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Risks Threaten Retirement. Rewire Your Plans - 525
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How do you shift from saving through your entire working life to spending and really living in retirement, while at the same time dealing the risks of inflation, rising healthcare costs, and things like tariffs? Jamie Hopkins is a CERTIFIED FINANCIAL...
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- [00:00]
Andi Last
How do you shift from saving through your entire working life to spending and really living in retirement while at the same time dealing with the risks of inflation, rising health care costs and things like tariffs? Jamie Hopkins is a certified financial planner, an attorney, and best selling author of Find you'd Freedom and Rewirement Rewiring the way you think about retirement. He returns to the show today on youn Money, you, wealth podcast number 525 with insights on how to rewire your plans for retirement. Plus, how should Fred and Ginger in Huntington Beach, California pay for repairs on their rental properties? How can Peter Lemonjello manage taxes in his early retirement? With 72T elections, rental income and an installment sale, can Calvin and Susie in Lancaster, Pennsylvania buy an $800,000 beach house? And should they? I'm executive producer Andi Last with the hosts of youf Money, you, Wealth, Joe Anderson, CFP and Big Al Clopine, cpa and our special guest today, Jamie Hopkins.
- [01:00]
Joe Anderson
Appreciate having this opportunity to chat with you again.
- [01:02]
Jamie Hopkins
Yeah, it's good to see you. Thanks for having me on again.
- [01:05]
Joe Anderson
It's always fun. Yeah. So a few years ago you wrote a book called Re. Let me make sure I get this right. Rewirement, rewiring the way you think about retirement. And so here's my question. So rewiring. So things are changing. How are things changing and how do we react to them?
- [01:24]
Jamie Hopkins
Yeah. And I'll tell you a little bit about the just that idea of rewirement and then how things are changing. So one of the things that I was actually sitting with a former colleague at American College when I came up with the title of that too. And we were looking at the research of just Americans and how much they actually learned throughout their working career. And they actually learned a lot about investing and saving and compound interest. But then when we tested how much people knew about retirement income plan that distribution period, you found out that people didn't know as much about it.
- [01:56]
Joe Anderson
Sure.
- [01:56]
Jamie Hopkins
Well, when you dive into that, it actually makes sense. Because your whole working career, what do they tell you? Save, save, save, save, save. They don't teach you how to spend. Spend is actually a bad thing.
- [02:06]
Joe Anderson
That's right. I mean, you get your 401, you click a box, you pick the percentage, and it's done for you.
- [02:11]
Jamie Hopkins
Yeah. And as long as you're going up and to the right throughout your working career, you're in a good spot. And then you get to retirement. We say, just kidding, now you need to know how to spend it down. And so that was the Notion that we need to change the way we think about retirement from this accumulation mindset to a decumulation mindset.
- [02:26]
Joe Anderson
Got it.
- [02:27]
Jamie Hopkins
But there's a lot of other things that change too. Right. Like how you find happiness, fulfillment, how you fill up your time. There were all these concepts that. Right. Life doesn't prepare us for. And our advisor has never been through retirement, and we've never been through retirement. So we have to learn from other people's experiences. And that's the whole notion around this, is how do we do that and manage these emotions that are new to us when we get to retirement? And there's a lot always changing. I always, like the book, kind of starts with this notion that retirement income planning is like trying to hit a moving target in the wind. The target's your retirement. Right. And that's unique to you. It's moving. We don't know how long you're going to live. You don't know when you're going to retire. And the wind is to change all the things that could blow you off course over the years.
- [03:11]
Joe Anderson
Yeah. I kind of feel like, you know, if we knew when we're going to die, it'd make this a lot easier.
- [03:18]
Jamie Hopkins
Yeah.
- [03:18]
Joe Anderson
Right. But let's, let's start with, I think, spending, distribution planning. Because you're right, we learn how to save. And those of us that are diligent, we've accumulated a nest egg and now it's like, it's hard to switch gears to all of a sudden, okay, instead of adding, I might be taking some away. So let's talk about ways to think about distribution planning.
- [03:39]
Jamie Hopkins
Yeah. And I think in this one, too, I think a fun concept is to talk about this, permission to spend. So I really like that concept. What you see in the US Spending data for retirement is people actually underspend. We actually don't overspend. You always retirement crisis, stuff like this. But if you look at Americans, we're very resilient and we manage actually tighter than you would think. So we don't run out of money, but we hold it all. And so people actually end up dying. Dying with big sums of money never spent. And sometimes you hear the news and it sounds like a good thing. I just saw one. It was a janitor, died with $7 million, no heirs, never spent any of it. And I was like, but that's actually a bad story. It's not a good story. Right. Because he could have lived a much better. However he wanted to spend it, even if it was charity. Right. He had to Give back. So one of the things I had an interesting concept recently was actually continue to work part time and then just spend that amount that you're earning part time. And it actually opens up this test driving spending in retirement. It gives you permission to spend more money. So I think that's a nice concept. But however that is whether it's budgeting. You know, I had a friend, I don't think he's here, but he lives in Nashville. He heard me talk about this at a conference. And he's continued to work. He was ready to retire. He's continued to work for six or seven more years. And I said, keep working and stop saving. Go on vacations, buy cars. And so he's continued to work and he stopped all of his retirement saving and he's in a much better spot. And it opened up that permission to spend.
- [05:09]
Joe Anderson
Yeah, I think that's such a hard thing to flip in a lot of people's brains, particularly if you're used to saving.
- [05:16]
Jamie Hopkins
Yeah, well, because we were told for 30 years and our work just keeps saving and if you save, you're going to be okay. And we're not taught how to spend down, especially to look at an account and see it start to decline. And that be a good thing. Right. When our account declines, that's usually a bad thing. Right. And so when you look at people, they mostly feel like overspending or buying something for themselves in retirement when their account comes down, that feels like loss and it actually is painful. So what you see people try to do, right, is they try to spend the income that their portfolios generate and nothing more. Principal needs to be protected.
- [05:51]
Joe Anderson
Right. You hear that a lot.
- [05:53]
Jamie Hopkins
Yeah.
- [05:53]
Joe Anderson
So, okay, you had mentioned lifestyle considerations because, I mean, retirement planning, a lot of us think about dollars and cents, but the lifestyle components are probably equally important, if not more important. So how do you think about that?
- [06:07]
Jamie Hopkins
Yeah, I mean, look, retirement is just a continuation of our life and we don't want this thing to take over to the point we're not enjoying ourselves, we're not living a happy life. I used to talk about this in some of my presentations, too. If I gave you two scenarios, one of them is you could die the richest person in the world, but you were the most unhappy person in the world, or you died completely broke at the end of your life, but you're the happiest person in the world. Almost everyone, not everybody, but almost everybody, would pick, I'd rather be the happiest person in the world.
