Retirement Changes at These 5 Major Financial Crossroads - 569

Summary

Your Money, Your Wealth — Episode 569: Retirement Changes at These 5 Major Financial Crossroads

Release Date: February 17, 2026
Hosts: Joe Anderson, CFP® & Alan "Big Al" Clopine, CPA
Theme: Making Informed Retirement Decisions at Critical Financial Moments
Episode Focus: The hosts answer listener questions about major retirement decisions at key "crossroads"—selling a business, the Roth vs. Traditional IRA decision near retirement, RMD timing, planning for cognitive decline, and maintaining an emergency fund in retirement.

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Episode Overview

This episode of Your Money, Your Wealth zeroes in on how critical timing and thoughtful planning at specific financial crossroads can be the difference between a comfortable retirement and a stressful one. Joe and Big Al bring their trademark humor and expert analysis to a range of listener scenarios, from a young entrepreneur with a lucrative business exit opportunity, to retirees tackling RMD strategy, state tax optimization, and asset management in the face of aging. The hosts also provide practical guidance on managing emotions alongside financial details, and, as always, pepper in banter, relatable stories, and memorable zingers.

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Key Discussions & Insights

1. Should You Sell Your Business? (Fine and Dandy from Illinois)

[01:07–19:41]

Listener Scenario

• 42-year-old business owner, multimillionaire on paper with $4M in personal and real estate assets, $14M business (potential $8M payout for his share if sold), $1–1.3M current personal income, considering vacation home build ($3M), wants to be financially free by 50, received a private equity (PE) buyout offer (80% upfront, 20% roll into second sale).

Discussion Highlights

• Is selling now financially prudent if the goal is “lavish” $400k/year spending in retirement?

  • Al runs the numbers:
    • Sale after taxes could net ~$9M; with 8 years to invest to age 50, could potentially reach $14M liquid—sufficient to safely withdraw $400K/year at a 3% distribution rate, factoring in inflation.
  • Joe weighs personal vs. financial dimensions:
    • “If the business is strong and you love running it, you might do better holding on and selling closer to 50. But if you want to ‘de-risk’ and enjoy more time with your family, selling now can make sense.” (13:51)
    • Importance of the emotional/intangible factor (less stress, more time with young family).

• Is it a mistake to sell 80% so young?

  • Diminished control and potentially less satisfying work with new PE owners.
  • PE’s excitement signals a strong business—may be better to take small chips off the table, maintain majority stake, and ride it longer.

• Vacation home question:

  • “Is it crazy to spend more on a vacation home than a primary?”
    • “If you can afford it and cash flow is solid, go for it! You’re a baller.” —Joe (18:47)
    • Run many scenarios to test comfort with lower future cash flow after the business sale and new home purchase.

Notable Quotes

• “He just takes his wallet out, throws it right on the desk. That thing made a giant thud.” —Big Al [04:32]
• “Would you want to be at home when you’re used to grinding?” —Big Al, on transitioning away from entrepreneurial life [17:15]

Summary Advice

• If the business is strong and personal burnout isn’t imminent, holding on a few more years may yield better long-term results, especially with a second bite at the apple possible. Otherwise, taking some “chips off the table” can de-risk, even if only selling a minority stake.

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2. Roth vs. Traditional Contributions Before Retirement Move (BNB and Shell)

[20:49–23:51]

Listener Scenario

• 65, retiring in a year, high current taxes (36% marginal with state/local), soon moving to a low/no-tax state, income will drop sharply after retirement.

Discussion Highlights

• Clear consensus: Make pre-tax (Traditional) contributions while still in high-tax/high-income state and bracket—take the deduction now at 36%. Wait until in lower tax state and bracket in retirement to do Roth conversions if needed.
• “What tax bracket are you in now and what will you be in when you retire? Arbitrage it.” —Joe [22:25]
• Map out a multi-year plan for conversions after retirement.

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3. Timing Required Minimum Distributions (RMDs): January or December? (Joel from California)

[23:51–27:30]

Listener Scenario

• Approaching RMD age, wants to know if there’s a tax or cashflow benefit to timing the first RMD distribution early or late in the year, especially related to estimated tax payments.

Discussion Points

• Big Al: Recommends December to ease estimated tax payment planning—fourth quarter payments can be made by Jan 15 of the next year [24:22].

• Joe: Prefers January to get money out of tax-deferred accounts quickly, so future growth is taxed more favorably as capital gains in non-retirement account [24:51].

• “Tax-wise, it’s a wash, but cash flow and tax payment timing differ.” —Big Al

• QCDs and Timing?
  No major impact except prefer waiting so growth stays pre-tax until the QCD is made.

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4. Planning for Cognitive Decline & Asset Simplicity (David from Logan, New Mexico)

[27:30–33:57]

Listener Scenario

• 68, solo, modest millionaire, worried about who will manage assets and pay bills if he becomes incapacitated, no family/friends to rely upon.

Discussion Highlights

• Simplify:

  • Consolidate accounts at one custodian.
  • Reduce to a handful of diversified ETFs.

• Automate:

  • Set up all bills for auto-payment.

• Planning for Help:

  • Consider hiring a fiduciary financial advisor or corporate trustee.
  • Daily money managers ("bill paying services that cater to the elderly") can assist.

• “Try to simplify as much as you can... automate as much as possible.” —Big Al [32:03]

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5. Emergency Funds in Retirement (Brian from Albany, NY)

[37:03–41:53]

Listener Scenario

• Retired, debt-free, Social Security covers all “core” expenses; withdrawals only for discretionary purposes. Wants to know if a large emergency fund is necessary.

