Rising Costs and Retirement Unknowns? Here's What to Do - 567

Summary

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Podcast Summary: Your Money, Your Wealth

Episode 567: Rising Costs and Retirement Unknowns? Here's What to Do

Hosts: Joe Anderson, CFP® & Alan (Big Al) Clopine, CPA
Date: February 3, 2026

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Episode Overview

This episode revolves around the central concern: How do you protect your future from rising costs and retirement unknowns that are out of your control? Joe and Big Al dive into a series of listener questions that touch on navigating pre-tax and Roth savings, managing pensions, facing rising long-term care insurance premiums, funding college education without derailing retirement, utilizing student loans, and weighing capital gains harvesting versus Roth conversions ahead of a move to a higher-tax state. As always, advice is wrapped in humor and real talk about making the most of what you have, staying adaptable, and not sweating the stuff you can't fully predict.

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Key Topics & Discussion Points

1. Pre-Tax vs. Roth Retirement Savings and Pensions (Al & Peggy, Illinois)

[01:18 - 13:07]

Situation:

• Married couple, early 50s, want to retire in 6-7 years.
• Current retirement savings: ~ $650k (Pre-tax/IRA/Roth), plus a $320k cash balance pension and retiree medical account.
• Debating final years’ contributions: Pre-tax 401(k) or Roth for tax diversity?
• Have part-time post-retirement plans, kids with 529 accounts.

Key Spitball Points:

• With current trajectory and assuming ~6% investment returns, projection is $1.1M by retirement. Annual spend goal set at $96k (inflated to $115k in future dollars).
• Plan includes working part-time for $36k/year at a shoe store to bridge to Social Security.
• Pension option: Lump sum or annuity ($24k per year with 100% survivor).
• Want to maximize Roth opportunities before retirement.

Insights & Recommendations:

• Distribution Rate: 5% initially, but drops once Social Security starts. (Ideal would be a lower spend or more part-time earnings for a safer margin).
• Roth vs. Pre-tax: Contribute pre-tax up to stay in the 12% bracket, funnel the rest into Roth. Take advantage of low tax rates now.
• Pension Lump Sum vs. Annuity: A 7.5% payout rate “sounds pretty good,” especially if it includes a cost-of-living adjustment. Annuity can be attractive given longevity and survivor needs, but depends on plan specifics.

  “If it's a 7.5% payout plus a COLA, I'd take the payout. That's a good rate.” — Big Al [10:48]

• Keep Monitoring: Variables like market return, part-time work feasibility, and expenses make this an ongoing calculation.

Notable Moment:

“You can only count on so many things. If the market does 6%, I think you’re in good shape ... but this is where it gets tricky because it’s tight.” — Joe Anderson [08:04]

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2. Long-Term Care Insurance Premium Increases (Eloise, Connecticut)

[15:20 - 20:27]

Situation:

• 70, divorced, retired, owns her home.
• $57k Social Security, $20k pension/annuities, ~$1.8M invested assets (IRA + Roth).
• Long-term care premiums have more than doubled and will increase 15% annually over the next three years.
• Considering dropping the policy and self-insuring.

Insights & Discussion:

• Keep the policy: At age 70, already insured, premiums—though rising—still offer significant value versus attempting to self-insure now, especially considering potential estate preservation.
• “If you try to buy that policy at 70 today, it’s probably double the price…they want you to drop it. That’s what they want, because they know it’ll pay out and the insurance company will lose. This is the time you can get back at the mean, bad insurance company.” — Joe [20:04]
• If no heirs/estate plan is a factor, self-insuring is more reasonable, but keeping the coverage is generally sound.
• Premiums likely still “pennies on the dollar” compared to benefits received, especially given mounting care costs.

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3. Funding College Without Torpedoing Retirement (Eric & Tammy, Baton Rouge)

[20:37 - 34:38]

Situation:

• Couple, 50s, combined ~$250k income, $1.8M retirement savings.
• Two kids: one a college sophomore, one in 10th grade; $90k left in college savings for both.
• Considering modest student loan use to help budget, also weighing using funds earmarked for younger child now for older sibling.

Key Points:

• Student Loans: Reasonable in moderation, impart ownership to student and allow parents to keep contributing enough to retirement to earn employer match.

  “You can always take a loan out for college, but you can’t take a loan out for retirement.” — Joe [29:55]

• 529 Use: Okay to treat accounts as interchangeable if needed—leftover funds can easily be reallocated.
• Retirement Trajectory: On track—likely to have $4-5 million by retirement, affording >$120k spending or even more if desired.

Guidance:

• Don’t short retirement savings for college—use loans if necessary, maintaining long-term financial stability.
• “I think you’re doing a really good job of planning…just don’t assume your daughter’s college will be cheaper; plan conservatively.” — Joe [32:40]

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4. Capital Gains vs. Roth Conversions Before Moving to a Higher-Tax State (Lana & Sterling, New England)

[35:58 - 48:14]

Situation:

• Both age 57, plan to retire in ~3 years; will relocate from a 5% state income tax state to one with nearly 10%+ combined state/local tax, including on capital gains.

• Very diversified asset base:

  • ~$670k pre-tax, $1.4M Roth, $500k brokerage, $75k HSA
  • Healthy pensions and Social Security to come
  • Aggressive (80/20) allocation

• Want to simplify brokerage holdings and are wondering if it’s better to realize capital gains now in lower-tax state, even at current high incomes, or focus on Roth conversions before the move.

Key Analysis:

• Taxes: Current state does not tax capital gains, but destination state does (as ordinary income).
• Strategy: Prefer harvesting gains now over high-level Roth conversions unless you'd otherwise lose a valuable bracket window.

  “I wouldn't do Roth conversions in the 32% bracket when you'll be in the 24 when you retire.” — Big Al [43:42]

• Broader View: Not necessary to “over-tweak.” Already well-diversified by tax type. Don’t get too focused on leaving assets for step-up basis—use them as needed; you may need the money for your own retirement.
• Rebalance: If you want to consolidate your brokerage account, consider tax-gain harvesting now to take advantage of the no-state-tax window. Don’t trigger extra tax just to optimize holdings unless benefits are clear.