- [06:36]
Joe Anderson
And I would, too.
- [06:37]
Jamie Hopkins
Yeah. And that's lifestyle. Right. So how are you designing your life? An interesting concept I wrote about in a later book called Find you'd Freedom was about accidental communities. I think it's a really interesting thing is that through most of our lives, we end up in what I called accidental communities. You go to college and your dorm room that you live in becomes your community. Honestly, you didn't pick them. Right. Like, it's whoever the school put on your floor. And sometimes that happens at work. Like, your company gets acquired and you're around new people and they become your community. Your neighborhood changes over and your neighbors are now your new neighbors. A lot of our communities are not purposeful, but when you get to retirement, this amazing thing happens is you can essentially pick whatever community you want to be part of now. Right. You can move. You're not at a job anymore, so you don't have to be friends with them anymore. Like, you can go pick the hobbies you want. And so it's this notion that you can move from your accidental communities to purposeful communities. And you might have communities that are actually harmful for you. Maybe you were. You like playing poker and you got really into gambling and you're spending a lot of money on it.
- [07:41]
Joe Anderson
Sure.
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Jamie Hopkins
Or you used to drink too much with, you know, people at the bar or the country club. And you can now reassess this and say, what communities do I want to be part of? Is your church a local organization? But that's an amazing time to reevaluate the communities you're in and be purposeful about them. And that's, you know, when you look at people that are happiest in retirement, they're typically giving back. So they're spending some amount of time engaging, and they are wrapping themselves around the people they want to be around.
- [08:07]
Joe Anderson
So let's dig into that just a little bit more because there are people that are so focused on their careers that they retire. And it's like, now what? How do they even think about what's going to be purposeful for them?
- [08:23]
Jamie Hopkins
Yeah. And that's about finding meaning and purpose. Right now, one of the things is you probably should try to figure that out before the day you retire.
- [08:30]
Joe Anderson
Good point.
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Jamie Hopkins
Really true. Now there's different ways you can do that. I think phased retirement is a fantastic concept in the United States. It's mostly informal. It's not. We don't have a lot of formal structure around that. Some countries have more formal phased retirement. And companies, we're kind of like, you know, you have a last day and that's it. You never talk to anyone again. But you can often bring that up to companies and say, I want to phase the three, two days, you know, four days.
- [08:57]
Joe Anderson
Right.
- [08:58]
Jamie Hopkins
You got to be willing usually to take a pay cut that can allow you to test drive other things. I do think it's helpful to write down like values. If you donate money to charities, actually go spend time with them. So in my organization, we have a charitable and foundation team that help charities and foundations. And then sometimes we get donors that come in and ask us like, hey, how do we work better with them? And one of the first things we always say is, well, do you ever spend time in that organization? They're like, no, no, we just donate money. Well, go spend time in the organizations. You donate money. So if you donate to like a. No kid hungry or a soup kitchen, like go there, spend time with it and see if you actually like it. So I think that's really important. And you know, location, location, location is almost everything. So sure, you should give yourself permission to move and be in an area around people you want to be with. You do see people happy. They move away from family. But there's a good amount of data that shows too that a lot of people move once and then they 10 they do move back sometimes because they don't like going to a new area without their family around. So, you know, or friends. Right. But be cognizant of that when you move too. Like, are you going to engulf yourself in a new community or test drive it out and see if you like it first?
- [10:08]
Joe Anderson
I think that's right. I think that's test drive. I mean, I can't tell you how many people that I know that they went on vacation, they had a great time, they bought a condo there and it's like never went back or rarely went back. And I think you need to test drive it to see if this is really something you want to do. Now in my case, I've been to Hawaii many, many times. I love it. We year after year after year, we bought a condo. Best decision I ever made. We go all the time, but a lot of people, it's just the opposite. They think they remember that one experience, but they never test drove it.
- [10:42]
Jamie Hopkins
Yeah, you actually have the opposite. So one of my aunts, actually my aunt and uncle bought a place in Hawaii and moved out there for a bit when they retired. But their kids, once they had grandkids, they actually hated it because they couldn't see them. So they actually ended up selling it and moving Back to the East Coast.
- [10:59]
Joe Anderson
I can, I can appreciate what they did.
- [11:01]
Jamie Hopkins
Love it. So they actually, they absolutely loved it. If they never had grandkids, they never would have moved back there forever. But it, but that attachment, they were like, well, we don't want to see them once a year. We want to be around them as they're growing up. So they relocated back to the East Coast.
- [11:15]
Joe Anderson
Right. So let's talk about retirement planning, because you can have the best plan, but there are risks, there are things that can go wrong. What are some of those things that. Risks that people need to look out for and how to solve for them.
- [11:31]
Jamie Hopkins
Yeah, I mean, the big ones today that are on people's minds. Right. I can't have a conversation without talking about inflation. And so inflation, oddly enough, while you're working, is it still a concern? Yes, it impacts millions of Americans, but your salary and the way that your business is typically compensated often adjusts pretty close for inflation. It's not always, like ahead of inflation. So you might be trailing, but your job tends to adjust for it. So when you look at people in that sense, like, it's not as big of an impact while you're working. When you get to retirement, though, it is a permanent increase in the cost of goods for the entirety of the 30 years. And your retirement savings portfolio isn't necessarily adjusting for this or your income sources. So that is a bigger deal. The other thing about high inflation is we really can't choose when there's going to be high inflation. Right. So it's not one of those risks that we can go, like, mitigate ourselves.
- [12:29]
Joe Anderson
Right.
- [12:29]
Jamie Hopkins
So we can try to plan around it, but it is just a big challenge for retirees. The other challenge that's interesting about high inflation is you'd actually, as a retiree, hope that you get high inflation towards the end of your retirement, not at the beginning. It's the opposite of like sequence of returns risk. If anyone heard about it, right. Where you'd want your bad returns towards the end, and here, right. It's dropping. Same thing. You'd want your bad inflation, high inflation.
- [12:55]
Joe Anderson
If you could orchestrate that, that would be.
- [12:57]
Jamie Hopkins
Right. It would. But the environment we're in right now is we've had this high inflation relatively soon. If you're retiring right around now or in retirement.
- [13:06]
Joe Anderson
Right.
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Jamie Hopkins
And that means every small increase on the top of it is just a bigger number.
- [13:11]
Joe Anderson
Right.
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Jamie Hopkins
And that's what people feel pain around. So that's a big challenge. And so often how to counteract that typically has been, you have to be higher in equities because they, they have not been a perfect inflationary hedge, but pretty good.
- [13:23]
Joe Anderson
Right.
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Jamie Hopkins
But that's a scary proposition for a lot of people. So that's a big one. Health care costs also in the news. You know, it's been in the news, you know, going back to the, the mid 2000s too. This is a 20 year conversation.
