Roth Conversions vs. IRMAA, Using Retirement Funds to Pay the Mortgage, Retirement Spending Plan - 534

Summary

Podcast Summary: Your Money, Your Wealth – Episode 534: Roth Conversions vs. IRMAA, Using Retirement Funds to Pay the Mortgage, Retirement Spending Plan

Introduction

In Episode 534 of the acclaimed podcast Your Money, Your Wealth hosted by Joe Anderson, CFP® and Alan Clopine, CPA of Pure Financial Advisors, the hosts delve into critical retirement planning topics. This episode addresses listener questions on Roth conversions, the implications of IRMAA (Income-Related Monthly Adjustment Amount), using retirement funds to pay off mortgages, and crafting effective retirement spending plans. With their signature blend of humor and expertise, Joe and Big Al provide actionable insights to help listeners navigate complex financial decisions.

Caller 1: Ralph and Alice's Roth Conversion Strategy (00:55 – 11:23)

Case Overview

Ralph and Alice, aged 63 and 58 respectively from Monument, Colorado, seek advice on optimizing their Roth conversion strategy to minimize tax liabilities, particularly concerning IRMAA. They have amassed substantial savings, including:

• Tax-Deferred IRAs: $2 million ($1 million each)
• Taxable Accounts: $1.5 million
• Roth IRA: $1 million
• HSA: $100,000
• House: Valued at $1.1 million, fully paid off
• Pensions and Social Security: Ralph receives a $41,000 annual pension and plans to delay Social Security until age 70, expecting $56,000 annually. Alice, currently a teacher earning $70,000, will retire at 60 with a $42,000 pension and begin receiving Social Security benefits earlier.

Key Concerns

Ralph is contemplating increasing his Roth conversions beyond the current $20,000 annual amount to stay below taxable income thresholds that trigger higher Medicare premiums under IRMAA.

Expert Analysis

• Big Al Clopine (00:55 – 11:23): Emphasizes the importance of leveraging lower tax rates now to avoid higher taxes in the future. “I would get over that and start thinking about how to maneuver things, you know, to avoid some of this tax time bomb,” Big Al advises, highlighting the long-term benefits of Roth conversions despite short-term increases in Medicare premiums.

• Joe Anderson (04:31 – 11:23): Points out that delaying Roth conversions until required minimum distributions (RMDs) begin could result in significantly higher taxes later. “He's going to be in the highest IRMAA for the rest of his life,” Joe notes, advocating for maximizing Roth conversions while tax rates are favorable.

Notable Quotes:

• Big Al Clopine (07:04): “If Ralph or Alice were to die prematurely, the money would be forced out at the same level, taxed even more because now Alice is a single taxpayer.”
• Joe Anderson (09:08): “It's going to go from $175 a month to $450 a month,” referring to the increase in Medicare premiums due to higher income from Roth conversions.

Conclusion for Ralph and Alice: Both hosts concur that Ralph should consider increasing his Roth conversions to mitigate future tax burdens, even if it means accepting higher Medicare premiums now. They stress the importance of personalized calculations and long-term tax planning.

Caller 2: Mary Jo's Question on Using 403(b) to Pay Off Mortgage (13:00 – 16:33)

Case Overview

Mary Jo, nearing retirement at 65, is contemplating using her $403(b) funds to pay off the remaining 15 years on her mortgage. She also anticipates receiving a pension and Social Security benefits.

Expert Analysis

• Joe Anderson (13:00 – 15:04): Strongly advises against using retirement funds to pay off the mortgage. “Absolutely not. Do not take money out of your retirement account to pay off the mortgage,” Joe warns, highlighting the severe tax implications of such a move.

• Big Al Clopine (14:05 – 16:33): Reinforces Joe’s stance by explaining the taxation consequences. “If you take money out of the 403, it’s fully taxable,” Big Al elaborates, estimating a potential $100,000 tax bill from a $250,000 withdrawal. He cites a past client experience where premature withdrawal led to significant tax penalties.

Notable Quotes:

• Joe Anderson (14:51): “She takes $250,000 out of her 403, she pays off the note April 15th, she's gonna get a tax bill of what, $80 grand?”
• Big Al Clopine (15:46): “We had this exact case... He took out all the money from his 401k and paid off the mortgage…and didn’t figure out the tax implications.”

