Smart Strategies to Retire Early and Spend More - 540

Summary

Podcast Summary: Your Money, Your Wealth Episode 540 – "Smart Strategies to Retire Early and Spend More"

Release Date: July 29, 2025

In Episode 540 of "Your Money, Your Wealth," hosts Joe Anderson, CFP®, and Big Al Clopine, CPA of Pure Financial Advisors delve into actionable strategies for early retirement, effective spending, and optimizing Social Security benefits. The episode features insightful listener questions, comprehensive financial analyses, and engaging banter that make complex financial topics accessible and entertaining.

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1. Introduction and Listener Engagement

The episode kicks off with executive producer Andi Last announcing a giveaway contest, encouraging listeners to participate in the YMYW podcast survey for a chance to win a $100 Amazon E-Gift Card. This segment, while promotional, sets the stage for audience interaction and community building.

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2. Listener Questions and Expert Analysis

a. Beth and Rip’s Early Retirement Plan

Listener Profile: Beth (51) and Rip (56) from Florida are high earners contemplating early retirement to enjoy semi-retired life and increased travel. They have robust financial assets, including income-generating real estate, substantial retirement accounts, and minimal debt.

Financial Snapshot:

• Assets:
  • Traditional IRA: $3.6 million
  • Brokerage Account: $1 million
  • Roth IRA: $100,000
  • Real Estate Portfolio: $1.8 million (10 rental properties, generating $150,000/year after taxes)
  • Primary Residence: $1.6 million (with $200,000 mortgage)
• Income:
  • Current Combined Annual Income: $770,000 (pre-tax)
  • Current Annual Spending: $250,000
• Retirement Goals:
  • Spending: $200,000/year for the first 10 years
  • Social Security: Rip anticipates $34,000/year at 62, $60,000/year at 70; Beth expects $33,000/year at 62, $59,000/year at 70.
  • Roth Conversions planned post-retirement

Key Questions:

1. Can Beth and Rip retire early, spend more, and still retire with zero debt?
2. When should they claim Social Security?
3. Is it sustainable to spend more than $200,000 annually during their early retirement?

Expert Analysis:

Joe Anderson [05:41]: "Congratulations, Beth. You've and Rip have done a phenomenal job of accumulating a ton of wealth here."

Joe highlights their strong financial foundation, noting their substantial real estate income and diversified investment portfolio. He emphasizes that their ability to generate $150,000 annually from real estate comfortably supports their $200,000 spending goal when combined with Rip's part-time income of $150,000.

Big Al Clopine [06:01]: "They could generate from that without much trouble... Plus, I think Rip will be working part time and making 150, so they're spending 200 and they're making 300 even without touching their portfolio for six years."

Big Al underscores the sustainability of their spending plan, projecting that their combined income from part-time work and real estate will not require dipping into their investment portfolios for at least six years. This provides a buffer to enjoy their early retirement without immediate financial strain.

Social Security Strategy:

Both hosts discuss the optimal timing for claiming Social Security benefits. They recommend delaying benefits to age 70 to maximize payouts unless there's a compelling financial need to take them earlier. This strategy leverages the increased benefits (approximately 8% per year) for each year benefits are delayed beyond full retirement age.

Roth Conversions:

Beth plans to initiate Roth conversions post-retirement to take advantage of lower tax brackets during this period. The hosts commend this strategy, which can enhance tax efficiency and provide tax-free income sources in the future.

Die with Zero Philosophy:

Beth mentions her alignment with the "die with zero" philosophy, intending to fully utilize her wealth during her lifetime rather than leaving substantial inheritances. Big Al [10:54]: "To me, I think that's a little tricky because you give all the money to the kids and then you need it for long-term care and you don't have it."

Big Al cautions against fully committing to this philosophy without considering unforeseen expenses, such as long-term care, emphasizing the importance of balance between enjoying wealth and ensuring financial security.

Conclusion for Beth and Rip:

Both Joe and Big Al agree that Beth and Rip's plan is robust and feasible. They recommend maintaining flexibility to adjust spending based on investment performance and personal circumstances over the next decade. Their strategy to potentially increase spending for travel and experiences is well-supported by their income streams, and they suggest periodic reassessments to accommodate any changes in financial status or personal goals.

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b. Forrest and Jenny’s Goal to Retire by 50

Listener Profile: Forrest (31) and Jenny (31) from Cherry Hill, New Jersey, are ambitious early retirees with significant real estate investments and aggressive savings strategies.

Financial Snapshot:

• Assets:
  • 401(k): $95,000
  • Roth IRA: $258,000
  • Brokerage: $105,000
  • Rental Income: $3,500/month from 10 properties (projected $12,000/month post mortgage payoff)
• Income:
  • Current Gross Income: $350,000/year (excluding rental)
  • Annual Savings: $100,000/year (maxing Roth, 401(k), HSA, and brokerage accounts)
• Retirement Goals:
  • Target Retirement Age: 50
  • Current Spending: $12,000/month (expected to rise slightly in retirement)
  • Post-Retirement Spending: Including travel and bucket list items, inflation not yet accounted for

Key Question: Are Forrest and Jenny on track to retire at age 50 based on their current financial trajectory?