- [13:36]
Joe Anderson
Right.
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Jamie Hopkins
You know, and that one is how is Medicare gonna, you know, evolve over time? There's very little retiree health care coverage outside of that. Employers used to provide it. You go back to the 80s, a lot of companies provided. It's mostly gone at this point.
- [13:53]
Joe Anderson
Sure.
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Jamie Hopkins
So, you know, what do you set aside for those additional costs? The interesting part about that space, if you dive into the true spending, almost all the additional costs are in the. It's where the gaps are around your prescription drugs. That's almost it. It's very interesting because people kind of talk about it like it's this whole bucket of health care.
- [14:15]
Joe Anderson
Yeah.
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Jamie Hopkins
If you actually look at the spending, it is, most of it is driven just by higher prescription drugs costs.
- [14:22]
Joe Anderson
Right.
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Jamie Hopkins
So that's, you know, that's a big challenge. And that's again, something that's kind of like a macro level or they're going to be caps on costs, but definitely something to pay attention to. And then the third one I always bring up is just public policy. So those are the three that are really. So like, are there changes to tax laws positively or negatively for you? You know, tariffs are a big conversation again, that impacts the cost of goods often, maybe not every cost of good, but some cost of goods will change. And that's pretty much expected and talked about at this point. And those have an impact on your plan. Even the availability of certain goods can be impacted by public policy.
- [15:00]
Joe Anderson
Right, Right. So, okay, you brought it up. Tariffs. So a lot of people, we hear about it, not everyone knows exactly what that means and what could happen as a result of tariffs. How would you answer that?
- [15:14]
Jamie Hopkins
Yeah, so tariffs are always kind of in place. Right. Like there are tariffs almost on country at different periods of time and on different goods. And they can range. So sometimes you use tariffs actually to increase supply from something you create inside of your country. So if you put tariffs on a cheaper good coming externally, it allows your country to kind of sell that good maybe more competitively, level the playing field a little bit. Level the playing field sometimes. And that's kind of a macroeconomic concept. Now the part where we get in a lot of arguments out there in the media and academics around tariffs are really like, what's the long term implication of tariffs on an economy, especially if they're more broad based. So what you do see a lot of times is tariffs on food. You might have tariffs on milk from other countries because you don't want cheap milk coming in because you want to make sure that you can produce food in your country at a competitive price. And if it gets flooded from external and everybody stops farming, then you get in a fight with somebody and they cut off all your food supply, you're in trouble. So like that's why countries will use it sometimes to kind of preserve economies inside, even though it might not be the most dollar sensitive. You just can't have a country that can't produce food. Right. You have to be able to produce food for your people. But the long term implications of these are kind of complex. Most academics and researchers and historians will say there's some inflationary aspect of tariffs. Right. Because they are artificially saying, hey, we want you to pay more for this item. So whether it's good or bad for your country isn't always determined. They can be good and they're used for good purposes. But that is a challenge. So it's, you know, a lot of that is negotiating with other countries and sometimes around particular products. Cars is another one that often have tariffs from other countries because you want to protect that manufacturing and those jobs inside of your country. But this one's not going away. I mean, I think that's the other thing is it's a hot topic right now. But we've always had tariffs. We're going to continue to have tariffs, they're going to ebb and flow, we're going to negotiate with countries, they will go up, they will come down and we're going to continue to pull that lever to really, you know, drive different aspects and focus inside the country. But it is something to watch out for. And obviously people are worried about it or talking about or happy about it. Right. Like you could fall on all sides of this. Right?
- [17:32]
Joe Anderson
Sure, sure. Given the current administration, you know, we have the, the current tax law set to sunset expire the end of this year, 2025. What's your feeling? Will it continue in full, in part or what are your thoughts?
- [17:47]
Jamie Hopkins
So tax cut and Job act, which was passed back in 2017, expect to expire. Most of the provisions, not everything but the personal ones, are mostly expected to expire at the end of this year. The reality is we are very unlikely to just have this thing run its course and expire and go back to the pre tax cut and job act rules. Right. While that is the default legal standing right now. So you kind of have to say, hey, like that is the pathway we're on in 2026 should look different. It's just very unlikely. If you really dive into it, there's two reasons it's super unlikely. It's not the stuff that ends up in the press, but one of the provisions, it was called 199 and then a capital A. So like tax people say 199 cap A and what it really is is a capital A. And that's how we refer to this. Yes, that was a provision that is temporary and does go away at the end of this year that brought the small business tax deduction down to be more equivalent to the corporate tax rates at C corporations. That one goes away. That was one of the big drivers and the most complex single provision of the entire bill. But nobody wants to see small business owners, which is the majority of American businesses lose that deduction and not have anything else happen. Like that's an outcome that really, I'd say no party is really in favor of just seeing C corporations with a big cut and most of American businesses without it. Nobody really wants that. So that's one where you're kind of like, ah, it's unlikely to just expire because both sides could get on board with that. The other thing is, you know, tax cut and Job act and Affordable Care act were passed via something called reconciliation. Most likely we'll, we'll end up in the same boat. This will be a reconciliation bill and you know, the House and Senate and President will sign off on a new tax bill to extend some of the cuts, maybe further some. The other issue though is if you do have this kind of individual rates go back up and the other tax rates, you get this like imbalance tax budget. That isn't really something that the current administration is looking for. So I don't think that's really likely. Now what things end up being passed and what things don't, we're way too early to tell. There are some inklings of bills, but third, they have not been flushed out enough to say, hey, these are the ones that are going to go. And if for those of you who remember back in tax kind of job act that the bill that got passed literally had provisions written, handwritten right in the margins of the printed document that ended up as law. So look like we're not there yet. Right. So just in all fairness, this could take to the end of the year, we might be looking at December before we actually see it. It could happen faster. You know, there are things being proposed, but it would not shock me that this takes some time to really get to.
- [20:35]
Joe Anderson
Yeah, that makes sense. One final question, Social Security, the viability of it going forward.