Conclusion for Mary Jo: Joe and Big Al unanimously advise against using retirement accounts to eliminate the mortgage. They highlight the heavy tax burden and potential financial instability that could result from such a decision.

Caller 3: Lucas’s Retirement Spending Plan (17:00 – 25:07)

Case Overview

Lucas, aged 35, along with his wife aged 36, aims to retire at 55. Their current financial profile includes:

• Annual Income: $375,000
• Savings: $830,000 in retirement accounts, $100,000 in Roth, $25,000 in brokerage
• Contributions: Maxing out 401(k)s and actively saving for future expenses
• Assets: Home and lake house with remaining mortgage years

Lucas plans to utilize his brokerage account from age 56 to 59.5, followed by withdrawals from his 401(k), Social Security, and pension starting at age 62.

Expert Analysis

• Big Al Clopine (17:00 – 25:07): Commends Lucas’s savings rate of approximately 17%, suggesting that it positions him well for early retirement. However, he notes the uncertainty in projecting brokerage account performance over the next 20 years. Big Al advises developing a formal withdrawal strategy closer to retirement to optimize tax brackets and account distributions.

• Joe Anderson (22:41 – 25:07): Conducts a detailed analysis, factoring in 3.5% inflation over 20 years, projecting future spending needs and account growth. He concludes that Lucas’s plan is viable, recommending a balanced approach to withdrawals from retirement accounts and brokerage to maintain tax efficiency.

Notable Quotes:

• Big Al Clopine (20:47): “I think the savings rate is really good. I think they'll probably be able to retire early and how they'll utilize their accounts is something to be figured out when they're much closer to retirement.”
• Joe Anderson (22:55): “He wants to spend $12,000 a month, correct?” followed by a breakdown of inflation and account growth projections.

Conclusion for Lucas: Lucas is on a promising path to early retirement thanks to a robust savings rate and diversified accounts. The hosts advise maintaining flexibility in withdrawal strategies to adapt to future financial landscapes and tax considerations.

Final Insights and Takeaways

Throughout the episode, Joe Anderson and Big Al Clopine emphasize the importance of:

1. Strategic Tax Planning: Maximizing Roth conversions while tax rates are favorable to prevent higher future tax liabilities.
2. Avoiding Early Withdrawals from Retirement Accounts: Highlighting the significant tax penalties and potential financial strain from such actions.
3. Comprehensive Retirement Planning: Encouraging listeners to develop diversified and flexible withdrawal strategies to sustain their financial well-being throughout retirement.

Notable Closing Quotes:

• Joe Anderson (24:17): “Take it from the retirement account.”
• Big Al Clopine (24:45): “It's amazing. Absolutely.”

Conclusion

Episode 534 of Your Money, Your Wealth provides invaluable guidance for retirees and pre-retirees navigating complex financial decisions. Joe Anderson and Big Al Clopine offer clear, practical advice tailored to individual circumstances, underscoring the podcast’s reputation as a top-tier resource for personal finance and retirement planning.

For more insights and personalized financial strategies, listeners are encouraged to access free resources and seek comprehensive financial assessments through Pure Financial Advisors.

Transcript

[Andi Last]

Ralph and alice in Monument, Colorado have $4.6 million saved at ages 63 and 58. Should they do Roth conversions? Mary Jo in Escondido, California wonders if she should use her 403 money to pay off her mortgage and Lucas has a plan to spend from his brokerage, then his 401k, then his Social Security and pension when he retires in 20 years. What do Joe and Big Al think of his strategy? We'll find out today on youn Money, you, Wealth Podcast 534. I'm executive producer Andi Last, traveling in a fried out combi as you listen or watch with the hosts of youf Money, you, Wealth, Joe Anderson, cfp, who is actually visiting FAM in Minnesota at the moment and currently in the home of ABBA Big Al Clopine, cpa to ask your money questions or to get a retirement spitball analysis of your own, click or tap ask Joe and Big Al in the episode description. Watch my how to video to find out how to make it a good one. Then send it on in as an email or a voice message like this one.

