Podcast Summary: Your Money, Your Wealth – Episode 553

"Should You Convert to Roth Before or After You Retire?"
Release Date: October 28, 2025
Hosts: Joe Anderson, CFP® & Alan “Big Al” Clopine, CPA

Episode Overview

In this episode, Joe and Big Al dig into several listeners’ questions about some of the trickiest retirement and tax-planning issues—and they do it, as always, with their trademark banter and humor. The main theme is the perennial Roth conversion timing dilemma: should you do it pre- or post-retirement? Along the way, they cover high-fee 457 plans, decumulation strategies, Social Security timing, and even “borrowing from yourself” with 401(k) loans. The episode is a wide-ranging, practical, and entertaining look at modern retirement planning.

Key Questions and Listener Scenarios

1. Should You Max Out a High-Fee 457 Plan?
   [01:01–06:39]

   • Listener: James from Texas, local government worker, household income $135,000.
   • Scenario: Considers maxing out a 457(b) plan with high expense ratios vs. investing in a low-cost taxable brokerage.
   • Discussion:
     • Big Al: “I would max it out if there was a Roth option... If I can't, then I would take it outside. I'd invest in low-cost funds in a brokerage account.” [04:44]
     • Joe: “I would go 100% into the 457 account. Max it out, Roth or not... Out of sight, out of mind. You check the box, save as much as you can.” [05:08]
     • Key Points:
       • Tax-sheltered savings beat taxable for most, even with high fees.
       • Roth options in 457s can tip the decision even more towards maxing out.
       • High-expense ratios matter, but not as much as participation/discipline for long-term wealth.
       • Brokerage accounts are more flexible but also more tempting to spend.
     • Memorable Quote:
       “People who have a 401k, 403b, 457 or whatever versus people that don’t at retirement—who has more money? It’s out of sight, out of mind. They save and they don’t look at it, they don’t touch it.” — Joe [06:12]

2. Roth Conversions and Retirement Decumulation for “Lois & Clark” (Full-Time Travelers)
   [06:39–18:45]

   • Listeners: Lois (65) & Clark (78), Florida residents living full-time in a motorhome; $3.8M net worth, thinking of buying a $500K house, minimal real estate, large IRAs.
   • Questions:
     1. How much should Lois convert to Roth before age 73 (RMD age)?
     2. Should the tax payment for conversions come from the brokerage account?
     3. Should they get more conservative with investments after a 12% average return?
   • Discussion:
     • On Asset Allocation:
       “20% [fixed income] is like a million dollars on $3.8 million, and they only need to be pulling $60,000 for the next five years. So I’m okay with 80/20.” — Joe [13:55]
     • On Roth Conversion Tactics:
       • Use mortgage strategically: Consider taking a loan on the new house and methodically using IRA withdrawals and Roth conversions over several years to pay both the tax and the mortgage, locking in lower tax rates before RMDs force higher withdrawals.
       • “The RMD is going to be a pretty high number, so you want to get converted certainly well past the 12% [tax] bracket, because by the time the RMDs kick in, you’re going to be in the 22 or 24% bracket.” — Big Al [16:49]
       • Tax payments for conversions should come from the brokerage to maximize Roth balance.
     • Estate Planning:
       • Consider projected heirs’ future tax brackets for Roth conversion aggressiveness.
       • 10-year rule for inherited IRAs: Discussed implications.
     • Memorable Exchange:
       “Honey, we got $96,000—that’s it. No, we can’t go $1 over that 12% tax bracket.” — Joe [11:16], lampooning clients who anchor spending decisions to tax brackets.
     • Conclusion:
       • Keep some flexibility (loan for house instead of using up all brokerage assets).
       • Be aggressive but strategic in Roth conversions toward RMD/estate goals.