  “They’ve done a great job. They’re diversified. Don’t overthink it or get cute... you can only fine-tune so much.” — Joe [47:52]

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Notable Quotes & Moments

• “Thank you for self-censoring.” — Andi Last joking as Joe reads a colorful listener email. [01:41]
• “You can always take a loan out for college, but you can’t take a loan out for retirement.” — Joe Anderson [29:55]
• “Most people have very little money in a Roth. You have $1.5M already… I would not worry about the capital gains tax; you could tax gain harvest if worried about the state tax.” — Joe Anderson [47:22]
• “If it's 7.5% payout plus a cost of living adjustment, I would take the payout. That's a good rate.” — Big Al [10:48]
• “They want you to drop it. That’s what they want… because they know it’s going to pay out and the insurance company is going to lose. This is the time you can get back at the mean bad insurance company.” — Joe Anderson (on LTC insurance) [20:04]

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Timestamps for Major Segments

• Pre-tax vs. Roth and Pension Elections (Al & Peggy): 01:18 – 13:07
• Long-term Care Premium Increases (Eloise): 15:20 – 20:27
• Kids’ College Funding/Student Loans (Eric & Tammy): 20:37 – 34:38
• Capital Gains vs. Roth Conversions Before Move (Lana & Sterling): 35:58 – 48:14

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Tone & Style

As always, Joe and Big Al deliver targeted, actionable financial advice in a style that’s both irreverent and deeply knowledgeable. Jokes about “Captain in my Pepsi Zero,” dog ashes, and being called “Joel” or “John” keep things light amid the technical spitballing. Their advice is grounded, emphasizing flexibility, keeping a long-term view, and avoiding overreacting to 'the noise'—with each question answered thoroughly, yet accessibly.

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Summary Takeaway

Protecting your future from rising costs and unknowns isn’t about predicting them all—it’s about putting a flexible plan in place. Maximize your low-tax Roth and capital gain windows, don’t put college ahead of retirement, and don’t abandon good insurance once you’ve earned it. Overthinking the details or getting “too cute” usually hurts more than it helps. As Joe and Big Al would say, keep saving, keep spitballing, and don’t lose your sense of humor along the way.

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Transcript

[Andi Last]

Should Al and Peggy in Illinois keep hammering pre tax retirement savings or should they pivot to post tax Roth for better tax diversification? Which pension option is best for their early retirement plans? Long term care insurance premiums are going up endlessly. For Eloise in Connecticut, Is she walking into an insurance industry trap? How do Eric and Tammy and Baton Rouge help their kids with college without blowing up their own retirement? And when do student loans make sense? Finally, should Lana and Sterling harvest capital gains or or prioritize Roth conversions before moving to a much higher tax state? The basic question in all of these is the same. How do you protect your future from rising costs and unknowns that are out of your control? We'll find out what it takes today on youn Money, you, wealth podcast number 567. I'm executive producer Andi Last, and here are the hosts of youf Money, you, Wealth, Joe Anderson, CFP and Big Al Clopine, cpa.

[Joe Anderson]

Al and Peggy Bundy, I'm guessing.

[Big Al Clopine]

I think so.

[Joe Anderson]

Hey, John. And Big Al.

[Andi Last]

Is that a first, Joe?

[Joe Anderson]

No, no.

[Big Al Clopine]

You've been called John. You've been called Jack.

[Joe Anderson]

Yeah. And Joel.

[Big Al Clopine]

Oh, Joel. Remember that? I think that was your favorite.

[Joe Anderson]

Yeah, Joel.

[Big Al Clopine]

The guy said, I listen. I've listened to your show for years. And Joel, you were the best.

[Joe Anderson]

Joel. Hey, John, Big Al. This is Alan. Peggy in Illinois. I'm 52 and she's 51. We have two kids, Kelly and Bud. They are 14 and 12 respectively. I caught your show by chance and willing to butter you guys up by saying I've listened to a lot of them. Yeah, a ton of them. You don't even know my effing name.

[Andi Last]

Thank you for self centering.

[Joe Anderson]

I enjoy a little Captain in my Pepsi Zero by day and a little Pepsi Zero in my Captain Morgan by night.

[Big Al Clopine]

That's a little spicy.

[Joe Anderson]

That's legit. Oh, all right. My wife Peggy enjoys coffee and tea. I drive to and from work in a 2021 Honda Accord. Peggy has a 2019 VW Atlas. No pets currently, but we have ashes of three different dogs of our past to be buried in my wife's ashes when she graces me with her exit.

[Andi Last]

Spoken like Al Bundy.

[Joe Anderson]

Oh, my God, that is morbid. So. But they're just saving save of the.

[Big Al Clopine]

Ashes for when she goes.

[Joe Anderson]

All right.

[Big Al Clopine]

She's quite close to those dogs. Yeah.

[Joe Anderson]

Yes. I earn $150,000 a year. Peggy works for Amazon with a negative salary, meaning she shops all day and doesn't work. Oh, God, this guy's a. I have a $470,000 401. She has an old IRA of $135,000. We have a Roth IRA account with a total of approximately $40,000. I currently contribute about $24,000 to the pre tax 401 annually and add about $68,000 into the Roths. Only debt other than Peggy's monthly negative income is $58,000 mortgage at 3.3%. I don't have a cash balance pension. I do have a cash balance pension that is around $320,000 when I'm 59 or a monthly benefit of $2,000. I can also delay it and it will increase at a conservative rate each year. I also have a retiring medical savings account through work that will have $110,000 in it when I retire that I can use for reimbursable health expense, insurance premiums, doctor visits, classes, etc. I plan on using these to fund health insurance premiums until Medicare kicks in. I want to retire at 58 or 59. My youngest bud will be 18 at that point and I have already had the talk with him. He understands that there will be trade school, military or prison for him.

[Big Al Clopine]

I want to retire so he's got the payroll. Yes.

[Joe Anderson]

In other words, trade school, military or prison.

[Big Al Clopine]

Yep. Pick one bud I think in that order.

[Joe Anderson]

Okay.

[Big Al Clopine]

Yep.

[Joe Anderson]

All right. I plan to continue to work part time at a shoe store making about $36,000 a year mainly for sanity reasons until 65 and claim Social Security at 67 or 70. Expenses in retirement will be low peppering. Peppering in golf and bowling, a few concerts and dining out frequently. Best guess $96,000 a year. No traveling for us. My questions Should I Switch my last six to seven years of retirement from 401 contributions to the after tax 401 option to increase tax diversity or continue to fund my pre tax 401? Or does it even matter with these smaller amounts? Any ideas on how to move Peggy to go back to work? Should I take the lump sum or roll it into an IRA or take the annualized amount? They do offer the 175.50 annuitized payout so if I pass away first, God willing she will still receive payments. I don't know how all these other people that write in have millions of dollars, but I plan on staying in the 12% tax bracket with small Roth conversions each year. Have you ever guys heard of backdoor Roth conversions? Nope, never. I think it is something you should look into. And in all seriousness, there are 500 there. There are 529 accounts for both kids. About $100,000 each of them to pay for education and then roll the rest in the Roth after they graduate. Thanks, Alan. Peggy, follow up. Missing information. Allen. Peggy, message from 8:30. Social Security 67 will be $68,000 and $86,000. Home value $375,000. Am I on track to be able to retire as I hoped in my previous message? Thanks so much. All right.

[Big Al Clopine]

Okay. A lot of questions here.

[Joe Anderson]

Yeah. Okay.

[Big Al Clopine]

I did some math on the retirement question.

[Joe Anderson]

Oh.