[Ralph]

Hey guys, this is Ralph and Alice calling from Monument, Colorado. I love your show. I stumbled upon it just by browsing through my financial podcast and you guys came as one of the better ones. I've been listening to you ever since and I love it. Anyway, I would love to hear your retirement spitball analysis from me. I'm mostly concerned at a strategy for Roth conversions. I've only been doing about 20,000 a year. But before I get to that, let me give you all the numbers. Number one, been a diligent saver most of my life. I have 2 million in tax deferred IRAs. Of that 2 million, 1 million is mine and about a million is my wife. I have a taxable account of 1.5 million and then I also have a tax free Roth of 1 million and an HSA of $100,000. Currently I am 63 years old. My wife is 58. I retired about a year ago. I have a pension. I get $41,000 a year for the rest of my life. No COLA adjustment. My wife is still working at 58. She's a teacher. She wants to go two more years. She makes about $70,000 but she will have a pension upon retirement at age 60, of which that pension will be $42,000 a year. She's got two years to go before tapping into that. As far as Social Security, I am going to delay my Social Security until age 70. That will amount to annually about $56,000 a year. We use that Mike Piper open security app to decide our Social Security strategy and stated, my wife should probably apply early at age 62. And thankfully, the windfall elimination provision and the government offset provision or whatever that thing was called, that was eliminated. So her Social Security from private sector will apply fully, and at age 62, she'll be able to take out $9,200 a year. And then the strategy was at age 65, and again, I'd be applying at 70. She would apply for the spousal benefit, and her total Social Security would be $17,447 a year. Annual spending during retirement. We're not spending too much. 60 to $70,000 a year. We do own our house free and clear. It's worth about 1.1 million. The biggest issue I have is trying to figure out these Roth conversions. As I said, I'm doing about $20,000 a year now, but I would entertain going a little bit higher because I think the tax man's going to bite me later on as that tax deferred account starts to grow. And I'm trying to do a balancing act and stay below Irma and play that game. But I would just love your suggestions and your advice. It's about all I've got. Oh, as far as the beer, I drink Guinness stout. Love it. Although it's getting a little high in the calories at my older age. And as far as the car I drive, and I'm not a liberal, but I guess now they criticize conservatives for driving these things. I drive a Tesla Model Y. It's probably the most innovative and greatest car I've ever owned. That's it, guys. Appreciate it. Have a great day.

[Joe Anderson]

All right. Well, Ralph and Alice, the honeymooners.

[Big Al Clopine]

That's right.

[Joe Anderson]

60 years old, he's tripping over dollars. Pick up some pennies here, Big Al.

[Big Al Clopine]

I think his biggest problem is he needs to spend more, enjoy life.

[Joe Anderson]

He's got $70,000 his money spending. His fixed income is $70,000.

[Big Al Clopine]

Yeah, it's $80,000. Right. And then he's got almost $5 million.

[Joe Anderson]

And Social Security is going to come in in 10 years or eight years, he's going to have more fixed income than he's actually spending. So he's got $2.5 million, let's call it, for him and his wife. Right. In retirement accounts. Let's say his RMD age is 73. Hers will be 75. I don't know. You double that. So two and a half is now five because they're not touching it. Who knows what it's invested in, but that could easily double in 10 years. His RMD is going to be $200,000.

[Big Al Clopine]

Yeah, just from that part.

[Joe Anderson]

That's the pensions of call it $80,000 plus Social Security of another $100,000, plus.

[Big Al Clopine]

The taxable money that will probably double all those dividends.

[Joe Anderson]

Yeah, take out dividends and interest and. Yeah, so he's worried about irmaa, Right. I mean, he's going to pay the highest irmaa, so I would try to get as much money out of the ROTHA or out of the retirement accounts as he possibly can with these lower rates, 22%, 24%. I would probably kick it to the 24. He's got plenty of cash outside. He's got to run the numbers himself. I guarantee he's got spreadsheets, he's got a calculator. He can look at this. And if he's doing $20,000 a year, because what he's trying to do is stay in the lower Medicare premium payments, but it's a few hundred dollars a month or a couple thousand dollars a year, he's going to have to pay that for the he's going to be in the highest IRMAA for the rest of his life. So I would get over that and start thinking about how to maneuver things, you know, to avoid some of this tax time bomb. Now, if Ralph or Alice were to die prematurely, if Ralph predeceases Alice, I mean, a lot of that money that they've grown is now going to be forced out at that same level, but it's going to be taxed even more because now Alice is a single taxpayer. No offense, Ralph, for killing you out first, but we usually go first to the moon. Ralph.