Discussion Highlights

• Joe: Emergency fund is crucial during earning years, but with guaranteed income and plenty of liquid assets, it’s less critical in retirement—perhaps only three months’ living expenses.

• Big Al: Distinguishes “emergency fund” (unexpected expenses) from “safe assets for down markets” (bonds/cash)—recommends at least three years of withdrawals in safe assets for sequence of returns risk.

• “As long as it’s an IRA, you don’t necessarily have to sell your securities—you can do an in-kind transfer to your brokerage account for your RMD.” —Joe [39:54]

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6. Listener Comment: SALT Cap and Roth Conversions (Schweta)

[35:37–37:03]

• Comment clarifies that filers under $500,000 AGI can deduct up to $40,000 in state/local taxes (SALT) in coming years. Additional consideration for Roth conversion timing for high-income filers—worth keeping in mind for conversion strategies.

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Notable Quotes & Memorable Moments

• “Always buy, never sell. Making T-shirts with that.” —Joe [04:18]
• “Super tight... run 15 different scenarios until you're blue in the face, until you're super confident.” —Joe [19:12]
• “I actually looked it up—they’re called daily money managers, Joe. That’s who handles bills of elderly people.” —Big Al [33:33]
• “You could argue either way, but me personally, I would do December.” —Big Al on RMDs [25:48]
• “I guarantee this—he’s a grinder.” —Joe, on Fine & Dandy’s entrepreneurial drive [15:10]

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Important Timestamps

• Fine and Dandy: Business Sale and Retirement Spitball — [01:07–19:41]
• BNB and Shell: Roth or Traditional Right Before Retirement/Move — [20:49–23:51]
• Joel: When to Take RMDs (January vs December) — [23:51–27:30]
• David: Planning for Cognitive Decline and Bill Management in Retirement — [27:30–33:57]
• Schweta: Roth Conversion & State Tax Deductions — [35:37–37:03]
• Brian: How Much Emergency Fund Should a Retiree Have? — [37:03–41:53]

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Podcast Tone & Ambiance

Joe and Big Al blend thorough, practical financial wisdom with relaxed, light-hearted banter—a unique mix that keeps even difficult topics feel accessible and fun. Their personal anecdotes and willingness to "spitball" live add authenticity and approachability to the technical advice.

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Bottom Line

Timing, simplicity, and flexibility dominate the retirement crossroads discussion. Whether contemplating a major business sale, accelerating or deferring income, preparing for the unknowns of aging, or just balancing safety and growth, Joe and Big Al emphasize assessing your true goals and risk tolerance—then running plenty of scenarios, with a healthy dose of humor and real-world perspective.

Transcript

[A]

When you're standing at a major financial crossroads, the timing of your decisions can mean the difference between success and failure. Join Big Al Spitball on the when of five retirement decisions today on youn Money, you, wealth podcast number 569. We'll kick things off with a whale of an email. Fine And Dandy is 42 years old with a multimillion dollar private equity offer on the table. Should he sell his business now or hold out for a second bite of the apple later? He also wonders if it's crazy to spend more on his vacation home than his primary residence. David calls himself an elderly orphan flying solo at 66 and in need of a plan to protect his million dollar portfolio as he ages. Bibi and Shell are trying to time their final year of retirement contributions to save as much as possible before moving to a lower tax state. Should they go Roth, IRA or traditional? Joel wonders when to take required minimum distributions from retirement accounts for the maximum tax benefit. And Brian in New York needs a spitball on when it makes sense to have an emergency fund as a retiree and for how much. I'm executive producer Andi Last, and here are the hosts of youf Money, you, Wealth, Joe Anderson, CFP and Big Al.

[B]

Clopine, cpa, Fine and Dandy from Illinois. Good afternoon, Big Al, Joe and Andy. First time writing, so. First time writing in. So I hope I'm doing this right and I'm not using any big words to trip you up too late. Well, just write normal. I love your take on a spitball. I've been listening to your show for a little over a year and I binge episodes while in the sauna after workout at the gym. Awesome. Is that fine or dandy? That's just hanging out in the sauna.

[C]

Neither.

[B]

Good boy. I always catch the new weekly episodes and work on my way backwards whenever it's not Tuesday afternoon. I'm in 2022 in your show at the moment. Wow, 2022 a few years ago. Yeah, I could read a lot better 2026 than I did in 2022.

[C]

Yeah, yeah, yeah.

[B]

That's practice.

[C]

You did get some. You got some practice.

[B]

All right, man. 2022 at the moment, and you are giving a spitball to people panicking about the diploma. The fun stuff. All right. I Drive a 2016 Tesla Model S and it still looks, feels, and drives like new. My wife drives a 2024 Volvo XC90 Recharge and we use it to haul around our two young children 23 months and nine months. Wow. What is that? Called Irish twins. If they're like.

[C]

I know you're talking about between a certain.

[B]

Yeah, maybe it's 12, nine, I don't know. You don't know what Irish twins are either? Andy, look at. Look at the education.

[C]

It's.

[B]

We are. We are just feeding everyone today here. But it's nine months. You got to be less than nine months.

[A]

12 months, okay? Irish twins refer to siblings born the same mother within 12 months or less of each other.

[B]

12 months, okay?

[C]

They just. They just missed.

[B]

They just missed the Irish twins.

[C]

Okay?

[B]

Both are paid off. The cars, not the kids, for a bourbon on the rocks. And I'm not too picky about the brand, but I do like Eagle Rare in Bardstone. Keep me mid shelf or better. Eagle rare. Never heard of Eagle Rare or Bardstone.