Expert Analysis:

Big Al Clopine [15:28]: "Anyone saving a hundred thousand dollars a year and already at 31 has almost half a million... At 50, you can kind of do what you want."

Big Al applauds Forrest and Jenny’s disciplined saving and investment habits, emphasizing that their aggressive savings rate positions them well for early retirement. He projects that their investments, growing at an assumed 7% annual return, could amass approximately $5.4 million each by age 50, providing a substantial financial cushion.

Joe Anderson [15:32]: "When I heard, yeah, we have 400 rental properties, I was thinking, this guy's like 90. What's he got? 10 rental properties."

Joe humorously acknowledges Forrest's impressive real estate portfolio for their age, highlighting the significant passive income it generates. This income stream is pivotal in supporting their high spending and savings rate.

Big Al Clopine [16:17]: "You're saving 100, they're in the driver's seat to do what they want as long as they keep doing this on a go forward basis... you may want to work a little bit longer."

While praising their financial strategies, Big Al advises considering potential changes in financial priorities or unexpected expenses that could impact their ability to maintain the $100,000 annual savings. He suggests that even with their strong position, having contingency plans and staying adaptable is crucial for long-term financial health.

Tax and Real Estate Considerations:

The hosts explore the potential tax benefits and definitions related to real estate professionals, noting that qualifying as a real estate professional for tax purposes can allow for more significant deductions. This status requires dedicating more than half of one's working time to real estate activities, which can optimize their tax situation and enhance overall financial efficiency.

Work-Life Balance:

Big Al shares a personal anecdote about wanting to retire at 50 but finding fulfillment in continued work, subtly suggesting that personal satisfaction and purpose can play significant roles in retirement decisions beyond mere financial capability.

Conclusion for Forrest and Jenny:

Forrest and Jenny are well-positioned to achieve their goal of retiring by age 50, thanks to their substantial savings, diversified income streams, and strategic investment in real estate. The hosts encourage them to maintain their disciplined approach while remaining open to adjusting their plans as circumstances evolve. Their proactive financial management serves as an exemplary model for listeners aspiring to early retirement.

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c. Memphis’s Retirement and RMD Conundrum

Listener Profile: Memphis, a 73-year-old listener, is navigating Retirement Minimum Distributions (RMDs) while still employed and seeking advice on maximizing retirement account contributions.

Financial Situation:

• Current Status:
  • Wife (73) has begun taking RMDs.
  • Memphis (74) plans to retire in July 2026 but is considering contributing to spousal IRA while taking RMDs.

Key Questions:

1. Can Memphis contribute $8,000 annually to his wife’s IRA while she is already taking RMDs?
2. Is it permissible to start withdrawing RMDs in the spring while still employed?
3. How can he effectively utilize his RMDs to maximize tax-advantaged retirement contributions?

Expert Analysis:

Big Al Clopine [22:56]: "So, can he still contribute $8,000 for spousal IRA even though she's taking an RMD? The answer is yes."

Big Al confirms that as long as Memphis is still working, he can make spousal IRA contributions for his wife, even if she is already taking RMDs. This is a valuable strategy for continued tax-advantaged savings despite her age and the commencement of RMDs.

Joe Anderson [23:34]: "That's the rule that changed. You can't put money into an IRA now... It was The Secure Act 2.0, I believe is when that changed."

Joe references the SECURE Act 2.0, which updated regulations regarding IRA contributions and age limits, clarifying that spousal IRA contributions remain permissible under certain conditions despite recent legislative changes.

Big Al Clopine [24:03]: "But the bigger question is, can he take his RMD while he's still working and then put his salary like basically all of it towards the 401 and the 457?"

Big Al engages with the core of Memphis's strategy, discussing the feasibility of withdrawing RMDs to support maxing out 401(k) and 457 plans. This approach aims to optimize tax benefits by reducing taxable income while maintaining retirement contributions.

Tax Efficiency Considerations:

The hosts explore the implications of taking distributions to fund retirement accounts, highlighting the balance between taxable withdrawals and tax-deferred contributions. They emphasize the importance of understanding how RMDs interact with contribution limits and overall tax strategy.

Strategy Recommendations:

Joe and Big Al advise Memphis to thoroughly assess his RMD obligations, ensuring that withdrawing funds to contribute to retirement accounts doesn't inadvertently push him into higher tax brackets. They recommend a careful calculation of the necessary RMD amounts and the optimal allocation of these funds to maintain tax efficiency.

Conclusion for Memphis:

Memphis can indeed contribute to a spousal IRA while his wife is taking RMDs, provided he meets the eligibility criteria as a working spouse. Additionally, strategic withdrawal of RMDs to fund other retirement accounts can offer tax advantages, but it requires meticulous planning to avoid unintended tax consequences. The hosts encourage Memphis to consult with a financial advisor to tailor strategies to his specific circumstances, ensuring compliance with IRS regulations and optimization of his retirement funding.