[Big Al Clopine]

Well, yes. So when you think of irmaa, so for our engineers and accountants and all of those out there that really like to get this dialed in correctly, just think of the extra IRMAA amount that you're going to be paying in two years from now. Just think of that. Add that to the tax that you're going to pay to figure out what your effective rate is and what we're saying. What Joe is saying, and I agree, is even when you add that in, it's going to be a pretty low rate relative to what it's going to be when you pull all that money out, the required minimum distributions. And remember, that's first year only every year it goes up after that. Right. So it's going to be a higher and higher amount. Add that to your pensions and Social Security and oh by the way your income from your non taxable or I should say taxable accounts. Non, non retirement accounts. That's all income too. So yeah, you're going to be in a pretty high tax bracket so I would keep going. I would even consider going to the top of the 24% bracket. But I agree with Joe. You got to run the numbers yourself to figure out how this is going to be. I'm not sure. I don't think you mentioned kids where this money goes to what your long term goals are at the end of life. But that should factor into this too.

[Joe Anderson]

Right? If it's charity he could do QCDs at least of 100,000 of it. But IRMAC, so this is just Medicare premiums and so what Medicare does is take a look at your overall modified adjusted gross income and then depending on where you fall two years prior, excuse me, is going to be your Medicare premium amount. And so I'm guessing so he's married finally joint he wants to stay under that 200,000 where you're Medicare Part B premium is $175. I'm rounding that 174.70. So if he goes to the top of the 24 out his income is going to be top of the 24 is 383.

[Big Al Clopine]

Yeah let's go with that one because that's near the top of the 24.

[Joe Anderson]

It's going to go from $175 a month to 450amonth.

[Big Al Clopine]

Right.

[Joe Anderson]

So what is that $275 extra a month?

[Big Al Clopine]

Yeah. Call it 300 times 12. Call it 3500. Right. So that's the extra he's going to pay for irmaa. So just consider that a little extra tax. Right.

[Joe Anderson]

And if it still makes he wants to save $3,500. I mean that's the delta. Right. Because if he doesn't convert because he wants to convert and stay in that lower Medicare premium. I get it, $3,500. I mean that's a lot of money to him. That's why he's got $5 million because it's like what the hell, $3,500 is a ton of cash. I don't want to spend that unnecessarily. But he's going to give it away to tax. So you just take a look at the top of the 24% tax bracket then you calculate whatever tax that that is and then you add on the $3,500 and then you can find your effective rate. It's still going to be a very good rate given if tax rates go up, which I believe they will by the time he turns 75 or 73 when he has to take his RMDs, I mean he's going to be in probably a lot higher tax bracket than he is today. And I would take advantage for sure of these lower rates and then I would just add back in the irmaa and I think he'd be really happy that he did so. But you're speculating on higher like I don't know what's going to happen to Medicare, what Medicare premiums are going to be. I have no idea what tax rates are going to be. But given where the law is today, given history, given the amount of money that he has, the IRS really likes people like Ralph and Alice because they have a ton of cash in retirement accounts that has never ever been taxed. He's going to pay at some point or the kids are going to pay or spouse is going to pay. So I think the best move is don't necessarily think about tripping irmaa. I'd be thinking more long term of how I can really maximize the tax code today and save the most amount of taxes over my life.

[Big Al Clopine]

Yep, I am right with you.

[Joe Anderson]

If you look at it year by year, you're going to make a different decision. If you look at it over the next 20 years.

[Big Al Clopine]

Yeah, I think that's what you have to do. And then particularly we don't know anything about the health of the two of them. If one of them has more impaired health than the other one will survive, they'll be in the single tax rates. This will be even worse than what we just said. So consider all that too.

[Joe Anderson]

All right. Good luck. Congratulations on quite the retirement there's the.

[Andi Last]

Investing rule of 72, the 80% retirement spending rule, the retirement spending smile, the 4% rule 100 minus your age for asset allocation. Are any of these financial formulas worth anything? There are. There are rules of thumbs to live by and others that can completely derail your retirement dreams. Discover which ones may be your golden ticket and which ones are your one way ticket to trouble. This week on youn Money, you Wealth TV with Joe Anderson, CFP and Big Al Clopine, cpa. Click the link in the description of today's episode to watch. Is there a formula for Retirement on YMYW TV? Then click through to our YouTube channel and leave us a comment to tell us what you think. Also download the Retirement Readiness Guide for free to learn the secrets to controlling your taxes in retirement, creating income to last a lifetime, making the most of your retirement investing strategy, and much more. These seven plays will boost your retirement readiness despite the uncertainties of market volatility, inflation, rising health care costs, and the future of Social Security and Medicare. Just click or tap the links in the description of today's episode in your favorite podcast app to access all of these free financial resources.