- [20:42]
Jamie Hopkins
Yeah. So this is one. I have a complete different view than the mass audience and I've been hammering this one for a long time. I actually wrote an article about this too. My concern of this self fulfilling prophecy that a lot of people and you looked at Americans saying, look, I don't think it's going to be there for me. And what I was concerned about this is this goes back almost 15 years. I said eventually when people say that enough, it's going to lead us to this ability to actually cut back on Social Security. Now everybody can disagree with me on this, but if you actually look at the numbers, Social Security is the single most efficient financial instrument that's ever been built in the history of the world. There's conversations about fraud and all those things. Social Security's total overhead runs at 0.3%. So if you think about any company ever, there is no company that runs at 0.3% overhead. So every time somebody's like, oh, we need something better and more efficient, I'm like, that's nonsense. There's. You can't run it like that. They don't have marketing, they don't have training, they don't have sales, they don't have all the things that build overhead in traditional companies. And maybe that's some of people's criticism. If you ever gone to a Social Security office, you can't really get a great answer. But they don't spend on it and everybody's part of it. It has been an incredibly efficient system. And if you look at our senior population in the United States. Right. It has kept them out of poverty at a higher rate than the average of the United States. It's been very, very good for that. Now does it need changes and some adjustments? Yeah, because it is running out of money in the sense of we had a big baby boomer population come in. People live longer than we were expecting. And so that's put stress on the calculation, but it's money in and it's money out. There is fraud more likely in the disability side of Social Security? That's the area that honestly needs more of a reform. When you hear about it, the actual Social Security, the retiree benefits, has very little fraud, very little abuse. And actually, even through the review Here, I don't think there's actually been much of a finding of that. They said they found a bunch of 150 year olds. That's a coding thing. If you actually look at it, there aren't 150 year olds getting a single payment. There are zero. Right. And that's actually very clear. Social Security puts out the ages of the people who get checks. There are zero going there. So, like, that's not a thing, although it is in the media. But it does need changes. Right. It can't continue on the path that it's been on forever. But it's a money in and money out system. So either you turn down the money that's going to go out of Social Security or you turn up the taxes that go in. I think most people right now aren't clamoring for higher taxes. So then the other way to make it more sustainable is to slow the money that's going out of it. That can be done in a lot of different ways. Extending full retirement age, making more of it taxable. So there are other things you can do to kind of address it. But to me, it's the backbone of American retiree security. This is the number that I always used to say is two thirds of Americans in retirement. It's more than half of the retirement income for one third of Americans. It is their only source of retirement income. Right. One third of Americans end up saving less than $10,000 for retirement when they get there. There is no system for them if we turn off Social Security.
- [24:01]
Joe Anderson
Right, Right. I think that's well said, Jamie. Thank you so much for your thoughts. This has been amazing.
- [24:07]
Jamie Hopkins
Thank you so much.
- [24:08]
Andi Last
Putting market volatility in perspective keeps us from making emotional decisions that can permanently hurt our retirement savings. In our latest webinar, Joe Anderson, CFP and Pure Financial Advisors Executive Vice President and Chief Investment Officer Brian Perry, cfp, CFA explain why stock markets are reacting negatively to the tariffs and what might come next. They also show you diversification and tax strategies that can help you navigate and even take advantage of this market volatility. Click or tap the link in the episode description to watch the webinar on demand and to download the Recession Protection Guide. You'll learn the signs of a recession and how to position and boost your portfolio when you're in one. Click or tap the links in the episode description to watch and to download all for free.
- [24:52]
Fred and Ginger
All right. Hi, this is Fred and Ginger from Huntington Beach, California. We have fun listening to your podcast and we're learning a bunch we don't drink much, but I like Pinot Grigio wine and Fred likes a little Zinfandel. I hope Joe blunders those names.
- [25:09]
Joe Anderson
Nope. Killed it.
- [25:11]
Fred and Ginger
Absolutely.
- [25:12]
Andi Last
He practiced in advance.
- [25:14]
Fred and Ginger
Pinot Grigio.
- [25:16]
Joe Anderson
Yeah. That's impressive.
- [25:17]
Fred and Ginger
Yeah. I drive a 2024 Tesla Y and Fred drives a 2007 Toyota FJ. Fred retired at 59 years old and now 62, working part time while collecting his pension. I'm seven years younger at 55 and hope to retire at age 60. Fred and I are constantly trying to figure out our finances because of our net worth is heavy on the real estate and light on the cash. Here are the details. Income. Fred is making $100,000 at his current job, but he also has a $78,000 pension. That's pretty rich.
- [25:53]
Joe Anderson
Yeah, it is.
- [25:55]
Fred and Ginger
Ginger, she's making a killing $175,000 job and she'll get a $78,000 pension at age 60. All right. Those look pretty good.
- [26:05]
Joe Anderson
Yeah, they do.
- [26:06]
Fred and Ginger
Personal home $1,700,000. Owe about $700,000 on it. Rental 1 is 1,400,400 grand. Rental 2% is 1,200,000 and paid off. So they have a couple spatterings of retirement accounts. Fred has an IRA of $150,000. He's also got a Roth of $100,000. Ginger's got a 403 of $200,000. She also has a Roth of $40,000, a Roth IRA of $50,000, some cash of $30,000 and a trust account of $55,000. So if I add all that up, what is that? 2, 3, 4, 5 5?
- [26:41]
Joe Anderson
That's a little over 600. 600,000.
- [26:43]
Fred and Ginger
Okay, question is about how to pay for rentals or how to pay for repairs on the two rentals. All right. We need about $100,000 to do the current repairs on the homes built in the 1960s. We are cash poor and wondering where to draw the money from. Since Fred is working again, we would like to max out his Roth 401 and allow me to do the same. That sounds good, but I feel like the priority should be to take care of those Randalls. With this new income, should we start taking distributions from his IRA and or trust or should we get a line of credit? If we do a line of credit, will the interest we pay on the line of credit also be something we can write off? I don't like the idea of more debt, but I'll do whatever it takes that makes financial sense. Looking forward to the Spitball. Well, I think the biggest unknown here, Big Al, is the spending.
- [27:33]
Joe Anderson
Yeah. We don't know what the spending. We don't know what kind of income the rentals are putting off. Positive cash flow, I assume, but we don't know for sure because there's a.
- [27:44]
Fred and Ginger
Ton of income here. Yeah, 350, $370,000 of income.
- [27:49]
Joe Anderson
Yeah, currently. And then once Ginger retires, 156,000 of pension. Don't even mention Social Security, so we don't know what that is. And if they've owned the properties for a while and one has no debt, probably pretty good cash flow, I would think.
- [28:04]
Fred and Ginger
You would think?
- [28:05]
Joe Anderson
Yeah.
- [28:06]
Fred and Ginger
I mean, they're in Huntington Beach. I would imagine the rents are not $2,000 a month.
- [28:12]
Joe Anderson
No.
- [28:12]
Fred and Ginger
They're more than a $1.2 million home.
- [28:14]
Joe Anderson
Or $1.4 million home, I would say. Yeah.
- [28:17]
Fred and Ginger
So it seems like a lot of cash flow coming in, but it also appears that maybe some cash flow is going out, which is fine. Usually with people with heavy pensions like this, it's like, man, your fixed income is going to be good in retirement. So I would. I'd be more inclined to take a line of credit than to start taking dollars out of retirement accounts.