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3. Hosts’ Interlude and Personal Anecdotes

Interspersed between the listener segments, Joe and Big Al engage in light-hearted discussions about travel experiences, favorite TV shows like "Yellowstone," and personal anecdotes that add a personable touch to the podcast. These segments, while not directly related to financial advice, enhance listener engagement and provide a relatable context to the hosts' expertise.

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4. Key Takeaways and Practical Advice

• Early Retirement Feasibility: With disciplined savings, diversified income streams, and strategic investments, early retirement is attainable for those who plan meticulously and remain adaptable to changing financial landscapes.

• Social Security Optimization: Delaying Social Security benefits can significantly increase lifetime payouts. Assessing personal financial needs and health projections is crucial in determining the optimal time to claim benefits.

• Roth Conversions: Leveraging lower tax brackets post-retirement to execute Roth conversions can enhance tax efficiency and provide more flexible, tax-free income sources in the future.

• Spousal IRA Contributions: Even in advanced age or when taking RMDs, spousal IRA contributions remain a viable strategy for continued tax-advantaged savings, provided eligibility criteria are met.

• Tax-Efficient Withdrawal Strategies: Balancing RMDs with retirement account contributions requires careful planning to optimize tax outcomes without compromising income needs.

• Balance Between Enjoying Wealth and Securing Future Needs: While philosophies like "die with zero" encourage maximizing lifetime enjoyment of wealth, it's essential to maintain a balance to cover unforeseen expenses and ensure long-term financial security.

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5. Conclusion

Episode 540 of "Your Money, Your Wealth" effectively bridges the gap between complex financial strategies and everyday application, offering listeners actionable insights into early retirement, Social Security optimization, and tax-efficient financial planning. Through thoughtful listener questions and expert guidance, Joe Anderson and Big Al Clopine provide a comprehensive roadmap for achieving financial independence and enjoying a fulfilling retirement.

Listeners are encouraged to engage with the podcast by participating in surveys, accessing free financial resources, and consulting with Pure Financial Advisors to tailor strategies to their unique financial situations. The episode underscores the importance of proactive planning, continuous education, and flexibility in navigating the multifaceted journey toward financial freedom.

Transcript

[Andi Last]

Here's your chance at a $100Amazon E gift card. Answer 18 questions in my 8th annual YMYW podcast Survey and you are entered. To win. Click or tap the link in the episode description, type the secret password YMYW and let us have it. Your legitimate, complete entries with your honest opinions about what would make your money your wealth. Your favorite, funniest top best personal finance podcast will be in the running for the hundred bucks. U.S. residents only. No purchase necessary. Survey and giveaway clothes and winner chosen at 5pm Pacific Time on August 31, 2025. Now can Beth and Rip retire early, spend more and die with zero? When should they claim Social Security? Forrest and Jenny have 10 rental properties at age 31. Can they retire at age 50? Joe and Big Al Spitball for YMYW audience members who are definitely not fictional characters today on youn Money, you, Wealth Podcast 540/plus what are the rules for spousal IRA contributions and required minimum distributions? Memphis wants to know. I'm Executive Producer Andi Last with the hosts of youf Money, you, Wealth, Joe Anderson, CFP and Big Al Clopine, cpa. And let's get to our first voice message.

[Beth]

Hi Andy and Big Al and Jo. We are huge fans of your show and have recommended it to several people who are now also big names. We are rip, who is 56 and and I am Beth, 51 from Florida and we're looking for a little spitball. And honestly, I have to admit I need a little reassurance because I am a little frugal and a bit afraid of running out of money. So we have both been high wage earners for years and Rip thinks it's time to cash in all of our hard work and start enjoying a semi retired life and travel more. So so Rip is a medical doctor and I am a successful biotech sales representative. Rip drives an Audi E Tron Electric and said he's never going back to gas. I drive a Volvo SUV which both of our cars are paid for. Rip's drink of choice is a Kentucky Bourbon and I love my mojitos. So a little about our family. We have four kids ages 18 to 25. Two are independent thankfully and one is finishing a Master's degree which is already paid for and will be independent in one year and the fourth is starting college which is also already paid for. We have two adorable pets, Rosie, our goldendoodle and Emerald, our black tortoise cat. So we are aligned with the philosophy of die with zero and we actually really plan to die with Zero and enjoy life. We plan to provide financial gifts to our kids during our lifetime so that they can enjoy it earlier instead of waiting till we pass away. I'm planning on retiring in one and a half years and Rip is planning on transitioning to part time where he'll be earning 150,000 per year for approximately six years. And he has mentioned that he can easily earn more money if we need it. So the following are our assets. We combined have a traditional IRA of 3.6 million. Our brokerage account is 1 million. We have a Roth IRA worth 100,000. We have a real estate portfolio with rental properties that's worth 1.8 million and we have no debt on them and they're generating 150,000 per year after taxes. Our primary residence is valued at 1.6 million with $200,000 remaining on the mortgage and we're planning on paying that off in less than two years. Our current combined annual income is 770,000 and that's before taxes. Our current spending is approximately 250,000 per year and we are currently both maxing our IRAs and have been for years. And the extra money has been going towards paying down our mortgage. So this is what our retirement spending goals are. We're targeting a $200,000 per year in spending during the first 10 years of retirement, our go go years, with the flexibility to increase that spending for travel and experiences if we have the extra money. We recognize the need to bridge a health care coverage gap prior to Medicare and we know that's going to be a significant cost. We like to hold on to our real estate until later in retirement, but we are willing to sell it if we need to. The following is our Social Security estimates. RIP at age 62, 34,000 a year, age 70, 60,000 a year. Mine is age 62, 33,000 a year and age 70, 59,000 a year. We plan to begin Roth conversions once I retire and RIP goes part time, so that way we can take advantage of the lower tax brackets after reducing income. And I like to just put a shout out there that we've learned so much about Roth conversions from you guys and I want to thank you for that. So the following is our questions. Will our plan.

