currently with an employer match, around 35 to 40% of income. With matches, we save around 35 to 40% of income. Our current annual expenses are around $85,000. All right. Expected $60,000 in today's dollars for retirement. My parents just started gifting my siblings and I each $15,000 per year. And I will continue, and we'll continue this going forward as an early inheritance instead of just lump sum after they're not around. They're both 72 years old and pretty good health. So I expect this to continue for quite a while. After they pass, I expect still get a couple hundred thousand dollars Social Security. I pulled these numbers for myself. I didn't do it for my wife, but assume hers would be similar to mine. So they're going to get about 22,000. At $62,000 or $32,000 or $40,000. I'm interested in potentially using the Rule of 55 to tap into my 401. At this point, my wife would be interested in early retirement as well, but isn't set on a specific age. At age 55, my kids would just be finishing up college. If that's the route they decide. Here's the questions.
- [46:57]
B
Okay.
- [46:58]
D
My God. How long did that take?
- [47:01]
B
It took a while.
- [47:02]
D
I need a drink of water.
- [47:03]
B
I think that's the show. We'll answer the question next show.
- [47:07]
D
Well, that's all we got time for, folks. We'll see you again next week. Do you think it's realistic, given my scenario, or is it just a dream? If not, what age do you think is more feasible? I'm also not against working part time, so. Al, I'm sure you did some homework here.
- [47:26]
B
I did.
- [47:27]
D
All right. What about Mr. Buckeye here?
- [47:29]
B
Well, okay, so based upon how much he's saving as a percentage, and I know the gross, I could calculate it. So got $800,000 to start, $60,000 of savings per year, 13 years, 7% ends up with about $3,100,000.
- [47:43]
D
O. So to recap, what you just said is that he's got $800,000 totally saved. He's 42 years old, wife is 41.
- [47:52]
B
Yep.
- [47:52]
D
All right.
- [47:53]
B
And maybe he wants to retire at 55, 13 years from now, 7%. Add $60,000 a year, you get $3,100,000.
- [47:59]
D
So he potentially could have $3.1 million in his accounts. When he turns his desired retirement age.
- [48:06]
B
Yeah. Keeping that same savings and at a 7% rate of return. So there's some caveats here, of course. And so retiring early, I just said 3% dist. To throw out a number. That'd be $93,000 he could get from the portfolio. And then you look at, he wants to spend $60,000 in retirement. So he says, I just said inflation, 3% 13 year, it comes out to $88,000. So yeah, it's close, but it looks pretty good.
- [48:34]
D
So he wants to retire at 55. And so at age 55, his living expenses is going to be 88. Or call it $90,000.
- [48:43]
B
Call it $90,000. And he, he could, he could get about. If he takes 3% of his portfolio, it'd be 90, 95.
- [48:51]
D
So 0.03. He would need $3 million at 3% at that point.
- [48:55]
B
So yeah, that's what I got. So I think that looks pretty good.
- [49:00]
D
So he just has to bridge the gap until Social Security for 10 years.
- [49:04]
B
That's right.
- [49:05]
D
So if you look at it from assuming no growth in the overall portfolio.
- [49:11]
B
Right.
- [49:12]
D
You got, he's going to retire at 55, 65, 67, waits until full retirement age. You know what gets scary with that long of a bridge is that the total dollars that he would have to pull out from his retirement date till his Social Security date would be over a million dollars.
- [49:32]
B
Yeah.
- [49:33]
D
So if you think of it, man, you start retirement with 3 million and you know that you're going to have to pull a third out of that.
- [49:39]
B
But that's a, that's no growth.
- [49:41]
D
I know, but you're, you say that and I know, I disagree with you.
- [49:45]
B
And I totally disagree with you. That's why I keep saying it. How, how could you. I mean, we, everything we do, we include a growth rate, except for this.
- [49:53]
D
But that's a true dollar figure.
- [49:55]
B
I agree. And that's assuming no growth, which is.
- [49:59]
D
Think that that could happen. You retire at 55 years old.