- [28:40]
Joe Anderson
I would, too. And I think you have to look at the properties themselves and figure out what kind of cash flows do they have. Can the properties support the extra debt? The debt payments, principal and interest? If they can, I would just do it through that. If it's going to make it tight. If you need this money, I guess, for your retirement, then that gets a little bit trickier. But I would say I would like to see you build up your Roth accounts more. I think that's a great idea. I would get a line of cred. You know, maybe there's a little extra cash flow with the pensions to pay this off quicker.
- [29:11]
Fred and Ginger
Right, right.
- [29:11]
Joe Anderson
But. But yeah, I think you continue with the Roth, get. Get a line of credit, and then depending upon if the properties can support them, then great, you're fine. If they. If it makes it more difficult, then just try to get that thing paid off more quickly.
- [29:24]
Fred and Ginger
Right. I mean, let's say you take $100,000 out. Can. Can you afford 20,000 bucks a year? You know, with the $375,000, as well as putting money into the Roths. If that's tight, well, then maybe you just push that payment out a little bit more. The interest rate's going to be pretty high, but if you think about the taxes that they're going to pay, on the distributions of their retirement accounts, they're in a, what, almost 32% tax bracket with that income right now?
- [29:52]
Joe Anderson
Yeah, with income now, it'll be lower with just the pensions. But again, we don't know about Social Security.
- [29:57]
Fred and Ginger
They're going to work for another five years. They want to put these rentals $100,000 today.
- [30:03]
Joe Anderson
Yeah, yeah.
- [30:03]
Fred and Ginger
So they're saying, hey, should we take a distribution from an IRA to pay this off for the trust account?
- [30:08]
Joe Anderson
Right.
- [30:09]
Fred and Ginger
Well, you pull money out of Fred's IRA of 150,000, you pull 100 grand out, it's going to cost you 150 or 130.
- [30:16]
Joe Anderson
Yeah, right, right. Well, I think they were saying maybe stopping their current contributions, but I wouldn't do that. I think you want to keep going with those. Get a line of credit, get that thing paid off maybe more quickly than you might otherwise, but that. That's what I think I would do. But we are missing some key facts here. Yeah, like, like, I'd like to know, what are the rental properties, how they're performing cash flow wise? Can they handle the extra debt?
- [30:42]
Fred and Ginger
Well, I would imagine that they can. And if they can't, they have plenty of income. I think the biggest caveat here is how much money do they want to spend? Yeah, is it $300,000 a year? Is it $200,000 a year? What's that number? Because then it's like, well, does it make sense to take on more debt if you're spending the additional cash flow and you're not paying down that debt fast enough so that it will be paying off by the time Ginger retires?
- [31:06]
Joe Anderson
Yeah, but you think about five more years to work and there's not a ton of money in the Roth IRA and you got a chance to fully fund them. Why not? Right?
- [31:15]
Fred and Ginger
Yeah. I mean, this is all cash.
- [31:17]
Joe Anderson
If you can, if you can, if you can.
- [31:19]
Fred and Ginger
I think it's all looking at cash flow to say, all right, well, here, let's take a look at the money coming in and where's the money going out? And then just figuring out the best way to keep you safe from yourself and then also making sure that the net worth is set up appropriately for when you do retire, that your pensions in or Social Security, plus the income from the rentals and the distributions from your retirement accounts is going to provide you the lifestyle that you want. So just off the cuff as a spitball, I think you would take a line of credit, pay your 7% on that versus, you know, paying a bunch of tax to Take the liquidity that you do probably need in the future.
- [32:00]
Joe Anderson
Right.
- [32:00]
Fred and Ginger
You know, to. To put some repairs on some rentals. Maybe you might want to sell the rentals.
- [32:05]
Joe Anderson
Maybe. Well, you might. I mean, you look at that.
- [32:07]
Fred and Ginger
You.
- [32:07]
Joe Anderson
I mean, probably.
- [32:09]
Fred and Ginger
What's the cash flow? What's the cap rate? What is the cash? Cash.
- [32:12]
Joe Anderson
And maybe you keep one rental and sell one and. And then have a big influx of cash, and then, you know, I don't know. There's a lot of ways to think about it.
- [32:19]
Fred and Ginger
I mean, they're going to be totally fine for retirement because it's a safe.
- [32:22]
Joe Anderson
Unless they're spending 400,000.
- [32:24]
Fred and Ginger
Yeah, right. I mean, they can always sell, you know, you know, sell the rentals at some point and, you know, 1.2 is paid off. 1.4, 400. So there's, you know, two. Two and a half million dollars roughly, of. Or $2.2 million of just equity right there. In the. In the rentals.
- [32:40]
Joe Anderson
Yeah, in the rentals, yeah. You bet.
- [32:42]
Fred and Ginger
So I would imagine that should be cash flowing.
- [32:46]
Joe Anderson
You would think it'd be cash flowing, certainly. Yeah. I mean, what.
- [32:50]
Fred and Ginger
Hopefully 3% cash on cash on 2.2.
- [32:54]
Joe Anderson
You would think so. Yep. Yep. I mean, it's harder to get cash flows in California, but with. With low debt like this, you would expect it, I think.
- [33:01]
Fred and Ginger
Okay. Yeah, that's what I would do. Thanks. Thanks for the question. All right, moving on. Let's go to. Didn't we read this? Lemon Jello Florida. We already went to.
- [33:12]
Andi Last
He's written into us a number of times. We have not done this one. This one's brand new.
- [33:16]
Joe Anderson
Okay.
- [33:17]
Fred and Ginger
All right. Well, I finally did it. I almost guaranteed I've read this, but.
- [33:25]
Andi Last
We can skip it if you want.
- [33:27]
Fred and Ginger
No, I'm good. After years of asking you guys questions, I decided to retire early at 51. I have a tax question, Big Al, this time around.
- [33:34]
Joe Anderson
Damn.
- [33:35]
Fred and Ginger
Oh, this time. Well, so was Lemon Jello, the one that was like, here, I retired early and I found my significance because I cooked my kids breakfast.
- [33:46]
Andi Last
No, no, no, no. That was somebody else.
- [33:50]
Fred and Ginger
No. Okay. Nope, got it. All right, so 51, that's.
- [33:55]
Joe Anderson
Yeah, you're thinking of someone that retired in their 40s.
- [33:57]
Fred and Ginger
I think maybe.
- [33:58]
Joe Anderson
Yeah.
