Tax-Smart Investing at Every Age: Starting Young or Catching Up - 568

Summary

---

Podcast Summary: "Tax-Smart Investing at Every Age — Starting Young or Catching Up"

Your Money, Your Wealth, Episode 568
Hosts: Joe Anderson, CFP® & Alan “Big Al” Clopine, CPA
Date: February 10, 2026

---

Overview

In this lively and entertaining episode, Joe and Big Al take listeners through actionable, tax-smart strategies for building and preserving wealth at all life stages, from the savvy twentysomething saver to those approaching retirement and even dealing with inheritance. Questions center on optimizing after-tax 401(k) contributions, making catch-up contributions, Roth conversions, mortgages (including President Trump’s proposed 50-year mortgages), handling unexpected retirement, inherited gold coins, retirement plan loans, and whether “simple” investing strategies are enough to hit millionaire status. True to their tagline "making fun of finance," the hosts bring humor and plain English to scenarios that span generations.

---

Main Discussion Points & Insights

1. 401(k) After-Tax Catch-Up Contributions & the Mega Backdoor Roth

[01:04–05:46]

• Listener question: At age 52, in a high (32%) tax bracket, is it preferable to make after-tax 401(k) catch-up contributions, contribute more to taxable brokerage accounts, or do something else?
• Key advice:
  • Take full advantage of after-tax 401(k) contributions, especially if your plan offers a Mega Backdoor Roth option.
  • Quote (Joe, 02:09): “Yeah, do the after tax all day, every day.”
  • If your plan allows, convert after-tax contributions to Roth as soon as possible to get all future growth tax-free.
  • Compared to taxable brokerage accounts, Roth is more flexible and delivers superior after-tax growth—capitalize on the FIFO treatment (First-In, First-Out) and tax-free withdrawals.
  • Check your plan specifics for how often in-plan conversions are allowed.
  • Quote (Big Al, 03:53): “For the plans that allow this... you can go all the way to $80,000 [total], including employer part.”
  • This strategy is often underutilized because employees don’t realize the benefits or their plan allows it.

---

2. Early & Unexpected Retirement: Timing Roth Conversions and European Moves

[06:11–10:19]

• Scenario: Janine, age unspecified, retires unexpectedly and considers Roth conversions while preparing a move to Europe.
• Roth conversions:
  • No IRS limit on the amount you can convert, but be tax-aware; aim to stay within your preferred bracket (e.g., 12% or 22%).
  • Early Social Security withdrawal impacts tax picture; Roth conversions may make more Social Security taxable.
  • Quote (Big Al, 09:43): “As you do a Roth conversion, more of your Social Security will be taxable. So just be really careful in this calculation.”
• On moving abroad ([10:24–11:08]):
  • $3,000/month can go far in Eastern Europe, but selling a US home may be tough depending on market timing.
• General advice: Do a careful bracket analysis, and don't rush to convert everything at once.

---

3. 50-Year Mortgages – Are They a Good Deal?

[11:35–15:53]

• Discussion: Would a 50-year mortgage offer real affordability?
• Analysis: Monthly payment savings over a 30-year loan are modest (~$350/month on a $500,000 mortgage at 6%).

Quote (Big Al, 12:23): “I wouldn’t because I don’t think you save that much. I ran some numbers.”

• Considerations:
  • May make sense to reduce payments very late in retirement if loan payoff isn't a realistic prospect.
  • Stretching debt isn’t always wise—interest paid over time will be much higher.

Quote (Joe, 14:24): “If I was like 70, I would do it. Well then it doesn’t matter — you’re not going to pay it off anyway.”

---

4. Retirement Account Loans – Double Taxation Confusion

[17:59–21:22]

• Listener scenario: Used a $50,000 403(b) loan for a home down payment but unsure if paying it back with after-tax dollars creates a “double tax” hit.

Quote (Big Al, 19:38): “I would pay off the 403 absolutely... because of the double taxation factor.”

• Explanation:
  • Loan repayments are made with after-tax dollars; upon distribution in retirement, money is taxed again — hence, “double taxation.”
  • Better to pay it off if you have funds available and rebuild your retirement savings for greater returns.
• Personal confessions: Both hosts once took retirement plan loans and regretted it.

---

5. Step-Up in Basis: Inheriting Highly Appreciated Assets/Gold

[21:22–28:41]

• Listener “Jonas Grumby” (the Skipper from Gilligan’s Island) asks: Can he gift appreciated stock to his terminally ill father, inherit it, and wipe out gains with a step-up in basis?
• Response:
  • Technically, yes, but IRS may challenge if the gift is solely for tax avoidance. Motive matters.

Quote (Big Al, 23:18): “Yes, it does work. But be a little careful because the IRS has the ability to claw these kinds of arrangements back when it's only done for tax reasons.”

• No fixed timeline for IRS challenge, but intent and documentation are crucial.
• Listener “Dolly” inherits a sack of gold coins:
  • If coins were inherited, they receive a step-up in basis (current value as cost basis).
  • Selling now would result in little to no tax owed, provided you “inherited” rather than received as a lifetime gift.
  • Quote (Joe, 28:36): “Yeah, I think you got a full step up in basis and you could sell them tomorrow and pay very little in tax.”

---

6. Young Savers: “NERDS” in Omaha – Is a Simple Investing Plan Enough?

[29:36–39:54]

• Profile:
  • Married, both 28, $144,000 combined income, saving aggressively to 401(k)s, Roth IRAs, some taxable savings; child age 1, plans for more.
  • Investment strategy: Predominantly VOO (Vanguard S&P 500 ETF).
• Should they do more?
  • Saving rate and accumulation are exceptional for their age ($225,000+ at 28).
  Quote (Joe, 34:01): "I think that is really good for a 28 year old."
  • Suggestion:
    • 20% income savings is excellent; increasing to 25–30% can supercharge early retirement.
    • Use Roth 401(k) options over pre-tax unless in a distinctly high tax bracket (likely not the case).
    • Emergency fund: 3–6 months' expenses.
    • Diversify beyond VOO: add international funds (bonds optional at this age).
    • Tax diversification: Build up Roth, pre-tax, and brokerage balances for future flexibility.
  • “Boo for life” (VOO for Life) is fine—until the portfolio matures; then diversify investments for more sophisticated needs.
  • Professional advice isn’t necessary yet, unless they want optimization; focus on maximizing current options and planning for changing income/benefit phases.
  • Quote (Joe, 39:06): “If you keep doing what you’re doing… at 7% over 30 years, you’re going to have $5, 6 million bucks.”