[C]

Neither.

[B]

My wife prefers a red wine, typically a cab or a Syrah. I like the wine too, but nothing makes the end of the day feel more complete than a bourbon once the kiddos have gone to bed and the house is quiet. I'm 42, wife's 41, and we like your take on a few things. I'm hoping to be financially free. Not sure if I'd retire, but I'd like not to care about earning another penny by the time I'm 50. Me too. I've got a pretty fat wallet, as you might describe it, and I've been investing in the market since I was in my teens. Over the past 13 years, I've been my own boss. Anyways, Buy, never sell. Here's the number.

[A]

Always buy, never sell.

[B]

Always buying, never selling. Making T shirts with that $2.2 million in a brokerage account. You do got a fat ass wallet.

[C]

Right off the bat, right there.

[B]

Just slaps you in the face with this thing.

[C]

Yeah, right.

[B]

He just takes his wallet out, throws it right on the desk. That thing made a giant thud.

[C]

By the way, instead of you reading all these, he's got about $4 million in a taxable account.

[B]

Okay.

[C]

He's got. He's got tax brokerage, he's got about 1.3 million in tax deferred and maybe 100,000 in a Roth.

[B]

Okay, so he also has 529 plans with about $7,500 in it for their 23 month year old. I'll probably open another 529 plan for some in the next month or so and set them up for a debt free future. We own a rental property worth $550,000 that I bought last April for cash, and it's generating about $2,000 a month deposit cash flow. We also own a condo worth about $500,000 that has a $180,000 mortgage on it. Also generates about $1,000 in profits after all expenses. I bought it in the 2000. I bought it in 2008 as my first property and have rented it out since My wife and I got married and bought our home in 2016. Our primary residence is worth $1,500,000 with $700,000 left on the mortgage with an interest rate of $2,125,000. Last December, we purchased some land to build a dream vacation property for $1,200,000. And I owe $140,000 on the land. We're hoping to build a 2. $2.5 million vacation home on that property over the next couple of years. When it's all said and done, I'd like to carry a mortgage of about a million dollars on that property. So I'd like to cash flow the build to cut down any future overhead costs. All right, where does this guy live? Illinois.

[C]

All right.

[B]

Where's the vacation home, do you think? Do you think it's on a lake in Illinois?

[C]

That'd be my guess. Yep.

[B]

Okay. I also own a business currently worth around 14 mil. I'm 50% partner in the building we operate is worth $2 million that we brought in 2018. Again, 50% is a private equity company. Came knocking, and I'm debating what to do. To sell or not to sell? Damn, if I sell, I'm financially free. Am I financially free at such a young age? I currently make anywhere from $800,000 to $1.3 million a year in recent years. My wife pulls in about $150,175,000. As a business owner herself, she owns a garden center. Garden. What is a garden center?

[A]

That's a place where you go buy your plants and your soil and your tools for gardening.

[B]

That's kind of cool.

[C]

Is that like Armstrong's or one of those?

[A]

Oh, yeah, Anderson. Something like that? Yep.

[C]

Okay.

[B]

We spend around 17 to 20 thousand dollars a month currently between living expenses, our nanny, and discretionary spending. So a lot goes towards saving. Investing in a recent land and rental purchases. Our average spending might be more if you consider travel costs, but travel is currently free due having over $10 million of Amex points and accounting. We typically take one to two nice trips a year using the points all the way with my friends and family. Okay. If I were to sell the company, I'd remain employed and my Salary would drop to about $300,000 a year. I'd get 80% of the sale cost up front. 20% would roll back in with the goal of selling again in five to seven years for a five times multiple. But that's an unknown of course. I currently max out my 401k, my wife simply or my wife's simple and drip $15,000 a month into the brokerage account. There's no pensions in our future and Social Security is 30 years away. So who knows. Here's my question from a financial perspective. Should I sell? I could keep making my million dollars a year with the business continues to do well. Or do we de risk and take some chips off the table? I could keep focusing on the business and try to get that value up over the next couple of years. Am I on track to retire at 50? If my goal is to no longer to earn an income and be able to spend lavishly, am I there? I'd like to be able to have a big ass budget from 50 plus and be able to spend $400,000 or more without stressing is it crazy to spend more money on a on my vacation property than my primary Can I afford a $3 million vacation home? When you consider the land plus the building, plus the build and the desire to be free by 50. I know it's a lot to ponder and there is more to the should I sell Question than just a financial spitball. But what would you do from a purely financial perspective? I know it's a good problem to have, but even good problems need a spitball. Thank you. Fine and dandy.

[C]

Okay. All right, let here a lot of.

[B]

Meat on the bone. Okay, so he's got four, four and a half million dollars currently.

[C]

Yeah.

[B]

And.

[C]

Liquid and he's making a million to 1.3 per year.

[B]

Okay. He's going to sell the business for 14 million.

[C]

Yeah, his he gets half. So between the business and I guess if they sell the property he'd get about 8 million out of that.

[B]

But that's not his portion.

[C]

No, that is his portion is 14 million.

[A]

2 million for the land or for the building.

[C]

16 million total. He's got to split that with his partner.

[B]

Okay.

[C]

So and he said that he would get 80% upfront. So I just took 8 million times 80%. That's 6.4 million.

[B]

I don't the basis on the business.

[C]

I don't know, probably low. I just said let's 2 million tax just to come up with a figure. I end up with about 4.4 million. You add it to his 4.3, you end up almost 9 million. And 9 million, if you. If you want to spend. He's currently spending about 20,000amonth. That would be less than a 3% distribution rate. So I think I'm okay with that.