[Big Al Clopine]

So he's 52, wants to retire in about six years at 58.

[Joe Anderson]

And he's got right now $650,000.

[Big Al Clopine]

Yeah, he's got $650,000. I just said if he's adding another $30,000 a year, 6%, he ends up with about $1,100,000.

[Joe Anderson]

Okay.

[Big Al Clopine]

Okay. And spending $96,000 a year, you take that 6%, 3% inflation rate, I get $115,000 spend. So what I'm going to do, I'm going to take the $115,000 and I'm going to subtract out his shoe store income of 36.

[Joe Anderson]

Okay.

[Big Al Clopine]

I'm going to subtract out a pension of $2,000 a month, $24,000. I get shortfall of $55,000. I take that into $1,100,000.

[Joe Anderson]

Pretty good.

[Big Al Clopine]

I end up with a distribution rate of 5. It's a little higher than you might like. However, that's not including Social Security. You got to bridge the gap. That will kick in. It's a matter of bridging the gap. If it were me, Joe, I would probably try to make more like $45,000 instead of 36,000, just because then it'd be like a 4% distribution rate, you know, maybe 40 to 50. You know, maybe stretch just a little bit more just in case something happens to investments and expenses or whatever. That's what I would probably do, but I think he's pretty close.

[Joe Anderson]

Yeah, No, I would agree. How much is he saving? I got 24,000 plus 8,000. So 35,000.

[Big Al Clopine]

Yeah. Yeah, I just put 30 grand, but okay. Yeah.

[Joe Anderson]

So he's having a good amount. Yeah. It really depends on what happens over the next 68 years.

[Big Al Clopine]

Yeah, that's the hard part, which we don't know.

[Joe Anderson]

Right. That's why this is an ongoing kind of thing. If the market does 6%, I think you're in good shape.

[Big Al Clopine]

Then we're pretty good. I still might want to make a Little bit more income, but it's really close.

[Joe Anderson]

Yeah, I would agree with that. But this is where it gets tricky because it's tight.

[Big Al Clopine]

Yeah, that's why I'd want to make a little bit more.

[Joe Anderson]

But that counts on variables too. It's like, how many times do we hear, hey, I'm going to retire from my job and I'm going to get a part time job or I'm going.

[Big Al Clopine]

To consult and it doesn't work out.

[Joe Anderson]

It's like more often than not. More often than not, he's working a full time job making $150,000 and he's like, yeah, for sanity purposes, I'm going to go work at a shoe store. I know he's saying that because Al Bun worked at a shoe store, but you work part time anywhere for $36,000 a year, it's like, oh my God, this is miserable. I'm not even having any fun. Unless you find something that you truly enjoy and don't worry about what the money is, but you need to count on those dollars for your retirement to pay off. I think there's too many variables that are unknown. But I mean, keep saving what you're saving and making sure that you have the right investment strategy. And as you get closer to your retirement, you're going to be able to kind of figure out if you're there or not. The Roth conversion question is that he makes $150,000. He's at. What are.

[Big Al Clopine]

He's just in.

[Joe Anderson]

He's in the 12th.

[Big Al Clopine]

No, not really. Okay, 150 minus 30, minus 30, 120.

[Joe Anderson]

Plus $24,000 into a pre tax. He's under. So he's in the 12%.

[Big Al Clopine]

Good point. I wasn't.

[Joe Anderson]

So I would be switching some of that 401 into the Roth component to get you to the $100,000 roughly of taxable income, because that's the top of the 12% tax bracket.

[Big Al Clopine]

Yeah, that's a good point. Yep, that would be the goal. Right. And so anything, you know, do the pre tax to get down to 100, anything over that due Roth, which is kind of hard to calculate, you're not going to get perfect. But do your best.

[Joe Anderson]

Right. It could be $5,000 like that over the next five, six, seven years. The more dollars that you have in the Roth, happier you're going to be. And if you can get it into the Roth ira at a 12% rate, that is going to be dirt cheap. So you're right. Does conversions make a lot of sense for you? Well, it depends on if he takes the pension. Social Security. Yeah, he's probably going to stay in the 12. The RMDs are going to be 40. I don't know, he might get a little bit into 22 maybe. But if you could stay in that 12% tax bracket, as you're looking at your savings strategy today, I think there's some opportunity there. What do you think? Does he take the lump sum or does he take the pension?

[Big Al Clopine]

Well, Joe, it's going to be plan specific, and we don't know enough about the plan.

[Joe Anderson]

Well, 22. Well, would you take $24,000 or $360,000?

[Big Al Clopine]

So that's a 7.5% payout. So that sounds pretty good. We don't know if there's a cost of living adjustment or not. And so to me, that would be really important to know that if it's 7.5% payout plus a cost of living adjustment, I would. I would take the payout. I think that's a good rate.

[Joe Anderson]

Yeah, they usually. It depends on life expectancy. I mean, if he's going to live a long time. Yeah, right. God willing, he said. Or. No, he wants to die before Peggy, and then Peggy's gonna have all the ashes.

[Big Al Clopine]

75 or. Yeah. With that.

[Joe Anderson]

She's gonna hang out with the dog Ashes.

[Big Al Clopine]

Do you think he wants to be with the dogs?

[Joe Anderson]

I think so. No, it doesn't sound like it does sound like it. Do you have any dog ashes?

[Big Al Clopine]

No. What's.

[Joe Anderson]

What? Like, what was. You had more than.

[Big Al Clopine]

Well, we've had two dogs. The. The first one, Daisy, we gave away to a friend, so we never got the ashes. Now we got our second one, Buddy. He's. He's only three, so. Okay. Ask me in about 10 years.

[Joe Anderson]

All right.

[Big Al Clopine]

Got it. Or eight years or whatever.

[Andi Last]

Do you have dog ashes hanging around, Joe?

[Joe Anderson]

No dog ashes.

[Andi Last]

Okay.

[Joe Anderson]

No dog ashes. Yeah. We got bogey.

[Big Al Clopine]

Yeah. How old is bogey?

[Joe Anderson]

I don't know. No idea. 2.

[Andi Last]

What is bogey?

[Joe Anderson]

Bogey is a dog.

[Andi Last]

What kind? Do you have a cavapoo? Do you have a Bichon Frise?

[Big Al Clopine]

What is your dog?

[Joe Anderson]

I don't know.

[Big Al Clopine]

How would you know?

[Joe Anderson]

I have no idea.

[Big Al Clopine]

I have a Cavapoo.

[Joe Anderson]

It's a smaller dog. It's somewhat cute.

[Big Al Clopine]

Yeah, I've seen it. It's. It's small.

[Joe Anderson]

Yeah. Good. Good question. They're all really good questions, Andy. Really good question.

[Andi Last]

The questions you expect to have answers from your audience.

[Joe Anderson]

I don't. I don't know what type of dog it Is you may.

[Big Al Clopine]

You may not be the kind of person that saves the dog.