---

7. College Funding vs. Retirement Savings Order

[39:38–41:36]

• Question: Where in the prioritization order should 529 (college savings) fall?
• Advice:
  • Fully fund retirement first, then consider 529s.
  • You can borrow for college, but not for retirement.
  • Do the math: Project college costs, run cash flows, and ensure you're not sacrificing your own secure future.

---

Notable Quotes & Moments

• Joe on after-tax 401(k) conversions: "Anytime I can get money into a Roth, no matter what tax bracket I'm in, if it’s after-tax dollars, you still definitely… you want to do it." [03:43]
• Big Al on crazy mortgages: "I’d rather have that thing paid off in 30 years rather than just extend this out…" [13:08]
• Big Al on step-up in basis and inheritance: "Technically, it does work… but the IRS could unravel it." [24:50]
• Joe on young savers: "If he keeps doing what he’s doing… he’s going to have probably at 7% over the next 30 years… 5, 6 million bucks." [35:56]
• Big Al on savings habits: “If you can save 20% of your income, then you’re going to be in great shape, considering you’re going to be doing this for 40 years.” [34:19]
• Joe (humorously) on the gold inheritance: "She got a sack of gold coins?" [26:54]
• Andi (producer) on the show’s purpose: "Your Money, Your Wealth is all about planning for retirement. But what about when something unexpected happens like it did for Janine?" [17:03]

---

Key Timestamps

• [01:04–05:46]: After-tax 401(k), Mega Backdoor Roth explained
• [06:11–10:19]: Forced early retirement, Social Security, Roth conversions
• [11:35–15:53]: 50-year mortgage deep dive
• [17:59–21:22]: 401(k) loans, the double taxation trap
• [21:22–28:41]: Step-up in basis, inheritance, and gold coins
• [29:36–39:54]: Young family’s spitball analysis — savings, investing, Roth vs. pre-tax
• [39:38–41:36]: College savings (529) vs. Retirement prioritization

---

Tone & Style

• Conversational, comedic, and relatable: The hosts make jokes ("maid woman," “sack of gold coins,” “big brain on Big Al”), and keep even wonky topics light.
• Straightforward, honest, and pro-planning: "I did it myself years ago… I'm never doing this again." (Joe on 401(k) loans)
• Detailed and tailored advice: nuanced responses by age, wealth level, and tax situation.

---

Final Takeaways

• Tax location—after-tax, Roth, pre-tax, and brokerage—matters as much as savings and investments.
• Start as early as possible for compounding results; 20%+ savings rate is a winning approach.
• Don’t overlook the “boring” tools (Mega Backdoor Roth, asset location, emergency funds). They deliver outsized benefits.
• Each decade brings new financial opportunities and pitfalls—proactiveness is rewarded, and complexity increases with wealth.
• Tune in weekly (or submit your own financial “spitball”!) for advice that’s as useful and specific as it is fun.

---

Transcript

[Andi Last]

John Q. Taxpayer is in the home stretch of his career looking for the best way to catch up and build his tax free bucket. Meanwhile, a pair of young financial nerds in Omaha are already strong savers, but they're wondering if a simple VU for life strategy is enough for them to reach multi millionaire status in retirement. Also, Janine retired unexpectedly. Can her remaining savings support a European retirement lifestyle? From Jonas Grumby's glitch in the Matrix tax strategy to the potential tax nightmare of Dolly's literal sack of inherited gold. Today on youn Money, you, Wealth Podcast 568, join Big Al spitball on how folks from different generations with different situations can reach the same ultimate goal. Positioning assets today to ensure the most tax free wealth tomorrow. Plus, the fellows spitball on the double taxation trap of retirement plan loans for Pete in North Carolina and the affordability of 50 year mortgages for Semper Fi in Michigan. I'm executive producer Andi Last and here are the hosts of youf Money, you, Wealth, Joe Anderson, CFP and Big Al Clopine, CF cpa.

[Joe Anderson]

We go. Hey guys, Love the show. Thank you for everything that you're doing. I'm 52 years old, 32% nominal tax bracket. Nominal.

[Big Al Clopine]

Yeah, I guess that's the highest rate.

[Joe Anderson]

Isn't that marginal?

[Big Al Clopine]

Yep, that would be what we usually call it.

[Joe Anderson]

Got it. Okay.

[Big Al Clopine]

Yep.

[Joe Anderson]

My question is regarding catch up contributions to my 401 for 20, 26 and beyond. Due to my income, I would have to make after tax contributions for the catch up portion of my 401. What would you recommend? Would I go for or invest more in the brokerage account? Being maxing 401 backdoor Roth IRAs, investing here and there in the brokerage account, I do not expect my retirement income to be much lower than it is now. Any help is greatly appreciated. Thank you. God bless. All right, John Q. Taxpayer writes in.

[Big Al Clopine]

Right.

[Joe Anderson]

He's missing the mega backdoor.

[Big Al Clopine]

Yeah, I think that's probably the key. So you explain that.

[Joe Anderson]

Yeah, do the after tax all day, every day.

[Big Al Clopine]

Now, not every plan has it available, but a lot of them do.

[Joe Anderson]

If there's after tax, you'll be able to take the after tax out and probably do an in plan conversion.

[Big Al Clopine]

Right.

[Joe Anderson]

So because you're already paying tax on those dollars, you can convert those dollars. I don't know if it's once a year, once a quarter, right away. So you have to check with your plan document or at the very least when he retires he'll be able to take the after tax and convert it to a Roth, he might have to pay some tax depending on what the growth looks like.