[B]

Said live lavishly and spend 400.

[C]

I know.

[B]

So it's not going to cut it.

[C]

Right. So. So, so then I might actually want to not sell. So how much would. If he wants to spend 400,000 a year at a 3% distribution rate, you want to go kind of a low distribution rate when it comes to retiring so early. So you would need about 13 million for that. Right. To get $400,000 at a 3% distribution rate.

[B]

Well, hold on, let's take a step back here.

[C]

Well, let me finish before I do. Before we do, because he's still working.

[B]

He's got $300,000 of income that is still going to come in.

[C]

I know, 950.

[B]

So he's got a bridge of 10 of like, what, eight years?

[C]

Well, so here's what he's got.

[B]

Four, eight, nine. And then he's got another eight years. That nine could be 18, plus his savings could be 20 million by the time he turns 50.

[C]

Oh, I agree. In fact, that's what I'm going to tell you.

[B]

Oh, okay, sure.

[C]

You're thinking the same. All right, so he's got about 9. Almost 9 million right now. I just did 6%, 8 years with no additional. Assuming the 300,000 he makes just pays for his bills.

[B]

Sure, Right.

[C]

He ends up with 14 million, and then he can spend his 400,000. Now, of course, there's inflation, so the 400,000 will be something higher, but. So that has to be calculated. But yeah, I think this. I think this looks good, but you know that in terms of retiring at 50. But the real question is, should he sell right now, Joe, or not? And I think for me, if it's strictly financial, I wouldn't sell. Because you're going to make that in just a few years anyway. And then you could sell it. On the other hand, I don't know anything about the business. How steady is it? I mean, if this is a business that is going to be around for a long time and you're quite confident I might want to keep it. If there's a risk that this there. Maybe there's technology involved and that's going to be replaced by something else. Maybe you sell it, you take the cash. Right. Now, to me, it depends upon the nature of the business.

[B]

Probably yeah, there's a lot to chew on here. And I think he mentioned that he's like, yeah, just from a financial perspective, do the numbers make sense? But from a financial perspective as well, is that all right? You're going to get a second bite of the apple in five years.

[C]

That's right.

[B]

So Al and I have a very personal experience with this because we sold part of our business to a private equity firm. And we're coming up on that five year where now it's looking at what does the business look like today versus what it looked like five years ago. And did it grow? Did it stay the same? Was it stagnant? So I think it's what type of business that you're in and can you continue to build and grow it?

[C]

Yes, to me, that's the key.

[B]

You know, if hindsight's 20 20, did it make sense for us to sell a portion of our company five years ago versus waiting five years? Of course, it's always going to make more sense to wait if you have a good business, if it's a growing.

[C]

Company, if it's a growing company because.

[B]

You'Re making a million dollars a year, but that million dollars is ordinary income. The 14 million that you're going to receive is going to be taxed at capital gains. So you look at. All right, well, what is the tax differential of this? Do you want to continue to build and grind and work as hard as you are, you know, to continue to build the bottom line of the business? But now he's got two young kids, a 23 month. And he's got the Irish twins.

[C]

Yeah.

[B]

Close to nine months.

[A]

Yeah, there's nine months. Yeah.

[B]

The Italian twins, the Norwegian twins.

[C]

Yeah. Right. Okay.

[B]

So, yeah, I think there's a lot of. But taking chips off the table still makes a lot of sense as well. So can the business grow faster than, you know, a diversified portfolio in the market?

[C]

Is it.

[B]

Or how much. What is that, Delta? How much more risk are you taking?

[C]

Yeah, so let's go down that path one second. So I'm, I actually like taking chips off the table when available, but I wouldn't do 80%.

[B]

Right, well. And then you're 42.

[C]

Yeah.

[B]

Do I want to sell 80% of the company at 40? I wouldn't much rather sell 30% of the business.

[C]

Yeah. Have a majority ownership. Right.

[B]

You're still in control. You still have.

[C]

Bring in a minority partner, take some chips off the table just for comfort and then. And then let it ride. Depending upon your confidence in the business.

[B]

I Guarantee this. He here. Did he say his wife is the garden business. Right. So he, He. He's a grinder.

[C]

Yep. Right.

[B]

Because he wants out at 50.

[C]

Right.

[B]

I know exactly what he's thinking.

[C]

Yes, he does. Right.

[B]

You know what I mean? It's like you're. You're working 80 hours a week, and you're, you're stressed about the business. You're the boss, you got the partner. And then, you know, you know, it's like, you know, it'd be nice not to worry about making another dollar if I have enough cash. I guarantee he's still going to work some or do something, but I don't know how happy he would be by running his business. His pride and joy is still at 40. By selling 80% of it and still working in the business. Yeah, you get another bite of the apple, but it's going to be significantly less. The private equity firm is probably. They're really, really smart people, so they know that they have a really good business here that they're looking to purchase, and then that it has growth potential. Or PE money wouldn't even come sniffing at you.

[C]

Yes, agreed.

[B]

They see it. They're like, this is a really good opportunity for us to get whatever X on their dollar because they have a mandate of what that private equity fund needs to do and needs to perform, and they're going to get their return prior to anyone else. And so they're looking at this and they're looking at the pro forma of it, and they're like, you know what? This is a really good business. We want to get in on this. So, yeah, there's a lot of emotion that you have to weigh out just financially. I mean, you're doing so well right now. At 40. You got $4 million. If you wait five years, you're probably gonna have double that.

[C]

Yeah, if.