- [50:02]
B
I think it totally could have, I think you could have a negative 10% like we did in the, in the.
- [50:07]
D
Last decade, saying, what is the total dollar figure that needs to come from the portfolio is a million dollars.
- [50:12]
B
I agree with that.
- [50:13]
D
Right.
- [50:14]
B
Yeah.
- [50:14]
D
So that's. If I look at. All right, you got to pull a million dollars. If it were me and I had $3 million and I had to pull a third of that total balance out, assuming no growth, to me, that would make me pause.
- [50:28]
B
Okay, so now I finally agree with your statement. Then the reason why I would pause is not that calculation just because it's too, it's too close. I'd rather have a part time job, eliminate some of the risk.
- [50:40]
D
I try to think of worst case scenario.
- [50:41]
B
Yes, agreed.
- [50:42]
D
If it's a worst case scenario, it's like, okay, I'm not going to have. Let's just assume zero over 10 years or 12 years. That's pretty bad.
- [50:49]
B
That's pretty bad.
- [50:50]
C
It's happened.
- [50:50]
B
And it could be worse.
- [50:51]
D
It could be a lot worse. Right. So that, I mean maybe the worst case scenario is a 20% loss, maybe 50%. Yeah. I don't know about that. I don't think over a 12 year time period on average. You know, I think you're right. You got to. I mean most. You're always going to look at. All right. Assumed growth rate of. But probability standpoint.
- [51:11]
B
Yeah. So.
- [51:12]
D
But if I'm looking at worst case scenario, I'm going to look at it that way. If it were me.
- [51:16]
B
Yeah. And, and I come up with the same conclusion for a different reason. My, my reason is it's just, it's a little more tight than I would like at age 55. Not. And, and so I would probably have a part time job to sort of COVID some potential gap.
- [51:32]
D
Yeah. I think he's close. He's doing a good job.
- [51:34]
B
I think so too.
- [51:35]
D
Yeah.
- [51:35]
B
Well, that was the first question. What's. Oh, second question.
- [51:38]
D
He's got a Roth ira.
- [51:40]
B
All right, let's see. He wants to bridge the gap.
- [51:42]
D
He helped bridge the gap. I plan to see. Look at this like I've already read this.
- [51:46]
B
Yeah.
- [51:47]
D
To help bridge the gap. I plan to prior. We already, we already prioritize savings into a brokerage account until we're able to take Social Security ineligible for Medicare. Most times it makes sense to hold off on taking Social Security as long as possible. But if waiting to retire is the main goal, is it unwise to think about taking one, at least one of us taking it at 62?
- [52:09]
B
Yeah. And I'm okay with that.
- [52:11]
D
I think so too. I would much rather probably do that if you have that long of a bridge. But you would make that decision at 62 depending on what the market value is on your portfolio.
- [52:21]
B
Not right now.
- [52:21]
D
Right. Yeah, yeah.
- [52:24]
B
Honey, when you're 42, you know what? 20 years.
- [52:27]
D
20 years. You're claiming Social Security whether you want to or not. Right. We're writing this down. All right. Currently with our highest risk tolerance, it's still being on the younger side. We are heavily invested in equities. 90 10. I'm curious on your thoughts. Would you dial it back? He's got 10, 12, what did we say? He's got 12 years. 13 years.
- [52:52]
B
13 years. I would stay the course maybe, I don't know, five years ahead, maybe start getting some more bonds in there. Maybe.
- [53:00]
D
Yeah. I don't know. 90 10, if I'm, if I'm looking at it.
- [53:04]
B
If, I mean, you could come down to 80 or 70% and then 70.
- [53:09]
D
30, I probably like a little bit more given the fact that you need the portfolio in 10 years. 9010 is fine, but he's young, so it's like in 10 years, if he still doesn't want to pull the trigger, it's not like he's 65 years old. And this is like, I'm totally burnt.