[Joe Anderson]

Wow, about time.

[Beth]

Four minutes in RIP going part time in one and a half years be doable? When is the optimal time for each of us to begin taking some Social Security? And can we sustainably spend more than 200,000 per year during our early retirement years? Thank you so much for your spitball. And look forward to hearing back from you.

[Joe Anderson]

Well, congratulations, Beth. You've and Rip have done a phenomenal job of accumulating a ton of wealth here. Pretty easy. One big album, they got 150,000 fixed income from the real estate. They want to spend 200, so they need 50,000. From what, $5 million they have liquid, Roughly.

[Big Al Clopine]

Yeah, it looks pretty good. I mean, even if you take their portfolio, Joe, at 3% distribution rate, they got 141,000. They could generate from that without much trouble. Plus, I think RIP will be working part time and making 150, so they're spending 200 and they're making 300 even without touching their portfolio for six years. So I think this looks great. I think that. And likely with the assets that they have, they'll be able to spend quite a bit more later if they want to. But so many things can happen, I hesitate to say, in 10 years now you can spend at this level. I think at that point, you kind of reassess. But Certainly the first 10 years look fantastic. They can spend more than than the 200 if they want to, and then what they can do after that is dependent upon how the investments do and how long. I think Rip works part time and all kinds of things depending upon when they take Social Security.

[Joe Anderson]

Right. So she's going to retire. We plan on doing Roth conversions once I retire. So she's retiring next year. Right now they make $770,000 a year. One of the things that she mentioned is that she's doing IRA contributions. So. And they have been for years. So I'm curious on what the basis is within that IRA and what's the market value of the ira, because they're not able to take deductions within the ira, and I'm sure there's opportunity to convert that with the basis sitting in the ira.

[Big Al Clopine]

Yeah, true. And we don't know.

[Joe Anderson]

Well, I'm just trying to, you know, give them a little bit more meat versus yeah, it looks good.

[Big Al Clopine]

So.

[Joe Anderson]

Okay, that's one thing I would look at. So if you're spending, if you're putting money into an IRA for the last several years, you have basis in the IRA. Look at the tax return 8606 form. And if you don't have one, you probably have to kind of go back and look at how many IRA contributions that you made. And then if you did take deductions, you weren't allowed because the amount of income that you have. So depending on who does your taxes in regards to Social Security, you Have plenty of assets. It really depends on what you want to do here and what assumptions that you want to make. Because Al, if they don't need the money, I think all the software programs is probably going to tell them to push it to age 70 because they get the delayed retirement credit of 8% per year once they reach full retirement age. But if you run another assumption of taking it at 62 and investing those dollars, you could make more on that. I mean it really depends on what type of assumptions that you need. Since they're not going to spend it, they could take it and invest it. But I think if I were them, I'd probably push off as long as I could.

[Big Al Clopine]

I think I would too. And at the very least I would have at least one of them. They have roughly the same benefit. I'd have at least one go to age 70 so that if there's a survivor between the two of them for a number of years, they at least, you know, they at least have a higher benefit. And that's particularly important if one wants to take it early. Like let's say it's 62. I'm actually not opposed to that strategy either. One at 62 and one at 70. Just have a higher benefit when one passes away but then have use of the money. And as you say, Joe, even investing, I think that's, that would be fine.

[Joe Anderson]

Yeah. I mean we've had Social Security experts on in the past in know you get variants of, of opinions. What was his name? The one that.

[Big Al Clopine]

Lloyd.

[Joe Anderson]

He always had those awkward pauses that we thought he was done speaking, but then I, I forget to start up again.

[Big Al Clopine]

Yeah, yeah.

[Joe Anderson]

Watnick. Lloyd Watnick, Lloyd Watnick.

[Big Al Clopine]

That's it.

[Joe Anderson]

Yeah. He was, I wouldn't, I wouldn't say a proponent, but he had an argument of that if you take it early and you invest in, you know, tax free income, if it can generate X percent, you know, run the math and you could, you could be better off that way too. But you know, there's a lot more risk involved in that as well. Or if you think Social Security is going to go bust, you know, which a lot of people do, then you might want to take it early. So you know, bird a hand is better than tuna bush, you get more benefit.