[B]

Yeah, then sell when you get closer to 50.

[C]

Well, you make a great point. If the PE firm is excited about it, then they think that it's got a huge future.

[B]

Yeah, they're gonna get there four or five times.

[C]

So I, you know, in this particular case, yeah, like Joe said, I don't mind taking some chip table, but I wouldn't do 80%. I do something much lower. Keep in control. And then, you know, you grind a little bit longer. You got young children. Like, if you were 40 with two young kids, would you want to be at home when you're used to grinding?

[B]

I love my children, and I would want to just 24, 7. No, that'd be tough.

[C]

Yeah, Be a little tough.

[B]

Yeah, yeah. But, you know, private equity brings a lot of interesting dynamics to the business too, because they're looking at it maybe from a different perspective than an owner. They look at it as, all right, well, how does this thing grow and how does it mature and what are some different avenues that we can really get into? How can we, you know, move some levers for you in, in, in put more dollars into areas that maybe you wouldn't have done? So, yeah, they, they, it's definitely, it's a cool and interesting ride, but it, it's, it's different.

[C]

Yeah, it's different. They, they generally come in with resources.

[B]

Knowledge, knowledge, resources you can tap into.

[C]

You know, if you contact, you know, you need a new COO or something like that. Yeah, right.

[B]

Yeah. But, yeah, do your due diligence. Take your. I don't know if there's a rush, but yeah, taking chips off the table I think might make some sense. But we have no clue what type of business this is, how long he's been doing it. But I imagine he's pretty good at it. He's probably been making a lot of money for quite some time given his net worth and the different properties that he has and, and so on. But now, going back to the vacation home, is it stupid or crazy to have a more expensive vacation home than your primary did? You're a baller. No, I think it's.

[C]

Especially if you can cash flow.

[B]

Yeah, you're cash flowing. It. No, it's all good. And let's see. But you know, $3 million if he's cash flowing and then he wants to go back and only have $1 million note, so you got to take a couple million dollars out of the nest. Eg, it's going to be super tight. I mean, I don't know if I'd want to be that tight. When he's used to having that much cash flow coming into the household.

[C]

Right, right.

[B]

And then all of a sudden that million three is now 300,000. All ordinary income tax. Your net paychecks are going to look different, it's going to feel different. Right. You have to run the numbers. I mean, I would run 15 different scenarios, but until I'm blue in the face, until you're super confident that, you know, hey, I'm good with the finances. And then you have to work on just your emotional well being of, of what the next 10 years is going to look like.

[C]

True.

[B]

I don't know. Yeah, we kind of beat that one up, I think.

[C]

So that's not bad.

[A]

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[B]

Let's go to BNB and Shell Dear Financial Gurus, I'm having a difficult time figuring out whether my spouse and I will be better off if I contribute to a Roth versus a traditional Any monies contribute to the Roth will be taxed at approximately 36%. This includes federal, state and local taxes. I am 65 and plan to retire in a year. We're hoping to move to Oregon to a much lower tax state or no tax state in the next couple years. Additionally, our federal taxes are likely to go down and as well once I retire. Please let me know your thoughts. Kind regards, BNB and Shell. Well, it's pretty easy.

[C]

Yeah. What do you say?

[B]

I would say pre tax.

[C]

I would agree.

[B]

You're in a pretty high tax bracket. 36% tax bracket. You're going to retire next year. You're moving to a state that has no tax dates or low tax dates.

[C]

Right?

[B]

They're going to be in a lot lower tax bracket. I would just wait until next year and then do larger conversions.

[C]

Yeah, it does seem like kind of a no brain brainer. Get the tax deduction right now while it makes sense for you because you're saving a lot in a 36% bracket plus state. Right? And now you retire. You'll probably. I don't know what your income is, but let's just say you're going to be in a 22% bracket without state or lower state. Yeah, that seems pretty obvious. Take the tax deduction today, you're going to retire soon, then start converting and you can convert. You know, just be careful on how much to convert. Take a look at how much you need to convert, how many years you have to convert, figure out what tax bracket makes sense and then come up with a multi year plan.

[B]

Yeah, but I think too sometimes people really don't understand the arbitrage here. What do you have to look at is what tax bracket that you're in right now. So 36%. What tax bracket are you going to be next year when you retire? Because now you have more control over your taxes than any other time because you're creating the income that you need from the portfolio that you built up. So is that portfolio all retirement assets? Do you have some brokerage assets? Do you have Roth assets currently, or is it all sitting in the retirement account? I would imagine that once B and B and Shell get into retirement next year, they're probably going to be spending less than $400,000 a year.

[C]

Right.

[B]

And if everything was coming out of your retirement account and you're spending $500,000 a year, then maybe you do the Roth because you're roughly going to be in the same federal tax bracket, but in most cases take the deduction, wait till next year, and then you can kind of figure out your conversion.

[C]

Yeah, no, it makes sense. It's that arbitrage that you're talking about, and it's not really that complicated. What tax bracket are you in today? What tax bracket are you going to be in retirement? If it's higher in this case, maybe a lot higher, then while you're working, then get the tax deduction and then convert when you're in a lower bracket, and then you'll end up with more dollars in your pocket. So, yeah, that's. That's a pretty easy one.

[B]

All right, we got Joel from California. No, this is not me. I have to.

[C]

That was my first thought.

[B]

Yeah, I know.

[C]

Yeah.

[B]

I have to start taking my RMDs in 2026. Should I take it in January or take it in December? Any tax benefit, Taking it later in the year? Quarterly estimate tax payments, or is it a wash tax wise? I can't seem to get a simple answer on this question. All right. We could probably debate.