3. Planning Roth Conversions After Early Retirement (“Ray Charles” in Chicago)
   [20:17–32:26]

   • Listener: “Ray Charles,” 52, $3.1M portfolio, high income, wants to quit corporate job at 55 for a lower-stress gig until 60, then fully retire. Wife earns $110K, retirement expenses projected at $130K/year.
   • Questions & Points:
     1. Is their plan financially feasible?
     2. If Ray stops saving at 55, will assets last for $130K/year from age 60 onward?
     3. Best Social Security claiming strategy?
     4. Should he use the “Rule of 55” to access 401(k) at 55?
     5. Should he pay off a 2.1% mortgage early?
   • Discussion:
     • Calculations show a sustainable plan (~4% withdrawal rate), especially if Social Security is timed strategically (defer highest benefit as long as possible).
     • Both hosts recommend deferring Ray's larger Social Security benefit to age 70.
     • Rule of 55 only needed if his new part-time work won't cover expenses—which it should, per his plan.
     • “Should I consider paying off the mortgage in the next few years?”
       “No. 2.1%. Keep it. You got plenty of assets. I'd want to continue to have the assets compounding for me.” — Joe [29:56]
     • On Early 401(k) Withdrawals:
       “If you have to [use the Rule of 55], fine. But if you don’t, let it grow.” — Big Al [28:40]
     • Humor:
       “What the hell is mountaineering?” — Joe [30:37], about Ray’s planned mountain adventures.
       “There is actually a Chicago mountaineering club!” — Andi [31:04]
     • Big Picture: The plan is sound if Ray keeps some earned income between 55-60; Social Security deferral is key.

4. Should You Take Another 401(k) Loan for Home Improvements? (“Gun & Rose” in Louisiana)
   [33:28–38:27]

   • Listeners: “Gun and Rose,” $436K in wife’s 403(b), $262K in TSP, $292K in Roth, mortgage $400K (after cash-out for property repair), wife’s job is stable.
   • Scenario: Considering another $50K loan from 403(b) for a home project and possibly to pay off a car loan.
   • Discussion:
     • Both hosts dislike 401(k)/403(b) loans unless absolutely necessary.
     • Problems:
       • Repayment must be made with [already] taxed dollars.
       • If job is lost, unpaid loan becomes fully taxable.
       • Opportunity cost: Missing market growth.
     • Alternatives:
       “I think if there’s no other way to do this, then maybe I’d get a home equity loan—and maybe I’d rather do that.” — Big Al [38:18]
     • Memorable Quote:
       “No, because I did one before... it sucks!” — Joe [36:17]
     • Conclusion:
       Avoid using retirement plan loans for optional home improvements; consider home equity as a better alternative.

Other Notable Quotes & Memorable Moments

• On Cruises and Financial Discipline:
  “You put stuff in brokerage accounts and guess what? It gets spent. Big Al’s going to ask you to go on his cruise where there’s no drink limits, no off limits, and he’s not going to buy you the drink package.” — Joe [06:21]
• On Financial Planning Discipline:
  “If you got a 401k plan at work, max it out. Save as much as you can, don’t touch it, you’ll be amazed at the power of compound growth.” — Paraphrasing Joe & Al’s general advice [Throughout Q&A segments]
• Joe on Mountaineering:
  “I’d much rather just keep grinding the corporate life than do that!” [32:03]
• Show’s Tone:
  Irreverent, candid, and full of gentle teasing—blending genuine expertise with humor.

Segment Timestamps (Major Content Sections)

• [01:01] — James: 457 plan vs. brokerage, expense ratios, contribution strategy
• [06:39] — Lois & Clark: Roth conversions while traveling, buying a house, asset allocation, estate goals
• [20:17] — Ray Charles: Early retirement math, Social Security, asset drawdown, mortgage decision
• [33:28] — Gun & Rose: 401(k) loans for home improvement, financial trade-offs

Summary Takeaways

• Roth conversions are generally more favorable in lower-income, pre-RMD years. Be aggressive if future tax rates or RMDs will be high, but plan how to pay the conversion tax—ideally from taxable/brokerage assets.
• Weigh high-plan fees against the value of automatic, tax-advantaged savings behavior.
• Timing Social Security is nuanced; deferral of the higher-earner’s benefit often maximizes household longevity protection.
• Borrowing from 401(k)/403(b) should be a last resort due to tax/repayment complications and lost compounding.
• Deciding on asset allocation in retirement depends on your risk tolerance and goals for heirs—there’s no one-size-fits-all.
• Always customize your strategy for your life goals, family tax situation, and timeline.

Further Learning & Resources (as referenced)

• The Ultimate Guide to Roth IRAs — Free resource for Roth account strategies, backdoor Roths, and withdrawal rules.
• [Retirement Lifestyles Guide](Link in episode description) — For planning around longevity, health, lifestyle, and withdrawal rates.

Note: For detailed spitball analysis or advice, listeners are encouraged to submit questions at YourMoneyYourWealth.com or schedule a meeting with Pure Financial Advisors.