[Joe Anderson]

I know, I know. It's a nice dog. It just kind of. Yeah, it barks a little bit too much for me.

[Big Al Clopine]

Yeah, I hear you.

[Joe Anderson]

You know, garbage man.

[Big Al Clopine]

Yeah, we get some of that too.

[Andi Last]

Yeah, it's like that's how they protect you.

[Joe Anderson]

Yes, I was very protected.

[Big Al Clopine]

I was doing our meeting today, dog sitting right there. I had to put on mute a couple times.

[Joe Anderson]

So anything else this guy wants to know? Besides my name isn't John?

[Big Al Clopine]

No, I think that was it.

[Joe Anderson]

All right, very good.

[Andi Last]

Okay, if you're watching us right now on YouTube or Spotify, did you notice the document that Big Al referenced when he was running those numbers for Al and Peggy? If you're listening in a podcast app, trust me, Joe and Big Al use this document all the time. It is the newly available 2026 key financial data Guide. And along with their email list and their HP12C calculators, this single two sided sheet is one of the core tools that Joe and Big Al use each week to spitball for you in real time. If you're new to ymyw, our annual Key Financial Data Guide is one of the free financial resources you'll want to download ASAP. It shows you at a glance the 2026 tax brackets and capital gains tax rates, retirement plan contribution limits, how Social Security is taxed, Medicare premium thresholds, and all the credits, deductions, exemptions, distributions, and exclusions that affect your financial decisions. One listener told us that this guide alone is worth the price of admission to youo Money, you, Wealth. So it's priceless. Click or tap the links in the episode description to download your own copy. Copy of the 2026 key financial data Guide.

[Joe Anderson]

Joe, Big Al, been listening to and enjoying your podcast for four years now.

[Big Al Clopine]

Wow.

[Joe Anderson]

There you go. He's still listening after four years.

[Big Al Clopine]

That's amazing.

[Joe Anderson]

Usually I don't know what the cutoff is, but a year and a half, people.

[Big Al Clopine]

As you know, I was just in Hawaii.

[Joe Anderson]

Yes.

[Big Al Clopine]

And I was at Costco.

[Joe Anderson]

Yes.

[Big Al Clopine]

And a guy came up to me. Are you Big Al?

[Joe Anderson]

No, sir.

[Big Al Clopine]

And he lives in Hawaii.

[Joe Anderson]

Wow.

[Big Al Clopine]

And he's. He. He's been watching our podcast on YouTube since 2017.

[Joe Anderson]

We've been on YouTube for 20.

[Big Al Clopine]

Since 2017, I guess. Oh, man. I mean, plus or minus a year, but that was. That was impressive. He's a young guy.

[Joe Anderson]

You were at. Where were you at? Home Depot?

[Big Al Clopine]

Costco.

[Joe Anderson]

What were you buying at Costco?

[Big Al Clopine]

Oh, I don't know.

[Joe Anderson]

Stuff.

[Big Al Clopine]

Wine, you know.

[Joe Anderson]

Yeah. Yes. Necessities.

[Big Al Clopine]

Yeah.

[Joe Anderson]

All right, Joe and Big Al, I've been listening to and enjoying your podcast for four years. And so I only have a short time left before I hit the five year wall and have to go. All right, stay with us. Stay with us.

[Big Al Clopine]

Try to hit the five year mark.

[Joe Anderson]

So here it goes. I have a very specific spitball question for you. My favorite drink is my morning mocha pot. Moka pot.

[Big Al Clopine]

Moka pot.

[Joe Anderson]

What the hell is moka pot?

[Andi Last]

Moka pot is a stovetop espresso maker. Espresso maker.

[Big Al Clopine]

Okay.

[Joe Anderson]

Okay.

[Big Al Clopine]

That's. That's Hawaiian. That's pigeon English. You'd fit right in.

[Joe Anderson]

Which I cannot live without. Okay. I drive a 2020 Hyundai Kona EV, aka my little rocket ship. All right. I live in Connecticut in. Like most people in Connecticut, I'm originally from New York. I'm 70, divorced and retired since 2017. I have income of $57,000 a year in Social Security, which I just started. All right, cool.

[Big Al Clopine]

Yep.

[Joe Anderson]

And $20,000 a year in pensions and annuities. Okay. My total annual spending runs between 70 and $80,000 a year. I have $1.2 million in an IRA, $600,000 in my Roth. I own my home, which is worth 700,000. My question is regarding long term care insurance. I've had a policy for 13 years. The premiums are increasingly, endlessly. That was a tough couple words for me.

[Big Al Clopine]

That is tough. It's increasing endlessly, even. I can't say it.

[Joe Anderson]

Increasing endlessly. They started at $2,700 and now they're $5,800 a year. They will be increasing another 15% for each of the next three years. When I got the policy, I didn' enough saved that I was comfortable with self insurance. I think that has fortunately changed, but I'm not sure. My question for the two of you is, is it good for me to drop the policy? I'll get my paid premiums as a frozen benefit amount if I drop it and self insure. I can target $500,000 from an IRA account if I do. But I also have my house, which I could sell if needed to move into assistive care in the future. Thank you. And Eloise at the Plaza.

[Big Al Clopine]

Plaza.

[Joe Anderson]

Okay, Eloise. Eloise. No, my thought is, do not give up the long term care insurance. I would continue to have that and pay for it for the next 15 years, even.

[Big Al Clopine]

Even though it's going up.

[Joe Anderson]

Even though it's going up.

[Big Al Clopine]

Yeah.

[Joe Anderson]

You're going to get it back in spades. 80% of us are going to need some sort of long term care type stay. Even if it's for a small, you know, injury of any kind. It is so expensive. It will. But she doesn't say, Eloise doesn't say if there is heirs, if there's, you know, if you want to spend your, your estate to zero. Yeah, you could probably self insure but just to preserve your estate, I think it's still going to be pennies on the dollar for how many premiums that you paid versus the benefit that, that, that Eloise will receive.

[Big Al Clopine]

Yeah, okay. I think I agree. It pains me to say that because I'm not a huge fan of long term care insurance and I don't have it myself and I, and I do think that particularly when you're single and you have a home, I think that's a great fallback. I think that would probably work for you for as, as long as you would need it. So I, I'm, I'm, I, I might not be quite as strong with you. I would say it's a little bit more of a personal choice but I'm leaning towards keeping it because you've already made these premium payments and it's probably going to help your estate again. You know, we don't know if you have kids or not. If you don't have kids, it might be, it might sway me the other way where maybe you get rid of it, you enjoy the dollars, you spend your estate down. But if you do have kids, I think I'd rather have you preserve that estate for them.

[Joe Anderson]

Single, without question. You already have it, you already bought it, you're already insured.

[Big Al Clopine]

Right. It's hard to get. Right.

[Joe Anderson]

Yeah, forget about it.

[Big Al Clopine]

Yeah.