[C]

We could. Yeah, you could argue either.

[B]

You could argue either.

[C]

I'm going to argue December. And the reason is because when it's in December, then it's only part of your fourth quarter. And if you have to make estimated payments, you can make those estimated payments. On Q4, which for estimated payment purposes is January 15th of the following year. If you do the conversion in January.

[B]

Conversion.

[C]

I'm sorry, if you do the rmd.

[B]

If you do the rmd, I'll go January.

[C]

Okay, you go January.

[B]

Yeah, because I want to take it in January because I want to get the money out of that retirement account as soon as I possibly can. The longer you keep the money in, let's say you have 20% return in the overall market and your RMD is $1,000. It doesn't matter. So that 20% growth is growing in the retirement account. I'd much rather have that 20% growth growing outside of the retirement account because then I'm subject to a capital gains tax versus the ordinary income. Other advisors would argue to say no, you want to continue to defer that income within the retirement account. That could be true depending on the size of your retirement account. But if he's asking us about estimated tax payments, I would imagine his retirement account is maybe larger than 100,000 bucks. So I would take it out in January. But then you have the estimated tax payments that you have to deal with, which in most cases it's not that big of a deal.

[C]

Well, yeah, but you lose that money.

[B]

Okay.

[C]

Use of that money. All right, so I'd take it in December. But you can argue either one, I think that that tax wise, it's the same tax, whether you do it in January or December, it doesn't matter, but it's just a matter of when you have to make those payments. So if, if estimated taxes and payments and use of those tax dollars is more important to you, then go ahead and make it in Dec. Want to get the money out earlier. In a growing market, that can be a good idea. You get it out before it grows, maybe invest it outside of the retirement account and it grows and you don't have to pay ordinary income tax. So yeah, you could argue either way. But me personally, I would do December.

[B]

I would do.

[A]

If you were going to do a QCD with your rmd, does it make sense when you do it?

[B]

No.

[A]

Okay.

[C]

Not really.

[B]

There's no tax.

[A]

Yeah. I'm just saying, would it make a difference if you are getting it out of your account earlier than later?

[B]

In that case, you would want the deferral to continue to grow in the retirement account, if you will, because then you can then if you're going to consistently do QCDs and you're not going to pay tax on those dollars anyway, and then when you die, it's going to go to a charity. I'm not really worried about the tax. Then it's okay. Well, how can I leverage the account as much as I can to get it to the charity? And it could be probably waiting on. That is better.

[C]

Yeah, I agree with that. Qualified charitable distribution. So that's when you're 70 and older. You can actually put money directly from your IRA to a charity and up to $100,000 a person. Yeah, I agree with you, Joe. You do that one in December because you let your account grow. Charity is going to get the money one way or another. Unless the charity needs it earlier.

[B]

Yeah, right.

[C]

Then that'd be another reason.

[B]

Okay, cool. Moving on. Let's go to David from Logan, New Mexico. Hello, Andy. Big Al. Joe. I'm 68. I'm a 68 year old man living in Logan, New Mexico. Never heard of Logan, New Mexico. Is that beautiful.

[A]

Find out?

[C]

Yeah, not sure.

[B]

He drives a 2004 Hyundai Accent in drink. Bush beer. Is it Bush Heavy or Bush Light?

[A]

Logan has a population of 970 people. No wonder we've never heard of it.

[B]

970.

[A]

970 on the 2020 census.

[C]

Got it.

[B]

Wow.

[C]

Okay.

[B]

He aspires to upgrade to Coors Light one day. You know, I got cousins that live in a town in Minnesota called South Haven.

[C]

Okay.

[B]

It's about 560 people.

[C]

560.

[B]

Maybe a little bit more, maybe a little bit less.

[C]

Right, right.

[B]

When I was a kid, it was 208 when we drive there. So I think it's a booming metropolis.

[C]

It's more than doubled.

[B]

Yeah. Wow. Yeah, they like Bush Light. Yeah, too.

[C]

Bush Light.

[B]

They love it.

[C]

That's a small town. Beer, maybe.

[B]

Yeah, I don't mind. Bush Light.

[C]

Yeah, I'll have it. Not sure I ever had it.

[B]

Yeah. He wants to upgrade to Coors Light one day. You remember the Pepsi Challenge?

[C]

Yeah.

[B]

I don't know if I could pass the Pepsi Challenge on Bush Light. Of course. Like.

[A]

Give you Bush Light and you would think that it is your favorite drink of all time. That's amazing.

[B]

I like.

[C]

You wouldn't tell then. You couldn't tell.

[B]

I don't know. It's been a long time since I've had a Bush Light. But I remember when I had a Bush Light, it was like. Yeah, that's pretty good.

[C]

So you can tell the difference between Pepsi and Coke.

[B]

Can I?

[C]

Yeah.

[B]

Not today. I don't. I haven't had a soda in a long time.

[C]

I haven't had one in 20 years myself. But. But back Way back when, to me, it was. The Pepsi was sweeter.

[B]

You know who won the challenge?

[C]

No.

[B]

Pepsi.

[C]

Yeah. Yeah. There's your sweeter.

[B]

But you know, who had the biggest wallet share? I mean, people would. Would take the Pepsi challenge. They pick Pepsi.

[C]

Yeah.

[B]

And they would still walk out of the grocery store with the cake.

[C]

Got it. Got it. You follow that pretty closely.

[B]

Loyalty. No, I just. I will sweat some stupid thing that someone was talking about it.

[C]

Got it. Okay.