- [53:24]
B
Right? Yeah, I know. I mean, and part of this, I mean, at least I'm thinking about myself. I might keep it that way if I was going to be okay with a part time job. So I didn't really have to use the portfolio that much. And then you could keep a higher allocation. But you're right, you get to less than 10 years, certainly less than five years. You want to tone it down because you're going to need access to that capital. And what if we have a prolonged downturn and your stocks are all down? You'll pull money out at the wrong time and never. It'd be hard to recover.
- [53:52]
D
Yeah. He wouldn't retire then.
- [53:53]
B
Yeah. You have to keep working. Right. So, and, and to keep working when the stock market is down is not necessarily easy.
- [54:02]
D
Yeah. Okay. Appreciate your time and response. Keep up the good work. All right. Looking forward to listening for many more years. Right, Big Al?
- [54:11]
B
Take care. That's right.
- [54:15]
D
I don't think they listen to many more years. I think they get totally burnt out listening to this garbage for like six months.
- [54:22]
B
How many years do we have on podcasts, Andy?
- [54:25]
A
Since 2016 is when it started officially.
- [54:28]
B
That's like a new list. They'd be good for life, don't you think?
- [54:33]
A
Well, interestingly, the YMYW podcast survey, I think the vast majority of people who have filled it out have said that they've listened for one to five years. Anything more than that, it just drops dramatically.
- [54:45]
B
It doesn't happen. Right.
- [54:48]
D
I don't think there's anyone that's listening to the show for more than five years. And I think the number of people that would actually stick with us for.
- [54:55]
B
Longer than six months is pretty low too.
- [54:58]
D
Yeah, because it's like all right. It's the same stuff, Right?
- [55:02]
B
Right, right.
- [55:02]
D
Trust me, I know. I read the questions and then the.
- [55:05]
B
Same questions over and over again. We probably have one guy just out there.
- [55:09]
D
Just rinse and repeat.
- [55:12]
A
The next one is from Sherilyn in El Cajon here in San Diego in California. She says, hi, Joe and Big Al. We're going to change that. It says, hi, Susan and Big Al. My husband retired about 20 years ago from the city of El Cajon after 31 years of work. The city is not in the Social Security system, so he was under WEP. He only got around $150 per month in Social Security because of WEP up, even though he had many quarters of work elsewhere. I am retired, but still working at the Diocese of San Diego. When I applied for Social Security at age 70, I asked the Social Security lady if my husband could get spousal benefits. Since I get around $2,000 per month, I figured he could get a thousand dollars or so off of my benefit. 50%. That's much better than the hundred dollars he gets now. They said no. The WEP law changed recently and he got a retroactive check for $4,700. But that only goes back a. Supposedly he will start receiving more on his benefit check starting in April. This email is obviously a little bit old, but I still have this spousal benefit question regarding him. We've been married almost 50 years. Wow, Sherilyn, 50 years. I hope you can at least answer yes or no without us having to make an appointment to go into the Social Security office. I figure the answer is still no, but I still don't understand the reason.
- [56:29]
B
Well, first of all, Sherilyn, I think. Yeah, you don't want to go to the Social Security office at all costs. So we're going to try to answer it for you. So, Susan, what do you think? Does this new law? Does this affect Sherylyn as well?
- [56:45]
A
Yes. I mean, if she's taking your Social Security benefits that she applied at 70, then her husband would be able to get spousal benefits based on the amount that she would have gotten at full retirement age.
- [56:59]
B
Yeah. So what's interesting here is so she's getting a couple thousand dollars, and so she applied at age 70. Okay. So think back to our last caller. So the spousal benefit is 50% of the benefit at full retirement age, which for Sherrilyn was somewhere between 66 and 67. I don't know exactly what, but whatever the benefit was at that point, that's what her spouse gets Half of plus indexed for inflation. So let's just for simplicity, let's just say that was age 66. Okay. So at age 66, whatever her benefit was, then half of that benefit he would get indexed for the cost of living, which Social Security announces each and every year, was actually pretty high, Susan, a couple years ago.
- [57:46]
A
Yeah, a couple years ago it was 9% or something. I think it was close to that. It's gone down since then, but it was close to that.