[Big Al Clopine]

Or if you think there's going to be means testing later, they've got a lot of income potentially. So maybe you take it early. But yeah, I mean based upon what, what I would do, I would, I would at least have one person wait till 70. I think that's what I would do. I, I would consider having that one of the spouses take it early just for a little extra spending money. Particularly during those 10 years they want to spend more money.

[Joe Anderson]

Have you read the book or, or heard of the book Die with Zero?

[Big Al Clopine]

I've heard of it. I have not read it.

[Joe Anderson]

Yeah, I haven't read it.

[Big Al Clopine]

I would, I would imagine the concept is exactly what it says.

[Joe Anderson]

Yeah. You're bouncing the last check to the mortuary, I guess.

[Big Al Clopine]

Right, right.

[Joe Anderson]

But interesting. Very popular book.

[Big Al Clopine]

Yeah. To me I think that's a little tricky because you give all the money to the kids and then you need it for long term care and you don't have it. Now you're trying to get the money back. I would just be a little careful, me personally, I guess, on that.

[Joe Anderson]

Are you going to die with zero?

[Big Al Clopine]

No, I don't think so.

[Joe Anderson]

Well, you got that big ass wallet, so it's gonna be hard for you to dive.

[Big Al Clopine]

It'd be hard to spend it all, wouldn't it?

[Joe Anderson]

Yeah. Yeah.

[Big Al Clopine]

And you're in the same boat.

[Joe Anderson]

Yeah. Brewster's Billions.

[Andi Last]

By the way, have either of you ever watched the show Yellowstone? That's apparently, of course, rip.

[Big Al Clopine]

Yep.

[Joe Anderson]

Yeah, I like that. I like RIP too. I love everything about Yellowstone. I like the prequels of Yellowstone. I like the very first one with Faith Hill and I think it's Faith Hill and McGraw. Tim McGraw.

[Big Al Clopine]

Tim McGraw.

[Joe Anderson]

Yep, that's a good one. And the next one was with good old Harrison Ford. So good, so good.

[Andi Last]

61% of working Americans feel retirement more than death. How can you avoid this retirement panic? This week on a brand new episode of youf Money, you, Wealth tv, let Joe Anderson CFP and Big Al Clopine CPA calm your nerves with seven practical plans for your income, spending, savings and healthcare to put you on the path to an anxiety free retirement. Click or tap the links in the episode description to watch retirement panic button 7 ways to avoid hitting it and to calculate your free financial blueprint. Just enter what you have now and what you want in the future into our financial Blueprint tool and it'll calculate the likely range of how much you'll need to reach your retirement goals. All for free. But don't stop there. Armed with your free financial blueprint, schedule a financial assessment with one of the experienced professionals on Joe and Big Al's team at Pure Financial Advisors to go over your blueprint results and help you craft a retirement plan spread specifically to help you reach your retirement dreams. Watch YMYW TV calculate your Financial blueprint and meet with our team. Click or tap the links in the episode description to begin taking charge of your financial future. It's all free. So what are you waiting for?

[Joe Anderson]

All right, so do we gotta. If we have another recording and if it's more than like a minute and a half, then maybe we save that.

[Andi Last]

Yeah, there's two more of them. One of them is a minute 45, and the other one's 3:37.

[Joe Anderson]

That's a little rich. Let's go to the next one.

[Andi Last]

So you want to do Forrest and Jenny?

[Joe Anderson]

Forrest and. Oh, you guys are so cute. Yeah, let's do Forrest and Jenny here.

[Forrest]

Hey, Joe and Big Al. My name is Forrest and my wife is Jenny. We live in Cherry Hill, New Jersey. I've been listening to your podcast for about three years now and really enjoy it. And you guys are hilarious and you make my drives into work fun and educational. My drink of choice. I am not a big drinker, but I do enjoy the occasional old Fashioned. And the wife likes the sweetest wine she can find. Getting into the numbers a little bit, we have about 95,000 in our 401ks, 258,000 in Roth, 105 in brokerage Social Security. If we wait until full retirement age, I would have about 3,500amonth and my wife would have about 3,000amonth. Currently, we have $3,500 a month in rental income from about 10 properties. Once they're paid off, cash flow will be about 12,000amonth in current dollars, not adjusted for inflation. My wife and I are both 31 years old. We're currently spending about $12,000 a month. I imagine in retirement, that would go up slightly. So we can add some additional travels, check off some of our bucket list items. That is also not inflation adjusted. That's current spending. A little bit more detail. Currently make $350,000 gross, not including the rental income. And we are aggressively saving about $100,000 a year by maxing out our Roth accounts, then 401 s, and then the excess is going into HSA and brokerage accounts. Question is, are we on track to retire at age 50 if we choose to. Thanks so much for the spitball. I looking forward to hearing it.

[Big Al Clopine]

Wow, 100,000 a year at age 31.

[Joe Anderson]

When I heard, yeah, we have 400 rental properties, I was thinking, this guy's like 90. What's he got? 10 rental properties.