- [33:59]
Fred and Ginger
All right, he's got a tax question. Starting in 2026, I will have no earned income. However, I will have company installment sale payments of $280,000 in 2026 and $140,000 in 2027. This will obviously be a mixture of principal and interest, and the amortization ends in 2027. I also have short term Airbnb rental income coming in each year. However, this is a new acquisition and is quite possible the income will not exceed the mortgage interest paid. That isn't a major concern as I live there. In four or five years anyway. Once 2028 comes, I'll have no more installment payments. So I'll have some installment interest income and I still have some rental income. Again, maybe no profit after the mortgage. My question revolves around how these income streams affect the standard deduction in tax brackets in general. I have the luxury of having built up some significant retirement, but may have left myself a little shortsighted on getting to 59.5. I was thinking of setting up a 72 tax election. I'm trying to decide whether to start that in 2026 or 2028 when the installment sale is over. I understand the 72t rules and would move what I need into a separate IRA in order to pull out the predetermined amount. That fits my strategy. I appreciate a spitball in the 72t tax election may be taxed in my situation. This question would apply to Roth conversions for those of your listeners that would benefit from that instead of an IRA distribution. Thanks as always. I have to run. My house is on fire.
- [35:45]
Joe Anderson
Okay, all right.
- [35:46]
Fred and Ginger
Your loyal listener Pete from Lemon Jello. His house is on fire.
- [35:53]
Joe Anderson
Yeah.
- [35:53]
Fred and Ginger
Is there fires in Florida?
- [35:55]
Andi Last
I'm hoping that's a euphemism. I'm not sure.
- [35:57]
Joe Anderson
All right, well, why don't. How about I talk taxes, you talk 72T. How about that? So I think his first question how do these income streams affect standard deduction and tax brackets in general? Well, you mentioned installment sale, rental income, 72t. So let's just talk about that. Installment sale is typically when you sell a business or it could be a piece of property, and you don't get all the money up front, you get payments over time. Right. And so the payments over time are some principal and some interest. As you mentioned, interest is ordinary income. Right. Principal payments are going to be a combination of basically return of capital and capital gains. So it depends upon how much gain on sale on, I assume maybe a business that you sold. So some of those principal payments will be taxable, depending upon what your gross profit percentage is based upon the year of sale. So that's capital gain, probably long term capital gain.
- [36:58]
Fred and Ginger
So if you break that down even further, so the installment sale is going to be taxed in three ways because you're going to charge if you're getting an Installment sale. There's interest involved because of your. The payments are pushed out over a time period, five, 10 years or whatever.
- [37:16]
Joe Anderson
You sell your business for 500,000 and you get 100,000 up front. So in other words, you have to pay taxes on that right away. But then you have a note or loan.
- [37:26]
Fred and Ginger
Yeah. You're carrying a note for the buyer.
- [37:27]
Joe Anderson
400,000 with the buyer, and the buyer pays you over time. In this case, some in 2026, some in 2027. And those will be part interest on the note and part principal. But the principal part will be part capital gains and part return of capital.
- [37:43]
Fred and Ginger
Well, the basis would be the original basis of what the business is or whatever that he sold. And then the capital gain would be the gain on the business. So, for instance, in your example, let's say you sell the business for 500,000. The business's actual cost basis is 100,000, 100,000 is return of principal. $400,000 is going to be capital gains.
- [38:04]
Joe Anderson
Yeah.
- [38:05]
Fred and Ginger
But over that period of time where they're paying interest, there's going to be an interest payment on top of that. That would be taxed at CAT or at ordinary income.
- [38:14]
Joe Anderson
Yeah. So let's say you get 200,000 of principal, and in your example, 80% of that is taxable, and you'll pay tax on that. 80%. 80% of the 200,000. So $160,000 would be subject to capital gains. 40,000 would be return of capital. So that's how you think about installment sales, moving out of rental income. Rental income? Yes. There's rental income, there's rental deductions. Right. And then you can create a loss of up to $25,000. In other words, if your expenses are greater than your income, including depreciation, as long as your income is below $100,000, which doesn't look like it will be for 20, 26 or 27. Yeah. So yes, you can deduct the mortgage, but you can't create a loss. It carries over. It's a passive loss carryover. And 72t election, you probably already know that's just ordinary income. That's money coming out of your ira. When it comes out, you got to pay taxes on it.
- [39:17]
Fred and Ginger
Yeah. And so I, like always thinking about it, what a 72T tax election is. It allows individuals to pull money out of a retirement account prior to 59 and a half without a 10% penalty. If you retire from your employer at age 55, there's an exemption there, too, that if you keep it in the 401 plan and you separate from service at 55. There is no 10% penalty. So the way around it, the 10% early withdrawal penalty if you retire, in Peter's case, at 51, is that all right? Well, the installment sale is going to cover me for a couple of years. Maybe the rental income is going to cover me for a couple of years. But hey, I'm 53, 54. I still need income here for the next five, six, seven years. So he could take money out of the retirement account, but it's pretty strict on how he takes the money out. So there's three different ways to do it. The 72 tax election, another term for it is a separate equal periodic payment. And so all that means is that you have to take the same amount of money out of the retirement account each year for five years or until you turn 59 and a half, whichever's longer. So if he takes it out 57, let's say he's going to have to go past 59 and a half with that payment. So you probably want to take it at 55. So then you could take that separate equal periodic payment until you turn 60. Or if you take it before that, you're going to have to pull it out for more than five years. But it's the same payment. There's three different ways to calculate the payment. So you just want to find out what payment is going to you just back in the number and to say, well, what's my living expenses? How much money do I actually need to pull from the overall retirement accounts? You could set up a separate IRA and then do the 72T on that IRA, and then you get those separate equal periodic payments and you avoid the 10% penalty. But yes, everything that comes out of there is ordinary income, unless you have basis in the overall ira. Hopefully you don't. If you do have basis in the ira, then it's pro rata. So you would have to look at your 8606form on your tax return to see if you do have any basis. But that's the only thing out of a retirement account that I ever come out tax free. Because there's no double taxation.
- [41:27]
Joe Anderson
Yeah, and you just said it, but just to be 100% clear. So the reason why you do a 72T election is to avoid that 10% early withdrawal penalty. Right. You still pay income taxes on this, which would happen at any age. But if you take money out of retirement plan before 59 and a half, in most cases, in many cases, you have to pay that 10% penalty. And the 72T election allows you to avoid that. At least the penalty part.
- [41:53]
Fred and Ginger
Yeah. So he's got a lot of moving parts here going back to the installment sale. How is that installment sale then recorded to the irs? Does Peter have to do a calculation himself or is the installment, whoever's bought it in doing the installment sale reporting that and he's getting a K1 or how does that. That I'll report.
- [42:19]
Joe Anderson
Good question. It goes on Peter's return.
- [42:21]
Fred and Ginger
So how does Peter put it on his return? How does he know what's basis, what's capital gains, what's interest? Well, is he going to have to calculate that or.
- [42:30]
Joe Anderson
Yes.
- [42:30]
Fred and Ginger
So he will have to calculate the ratios himself, depending on what the basis or his accountant.