[Big Al Clopine]

Right.

[Joe Anderson]

But the after tax component of a Roth IRA plan is a really cool thing. So even though the catch up because of the secure act or is it one act made the catch up contributions, if you're.

[Andy]

I think it was secure too, wasn't it?

[Big Al Clopine]

Was it secure?

[Joe Anderson]

2.0 is now Roth. So yeah, if you can continue to contribute to the plan after tax and then convert it to a Roth, that is better off than going into a brokerage account because all of the future growth is going to be 100% tax free for you if you take your after tax contributions and invest it in the brokerage account, which is is fine, it's great, you got some liquidity there. But all the growth is going to be subject to a capital gains rate. And if you sell it prior to a year, it's ordinary income. So the more that you can get into the Roth, the better. Roth is more flexible because it has FIFO tax treatment as well. You can take dollars out if the contributions earnings don't yet qualify for tax free. So anytime I can get money into a Roth, no matter what tax bracket I'm in, if it's after tax dollars, you still definitely. And you want to do it.

[Big Al Clopine]

Yeah, I agree with you Joe. And I think a lot of people don't really realize that many plans have this opportunity. So the numbers for 20, 26, 24,500 is your 401k max and then you can do another $8,000 as a catch up. So 32,500 is the amount that you typically can think of putting into your 401. But for the plans that allow this, and a lot of them do now, they allow you to put more money in after tax money you can actually go and when you're over 50 you to go all the way to $80,000. Now that includes the employer part, so you have to be careful not to overdo it. But let's say your employer is putting in $10,000 on your behalf. Right. And so you could put another 35,000 ish into your plan after tax and then convert that to a Roth and you're good to go. And I agree with you Joe, that's I'd much rather have money in a Roth than a brokerage account if given the choice.

[Joe Anderson]

Yeah. So yeah, I think anyone that's listening to this more and more plans are have the after tax component.

[Big Al Clopine]

I think so too.

[Joe Anderson]

If you work for a large employer. It's almost 90%. Yeah. Yeah. So but we see it missed quite often. So. Because they don't know it's available or they're like, well, maybe I don't want to. Why would I want to do after tax contributions into my 401 plan? Because it's after tax and then the earnings are going to be taxable.

[Big Al Clopine]

Yeah. What's the point?

[Joe Anderson]

What's the point? Yeah, but if you can do an interplan conversion in most plans for larger companies, allow an interplan conversion. So you put the dollars in, maybe you wait, you do it once a quarter.

[Big Al Clopine]

Yeah.

[Joe Anderson]

So you put in $10,000 or $8,000 a quarter into the overall plan and wait, and then you just keep converting that $8,000 that you put in after tax into the Roth. And then all future growth is 100% tax free. So, yeah, leveraging that pool of money is key.

[Big Al Clopine]

Yeah. And that $8,000, maybe it's worth 8,500 or 9,000. You convert that whole amount and then when you do that, then, yeah, you'll pay taxes on the difference. So 9,000 versus 8,000. You'll pay tax on $1,000 because that's the growth. But you got $8,000 into the Roth component of the 401k. The sooner you can do the conversion, the better before it grows. Right. So consider that as well.

[Joe Anderson]

Okay, good question, Johnny Q. But now we got Jeannie from Brothels, Washington. Okay, Brothel.

[Andy]

Yeah, I think it's Bothell. I'm not sure.

[Joe Anderson]

Oh, I don't see an R in there.

[Big Al Clopine]

Oh, yeah. Why did we think it was brothel?

[Joe Anderson]

I don't know. I have no idea. What, what is it called? Bothell.

[Andy]

I think it's Bothell.

[Big Al Clopine]

Yeah, you're right.

[Andi Last]

Might be Bothel.

[Andy]

I don't know. But I don't think there's a brothel there.

[Joe Anderson]

Could be.

[Big Al Clopine]

That's when you look at it quickly.

[Joe Anderson]

That's what it looks like. Yeah. And your eyes are a little burning. All right. I was maid. Retired unexpectedly. She's a maid woman.

[Big Al Clopine]

Apparently they told her, you're retired, Janie.

[Joe Anderson]

From Brothel, Wisconsin or Washington, you are now retired. That happened in May last year. And I've been living off my severance in stock payout until that ran out. My plan was to sell my house and move to Europe where my $3,000 a month budget can cover my living expenses, healthcare, insurance, but having trouble selling the house in the current market. So now I was forced to apply for Social Security this month earlier than I planned. And I'm netting about $2,600 a month, and I am withdrawing that 4% out of my $179,000 IRA to make ends meet. Since I have no salary coming in in 2025, should I go ahead and convert the max to a Roth before year end? Yeah, a little late. Just a bit outside on this one.

[Big Al Clopine]

Could do for 2026.

[Joe Anderson]

Yeah, let's pretend this was 2026.

[Big Al Clopine]

Yep, yep, yep.

[Joe Anderson]

Sorry, Jeannie, you kind of missed that. But I'm not. Since I have no salary coming in for the 20, should I go ahead and convert the max? Well, the max would be $179,000, so, no, you wouldn't have wanted to do that. And I'm glad we didn't get to this question until February of 2026. The max. There is no max in Roth IRA conversions. You can convert as much as you want. Just know that you're subject to income tax on any dollar that you convert. So the dollars that you think about, that you should be thinking about from a conversion perspective is what tax bracket do you want to max out? So is it the 12%, is it the 22, the 24 and so on? That's going to determine the number of what is converted to the Roth. Not there is no max Roth conversion.