[Joe Anderson]

Mary Jo's calling in writing in hey, I'm about to retire in four months. I have 15 years left on my mortgage. I have enough money in my 403 to pay off my loan. Is this a good idea? I'll be receiving a pension from my employer as well, and I'll be taking my Social Security. I'm 65. Mary Jo I emailed her and asked.

[Andi Last]

Her for more information and she hasn't responded yet. So this is what we have to work with.

[Joe Anderson]

No, absolutely not. Do not take money out of your retirement account to pay off the mortgage.

[Big Al Clopine]

I knew you're going to say that, and unfortunately I agree. And here's why. It's because if you take money out of your 403, it's fully taxable. So you're going to have to take more money out of the 403 to pay the tax so that you can have a net amount to pay the mortgage. And you're going to be surprised how quickly that 403 account just gets swallowed up by taxes. So not only are the taxes all at one time, but it pushes you in a higher bracket. You'll pay a lot more tax than you should. Yeah, you just don't want to do that. It's just not a good idea.

[Joe Anderson]

We've seen it so many times. We've seen people take money out of retirement accounts to buy homes. And so oh yeah, I want to buy my dream lake home. And all the liquidity is in the retirement account, right? And they don't want to have a mortgage, so they take the $500,000 out of the retirement account and they buy the house. Or in Mary Jo's case, she lives in Escondido. So I don't know. It's a 15 year note. I'm guessing it's gotta be a few hundred thousand dollars. So she's got enough money she's got just enough money in the 403B AL to pay off the note. So guess what? She takes that $250,000 out of her 403, she pays off the note April 15th, she's gonna get a tax bill of what, 80 grand?

[Big Al Clopine]

Yeah, yeah, let's say 100 grand, which she doesn't have. Right. So then she goes and gets a mortgage for the 100 grand, but she has no money at all because the 403B is gone. So now it's like, oh, now I got to pay this mortgage and I got no money.

[Joe Anderson]

Right? I mean, that's what happens. The $250,000, you take a huge check like that, it's like, well, that's 250,000 of ordinary income on top of whatever income that you have. Let's just assume that that puts her in the 24% tax bracket. Plus state here in California is 10. That's 34%. 34% on $250,000. It's a big number. 70, $80,000. She doesn't have the liquidity because all of the money, all the liquid cash was in her retirement account. But now she can't get a loan because she's retired if she doesn't have any liquid assets because she wrote the check out of her 403 to pay the note.

[Big Al Clopine]

We had this exact case, Joe, you and I, 15 years ago. Remember? The guy who came in was so proud. Joe. Al, you're not going to believe it. I took out all the money from my 401k and I paid off the mortgage. I am so proud. I have no mortgage. We said, well, what about the tax money? Because we computed it, it was close to $100,000. Where are you going to get that? He goes, oh, I didn't figure that. And of course, then not only is the 100,000 is probably penalties for not making estimated payments timely. Right? So you got all of that. Fortunately, in that particular case, he'd taken the money out and he returned it within the 60 day rollover rules. So he was able to get out of it. But yeah, just. It's tricky. Can be.

[Joe Anderson]

All right, well, hopefully we caught Mary Jo in time if it's like $5,000 mortgage left. And sure, but the way she framed the question, it was like, I have just enough in my 403B to pay off my mortgage. All right, let's go to Lucas looking for some advice on my plan. All right, let's go to the next question. We don't give advice here, Lucas.

[Big Al Clopine]

Change the word advice to spitball.

[Joe Anderson]

All right, My wife and I are 35 and 36. She drives a 2015 Chevy Tahoe, and I drive a work truck, mostly provided by the company. Also, I have an older Tahoe, 2007. She just won't give up going on 250,000 miles. My wife drinks champagne in margaritas. I drink Old Fashions in Manhattan's. Blatton's Neat is a great nightcap. Gotta tell you, never, never had a Blatten.

[Big Al Clopine]

I don't even know what that is, do you?

[Andi Last]

It appears to be bourbon. Blanton's Neat. Blinton bourbon.