[Big Al Clopine]

It's crazy.

[Joe Anderson]

I mean, 31, that's like, big Al, like, what did you have at 31? Did you have quite a few?

[Big Al Clopine]

I think I had one rental at that point and my own house. I think that's what I had. I didn't have 10.

[Joe Anderson]

What was the most doors that you've ever owned?

[Big Al Clopine]

I had a 16 unit apartment in Las Vegas for a while. So that was, I think I had like 25 doors at one point. 25, yeah, something like that.

[Joe Anderson]

That's still, that's quite a bit.

[Big Al Clopine]

It's pretty good.

[Joe Anderson]

Mobile. All right, well look at this.

[Big Al Clopine]

Anyone saving a hundred thousand dollars a year and already at 31 has almost half a million. Yeah, Forest, I mean you're going to be in a good shape. I actually ran a little numbers just for fun. So if you take your 100,000, you go 19 years in the future at 7% with 458,000, you'll end up with about 5.4 million at each 50. Yeah, you can kind of do what you want. And if you look at your spending 144,000 now, I did, I just did. A 3% inflation rate gets you to 250 and I don't know what your rental income will be then. Right now it's 42,000. I just said 60. So you know, you need 190 from your portfolio. That would be a three and a half percent distribution rate. The truth is you'll probably be making more on your rentals at that point. So. Yeah, I think this looks, I think this looks, looks really good. What I would tell you though, being someone that wanted to retire at age 50 and when I got there it was too early, it was too early to retire. So I think it's a great goal. But I have a feeling by the time you get there you may still have enough gas in the tank where you want to work a little bit longer and contribute. So that would be my non financial suggestion or advice. Not advice, but thoughts.

[Joe Anderson]

What do you think Forrest does for a living?

[Big Al Clopine]

Well, hard to say but he's pretty successful engineer.

[Andi Last]

At what point can you actually say that you are a real estate professional? If you own 10 properties it has.

[Big Al Clopine]

To be more than half of your.

[Joe Anderson]

More than half of people currently working.

[Big Al Clopine]

Yeah, it's more based upon time. Right. So yeah, it has to be more than half of your working time. So in other words, if you work 2000 hours in a full time job, you need to work 2001 hours in real estate to be a real estate professional. However, let's just say that's forest. Maybe Jenny's the one making the money, I don't know. But let's just say it's Forrest. Jenny isn't working that much. She could be the real estate professional and would qualify for the family, which would allow them to take more deductions. So that would be something to consider if they haven't already. Yeah, this looks great. I mean, we try to tell people to save 20% of their income if they can get to such a lofty position. 20% of 350 is 70,000. They're saving 100. They're basically in the driver's seat to do what they want as long as they keep doing this on a go forward basis. Something else that happens though, Joe. You can attest to this. Sometimes kids come along, sometimes spending priorities change, and maybe you don't necessarily save the 100,000 each and every year. So I think it's a great goal to try to retire at 50. But I'm just saying, from my own experience and others I've talked to, you may want to work a little bit longer.

[Joe Anderson]

Yeah, you should have like a 4 year old at 50.

[Andi Last]

I was going to say, do you still have the gas in the tank to Continue Working past 50, Joe, or are you ready to call it quits, man?

[Joe Anderson]

I'm with Forrest. We're done. But unfortunately I can't now. I was reading like with the other one with Rip and Beth, like, yeah, 50. All my kids are out of the house. One's got a master's degree and I'm like, man, I got a four year old. We're just living two totally different lives.

[Big Al Clopine]

Two different lives. That's okay. Yeah, I, I have a good friend Joe, who's turning 60 this year and he's got a not even one year old.

[Joe Anderson]

Oh, wow.

[Big Al Clopine]

So you're, you got all kinds of time on him.

[Joe Anderson]

Rock star or something or what? Memphis. Let's go to Memphis. Al, you've been to Memphis.

[Big Al Clopine]

I have not. I've been to Nashville and Chattanooga, but I've done Memphis.

[Andi Last]

Memphis is cool.

[Joe Anderson]

See the choo Choo in Chattanooga.

[Big Al Clopine]

I heard the song while I was there. Chattanooga Choochie.

[Joe Anderson]

Yeah, I've never been to Memphis. I like to go to Memphis. My wife bought her wedding dress in Memphis, so.

[Big Al Clopine]

Oh, okay.

[Andi Last]

So you've never seen Sun Studio, You've never seen Graceland, You've never seen any of the cool stuff in Memphis. You gotta go. It's an awesome place.

[Big Al Clopine]

Okay.

[Joe Anderson]

I've seen it on like TV documentaries. All right, let's go. I drive a 2003 Lexus. It just won't break down. So I have an excuse to spend money to buy a new one. And my beverage of choice is sugar free E and W root beer. Wow. He's going root beer. A and W and sugar free.

[Big Al Clopine]

Yep.