[Big Al Clopine]

Yeah, and I do think a lot of people get confused about that because there's. There's Roth contributions, right? So you can contribute, what is it, 7500 this year, 8000? I can't even remember right off the top of my head. But you can go ahead and contribute that if you have earned income and there's a limit. And then, of course, if your income is too high, then it gets phased out. But as far as a conversion, you can convert any amount that you want to. You just have to be smart about it, be careful about it. Convert as much as is appropriate in your situation. Now, Janie, we don't really know your situation to tell you what's the right bracket, but based upon what you did tell us, I probably wouldn't go above the 12% bracket, which for a single taxpayer is $50,000. And then there's the standard deduction of 16. So call it 65, 66,000. That would be the total of all income. But here's what gets a little tricky, and that is you're receiving social. So as you do a Roth conversion, more of your Social Security will be taxable. So just be really careful in this calculation, actually.

[Joe Anderson]

But she's got a $3,000 a month pension. Doesn't She.

[Big Al Clopine]

I think not. I think.

[Joe Anderson]

Or Was that a $3,000 a month budget?

[Big Al Clopine]

That's a budget, I think. Yeah. For living expenses and health care.

[Joe Anderson]

Got it.

[Big Al Clopine]

So, yeah, I think that's, you know, to me, the most important. Like if these are. If this is her only asset, Joe, I would be careful on converting because the RMD is not going to be that much. And if you convert too much, then you may end up having more of your Social Security tax. Just be careful of that.

[Joe Anderson]

Do you. So where in Europe do you think she's going?

[Andy]

Eastern.

[Joe Anderson]

Well, Eastern Europe, possibly cheaper.

[Andy]

If you're going to go someplace, because $3,000 a month is going to get you by, it's probably Eastern Europe, I would imagine.

[Joe Anderson]

Dude, you got like a spot that you're thinking about.

[Andi Last]

Ask Aaron.

[Andy]

He's probably tell you all about Croatia.

[Joe Anderson]

Slovenia. I never heard of it. $3,000 a month can get you by in Slovenia, no problem. But the beer costs in Slovenian. 85. No, sir. Wow.

[Big Al Clopine]

I don't think you'd get by on that.

[Joe Anderson]

Well, all right. So what I wonder why the. She's like in this market, are we having a troubled housing?

[Andi Last]

This was in October of last year.

[Andy]

I don't know if that makes a difference, but I don't think that the market was significantly worse then in terms of being able to sell your house. I mean, it's been a, it's been an owner's market for a while now, hasn't it?

[Joe Anderson]

Yeah. So. Okay. Well, I wonder if she's. She's moved to Slovenia. Right back in. Let us know where you're at.

[Big Al Clopine]

Yep.

[Joe Anderson]

Hoorah.

[Andy]

Hoorah.

[Joe Anderson]

Your money or wealth? I served in the Marine Corps from 2015 to 2023 and now serve in the Michigan Army National Guard. Well, thank you for your service. I do enjoy running a short easy six miles in the morning. I'm trying to keep up with Big Al. Six easy miles.

[Big Al Clopine]

Six easy miles. Okay.

[Joe Anderson]

That's impressive.

[Big Al Clopine]

That is.

[Joe Anderson]

My question is, what is your opinion on president's trump plan on 50 year mortgages? Is doing a 50 year mortgage any better than a 10, 15, 30 mortgage? Is it really more affordable to do a 50 year mortgage? As always, simplify. Stevensville, Michigan. A 50 year mortgage. Big Al, would you ever do a 50 year mortgage?

[Big Al Clopine]

I wouldn't because I don't think you saved that much. I ran some numbers.

[Joe Anderson]

Oh, you did.

[Big Al Clopine]

So I will give you my thoughts. Okay, so I just did $500,000, Joe, at a 6% interest rate, which is roughly what it is currently 15 year would be $4,200. 4,219. 30 year, 2998. Let's call it $3,000. And a 50 year, 2632. $2,632. So you would save about $350. I'm not saying that's not nothing, but for me I'd rather have that thing paid off in 30 years rather than just extend this out that period.

[Joe Anderson]

So you're doing payment, Is that what you're doing?

[Big Al Clopine]

Yeah. P and I, principal and interest.

[Joe Anderson]

Okay. So on a 15 year mortgage, you said $5,000 a month.

[Big Al Clopine]

15 year, around 4,200.

[Joe Anderson]

$4,200. Okay.

[Big Al Clopine]

30 year, $3,000.

[Joe Anderson]

Okay. So that's a $1,200 delta of cash flow. Okay.

[Big Al Clopine]

And then a 50 year would be, call it 2650.

[Joe Anderson]

2650 minus 42 is what? 2650, 4200. It's 1550.

[Big Al Clopine]

Yeah, no, I agree. But I'm more concerned about 30 year to 50 year, which is only about three hundred and fifty bucks.

[Joe Anderson]

Got it. Okay.

[Big Al Clopine]

Would you do 50 year?

[Joe Anderson]

Well, I don't know. It depends. It's like what, what they're doing is they're trying to, to lower the payment.

[Big Al Clopine]

Sure.

[Joe Anderson]

And still pay off the, the principal. Because you could do an interest only loan and sometimes that gets people into trouble because you're not paying any dollars.

[Big Al Clopine]

Yes.

[Joe Anderson]

Whatsoever to the principal. So a 50 year just spreads that thing out. 50 years and it lowers the payment. But you're right at 30 versus 50 if it's only 300 bucks a month.

[Big Al Clopine]

I mean you're probably 40 years old when you get it. Maybe. So you're going to be 90.

[Joe Anderson]

I don't know. If I was like 70, I would do it.

[Big Al Clopine]

Well then it doesn't matter.

[Joe Anderson]

It doesn't matter.

[Big Al Clopine]

You're not going to pay it off anyway.

[Joe Anderson]

You're not going to pay it off anyway. So you stretch that thing out as far as you can if you're not going to pay it off.

[Big Al Clopine]

Yeah.

[Joe Anderson]

So I think that makes sense. That extra 350 bucks, that's a case. Couple cases of PBR, it would be.

[Big Al Clopine]

Like the way you think.

[Joe Anderson]

Yeah. And some chips. Not Sylvania, though.

[Andy]

Slovenia.

[Joe Anderson]

Got it. Yeah. But I think a lot of times it's when people approach retirement, they want to be debt free.