[Joe Anderson]

But yeah, age 70, you have the insurance in place. Yeah. It's going to continue to endlessly go up increasingly ever. So yeah, I think you did a really wise choice by getting the insurance. If she tried to buy that today at 70 to get underwritten, try 10,000.

[Big Al Clopine]

It'D be a lot, wouldn't it?

[Joe Anderson]

Yeah, it'd be double of what the premiums is probably. So, so I think you just put things into perspect even though. Yeah, you get a frozen benefit amount. If you drop it, they want you to drop it. That's what they want you to do because they know it's going to pay out and the insurance company is going to lose. This is the time you can get back at the mean bad insurance company.

[Big Al Clopine]

Well, you heard it from Joe.

[Joe Anderson]

Yeah. John, John. Call me John.

[Big Al Clopine]

When I spike software, I still like Joel better.

[Joe Anderson]

Yeah, just call me Billy. We got Tammy and Tammy and Eric in Baton Rouge. Dear Joe, Big Al and Andy, thank you for taking our question. Very polite. Come out. Very professional.

[Big Al Clopine]

You know, Southern hospitality.

[Joe Anderson]

Yes. My husband found your podcast in mid-2020, and I think he listens to every episode since then. Usually listens while jogging around the neighborhood, unless we have a long car trip coming up. So she's writing on behalf of her husband?

[Big Al Clopine]

I think. I think so. Yeah.

[Joe Anderson]

Very nice. Sweet lady here.

[Big Al Clopine]

Yep.

[Joe Anderson]

All right, so let's see. Where did I. In which case we'll have save a few episodes and we'll listen to them.

[Big Al Clopine]

Together on those long car trips.

[Joe Anderson]

They live together.

[Big Al Clopine]

Okay.

[Joe Anderson]

So romantic. We just love your show.

[Big Al Clopine]

Is that what you and Rose do on a long car trip? No, no.

[Joe Anderson]

It's very entertaining and your discussion and spitballs have been very huge help to us over the last five years. This is our first time writing in. My husband and I are 50 years old, and his favorite. His favorite drink is a cold Virgil's cream soda.

[Andi Last]

Yes.

[Joe Anderson]

There's no booze in that.

[Andi Last]

No. It's literally just cream soda.

[Joe Anderson]

When's the last time you had a cream soda?

[Big Al Clopine]

I was 7 years old, probably. I'm gonna say under 10.

[Joe Anderson]

Did you go to the soda shop down the street? Pork Chevy?

[Big Al Clopine]

I. I sort of remember someone handing me a can of cream soda. I was probably 10. I opened it up, took a sip, I said, no, thank you.

[Andi Last]

Wow. The last time I had one was in May, right before I left the country. I can't get it here, but, yeah, it's totally one of my favorites.

[Big Al Clopine]

Well, I would say I didn't really care for it. You ever had it?

[Andi Last]

If it doesn't have booze in it, Joe hasn't tried it.

[Joe Anderson]

Long, long, long time ago. Just. Yeah. Anyway. Okay. But I thought your favorite drink was root beer, Andy.

[Andi Last]

It is. It is. But Virgil's cream soda is a very close second.

[Joe Anderson]

Got it.

[Big Al Clopine]

Okay.

[Joe Anderson]

I think Andy is also a big fan. Oh, look at that. And my drink of choice is coffee.

[Big Al Clopine]

Okay.

[Joe Anderson]

All right. We have an American cattle dog. Cattle dog type mutt from a shelter in a black cat. We are not huge fans of either one, honestly, but our kids love them.

[Big Al Clopine]

So they keep them.

[Joe Anderson]

I drive a 2024 Volkswagen Tahoe. My husband drives a 2023 Subaru Outback. My husband has a relatively stable job that he loves working for the federal government, and I work at a local university. My husband income is about $200,000 a year. Mine's 50. My husband would love to work another eight to 10 years and then maybe work part time for another 10 years in a more flexible position that will cover our monthly expenses until hanging it up for good in his mid to late 60s. I'll work as long as necessary to help us meet our goals, but I'd love to retire in my early 60s. Our current savings we have about $1,800,000 for retirement, $1,600,000 in our traditional 401 and a TSP of $200,000 in Roth 401s in the Roth portion of my husband's TSP. Okay, we know we need to get those Roth balances up and do some conversions eventually. We also have about $7,000 in a small brokerage account, $300,000 of equity in our house. If we stick to our plan and assume that we don't start to collect our fixed income until age 62, my husband will have a federal pension of about $55,000 a year. In our mid-60s, his Social Security will add another $45,000 a year and mine would add about $12,000.

[Big Al Clopine]

Wow.

[Joe Anderson]

Our expenses. We think we'll spend about $120,000 a year, not including the college expenses, but we'd like to spend a little bit more in retirement if we can. Our kids are the source of both of our questions. We have a college sophomore and a 10th grader. Like most parents, we save for college, but we aren't able to save enough. We have about $90,000 left in our college savings accounts, but we have six or seven more years of college expense. First, what are your thoughts on student loans in the circumstances under which they make sense? My son doesn't have any student debt yet, but for a variety of reasons, he just transferred to a school that is significantly more expensive than a school where he spent the first three semesters. He could borrow about $7,000 a semester at about 6% interest rate. We think it makes sense for him to take out some modest student loans. Which 1 will give him some ownership of the investment and 2 allows us to keep contributing at least 5% of my husband's salary to retirement, which will get us the full 5% match for his employer. As it stands between spending down our existing college savings and using all my take home pay, we're already covering almost all of our son's college expenses. We can always help him repay the loans down the road if we want. I know a lot of financial advisors would recommend against taking loans unless absolutely necessary. But this approach seems right to us. What do you think? Okay, second question. When we started saving for college years ago, we set up two separate accounts, one for each kid. We could reduce the strain on our household budget over the next few years if we just start using our younger college savings account for our son who's already in college. We feel a little uneasy about that. By the time our younger child gets to college, she may pick a school that costs a lot less than the school our older child just transferred to, or she may earn more financial aid than he did. And if not, we can probably find ways to increase our income or work a little longer than we planned so we can provide her the same support for the both of them. Should we continue to save the money in the younger child's account, even though we could really use it now, from a financial perspective, should we treat the two accounts as interchangeable? Thank you very sincerely for taking our question and for the great information and the valuable service you provide to your audience, Eric and Tammy in Baton Rouge, Louisiana. All right, interesting question. We got student loans. So the son said, I'm out.

[Big Al Clopine]

Yeah. I don't like this college.

[Joe Anderson]

I want to go to something a little bit more ritzy. Yeah.

[Big Al Clopine]

It has a football team.

[Joe Anderson]

Okay. So it's significantly more expensive. They got $90,000 left in the college savings. They got two accounts. Is that 90,000 for the sophomore in college, or is that the total amount that they have for both kids? I didn't.

[Big Al Clopine]

I'm thinking it reads like that's the total for both.