[Joe Anderson]

My wife is retired, and at the age of 73, she began drawing RMDs this year. I'm 74 but still working until next year, July 1, 2026, so will not be withdrawing RMDs from my 401 or 57 until next year. Can I still contribute $8,000 to her IRA this year and next year as a spousal IRA contribution while I'm still working? Even though she is drawing RMDs? Seems too good to be true, but I haven't found a rule against it. Also, can I start withdrawing RMDs in the spring while still working? I still have to withdraw 110,000. What? I will have to withdraw $110,000 next.

[Big Al Clopine]

Year for the R and B.

[Joe Anderson]

Now that's. And use it to live on while contributing $31,000 from each of my paychecks to max out the 401 and 457 annual contributions limits in 2026 before I retire in July. That also seems too good to be true. Just making these contributions will save me quite a bit of income tax next year. Thanks for all the years I've been listening to your excellent retirement advice. It's not advice, Memphis. Not advice. We're just a couple of kids talking stuff. It has enabled my wife and I to save and plan quite a bit. So for that, thanks, Joe and Big Al. And I'll just throw Andy in there. We'll not have to worry about having enough for retirement. And a special. Oh, there she is. Oh, my bad. And a special thanks to Andy for her years of putting up with both of you. Thanks so much for considering my questions.

[Big Al Clopine]

So, can he still contribute $8,000 for spousal IRA even though she's taking an RMD? The answer is yes.

[Joe Anderson]

Why?

[Big Al Clopine]

So he's working. He's working.

[Joe Anderson]

He must make a lot of money because if. Why would you go in an IRA versus a Roth?

[Big Al Clopine]

Well, that's the second part of the question. But first part is you're working. You want to do a spousal IRA, but she's of the age where she's taking RMDs. You can still do the spousal IRA even though she's taking RMDs. Yep. You agree with that?

[Joe Anderson]

I know there's a rule where once. But the rules have changed, so. No. Yeah, I'll go with that. But once you reach 70. I thought you couldn't put money into an IRA, but you could put money into a Roth IRA.

[Big Al Clopine]

That's the rule that changed. You can't put money into an IRA now.

[Joe Anderson]

Okay, so I knew that there was a rule.

[Big Al Clopine]

It was The Secure Act 2.0, I believe is when that changed.

[Joe Anderson]

Oh, look at the smart big brain on Big Al.

[Big Al Clopine]

Yeah, it's just right here. I just on vacation. It's still fresh.

[Joe Anderson]

It's still fresh as a daisy. All right. But yeah, I would much rather go Roth IRA or do an ira. But again, I mean if he's putting IRA contributions for his wife spousal contributions into the IRA and he's not going Roth ira, he's got basis in the IRA that he needs to look at for conversion purposes or for the pro rata purposes if he's taking distributions from those accounts because he'll pay double tax.

[Big Al Clopine]

But the bigger question is, can he take his RMD while he's still working and then put his salary like basically all of it or a lot of it towards the 401 and the 457?

[Joe Anderson]

Yeah, but his required beginning date is not until the following year, right?

[Big Al Clopine]

True. That's true.

[Joe Anderson]

So he doesn't have to take an RMD next year. He's going to retire in June of 2026. July of 2026. So his required beginning date is April 1st of 2027.

[Big Al Clopine]

Yes, I agree with that. But I think he wants to max fund his 401k and 457. He doesn't have enough money to do it. That's what I'm reading between the lines.

[Joe Anderson]

Can I start withdrawing RMDs in the spring while I'm still working? I will have to withdraw $110,000 next year and use it to live on while contributing $31,000 each from my paychecks to max out the 401 and 457 annual contributions for 2026 before I retire in July. So if his paycheck's coming in and his paychecks can afford to fully fund the 457 and the 401 plan, as long as the dollars come from his paycheck, he could fully fund those plans. And then if he has to take distributions from other assets to live off of because he's putting in 60 some odd thousand dollars into the retirement account. Yeah, I mean you could pull money from a retirement account and you could fund your 401 and 457 at the same time, it's like stealing from Peter to pay Paul. Right.

[Big Al Clopine]

You know what I mean?

[Joe Anderson]

You're paying taxes on the distributions and you're getting a pre tax contribution, so I don't know, Wash, wash.

[Big Al Clopine]

But it also avoids two RMDs next year. Which is what he'd have to do if he waited to his required beginning date.

[Joe Anderson]

No, no, for sure. But he could. Yeah. If he needs to pull money from his retirement accounts to live off of while he's fully funding the retirement accounts, you can absolutely do that. But it doesn't make mathematical sense to do that. Do you agree with that?

[Big Al Clopine]

No.

[Joe Anderson]

Why?

[Big Al Clopine]

Because if he doesn't want to have a double RMD next year, he does his RMD this year. He lives on that. And then he max funds his retirement with that same money. Right. So he lives off of that. But the funding of his retirement account comes from his paycheck. Then he's, he's hasn't thrown himself into a higher tax bracket.

[Joe Anderson]

But his RMD is not 110,000. He just needs to withdraw $110,000 to live off.

[Big Al Clopine]

And he doesn't say what his RMD is. You're right. And it doesn't really matter whether it's RMD or not.