[Big Al Clopine]

Okay.

[Joe Anderson]

Yeah. The guy's 30 and he's drinking Old Fashions. Manhattans and Latins.

[Big Al Clopine]

Yeah, he's old school.

[Joe Anderson]

Don't you got to at least get to 60?

[Andi Last]

Hey, you like old fashions and you're like 37.

[Joe Anderson]

I only have one old fashioned, like every couple months. Six months, one. A quarter maybe. Well, I did find this mix. I think I forget it's like in an orange bottle that it's like pre made so you don't actually have to make it. Someone brought that over to the house and I had a little sip of that. I thought that was okay.

[Big Al Clopine]

It was all right. Okay.

[Joe Anderson]

But anyway. All right. So in my younger years. Oh, boy. I would mix wine and Jack Daniels. You should try it. Oh, you'll love the hangover. Sounds awful. Yeah, two pretty okay kids, 12 and 6. Okay. Pretty okay.

[Big Al Clopine]

Pretty okay.

[Joe Anderson]

All right. We vacation a lot.

[Andi Last]

It doesn't say that's with the kids or without.

[Joe Anderson]

Yeah, I don't know. They're only okay, so probably not. We go 10 days in Mexico, two weeks in Europe, and they do this every year. I also own a lake home. We spend a lot of time at looking for 10,000 to $12,000 a month in retirement. We earn about $375,000 annually. We have $830,000 in a 400, 100 grand in Roth, and we both max out the 401s at $23,500. 4% max or 4% match. So only about $9,000 match combined. We have $25,000 in brokerage and we contribute about 9,000 or $1,000 a month. It took $100,000 for a down payment on a cabin recently. Okay, 500 and 29s are 42,000, 31,000. We contribute $600 a month, $50,000 in savings. We want to retire at 56 and 55. I have a pension option to collect around 400,000 at 55 or collect $3,500 a month with no survivor benefit at 62. Also a small retirement through the union hall. Our combined social and pensions, if we collect at 62 would be roughly $7,400 a month. Both employers and 401 use the rule of 55 if needed. Do you think it's achievable to live off the brokerage from 56 to 59 and a half? Not worried about depleting the brokerage 401 after 59 and a half and supplement my withdrawals at 62 with Social Security pension. We will end up contributing more to the brokerage when the kids 529 plans are done and the mortgages are paid. Nine years left in the primary and 11 years left on the lake home. Thanks. Right, okay, so we got to do some math here.

[Big Al Clopine]

Well, here's the math I did, because when you're 20 years away and changing cash flows, it makes this rather difficult. But I just looked at what he's saving. What they're saving right now, between the two 401s, the Match and the 529, they're saving about 63 grand out of their salary of 375. That's about 17% savings rate, which is great. We tell people if you can get up to 20, you could probably retire kind of any way that you want to. Maybe not any way that you want to, but you can have a very nice retirement. And they're probably actually saving more than that because they're buying cabins and, and things like that. So I think the savings rate is good. Whether they'll have enough in brokerage in 20 years from now is. Is virtually impossible to say since they're not really saving at a brokerage right now, I think. But I would say another point here, Joe would be it looks like he's trying to spend different monies at different times. And I've never thought that that was a very good idea. I think you got to have a formal withdrawal strategy when you get to that point. And since they'll be over 55, they can take from their 401, which probably they'll want to. They'll probably want to fill up lower brackets and even do Roth conversions and not necessarily live completely off a brokerage or if the brokerage account's really high, live off of that. But do Roth convers to then put more money into the Roth. I mean, there's all kinds of things they can do, but we're Talking about something 20 years from now, which is a bit hard to predict. So I'm going to go back to my original thought on this, which is I think the savings rate is. Is really good. I think they'll probably be able to retire early and how. Which monies they'll use or what's the right distribution strategy that would be figured out when they're much closer to retirement. That's what I think.

[Joe Anderson]

He's 35, wants to retire 55.

[Big Al Clopine]

Yep.

[Joe Anderson]

So let's figure it out for him. All right. So he wants to spend $12,000 a month, correct?

[Big Al Clopine]

Yep. But then you have to inflate that $24,000.

[Joe Anderson]

20 years. Let's use 3.5% inflation.

[Big Al Clopine]

Okay.

[Joe Anderson]

So he wants to spend $286,000 in future dollars.