[Joe Anderson]

Yeah. Left in our college savings accounts.

[Big Al Clopine]

Yeah.

[Joe Anderson]

I say the kid takes a loan.

[Big Al Clopine]

Okay.

[Joe Anderson]

I took loans.

[Big Al Clopine]

Yeah.

[Joe Anderson]

Gave me ownership.

[Big Al Clopine]

Yeah. Yeah. I, I 100 agree. I remember when my kids went to college.

[Joe Anderson]

Yeah. I remember that. You were spicy as all hell.

[Big Al Clopine]

I, I didn't have a big wallet back then. I, I took loans on their behalf, too. Yeah.

[Joe Anderson]

Expensive, expensive schools.

[Big Al Clopine]

Well, younger side.

[Joe Anderson]

Yeah.

[Big Al Clopine]

My older son went to San Diego State. It wasn't too bad. Lived at home mostly. Younger son went to Boulder.

[Joe Anderson]

Yeah.

[Big Al Clopine]

Oldest son. It was during the worst of the Great Recession, and in case you don't know, I had a lot of real estate and it was a little spicy over time for me so that, that I could cash flow because it wasn't too expensive. But my younger son went to Boulder was quite a bit more expensive. We did get some loans there and we decided to pay him off but ourselves. But I think there's, there's some, the validity in having your, your son or daughter. Pam, just give Them ownership and what they're actually borrowing the money for.

[Joe Anderson]

Yeah. I don't know. If my folks paid for my schooling, I probably wouldn't have done nearly as.

[Big Al Clopine]

Well as I did because you, you had ownership. Yeah, I like that. Yeah, yeah.

[Joe Anderson]

It's like, you got to pay this back. I'm taking money out and it's like, okay, you gotta buckle down. If it was given to you, you treat it differently. Yeah. I mean, for me, anyway.

[Big Al Clopine]

Yeah, I 100% agree. I think that's very valid.

[Joe Anderson]

And, you know, you just kind of watch it. $7,000 a semester.

[Big Al Clopine]

It's not 14,000 a year. It's not that bad. Yeah. My only caveat is be careful not to borrow too much. Like, you hear stories about people who go to med school.

[Joe Anderson]

Yeah. There' $400,000 dentist.

[Big Al Clopine]

That's right. You know, two of them, husband and wife, they get married and they got $800,000 million dollars of debt. That's. That's a bit extreme.

[Joe Anderson]

Yep, yep, yep, yep.

[Big Al Clopine]

I would be careful in that case, but. No, this is fine.

[Joe Anderson]

You can always. You can always take a loan out for college, but you can't take a loan out for your retirement.

[Big Al Clopine]

That's good point.

[Joe Anderson]

So you definitely want to make sure that you're still on track for your retirement. You're. You're going to retire in your mid-60s, so you still have time. Your husband loves you, his job, you love your job. You guys make great income. Combined, $250,000. You're off to a really good start with. Or not to a good start, but you have a really good nest egg.

[Big Al Clopine]

Yeah.

[Joe Anderson]

Currently, I mean.

[Big Al Clopine]

Yeah. About 1. About 1.8 million.

[Joe Anderson]

Yeah. $1.8 million in there. They're going to have $112,000 fixed income.

[Big Al Clopine]

Yeah.

[Joe Anderson]

They want to spend 120,000.

[Big Al Clopine]

Yeah. So that, that looks like you're spitting.

[Joe Anderson]

Pretty good right now, that 2 million, let's say. Well, let's just round to $2 million, make the math simple. They're 50 years old.

[Big Al Clopine]

Yeah. Right.

[Joe Anderson]

I mean, they got $2 million at 50.

[Big Al Clopine]

Yeah.

[Joe Anderson]

So in 10 years from now, when they turn 60, that could easily be close to 4 million bucks.

[Big Al Clopine]

It could be. Four is right.

[Joe Anderson]

And then they want to work until mid-60s. So that could be around $5 million sitting in retirement accounts by the time they're 65, 68 years old. Right. Four times five is 200,000. So $200,000 is what they could live off of, plus another 120. That's 320,000. You take the present value of 320,000 given a discount rate. I mean, they're sitting really good if they don't save another dime into the retirement account.

[Big Al Clopine]

Yeah. So in other words, they could spend more than 120,000 a year.

[Joe Anderson]

Yeah. In retirement. Or if they want to spend $120,000 a year in today's prefer more for. No.

[Big Al Clopine]

And that's, that's, of course, the 120,000 is cleaning full Social Security. That won't happen until age 67. But still. No, I agree. I think they're in great shape.

[Joe Anderson]

Yeah. Hopefully that helps you.

[Big Al Clopine]

Tammy and Eric, we got a second question.

[Joe Anderson]

The second question is, should they.

[Big Al Clopine]

Should they continue to save money in our younger child's account, even though we could really use it now, from a financial perspective, should we treat the two accounts as interchangeable?

[Joe Anderson]

Don't. I would not stop saving into that account. You don't know. She's assuming that the daughter's gonna go to a cheaper school. Yeah. Well, she might end up becoming a doctor. That's gonna have eight years of school and you need twice as much as you thought.

[Big Al Clopine]

Yeah, true. So I would say this. I would say I would also continue saving in the daughter's account, but I might. I might reduce it in favor of putting a little bit more for the sons. And then if by the time your daughter gets to college age and it's a more expensive college. Yeah. Just work two or three more extra years. Right. That, that, that would solve that for sure.

[Joe Anderson]

So, yeah, there's. She just needs to map this out a little bit more. I think she's doing a really good job of. Of the planning that they're doing. They're saving. They're saving great. They understand their cash flow. But yeah, I get where she's coming from. But you can't assume that it's going to be cheaper because as soon as you do that, it's probably going to be more expensive. You got to plan a little bit more conservatively there. But yeah, they want to tone down a little bit of the savings, but I would hate for them to miss the match. So if they're saving up to the match, continue to do that. Continue to save into. But you can change the beneficiary, so it doesn't really matter. You're going to pay for her college regardless. Right. Can you use them interchangeably? The answer is yes, because he's a sophomore. And how old is she? She's a 10th grader.

[Big Al Clopine]

10Th grader. Yep.

[Joe Anderson]

Okay, so she's got three more years.

[Big Al Clopine]

Yeah. It's close.

[Joe Anderson]

And so he's got a couple more years.

[Big Al Clopine]

Yep.

[Joe Anderson]

Yeah. If you want to use them. Because if there's money left over in his, you just change the beneficiary to her at that point it sounds. And if he takes out loans. Yeah, you can, you can definitely do that. You're going to come out of pocket regardless for hers.

[Big Al Clopine]

Right.

[Joe Anderson]

Because I think you want to be fair to say, hey, this is the amount of money that we saved for Billy and this is how much we'll save for Sarah. Just made up those two names. I wonder if I was pretty close.