[Big Al Clopine]

Yes.

[Joe Anderson]

Except for our boy that we met today.

[Big Al Clopine]

Yeah, he, he doesn't mind.

[Joe Anderson]

He doesn't mind debt.

[Big Al Clopine]

Bring it out.

[Joe Anderson]

But if, if I reach my retirement age and I Still have a fairly large mortgage and I know that I'll probably never pay this thing off before I die then does a 50 year mortgage make sense? Maybe it does. That just reduces my overall payment if I can get a lower interest rate. But at the end of the day you're probably going to pay more interest over 50 years than you would pay a lot.

[Big Al Clopine]

And I don't, you know from a mortgage is usually cheaper rate than a 30, 50 year could be even more. I, I don't know.

[Joe Anderson]

Yeah, you there, there's a lot of variables in place but if you're just looking at dollar you know cash flow wise you're going to have more cash flow if you go longer. But financially does it make sense? I. Probably not.

[Big Al Clopine]

I, I could see a case is where it would but I think in most cases probably not.

[Andy]

Can I ask a follow on question that just came to me as we were talking about this is if you.

[Andi Last]

Die while you're still in the midst.

[Andy]

Of paying your mortgage, how's that dealt with?

[Joe Anderson]

So let's say you inherit a house. It's worth $500,000, but there's a $300,000 mortgage on it. And so if you want to stay in the home, you would probably. Well, it depends on how the mortgage is set up. You can assume the mortgage or you would have to sell the house and pay off the mortgage or you refinance and get your own mortgage of 300,000 on the home if you wanted to keep the house. If you're selling the house, you sell the house and you net 200,000 minus brokerage fees and things like that.

[Andy]

Got it?

[Big Al Clopine]

Yeah. It's the estate's responsibility. And if the estate has no money whatsoever, then the bank will be interested in maybe a foreclosure.

[Andy]

Yeah.

[Joe Anderson]

Wow, that was somber.

[Big Al Clopine]

I'm just telling it like it is.

[Joe Anderson]

Yeah, Just a visualization of the big bad banks knocking on the door to, you know, put a little pink notice on the door.

[Big Al Clopine]

Right.

[Andi Last]

The infamous boxer Mike Tyson once said, everyone has a plan until you get hit in the face. Your money, your wealth is all about planning for retirement. But what about when something unexpected happens like it did for Janine? If you're among the 49% of Americans punched in the face by an unplanned early retirement, Trainer's Joe Anderson, CFP and Big Al Clopine CPA will get you into shape. This week on youn Money, you wealth TV. They've got 15 defensive maneuvers that'll help you bob and weave, slip and duck the Knockout of retiring earlier than you expected. Click or tap the links in the episode description to watch YMYW TV and to calculate your free financial blueprint. Just input what you have now and what you want for the future and the financial Blueprint tool will output three scenarios illustrating what you'll need to get there. It's yours free courtesy of your money, you, wealth and pure financial advisors. Click or tap the links in the episode description to begin planning your financial future.

[Joe Anderson]

We Got Pete from North Carolina. My wife and I are both 42. Bought a home in June of 2025 and use a $50,000 loan from our retirement account for the down payment. We're going to be selling our old house and shouldn't add $200,000. The mortgage on the new house is a 30 year fixed at 6.5 while the 403 loan is 5% over three years. But the interest is paid to myself. I've read about double taxation since I'll be paying it back with after tax dollars and then we'll pay on the money when it comes out of the 403. I can't wrap my head around which debt I should throw the money at. Is there a way to calculate what the effective interest rate is on the 403401 loan? Obviously the 5% interest is less than what I'd likely get in the market, but I certainly better than paying it to the mortgage company, right? Or because I'll be paying tax on the interest. Does it really make sense just to wipe out the loan? We've been going to. We're going to be making around $350,000 this year. Married finally jointly. Thanks for all you do Pete. All right. These 401 loans, in this case 403 loans took $50,000 out. He's paying himself back but he took the $50,000 out to do a down payment for the home. He's selling his old home. He's going to net $200,000. He's like do I throw the 200,000 or whatever dollars to the 50,403 loan or does he continue to pay down the mortgage? What would you do?

[Big Al Clopine]

I would pay off the 403 absolutely. I have those loans every chance I get because of the double taxation factor and the fact that if you've got the Money in the 403Chances are in a typical market you're going to make more than the interest rate. So you're kind of cheating yourself out of that money. But I think Joe just not having the 403, loan in case you need it in an emergency is just a little peace of mind.

[Joe Anderson]

Yep. I do not like taking loans out of the retirement accounts. I did it myself years ago. And then paying that thing back, it was painful.

[Big Al Clopine]

I did it once, too. I didn't like it. I hated it.

[Joe Anderson]

It was like.

[Andy]

Okay, so both of you know better. What was the reason that you decided that it made sense in your circumstances to take a retirement loan?

[Joe Anderson]

This was like 20 years ago.

[Andy]

Oh, okay. Got it.

[Big Al Clopine]

Yeah.

[Joe Anderson]

Yeah. Yesterday. Big Al's got the big ass wallet. He doesn't need to take a 401k loan.

[Big Al Clopine]

Yeah, that's.

[Joe Anderson]

Maybe I do.

[Big Al Clopine]

That's before I had a big wallet.

[Joe Anderson]

Yeah. But yeah, I remember doing that. And then it's like after tax dollars to go into the retirement account to pay the pre tax dollars. That. And then I'm like, I'm never doing this again.

[Big Al Clopine]

Yeah, I, I, I did it quite a while ago. And I did it for real estate, I think maybe the condo I bought in Hawaii over 20 years ago.

[Joe Anderson]

Okay.

[Big Al Clopine]

And it helped me buy it. So I like that. But I wanted to get that thing paid off as soon as I could because it just. You take the money out, there's no taxation. But then you kind of forget when you put the money back in, it's with after tax dollars. So that's the double taxation part.