- [57:53]
B
It has. So I kind of tend to figure maybe 2%, ish, maybe a year as the. As the extra benefit. So if you're getting a couple thousand, I bet your husband ends up getting 700, 750, something. Something like that. So, yeah, it's. So the answer is yes. You don't have to go to a Social Security office. The answer is yes. That's why he got that check, because it was retroactive to 2024. Right. So it's an extra amount he should have got for all those months that he didn't get it. So now that we're recording this a little bit later than your question, you probably already have noticed that he's getting a higher benefit, but the answer is yes.
- [58:36]
A
So the way that worked was basically they got a lump sum retroactive payment, and then it caught up to present day, and so then his payments going forward would be increased based on whatever that calculation is, from that point forward after he received the retroactive benefits.
- [58:51]
B
That's exactly right. Right. So if you were fortunate enough to get a check, then the higher. Then the Social Security administration is saying that they believe that you qualify for this higher benefit. If you didn't get a benefit or a check and you think you should have, well, that's when you got to call Social Security. Maybe you got to go to the office and, you know, just grin and bear it. You know, you just have to do it right. To get your higher benefit. But I think that Social Security, Social Security administration has been pretty good at figuring this stuff out.
- [59:22]
C
Yeah.
- [59:23]
A
Because they've got a lot of requests for it. Probably by now they've had a lot of practice.
- [59:27]
B
Yeah. So at any rate, yeah, good news, Andy, for people that are receiving Social Security, that either husband or wife or both work for the government.
- [59:36]
A
And so basically, if you haven't heard about this, if you weren't aware of the fact that this weapon GPO law has changed, it's definitely worth looking into whether or not that changes your Social Security Security situation.
- [59:47]
B
Yeah, without a doubt.
- [59:49]
A
Without a doubt.
- [59:49]
B
I think this. I think this will change. This will be important for a lot of people.
- [59:53]
A
That last discussion with Big Al and our special guest Susan Brandeis, CFP is from the Social Security versus Pension no More episode which garnered the most plays and listeners and viewers for YMYW on Spotify in 2025. As we close out this best of 2025, let's talk about some other stats. Last year you watched the youe Money, you, Wealth podcast for more than 41,000 hours on YouTube, consumed it for nearly 43,000 hours on Spotify, and get this, you listened for nearly 204,000 hours in Apple Podcasts. You made it one of the top 5% of all video podcasts on Spotify. You downloaded it over a million times in the podcast apps last year and over 5 million times since Joe and Big Al started Making youg Money, you, Wealth. You put yout Money, you, Wealth in the top 5% most popular shows out of nearly 3.7 million podcasts globally. Thank you friends. Each and every year you continue to show us how much you value your money, your wealth, your podcast. This show would not be a show without you. And get excited. Tell your friends and Neighbors, subscribe on YouTube and follow in your favorite podcast app because we've got brand new episodes beginning next week.
- [61:12]
D
Woohoo.
- [61:13]
A
In the meantime, now is the perfect time to show everyone that you can stick to your New Year's resolution To get your finances in order, schedule a free financial assessment with one of the experienced professionals on Joe and Big Al's team at Pure Financial Advisors. Like a spitball, a financial assessment doesn't cost anything. But the major difference here is that this is a comprehensive, one on one analysis of your unique situation and your plans and goals for the future. 100% just for you, not the entire YMYW audience. The team at Pure will review where you are now, where you want to be in retirement, and they'll help you develop a plan to get you there. Click or tap the free Financial Assessment link in the episode description or call 800-80-899-46257 to schedule yours. Now you can meet in person at one of our offices in San Diego, Woodland Hills, Irvine, Brea or Davis, California Mercer island or Redmond in the Seattle, Washington area Greenwood Village in the Denver, Colorado area Lehigh in the Salt Lake City, Utah area Franklin in the Nashville, Tennessee area or Wheaton or Northbrook in the Chicago, Illinois area. Or you can make meet with the Pure team online via Zoom. No matter where you are, click or tap that free financial assessment link in the episode description to get started. Your Money, you, Wealth is presented by Pure Financial Advisors, 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.