[Big Al Clopine]

Yeah, you're probably right on.

[Joe Anderson]

Yeah. But yeah, yeah, I'm gonna have this problem in like what, what year? Like 16 years from now. And I'm like the same age as Tammy and Eric. I'll be running these numbers when I'm 80.

[Big Al Clopine]

You'll have to touch base with them then.

[Joe Anderson]

Yeah. See what they did to see what happened.

[Big Al Clopine]

Yeah.

[Joe Anderson]

All right, well, good luck. Good question. Good job.

[Andi Last]

If retirement versus college savings is freaking you out or if you're stressing about every tax move you make, like Lana and Sterling, coming up, you're not the only one feeling retirement panic. In fact, over 60% of working Americans fear retirement more than death. This week on YMYW tv, Joe and Big Al outlines seven practical strategies for your income, spending, savings and healthcare to put you on the path to an anxiety free retirement. Click or tap the links in the episode description to watch retirement panic button, seven ways to avoid hitting it and to calculate your free self guided financial blueprint. Enter what you have now and where you want to be in the future into the tool. It'll output how much you need and the steps to take to help you reach your retirement goals. But don't stop there. Next, schedule a financial assessment with one of the experienced professionals on Joe and Big Al's team at Pure Financial Advisors. They'll review your blueprint results with you and help you tailor a plan to reach your unique retirement needs. Watch YMYW tv, calculate your financial blueprint and meet with our team. Click or tap the links in the episode description to begin taking charge of your financial future. It's all free courtesy of your money, your wealth and Pure Financial advisors.

[Joe Anderson]

We got Lana and Sterling from New England.

[Andi Last]

That's actually a reference to the TV show the animated series Archer. Did you ever watch that?

[Joe Anderson]

Oh, that's the. Yeah, I think I've seen a commercial on it. The guy was a private eye or James Bond or something.

[Andi Last]

I'll take Your word for it? This is what they look like.

[Joe Anderson]

Yeah, it's kind of like raunchy.

[Andi Last]

Oh, okay.

[Joe Anderson]

Yeah. You've never seen it, Andy?

[Andi Last]

No, I haven't.

[Joe Anderson]

Well, there you go. It's something for you to do tonight.

[Andi Last]

Apparently so.

[Joe Anderson]

Hello, Andy, Joe, Big Al. My husband and I absolutely love your show.

[Big Al Clopine]

Wow.

[Joe Anderson]

Perfect. Your spitballs and insights have dramatically improved our finances and we're incredibly grateful. We strive older, high mileage Toyotas. My husband isn't a big drinker, but enjoys coffee with Baileys. I love martinis and cabernet together. My husband and I are both 57. We'll retire in the next three years. We have two adult children who have launched and don't need our support. We currently pay state taxes at 5%. In three years, we'll retire to a state with taxes at 9.9 plus 2.5% additional taxes for the area we want to live.

[Big Al Clopine]

Okay. All right.

[Joe Anderson]

My main question is whether it makes sense to sell our highly appreciated asset in the brokerage account now while we're still in the lower tax state or have our children inherit them with a step up basis years from now. Is selling those assets now in the lower tax state more valuable than the Roth conversions I would like to make before we move to the higher tax state?

[Andi Last]

Just before you go any further, this is two pages long.

[Joe Anderson]

Okey doke. All right. Take a deep breath. Okay. I should add that my current estate does not tax capital gains while my retirement state taxes capital gains as earned income. Okay. I should add that my. Where the hell do they live? New England, Nebraska or Nebraska? Nebraska.

[Big Al Clopine]

But they're moving somewhere where it's 9.9 plus 2.5% is 2 1/2% local.

[Joe Anderson]

9.9 state.

[Big Al Clopine]

Maybe it sounds like an east coast state.

[Joe Anderson]

Maybe I should add that the current state that they live in does not tax capital gains. All right, so there's no state tax on cap gains while my retirement state tax capital gains as earned income. That doesn't make any sense. While my retirement state taxes.

[Big Al Clopine]

Yeah, well, like California, the state that.

[Andi Last]

He'S going to retire to.

[Big Al Clopine]

Yeah. California does not have.

[Joe Anderson]

Oh. While my retirement state.

[Big Al Clopine]

Yeah.

[Andi Last]

Taxes capital gains. Yes.

[Big Al Clopine]

In other words, same. It's still capital gains, but same tax.

[Joe Anderson]

All right. We would have to pay nit tax on anything we sold within our brokerage account. We have money market funds in our brokerage account to cover the taxes because of the difference in the state tax rates and the fact we both have pensions. I want to do as many Roth conversions reasons as I can. Over the next three years we are close to the top of the 24% tax bracket. We want to avoid converting the 32% tax bracket. The income from my side job is variable, but I'm guessing that over the next three years we'll be about 60, 60 thousand dollars a year shy of the 32% bracket. I'm not sure whether to use the space for Roth conversions or federal capital gains tax. Here is the details. At retirement we will conservatively have a $3 million net worth. After the sale of our home. Our plan is to rent an apartment for the rest of our lives. I've never heard that. That's first.

[Big Al Clopine]

Yeah, that's less common.

[Joe Anderson]

I like it. All right. They got tax deferred retirement accounts of $670,000, Roth accounts $1,400,000 brokerage accounts $500,000 HSA 75,000 pensions starting in three years $65,000 with a call of 100% survivor benefits, Social Security husband 6224 me at 70 53,000. Salary today is $350,000. Together until age 60, $120,000 a year. From age 60 to 70 defy contributions until 60 is $150,000 annual to Roth 403,457 solo 401 and backdoor Roth IRAs. Planned retirement spending with taxes is $180,000 plus vacations of $40,000 a year for the first 10 years. In all accounts we are invested aggressively for our ages with an 80:20 portfolio. We are conscious of asset location and have most of our bonds in similar investments. In our tax deferred accounts we have slightly weighted small cap US value in emerging markets in our Roth accounts. But most of our Roth money is in the total US in total international ETFs within the brokerage account we have $174,000 in mutual funds with $85,000 in unrealized long term capital gains. We have $66,000 in stocks and $46,000 in unrealized long term capital gains there. The mutual funds are low cost Vanguard funds and the stocks are blue chips. We would like our brokerage account to be simpler with most VTI in a small amount of cash. There's another $150,000 inherited mutual fund we will hold onto because the capital gains are enormous. We will leave that to our kids for the benefit of their step up in basis. We would appreciate a general spitball on our retirement. We are not looking for advice but would love to hear the two cents about any possible TWEAKS or changes. We are fairly confident we have enough money, but we want to make sure we'd be okay if my side job doesn't make as much money in the new state. Most importantly, I would like to know whether I should prioritize Roth conversions or selling brokerage assets. Now that we have a more streamlined brokerage account to use early in retirement, we're not sure if it's a disadvantage to have mutual funds and stocks in our brokerage account that we don't want to sell because of the higher state taxes in retirement. Would it be wise to leave the brokerage account alone and let the kids inherit the majority of it? Again, thank you so much for sharing your wisdom. All right, let's see here.