[Joe Anderson]

All right. There you go, Pete. Congratulations on the new home. All right, we got Jonas Grumby, the Colonial. Is this a fake name? Jonas Grumby?

[Andy]

It probably is. I have not actually looked it up yet.

[Joe Anderson]

Okay. Lives in Texas. Hello, gentlemen. Enjoy the show. I drive a 2018 Honda HRV and the wife drives a 2023 Honda Tucson.

[Andy]

Guess what? Jonas Grumby is the name of the skipper from Gilligan's Island.

[Big Al Clopine]

Okay.

[Joe Anderson]

The Skipper.

[Big Al Clopine]

Skipper. Yeah. Okay.

[Joe Anderson]

You seem really excited about that, Andy.

[Andy]

I'm just shocked. It never occurred to me that of course the Skipper has an actual name.

[Big Al Clopine]

Yeah, right.

[Joe Anderson]

You know Gilligan's name was John Denver.

[Big Al Clopine]

Yes, I do know that.

[Joe Anderson]

Choice of drink. Both. It's Diet Coke, but don't turn down a frozen margarita when offered. Have identified a glitch in the matrix.

[Big Al Clopine]

Oh, boy, here we go. All right.

[Joe Anderson]

Hypothetical situation. In a brokerage account, I have securities with the total purchase price of $100,000. The current value today is 600,000. I would like to sell the security, but obviously incur a massive capital gains tax. Is the following allowed gift, my terminally ill father, the entire security. Fill out the proper forms for the government, this gift would count for my overall $13 million exclusion. But is exempt from taxes at this time. My father passes, I inherit the money. I would then get a step up in basis and able to sell. Pay no tax. Does this theory fly? What do you think, Al? I don't know. Just give it to dad and dad passes away and then you're the beneficiary of that account and it gets a full step up in basis. Now you're back to square one.

[Big Al Clopine]

Yep. Paying no tax. Yes, it does work. But be a little careful because the IRS has the ability to claw these kinds of arrangements back when it's only done for tax reasons. Right. So if you're going to do this.

[Joe Anderson]

Isn't that five years? God, I forget those rules.

[Andy]

I was going to say, does it depend if dad is terminally ill and lasts five, seven years?

[Big Al Clopine]

No, I think it's. I don't think it's a timeframe. I think it's more like the purpose. Like maybe dad needs additional money for his care. Right. So that would be a reason to give him some stock. And he sells the stock and pays no tax. But then he dies with extra money. And then if you're just doing this for a tax dodge, the IRS could unravel it. And will they unravel it? Well, the IRS doesn't have a ton of resources, so it's probably something that would go under the radar. But. But they could. And so just be aware of that.

[Joe Anderson]

Yeah. For some reason something's. I remember a clawback three or five years from.

[Big Al Clopine]

I think you're thinking estate tax. There's a clawback when. When you're.

[Joe Anderson]

Right.

[Big Al Clopine]

Yeah. When you're.

[Joe Anderson]

Oh, that's on the other side. If dad was giving.

[Big Al Clopine]

Yeah.

[Joe Anderson]

His asses.

[Big Al Clopine]

Think that's what.

[Joe Anderson]

And he died.

[Big Al Clopine]

Yes.

[Joe Anderson]

Yes. That is what.

[Big Al Clopine]

Yeah.

[Joe Anderson]

Thinking about. So clause back into dad's estate for estate tax purposes. But this is. This is the other. He's given the money to dad that dies and then he gets a step up.

[Big Al Clopine]

Yeah. But technically it does work.

[Joe Anderson]

Yeah. That's morbid.

[Big Al Clopine]

Yeah. True.

[Joe Anderson]

So. Yeah, I guess so. Let's go to darling.

[Big Al Clopine]

Okay.

[Joe Anderson]

Tennessee. Dolly Parton. Call me Dolly. You know Dolly Parton still, like, she looks great. She's 80 something years old.

[Big Al Clopine]

Yeah. She does look great. I agree. Yeah.

[Andy]

She's becoming quite popular on social media.

[Joe Anderson]

She is.

[Big Al Clopine]

Is that right? Okay. All right.

[Joe Anderson]

Don't. What? Like on. On the Facebook.

[Andy]

Facebook, Instagram. Yeah. She might be on Tick Tock. I'm not sure.

[Joe Anderson]

Not really. No.

[Big Al Clopine]

Yep.

[Joe Anderson]

Never had a Facebook or Twitter or I have an Instagram account.

[Andy]

But you haven't used it in like 10 years.

[Joe Anderson]

Yeah, probably. There's a lot. Yeah. That rots your mind.

[Big Al Clopine]

That's right. That's why you don't want to do it.

[Joe Anderson]

Yeah. Call me Dolly. My husband and I are 63 and retired. We're set financially bearing an event of. Cat.

[Big Al Clopine]

Cataclysmic.

[Joe Anderson]

Cataclysmic portions. Good try, man. Just listening to myself makes me. My IQ has just dropped significantly. We enjoy old fashions in mojitos. We drive a 2018 4Runner. I drive a 2025 Tacoma. We used to use a 2017 Maxima for the road trips going on 130,000 miles now. Right. I listen to your podcast while on the road and have learned plenty while getting a good laugh, but also regret I didn't find you sooner regarding those Roth conversions.

[Andy]

Notice it actually says Roth conversations.

[Joe Anderson]

Oh, Roth conversations. Thank you, Andy. Yeah. All right, here's my question. My mother handed me a large sack of gold coins before she passed away recently. Oh, my God. She got a sack of gold coins?

[Big Al Clopine]

Yeah. And so here you go, son.

[Joe Anderson]

My daughter. My parents collected these in the 70s and 80s when they were a few hundred dollars apiece, but kept no records of the actual basis. And as of today, one ounce is worth 4600. I have heard you say many times that you don't prefer collecting these, but the cows are out of the bar. Is there any way to cash these in with a minimal tax hit? Or maybe I should hold on to them. Hold on to them while we are able to use the barter for tobacco, alcohol, and gold. And silver. Thanks a bunch.