[Big Al Clopine]

Right.

[Joe Anderson]

All right, so he's got $900,000 today. And so let's say. And he's saving $60,000 a year with Match.

[Big Al Clopine]

Yeah. I get $63,000.

[Joe Anderson]

$63,000 a year. And you got 20 years. And I'm going to assume a 7% growth rate, which will be $6 million in 20 years.

[Big Al Clopine]

Okay.

[Joe Anderson]

All right. So at 55, let's say he takes 3.5% out of that account, which is going to give him about $212,000 of distribution at a 3.5% burn rate at 55.

[Big Al Clopine]

Right.

[Joe Anderson]

I think he's good because that's not including his pension. That's going to give him another $3,500 a month. That's not including Social Security. Yeah. I think you could bridge the gap there at 55, but I wouldn't worry about draining the brokerage. You're 55. Take it from the retirement account.

[Big Al Clopine]

Yeah. Because you retire after 55 and you can do that without penalty.

[Joe Anderson]

Yeah. So it's not like draining the brokerage account in cash and then just then pushing my retirement account. You want to have a mixture. You're probably going to take a little bit from your retirement account, a little bit from the Roth and a little bit from the brokerage account to keep you in the lowest tax bracket possible, you know, through your overall entire retirement. So. But no, I think he's in. The guy's 35. He's got a million bucks liquid.

[Big Al Clopine]

It's amazing. Absolutely. Yeah. Right.

[Joe Anderson]

And then he goes to Mexico for 10 days and he has wine and Jack Daniels when he's at the cabin, Right?

[Big Al Clopine]

Yep. No, it's.

[Joe Anderson]

And go to Europe for two weeks. Maybe go to Europe for a week, you know, and save that. And you can retire at 50.

[Andi Last]

And don't take the okay kids.

[Joe Anderson]

Yeah. What's up with the okay kids? Kids are okay. I don't know. Are they okay, like, in good health or. Yeah. I don't know. Never really cared for them.

[Big Al Clopine]

Hopefully they're not listening.

[Joe Anderson]

What are they, 6 and 12?

[Big Al Clopine]

Yeah, if he plays. If he. If he plays it in the car and they happen to be in the.

[Joe Anderson]

Car, I'm sure if they're anything like.

[Big Al Clopine]

My kids, they won't be listening.

[Joe Anderson]

Yeah. Not compute. All right. Are we good?

[Big Al Clopine]

Sure.

[Joe Anderson]

Wonderful. Alan, how long are you in Hawaii?

[Big Al Clopine]

I'm here the rest of this week and next week, then I'm back.

[Joe Anderson]

Wow. How's the weather? You look like you got sunburn already.

[Big Al Clopine]

Yeah, it's 80 degrees right now. Water's about 75. It's lovely. It's perfect.

[Joe Anderson]

Gonna head out for a little snorkel after this?

[Big Al Clopine]

I think so. Yeah.

[Andi Last]

And some rum.

[Big Al Clopine]

Yeah. I don't normally sit inside in the afternoon unless I have to. It's a little warm in here. And that's. That's in my shorts.

[Joe Anderson]

Oh, well, we'll get you outside.

[Big Al Clopine]

Yeah. Okay. All good.

[Joe Anderson]

All right. Wonderful. Thanks, Andy. Great job, Al. Thanks for joining us. We'll see you again next time at your Money or Wealth?

[Andi Last]

This is yous Money, you, Wealth, you, podcast. If you enjoy ymyw, do us a favor and tell your friends. It helps us to reach more listeners like you. And don't forget to leave your honest reviews, comments and ratings for your Money, you, Wealth in Apple Podcasts, on YouTube, and in all the other apps that let you do that. That would be Amazon, Audible, Castbox, GoodPods, Pandora, Player, FM Podcast Addict, and Podchaser. We are on all of them. Your Money, you, Wealth is presented by Pure Financial Advisors. To really learn how to make the most of your money and your wealth in retirement, you need more than a spitball Schedule a no cost, no obligation comprehensive financial assessment with the experienced professionals on Joe and Big Al's team at Pure. Click or tap the free financial assessment link in the episode description or call 888-994-6257 to book yours. Meet in person at any of our locations, nationwide or online. Right from your couch. No matter where you are, the Pure team will work with you to create a detailed plan that's tailored to meet your goals and your needs in retirement. 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.