[Big Al Clopine]

Well, they're going to have, let's. She thinks at least 3 million. I think maybe even a little more, but we'll go with 3 million when they retire. Right. And they want to spend $220,000, but they've got a lot of fixed income, although some is Social Security, which won't kick in yet. The pension is, let's see right off the bat, what is the pension?

[Joe Anderson]

Pension starts in three years at $65,000 a year.

[Big Al Clopine]

$65,000, right. Okay, so that's about $160,000.

[Joe Anderson]

Well, they got $120,000 a year coming in from age 60 to 70. So the $65,000 is her side hustle. Yeah.

[Big Al Clopine]

Yeah. Okay.

[Joe Anderson]

Is the one hundred and twenty.

[Big Al Clopine]

Yeah. So that's, that's, that's fine. And then, and then when the Social Security kicks In, they got 142,002 spending 220 for 10 years, then go down to 180. So I think the numbers probably work.

[Joe Anderson]

They have $428,000 in a brokerage account. What the capital gains is what, what do you think, 200 grand?

[Big Al Clopine]

Yeah, if that. Well, I would.

[Joe Anderson]

You can slowly. I think they're overthinking the state tax and the non. State tax.

[Big Al Clopine]

They are. I, so first of all, I would say I, I wouldn't do Roth conversions in the 32% bracket when you're going to be in the 24 when you retire.

[Joe Anderson]

$1.4 million already.

[Big Al Clopine]

Already. I mean, yeah, I, the, the state tax, that's a, that what, that's a difference of, let's call it 5 to, to 12 to 13. Right. Maybe some, maybe 7, 8, 8%. We'll say 8%. We'll be generous that way. But yet the current tax rate there at 32%, but it's going to be 24. That's also 8%. So I don't see why you'd want to do that early. I probably would start doing capital gains if your current state, it's tax free. I mean, why not? And then regardless of income level, it's still going to be taxed at probably 20%. Right. Plus the net investment income tax. So 24. But you know, that's a good deal at age 57. Am I worried about the kids inheriting.

[Joe Anderson]

Like step up in bases.

[Big Al Clopine]

I think you're going to need them. I think that's a question when you're in your 80s. And then if you still have them. Right.

[Joe Anderson]

Yeah.

[Big Al Clopine]

I think right now, the way these.

[Joe Anderson]

They're going to need every dollar that they have to get the income that they need. Right.

[Big Al Clopine]

I think so. I, I think you're gon. I think they're going to need it all or a lot of it. Right. So I wouldn't even be thinking about step up for the kids at this point.

[Joe Anderson]

Right. Oh, I don't want to. What's it. They're way too concerned about taxes that are, that they shouldn't be concerned about. Yep.

[Big Al Clopine]

Yeah.

[Joe Anderson]

Because they are very well diversified from a tax perspective.

[Big Al Clopine]

They really are.

[Joe Anderson]

Yeah. We don't see a lot of money of 1.5 in a Roth.

[Big Al Clopine]

Right.

[Joe Anderson]

Most people have very little money in a Roth and so they're trying to get as much money out of their retirement accounts to get it into a Roth because they have millions. In a standard retirement account, you have still a good chunk of money there, 672,000. But you could still utilize low brackets to get that money out. 12 and 22% is still relatively cheap. Yeah. I would not worry about the capital gains tax. Yeah. You could tax gain harvest. If you worry about the state tax there, you could sell the investment and buy it right back. Pay the tax and buy it back. And then you. That's a way to, you know, to step up your basis there.

[Big Al Clopine]

Yeah. I'm okay with that. Because there's no state tax to pay on that. And, and then plus the federal tax, capital gains, irregardless of your income level, they're taxed at capital gain rates.

[Joe Anderson]

Right.

[Big Al Clopine]

Which the worst case is 24%.

[Joe Anderson]

And then you're kind of worrying about thinks, hey, we want to clean this up and just go mostly vti. It's like, okay, I mean, don't, don't pay tax just to get into one index or etf.

[Big Al Clopine]

Right.

[Joe Anderson]

It sounds like you're in low cost Vanguard Funds. I think you're doing asset location. You have the right asset classes in the right accounts. They're tweaking too much.

[Big Al Clopine]

I would agree with that. I think that, you know, when you think about setting up a perfect retirement for tax purposes, you know, then you, you, you want to have as much money in a Roth as you can.

[Joe Anderson]

Check, check.

[Big Al Clopine]

You want to have money and taxable because the capital gains tax is lower. Check. So you're already in a great spot. I think if you want to tweak this anymore, you could tax gain harvest. I don't think I do Roth conversions right now because you're in too high of a bracket relative to your retirement bracket, irregardless of the state.

[Joe Anderson]

Look, if they have $65,000 in pensions, they're going to have healthy Social Security. Their fixed income is going to be strong. Yeah, you're going to have to pay a little bit of tax, but I think they're going to pay a lot less tax than most with the same liquid assets because of how much money they already have in the Roth IRA.

[Big Al Clopine]

100 agree. Yep.

[Joe Anderson]

So they've done a great job. They're diversified. Don't overthink it. Don't over tweak it. Don't get cute, you know, Right. It's like if, if the funds were way out of whack, if they were doing something. But it's like you can only fine tune so much. So anyway, they're in a good spot. That's my two cents.

[Big Al Clopine]

Okay.

[Andi Last]

Next week on ymyw, Joe and Big Al spitball on how a pair of 28 year old financial nerds in Omaha can set themselves up for a great retirement in 35 years. We'll also talk after tax 401k catch ups versus brokerage investing for John Q. Taxpayer, Roth conversions after after a forced retirement for Janine, the affordability of 50 year mortgages for Semper Fidelis, whether Pete should pay off his 401k loan or his mortgage, and the nuances of managing taxes on inheritances for Jonas Grumby and for Dolly. Make sure you're following us in your favorite podcast app so you don't miss a thing. Watch us make YMYW every week on Spotify or subscribe to our YouTube channel where you can also join me in the conversation in the comments. Every time you like, share or comment, it tells the almighty algorithms that this show is worth your time so they'll show it to more people and we appreciate it when you do so. To recap today's episode. Protecting your future from the unknowns isn't about predicting the future. It's about building a plan with enough flexibility to handle whatever that future throws at you. Let Joe and Big Al's team of experienced professionals at Pure Financial Advisors help you build that kind of flexible plan for yourself. Schedule a financial assessment at the link in the episode description. Book your meeting at one of our offices in and around Seattle, Chicago, Nashville, Denver, Salt Lake City, Phoenix, Sacramento or Southern California, or online via Zoom. It's a free no strings attached look at your entire financial picture. Just click or tap the links in the episode description or call 888-9946 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.