[Big Al Clopine]

Yeah.

[Andy]

Imagine Dolly Parton out there handing out gold coins to get alcohol and tobacco. Just doesn't seem right.

[Big Al Clopine]

Yeah, it doesn't, does it? Well, I would say, did she really give them to you or did she pass away? Did she. Did she say, hold these for me, son, because I don't want to lose them? And then she passed away and you inherited them with a full step up in basis.

[Joe Anderson]

Look at you, Big Al. Look at the big brain on Big Al.

[Big Al Clopine]

I think she might have just given it to you.

[Joe Anderson]

Yeah, the bag of gold coins was. Hey, just make sure this is not yours yet.

[Big Al Clopine]

I'm. I'm kind of. I'm sorry. I'm starting to fail, you know, and getting weaker. Cognitive decline. And I want you to watch over this bag of gold. And then, you know, when I do pass away, then of course, you'll get it as an inheritance.

[Joe Anderson]

Yeah, because there's no record of ownership at that point. It's not like a stock certificate where the gifted stock.

[Big Al Clopine]

I think it's just semantics on what really happened. Yes.

[Joe Anderson]

Yeah, I think you got a full step up in basis and you could sell them tomorrow and pay very little in tax.

[Big Al Clopine]

Yep.

[Joe Anderson]

Dolly, look at that. We're just making money for you. All right. That's a huge win big.

[Big Al Clopine]

Yeah, that's a good one.

[Andi Last]

Dolly's sack of gold is a good reminder that it's not just what you own, but where you own it that can make a big difference in your tax bill. Download our free guide on why asset Location Matters. It explains how owning assets with higher expected returns in your Roth accounts, lower returning assets in your 401ks and IRAs, and not holding income producing assets in your brokerage accounts, for example, may reduce your taxes and provide better long term returns on those investments. Just click or tap the links in the episode description to download our guide on why asset location matters, to listen to our previous asset location discussions, and to watch a refresher video that explains the difference between asset location and asset allocation. Courtesy of your money, you, wealth and pure financial advisors. Tell them you heard about it on the podcast.

[Joe Anderson]

Okay, we got some young financial nerds out of Omaha, Nebraska. Hey team. Love the show. Thanks for all you do. I'll try to keep this short, clear and simple so y' all don't have to read too much. I am a financial information nerd. I love listening to your podcast and many others, reading, listening and learning as much as possible. He writes like a young financial nerd too. Yours, as you could guess, is my favorite. And I love Tuesdays when the podcast comes out so I can listen while I walk my five year old goldendoodle. I've been listening for over three years now. I think time flies when you're having fun. When I'm walking, driving or working, I'm just looking for a general financial spitball what I believe is a simple financial situation. But here's the basics. Drink a choice Coors latte when the mountains are blue or if I'm feeling fancy than an old fashioned bottom shelf of course. Well we got bottom shelf, we got mid shelf, we got top shelf. Wife's Any margarita will do our high noon seltzer cars. Wife drives 2021 Honda SUV and I drive a work that is paid by my company. We're both 28 and we have a young one with one dependent and hopefully more soon. Here's the breakdown of Our finances all right. Combined income 144 taxes and bonuses generally $10,000 of bonuses a year combined, though we never count them. Never count on them. Assets 401 His $50,000 8% contributions with a 4% match. Hers $22,000 3% contribution with a 3% match Roth IRA His $75,000 Hers $42,000 Maxing out each year is the goal. Joint brokerage $5,000 Throwing a couple hundred dollars a month just to have this as a bridge account. Pension $10,000 current value state couple hundred bucks a month in Retirement company puts 4% regardless of what we do. Increases 1% contribution per year until max is out at 7%. HSAS13529 plans 5200 ideally $5000 a year per child. About half of the state benefit in our state of Nebraska. Should I increase this for reference? Our daughter just turned 1. Cash and other assets $30,000 in a high yield savings account debt home loan $330,000 worth around $380,000 ideal retirement age guessing 65 to 67 although we are both early in our career, we love working and having something to do with may retire to a new less stressful career later in life. Working at a doggy daycare. We love dogs. Annual spending who freaking knows. We both love saving and hate spending. Is that you Big Al?

[Big Al Clopine]

No, no, that's not me.

[Joe Anderson]

But what? Assume we wouldn't have daycare costs, formula for children cost or a mortgage in retirement. Ideally current spend around $5,000 a month. What would think would be reasonable for someone 40 plus out in retirement if we even make it that far? Fixed income played out my pension using AI assistance stayed around 6,000 to $8,000 depending on how I've invested and assume a stagnant 3% increase income. Would love to know how you all look at pensions in social insecurity for someone my age. Spitball. Unlike many of your listeners, my wife and I are very early in our working career in beginning stages of our retirement savings. Want to know what would you recommend for someone in our shoes? Do we just boo for life? That's V o O. Yep, we got it. Boo it. Boo it for life.

[Big Al Clopine]

Boo it for life.

[Joe Anderson]

All right. Or would it make more sense to hire a professional? Max out Roth options. Is it that simple? I feel every caller or writer into the show has complex solutions to amass large amounts of money. Though I would love to end up with millions. Yes, plural. I feel we are not doing enough. What is a general spitball for Folks younger who haven't amassed millions. Thanks for all you do. All right. Young financial nerds in omaha, Nebraska.

[Big Al Clopine]

Okay. 28 years old and they've got about 225,000.

[Joe Anderson]

I think that is really good for a 28 year old.

[Big Al Clopine]

It's almost unheard of. So I think congrats, you're doing well. Great start.

[Joe Anderson]

Yep. I think if you could save 20% after taxes is probably 50% more than most.