[B]

But, yeah, I follow it. I keep on.

[C]

And you remembered.

[B]

Yes, I was waiting for it to come back. Waiting for it to come back. All right. I have no pets, but I'm hoping a stray cat with a notched ear will appear soon. That's interesting.

[C]

I'd never hoped for that.

[B]

Yeah.

[A]

That's got to be a reference to something.

[B]

Yes. I don't know what that reference is. I'm hoping you can tell me how an elderly orphan with a modest portfolio, just over a million bucks, could position my assets for the possibility of cognitive decline. Or if I'm forced into assisted living, I will not have friends or family who can manage my finances. For the moment, Social Security covers all my expenses, But I anticipate having to tap my retirement accounts in the future. My only income is 21,800, and I have $264,000 in a Roth, $614,000 in a traditional IRA, $122,000 in a brokerage account, $32,000 in I bonds. Thanks for your assistance, David. A humble peon pion.

[C]

Okay.

[B]

All right.

[C]

Yeah.

[B]

So David's chilling in New Mexico, drinking.

[A]

Which is, by the way, Logan, New Mexico is three hours away from Albuquerque. So he's literally, like, in the middle of nowhere.

[C]

Okay, well, good to know.

[B]

And he's an orphan with a modest portfolio. So he's got a million bucks, a ton of cash.

[C]

That's not modest. That's big.

[B]

That's nice. Yeah, that's healthy.

[C]

Yeah, that is healthy.

[B]

And so it's like. Okay, well, he might need to go to.

[C]

He's planning for his future demise.

[B]

His future demise. His future cognitive decline.

[C]

Yeah.

[B]

So I don't know if he's asking who can help him manage his dollars or how he should be managing the dollars today. Well, I'm assuming that and 10, 15, 20 years or whatever the time frame is that he needs to go to.

[C]

Yeah, I think I have a couple. Let's answer it both ways. I think the first one is try to simplify as much as you can. If you have multiple accounts, combine them so you Just have a few accounts.

[B]

Keep it simpler, keep it at one custodian. So if you're Roth, your 401 and your broke account, put it all at the same custodian. Charles Schwab, T.D. ameritra or fidelity or, I don't know, Vanguard or wherever.

[C]

Yeah, with, with your bills, I would say automate as much as you can. You know, most banks allow you to, to set up ongoing payments or even vendors like your utility company or whatever it may be will they'll, they'll withdraw from your checking account, so you don't even have to think about it. So that's one thing I would do. I think if we think about investments, I would probably keep them simple too. Maybe just have two or three or four ETFs, maybe even just three. Maybe a US stock fund, an international stock fund, and a bond fund. And call that good.

[B]

Yeah, you could also hire a couple things. Let's say, of course, you could hire an advisor to help you with it and if something were to happen to you, or you could have a corporate trustee or fiduciary trustee to say, hey, if I have to go into this, I need my bills paid. I need to pay for the assisted living if I'm not able to do so myself. There's several different options to make sure that a, the finances are taken care of and then that you're taking care of with the finances that you need to make sure that you're still not on the streets.

[C]

Yeah, there are bill paying services that cater to elderly, so that's one way to go. I actually looked it up. They're called daily money managers, Joe. That's, that's who handles bills of elderly people.

[B]

You looking for yourself soon?

[C]

Yeah, I'm already signed up.

[B]

Got it.

[C]

This show is making me decline quickly.

[B]

All right, well, David, you've done an awesome job of saving. Yeah. And I think. Yeah. Keep things pretty simple at this point. Hire an advisor to potentially help you with all of this. Or you can go the other route to kind of hire a fiduciary or corporate trustee if you want to continue to manage your own assets until there's a time that you don't want to or you can't. So plenty of options.

[A]

Retiring at 62. Is it a great idea or a huge mistake? For some, retiring early at age 62 is considered the sweet spot. But will calling it quits this early set you free? Or will it actually set you back? This week on a brand new episode of youf Money, you, Wealth tv, Joe Anderson, cfp. And Big Al Clopine CPA Share the formula for creating lifetime income, bridging the health care gap before Medicare, and keeping more of your savings from the irs, along with tips to ensure your early retirement is a rewarding one. Find out how to stress test your strategy and get against inflation and market swings so you can retire with financial confidence and a clear sense of purpose. Click or tap the links in today's episode description to watch YMYW TV and to download the Retirement Readiness Guide. It walks you through income planning, Social Security taxes, health care investments, and legacy planning so you can see where you stand and what to fix before it's too late. As soon as you're done watching or listening to the podcast, click or tap the links in the episode description to watch YMYW TV and to download the Retirement Readiness Guide. Start making smarter decisions with your money today, courtesy of youf Money, you, Wealth, and Pure Financial Advisors.

[B]

All right, I have no idea how to pronounce schweta.

[A]

I believe you just did. I think it's shweta.

[B]

Shweta.

[C]

That's a pretty good shweta.

[B]

Okay, on episode oh God, someone's gonna.

[C]

On something.

[B]

All right. On episode 599, a caller mentioned that a CPA advised keeping AGI under $500,000 when doing Roth conversion. The listener wondered why, beyond the MFJ tax bracket cutoff of around 500 1,500 to stay in the 32% tax bracket. The CPA may also have been pointed to the salt cap changes. Fillers under the $500,000 of income can now deduct up to $40,000.

[A]

Filers, not fillers. Tax filers.

[B]

Oh, filers. Oh, filers under five. Whatever. Yeah, they're filling the bracket.

[C]

That's right.

[B]

I thought Schwada was talking like tax thing.