[Joe Anderson]

But what I'm saying is. All right, so Alan, you have to pull $110,000 from your retirement account. Would you add $60,000 to the retirement account to pull $110,000 out, or would you just not contribute to the retirement account and pull $40,000 out?

[Big Al Clopine]

I would do the latter, but I'm assuming that maybe the RMD is that amount and he has to pull it out. But we don't know. He didn't really say that.

[Joe Anderson]

Yeah, but what I'm seeing is that if I'm funding a retirement account of 60,000, but then I have to go around and pull $100,000, $10,000 out of it. It doesn't make sense to put the money in it in the first place because you get a pre tax contribution going in, but it's after tax. I mean, you're going to pay the tax regardless.

[Big Al Clopine]

Okay, so I agree with your statement. I was just going on the assumption that that was his RMD was $110,000 and he had to pull it out. But I could be wrong.

[Joe Anderson]

Right? Okay. Yeah. So he doesn't have to take an RMD until next year. But if $110,000 is the RMD, then he would have to pull out $220,000 next year.

[Big Al Clopine]

Yeah. And then he would do what he's suggesting if not. If he just needs that to pull it out so he can max fund his retirement account. You're pulling it out and putting it back in. There's no real tax impact if the RMD is, in fact, lower. I agree with that statement.

[Joe Anderson]

But if I'm going to fully fund the 401 plan at $61,000. So this is the strategy I would do. He needs $110,000. We don't know the balances of any of his accounts. He's just asking. Hey, I'm in my 70s. I want to still contribute to retirement accounts because I love retirement accounts. He just loves putting money into them.

[Big Al Clopine]

Yep.

[Joe Anderson]

Hey, she's retired. Can I put money into him? Yes. No. Way too good to be true. He gets really excited about it.

[Big Al Clopine]

Right.

[Joe Anderson]

What I would rather him do is. Yeah, Fully. If he needs $110,000 to live off, he's going to retire in July. From July until December. That's what his living number is. That's the nut that needs to crack to. If he has other assets to live off of, I would live off of that. Fully fund the retirement accounts. His income is going to be lower than ever before because now he's retired in July. I would do the math on what the RMD is going to be next year, and I would either do a conversion this year and then maybe not do a conversion next year, though there's so many planning opportunities that. That. That Memphis has.

[Big Al Clopine]

Yes.

[Joe Anderson]

Because he's still. But. But I guess, to answer his question, and he'll be happy he's eligible to fully fund both of those plans. And if he wants to do spousal retirement accounts for his wife, he can.

[Big Al Clopine]

Yeah. So that's. So the answer is yes and yes.

[Joe Anderson]

Yes and yes. Okay. All right. So that's it for us. We're back on track. Alan, then what, you're leaving for another three months?

[Big Al Clopine]

No, I'll be here for a while.

[Joe Anderson]

Okay. All righty. Very cool. Okay, well, that's a wrap for us today.

[Big Al Clopine]

Thanks.

[Joe Anderson]

Where were you, Alan? Just real quick, you were in, like, five different countries.

[Big Al Clopine]

Yeah, I started in Japan, and then I ended up in France, Spain, Sweden, Greece, Austria, and Italy. Oh, I can't answer that. They were all fantastic in different ways. They really were. It was an amazing trip, and I wouldn't have planned. I wouldn't have planned to go from Japan to Paris, but it's just the way two different works that two different trips came together that were supposed to be separate, but I could fly from Osaka to Paris direct. And I thought, why not? So that's what we did. And we have at any point, wish.

[Andi Last]

That you had been back at work.

[Big Al Clopine]

Well, I love doing this podcast, but no, I really enjoyed the trip.

[Joe Anderson]

Is it too long?

[Big Al Clopine]

No, not really.

[Joe Anderson]

Wow.

[Andi Last]

Would you still be traveling if you could?

[Big Al Clopine]

No, I think it was right. I think it was a little bit too long for Ann. So next time we do a long trip, maybe we'll do a month instead of five weeks.

[Joe Anderson]

Just living out of hotels and luggage and planes, trains, automobiles. Five and a half weeks I like. After five days, I'm dead. Well, then that's just going to Minnesota.

[Big Al Clopine]

Well, but you.

[Andi Last]

That's the problem.

[Big Al Clopine]

You have young children. That makes a big difference when you. When you're that category.

[Joe Anderson]

I could go a lot of directions there, but I'm not.

[Big Al Clopine]

Yep.

[Joe Anderson]

All right. Well, good. Good to have you back, buddy.

[Big Al Clopine]

Same.

[Joe Anderson]

All right, we'll see everyone next week. You listen to what's the show called? You'd Money, you, Wealth.

[Andi Last]

This is yous Money, you, Wealth, you, podcast. If you enjoy ymyw, tell your friends and help us reach more listeners and viewers 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, like Amazon, Audible, Castbox, GoodPods, Pandora, Player, FM Podcast Addict, and Podchaser. We're on all of those and a whole bunch more. Your Money, you, Wealth is presented by Pure Financial Advisors, 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.