- [42:35]
Joe Anderson
But there's a form that you put on your 1040, the year of sale, and what that does is that calculates what? That gross profit percentage. Remember that example we gave? You sold your business for 500,000. You paid $100,000 to start the business. So that's your basis. So your gain is $400,000 or 80%. That goes on the form. The 80% is calculated and then every year you get a principal payment. After that, 80% of that principal payment will be long term capital gain. Plus you pay ordinary income on the interest income part of that note.
- [43:11]
Fred and Ginger
Got it. Okay. Hopefully that helps. Peter, thanks for listening. Thanks for all the questions. It wasn't for you, we wouldn't have anyone to talk to you. Hopefully your house is not on fire.
- [43:24]
Joe Anderson
Yeah, hopefully you just said that because.
- [43:26]
Fred and Ginger
Yeah, Southern California. Well, yeah, that's a little too close to home here.
- [43:30]
Joe Anderson
Correct.
- [43:31]
Fred and Ginger
Did you know anyone that lost their house?
- [43:36]
Joe Anderson
I knew someone from our church. Their, their son lost their home, but I didn't know them. And I, I know someone fairly well that didn't lose their home. But 13 out of the 19 homes burned down. And so that's almost. Not quite. Almost as bad. They can't go back to their home still.
- [43:54]
Fred and Ginger
Sure.
- [43:54]
Joe Anderson
Yeah.
- [43:57]
Fred and Ginger
Yeah. They probably can't sell it either.
- [43:58]
Joe Anderson
No, it's a mess.
- [44:01]
Andi Last
Home equity may be the biggest asset you own. Many people prefer not to include their home as part of their cash flow plan in retirement. But we're living longer and retirement is getting more expensive. Expensive. From various mortgage options, including HELOCs and reverse mortgages, to the seven benefits of downsizing and some creative alternatives. Joe and Big Al discuss how your home can create retirement income this week on YMYW TV. Watch the show and download 10 tips for real estate Investors for free. Just click or tap the links for both in the episode description.
- [44:33]
Fred and Ginger
So let's go to Lancaster Penns. We got. Hi, Joe, Al and Andy. The. This is Calvin and Susie from beautiful Lancaster, Pennsylvania. I love the show, especially when Joe reads the mail. Yeah, call me the mailman. Yes, Mr. McFeely. Anyone?
- [44:50]
Joe Anderson
No, we're not with you. No, you have to tell us.
- [44:52]
Andi Last
It's Mr. Rogers.
- [44:53]
Fred and Ginger
Come on, Andy.
- [44:55]
Andi Last
Yeah, it's from Mr. Rogers.
- [44:57]
Fred and Ginger
Mr. McE. All right.
- [45:00]
Andi Last
Can you guys hear me?
- [45:02]
Fred and Ginger
Yeah, we can.
- [45:03]
Joe Anderson
Okay. Yeah.
- [45:04]
Jamie Hopkins
Yes.
- [45:04]
Fred and Ginger
I was just not listening.
- [45:06]
Andi Last
Neither are you, apparently. I said Mr. Rogers.
- [45:09]
Fred and Ginger
I'm listening. We are both 63 and plan on retiring in December 2026. I'll be 65. We are hazy IPA drinkers and occasional red wine thrown into the mix. Susie drives a 2010 Audi A4 convertible. And I have a company vehicle until I retire. Primary question is, you have a convertible in Pennsylvania. It gets a little chilly.
- [45:35]
Joe Anderson
You know, you probably only get to drive it.
- [45:37]
Fred and Ginger
Remember your convertible year went through that midlife crisis.
- [45:40]
Joe Anderson
Yeah, yeah, yeah. It was really fun.
- [45:42]
Fred and Ginger
Yeah, you gotta get that.
- [45:43]
Joe Anderson
I. Mustang.
- [45:44]
Fred and Ginger
Red Mustang convertible.
- [45:46]
Joe Anderson
Convertible. I. I really enjoyed that for years until I realized, you know, it's too cold in the winter. And I. I think I told you one time, I. I drove it to Vegas in the summer, and I thought, this is awesome. I'm gonna have the top down in Vegas.
- [45:59]
Fred and Ginger
You pride yourself.
- [46:00]
Joe Anderson
I was. It was. I almost had heat exhaustion, heat stroke. So I had put it on the air conditioner. So I. Yeah. Anyway, there are some drawbacks, but it's. It's great for your midlife crisis. I'm still waiting for you.
- [46:15]
Fred and Ginger
It's coming.
- [46:16]
Joe Anderson
It's coming.
- [46:17]
Fred and Ginger
Oh, boy. All right, we got the primary question. Can we. And should we buy beach house? Well, look at you. You got the convertible already. You got to get the beach house.
- [46:26]
Joe Anderson
I would think so. It goes with a car.
- [46:28]
Fred and Ginger
Yeah. All right. Our finances. We have $2,600,000 in tax deferred accounts, plus $627,000 in Roth IRAs. We have a pension worth $11,000 per year. We do not have a cola. We have about $650,000 in our beach house fund. In $60,000 in emergency fund. We have paid for primary house worth $425,000, which we plan to keep for at least five more years. We have no debt and currently make $275,000 combined over the next couple of years. My Social Security is $3,800 or $3,800 a month at 6,700, $4,700 at 70. Susie's is $2,303,000. Our spending plan for retirement is $120,000, but that will increase to $140,000 to cover the second property. We the plan was to cash flow ages 65 to 67 or 70 and use our cash to do Roth conversion. Susie has other plans, which means beach house, which Susie drives a convertible, right?
- [47:36]
Joe Anderson
Of course she does. She needs the beach house to park the car in front of.
- [47:40]
Fred and Ginger
A beach house purchase would take all of our cash and possibly more. I'm anti mortgage, and I may win that battle. My question is the $800,000 beach house purchase a wise decision based on the information provided.
- [47:59]
Joe Anderson
Okay.
- [47:59]
Fred and Ginger
I've listened for a long time, and a fan of the Roth conversion says a Roth conversion opportunity trump that beach house desire. Okay. Calvin, does a Roth conversion trump a beach house? I mean, what is the beach house? A pilot? No, an 800. Let's see. First off, let's see if they can afford it. They got $650,000 fund in a fund.
- [48:27]
Joe Anderson
Already set aside for it.
- [48:29]
Fred and Ginger
And he's anti mortgage.
- [48:31]
Joe Anderson
Yeah.
- [48:32]
Fred and Ginger
Come on. You got to spend a couple.
- [48:35]
Joe Anderson
Couple dollars to get your lifestyle right. Well, I guess counting the beach house fund, Joe, they've got about almost $4 million of liquid assets.
- [48:45]
Fred and Ginger
So two and a half in deferred accounts, 650 roughly in Roth. That's three.