[C]

Filling up a bracket. Yep. Well, that's a true statement. So we didn't think of that. So that's actually a very good comment. So 2025 to 2029, you can actually deduct up to $40,000 of your state and local income taxes. Right. Property taxes and the like. But it starts phasing out when you're married at $500,000. Actually $505,000 in 2026. Yep.

[B]

All right, thanks for the comment. We got Brian from Albany, New York. Hey Joe, Al and Andy. I'm a loyal listener and appreciate your spitballs and love the humorous banter question. What is a proper amount to have an emergency fund as a retiree? Various Internet sources suggest anywhere from 1 to 24 months. Here's the particulars. I waited until 70 to claim Social Security and have been debt free, including the house, for years and don't live extravagantly. Our combined Social Security is adequate to cover all of our expenses. What we pull from retirement savings is for discretionary purposes. Purposes such as vacations, maybe a home remodel. Next year I'll need to start taking those RMDs, which will be more than I'm currently drawing from the ira. I have additional funds in a brokerage account in a Roth. I understand that having an emergency fund can protect you from drawing down investments in a year where the market's down, but I'm going to have to take RMDs regardless of the market condition. Look forward to your comments. Brian. Very good question, Brian. So cash reserves. So cash reserves are very important and they're more and less important in different stages of life depending on what your fixed income is. When you're working, cash reserves are very important. In case you lose your job. Correct. In case you get disabled, in case, whatever happens and you have a mortgage to pay for. You have kids to, you know, to put meals on the, you know, on the table. So that's why you hear, you know, cash reserves is a very important component because you don't want to go in debt and that thing snowballs in case that cash flow or income doesn't continue to come into the household. But Alan, at retirement, it's a little bit different story because he's got plenty of liquid assets that he doesn't necessarily need. He has fixed income that is covering all of his expenses at this point, besides some vacations and some ancillary things. So how much cash reserve do you think?

[C]

Good.

[B]

O' Brien should have?

[C]

Yeah, it's a great question. Personal choice. I mean, I would probably do like three months. I don't think you need a lot. However, the second part of what you said is for a market downturn, I view that as differently than an emergency fund.

[B]

Right.

[C]

I would like you to have maybe three years at least in bonds or safe money. So the market goes down for a continuous period, period of time. You've got safe money that really hasn't gone down. That's different to me than an emergency fund. Emergency fund is just exactly for that something happened you didn't expect. Right.

[B]

Yep. So, yeah, he didn't tell us his asset allocation. And this is probably one of the only emails that we get where we probably needed the asset allocation.

[C]

True.

[B]

A lot of times they give a. Well, I'M in this fund and that fund. It's like, I don't care. But Brian here. Yeah, that would make a little bit more sense. Like how much money do you have in stocks and bonds? And then what type of bonds do you actually own? Are they longer in duration? Where they're maybe a little bit more risky, but they're giving you a higher coupon, or are they shorter term? Are they Treasuries, Are they corporates? And then that can help determine do you have enough fixed income or short term, safer type monies in that stock market decline that your bonds usually perform, or they stay flat, that you can then sell, you know, to provide your income given the rmd, right. You don't have to sell anything. So let's say it's in a down market and you have to take your required distribution. Market's down 30% and you're like, oh, I have to take my RMD from my retirement account. As long as it's an IRA, if it's in a 401k, then you have to sell the security. So you have mutual funds in your 401. You have to take the RMD out of the 401, you sell the security and then you get the check and it's going to come to you in cash and then you can reinvest it. But that might take a couple of days, couple of weeks or a month, depending on the efficiency of that 401 provider. If it's in an IRA. So I'm just going to use, I don't know, pick a custodian. Fidelity. I have an IRA at Fidelity and I have to take my required distribution and it's $100,000. I don't have to sell any of my securities in that IRA. I can just transfer $100,000 worth of XYZ stock now into my brokerage account. That's the best way to do it because then when the market recovers, all of that recovery is going to go in the brokerage account versus the retirement account. And then that recovery, when you do sell, it will be taxed at a capital gains rate versus your ordinary income rate. So don't think that you have to sell. But now if you do have money in a 401 plan, that's a really good option for you to roll it into an IRA to give you some flexibility or optionality when it comes to your RMDs.

[C]

Right? I agree with all of that. Wow.

[B]

Okay.

[C]

I got nothing to add.

[B]

Full of good nuggets today.

[A]

Earning our keep, Daniel and Gemma both need help with their parents finances. Cookie and Jerry and Fred and Wilma and George and his wife are 40 somethings looking for retirement spitballs and Jonathan is 26 and hoping to retire early. Joe and Big Al Spitball for all of them and more next week on ymyw. You, Money, you, Wealth is your podcast. If you enjoy the show, tell your friends and help us reach more listeners and viewers like you. And don't forget to leave those honest reviews, comments and ratings for your money, you wealth in Apple podcasts, on our YouTube channel, and in all the other apps that let you do that like Amazon, Amazon, Audible, Castbox, GoodPods, Pandora, Player, FM Podcast Addict, and Podchaser. We're on all of them. 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, it doesn't cost you anything, but the major difference 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 for the entire YMYW audience. The Pure team 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 Financial Assessment link in the episode description or call 888-994-6257 and 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 and 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 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. Pure Financial Advisors is a registered Investment Advisor. This show does not intend to provide personalized investment advice through this podcast and does not represent that the securities or services discussed are suitable for any investor. As rules and regulations change, podcast content may become outdated. Investors are advised not to rely on any information contained in the podcast in the process of making a full and informed investment decision.