- [48:51]
Joe Anderson
And then 600. 650 in the beach house fund, and then more for emergency. So almost 4 million. And plus the pension. Pension plus Social Security will be between 84,000 and 103,000, depending upon if they take it at 67 or 70.
- [49:09]
Fred and Ginger
What did you say?
- [49:10]
Joe Anderson
Between 84,000 and 103. Because they have.
- [49:13]
Fred and Ginger
She's got $3,800 a month in 23, 2312.
- [49:19]
Joe Anderson
12 months of that, plus she's got an $11,000 per year pension. That's in that second paragraph.
- [49:25]
Fred and Ginger
Yep. So that's 60 plus. Yeah. All right, so $90,000. They want to spend $120,000.
- [49:32]
Joe Anderson
Yeah. Or maybe even $140,000. But they got $4 million. Seems like they can afford it.
- [49:37]
Fred and Ginger
$60,000. You put that into. So that would be the shortfall roughly at $140,000.
- [49:43]
Joe Anderson
Yep.
- [49:43]
Fred and Ginger
So if I go $60,000 and let's just use the retirement accounts.
- [49:48]
Joe Anderson
Yeah, okay, Fair enough.
- [49:50]
Fred and Ginger
It's 2.3%.
- [49:52]
Joe Anderson
2.3% looks good.
- [49:53]
Fred and Ginger
Yeah.
- [49:54]
Joe Anderson
They can afford it.
- [49:55]
Fred and Ginger
Yeah, for sure. Would you put a mortgage on this bad boy.
- [50:02]
Joe Anderson
Well, see, I want to go back to the question. Is the $800,000 beach house purchase a wise decision? Well, define wise decision to me. Financially, maybe, maybe not. In terms of happiness, keeping your spouse happy, having a good time in retirement, I think it could be a really wise decision.
- [50:25]
Fred and Ginger
I don't think they're going to spend all of their liquid assets. They need 40, $50,000. That's a 2.5% burn rate. They're going to be 65 years old. I know, but that money's going to last. It's going to continue to grow, and it's going to be in a deferred account. The $800,000 beach house is. It's probably going to keep its value or maybe increase a little bit. I don't know what beach that they're buying.
- [50:48]
Joe Anderson
Right.
- [50:50]
Fred and Ginger
What's the goal? Is there legacy goals? Does this want to go to kids, grandkids? Are you going to have family get togethers there? Is this going to be a legacy move? They have enough. They can afford it. Is it wise? I think there's a lot more positives than negatives.
- [51:09]
Joe Anderson
Yeah, yeah, well, that's what I'm saying. And I think a lot of times when people have saved as well as they have, Joe, I mean, it's impossible.
- [51:16]
Fred and Ginger
For them to spend.
- [51:17]
Joe Anderson
Right. And they want to make every decision based upon is this the wisest decision or should they do a Roth conversion?
- [51:24]
Fred and Ginger
Well, if, you know Roth conversion, financially, if you're talking textbook financial planning, sure. Right. But I don't know, are you going to be happy looking at your Charles Schwab Roth IRA balance or, or the beaches? Are you gonna be happy, you know, having a little. What's he, what's he having for a little cocktail here?
- [51:43]
Joe Anderson
Hazy.
- [51:44]
Fred and Ginger
Yeah, come on.
- [51:45]
Joe Anderson
You're just gonna have a beat.
- [51:46]
Fred and Ginger
You're gonna have a cooler of hazy.
- [51:48]
Joe Anderson
IPAs and then, and then red wine when it's cooler weather. Yeah, yeah, you go for the beach house.
- [51:53]
Fred and Ginger
I know, I, God, I, I, I'd buy the beach, but Susie's got to park that convertible.
- [52:00]
Joe Anderson
Somebody's got to park it somewhere.
- [52:01]
Fred and Ginger
Yeah.
- [52:02]
Joe Anderson
Unless you got a three car garage.
- [52:06]
Fred and Ginger
Yeah, I don't know. I think, Andy, do you have an opinion on this?
- [52:12]
Andi Last
I can see the value of both. Is there a reason not to do the beach house but also do some Roth conversion?
- [52:19]
Fred and Ginger
I think that's even possible as well.
- [52:22]
Joe Anderson
Yeah, I think so, too. And personally, I wouldn't be opposed to having $150,000 mortgage on a beach house that I Want? I mean, they got the money and the cash flow to pay it off.
- [52:33]
Fred and Ginger
Yeah. Let's say $150,000. Well, he says no mortgage.
- [52:37]
Joe Anderson
Okay, I get it.
- [52:38]
Fred and Ginger
Hear me out.
- [52:39]
Joe Anderson
I understand.
- [52:40]
Fred and Ginger
All right. 30 year fixed. Even at 7%, your payment's $12,000 a year.
- [52:47]
Joe Anderson
Yeah. It seems doable. With their cash flow, it seems doable. And then if you want to pay it off in five years, you probably can.
- [52:54]
Fred and Ginger
Yeah, exactly. So let's see. I don't know, Calvin. I think you could do the conversions. I think you could potentially get the beach house. I would. I know you're no mortgage kind of guy, but I think I would think about the cash flow. I mean, just financially speaking, doesn't make sense. I don't know. If it doesn't hurt, just push that thing out. 65 years old, you can have a beach at. I'm in favor for it.
- [53:24]
Joe Anderson
Yeah. Okay.
- [53:25]
Fred and Ginger
That's where I stand.
- [53:26]
Joe Anderson
I'm with it. All right.
- [53:29]
Fred and Ginger
You're welcome.
- [53:30]
Andi Last
Susie, thank you so much for all of your questions. It's true, this show literally wouldn't be a show without you. But here's the thing. 16% of our listeners in Apple Podcasts aren't following the show in Apple podcasts and on YouTube. 49% of people who watch this podcast haven't subscribed to our YouTube channel.
- [53:49]
Jamie Hopkins
Channel.
- [53:50]
Andi Last
And you know, when you follow and subscribe and like and comment, all of those engagements tell Apple and YouTube and all the other apps that our content is of value to you, which means that they'll show it to more people, which means that we can help more people with their finances. So I've got a favor to ask. Wherever you watch or listen to the youe Money, you, Wealth podcast, please click the subscribe or Follow button and tell your friends and colleagues to do it too. It really makes a difference and we really appreciate your help. Your Money, you, Wealth is presented by Pure Financial Advisors. Get a free financial assessment from the experienced professionals on Joe and Big Al's team at Pure and unlock peace of mind. They'll analyze your entire financial picture and help you craft a personalized plan for the retirement you deserve. Whether you prefer a face to face meeting at one of our nationwide locations or a convenient online consultation, Pure makes it easy. Click or tap the free assessment link in the episode description or call 888-994-6257 to schedule yours. 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.