[Big Al Clopine]

Yeah. 90% more than most. Yeah, no, I think that's right. I think if you can work up maybe already there, I don't know. But if you can save 20% of your income, then you're going to be in great shape, considering you're going to be doing this for 40 years. If you want to retire earlier, since you don't, you hate to spend money, maybe get up to 25, 30%, 40%, then you can retire even earlier if you want to, and live the life that you want to live. Something that comes to mind, Joe, to me, is that 401k. I'd want to do a Roth option if available, because you're in, I think, in a low enough tax bracket to where the tax deduction is less important now. And chances are your income will go up in the future. So getting more money in a Roth IRA is something. I think you'll be very grateful in the future. It looks like from what you told us, you've got in the 401, it's all. It's all regular. It's not Roth. So that's something I would think of. Maybe emergency fund, three to six months. That would be something I would do. And as far as Voo for Life, that's Vanguard S&P 500 ETF. That's a good fund. I might add an international fund and a bond fund. Maybe not even a bond fund at this point. At this age, just let it go.

[Joe Anderson]

If he keeps doing what he's doing, he's going to have probably at 7% over the next 30 years. He's going to have 5, 6 million bucks.

[Big Al Clopine]

Yeah, yeah.

[Joe Anderson]

A lot of money. Right. So here's what I do. Here's my suggestion to the young financial nerds.

[Big Al Clopine]

Okay.

[Joe Anderson]

You start. You got $150,000 combined income. So you're in the 50 or the 12% tax bracket. So Roth for sure, given a $30,000 deduction or your standard deduction, and you're putting at least $10,000 in the retirement account, so he 12.

[Big Al Clopine]

Yeah.

[Joe Anderson]

$100,000 is the top of the 12% tax bracket. We're married, finally jointly. So I would max out Roth IRAs first. Then I would go to the 401k and go to the match. And then if you have more dollars after that, then I would continue with the 401ks, but then I would absolutely go Roth in the 401ks because you at least I would put $10,000 pre tax and I would do that every single year. Start with the Roth, go to the 401 with the match. If you have extra dollars, you might want to throw a couple dollars into the brokerage account like you're doing. That sounds good too. For a bridge account, you want to be tax diversified as you continue to build your wealth, or if it's more simple, then you can just continue with the retirement accounts as your income will increase over the years, then that's where you're going to spread out your dollars and savings a little bit more because you're going to max out your 401 plan. Given the young nerds here, they're going to be like, hey, we have more do or your income is going to get high enough where you can't qualify for the Roth IRA. So then you got to do backdoor Roth IRAs. The more dollars that you start making and the more dollars that you have invested and the wealth continues to create, then that's where more complex planning comes into play. But the reason why I think that a lot of our listeners and writers and callers is that we have to come up with more complex strategies is because they didn't start at age 28 and write into a podcast that can help, you know, direct on how to be thinking about this. The investment, of course, is one thing. If you just stay boo for life, I think I'm totally good with that until you probably have a million dollars. And you need to start thinking about maybe a more complex and sophisticated investment strategy. But if you keep doing what you're doing. But what I would be thinking about is now when I retire, where's all my money? If it's all in my 401 plan like most people have, I'm just subject to 100% ordinary income rates. I'm not looking at the tax and my savings combined. But if I can start at 28 and understanding the tax code of where you fall and either go Roth or pre tax in brokerage, you're going to be much more diversified from a tax perspective. You're going to have that much more flexibility and you will have full control over the amount of money that you pay in tax, which is in some cases, you know, a several percent rate of return on your investment. Right. So you don't have to like have this crystal ball to figure out what's the best investment. Be totally diversified in a low cost. And if I'm smart on the planning and tax side, it's it. I think you'll work yourself out way more than someone that has a more sophisticated maybe investment strategy.

[Big Al Clopine]

Yeah. What's great is they're thinking about this at age 28. I mean, so few people think about this at age 28. So. So good for you. Now the only thing I might add is you got a young one. Right. So think about life insurance. Right. That would be important. If something happens to one of you and you're both working and you lose some income, just make sure you're covered with whatever your needs are there. But yeah, Joe, I think we, I think we got it. I still, I still would do a foreign etf.

[Andy]

In the sequence of savings, they mentioned the fact that they've got a one year old and that they're putting, they want to put $5,000 per year into 529 for the kids per child and.

[Andi Last]

They want to have a bunch more.

[Andy]

So where does saving to the 529 go into that sequence of savings?

[Joe Anderson]

Fully fund retirement and then you go to 529. In my opinion, you could take loans for college. You can't take loans for retirement. You need to do, you know, $5,000 a year. I don't know, it's. You map it out. I think they're doing really well for retirement. But that's why you want to make sure that you have a balance sheet and income statement that you're model out over the next 10, 15, 20, 30 years. All right, now my one year old is going to be in college in 18 years from now. What do you think college costs are going to be? Is it free or is it eight times the amount that it is today? And then that can tell you how much money that you should be saving into the overall 529 plans, what target rate of return that you should be thinking about. If you did save the $5,000 per kid and that you want more kids and you switch your savings there's versus your retirement, what does that do to your overall retirement and how much longer? I mean, all of this is pretty easy to figure out. Once you kind of start with a foundation of, you know, you just got to fill out the, you just got to do the work to do the planning. A Little bit.

[Big Al Clopine]

Yeah. I do like that they're thinking about it though. And I like that they're funding it while their kid is one year old.

[Joe Anderson]

Sure.

[Big Al Clopine]

But yeah, I agree with that. I think you got to make sure that you're okay first. Make sure your retirement is where it needs to be. You know, we told you try to save 20%. Right. And if you're there already and have extra, great, you can throw some more, you know, but that, I don't know.

[Joe Anderson]

Let'S say in 20 years from now he's done saving for retirement and he could just cash flow college.

[Big Al Clopine]

Yeah. Yep.

[Joe Anderson]

So there's lots of different options.

[Big Al Clopine]

Yeah, that's true.

[Joe Anderson]

But I don't know. That's all I got. I don't know if that's good or bad.

[Big Al Clopine]

I think that's a few things.

[Joe Anderson]

Okay. All right, that's it for us. Andy, wonderful job. Thank you very much as always. Thank you for putting this together. Alan came very prepared today.

[Big Al Clopine]

Yeah, I looked at these before.

[Joe Anderson]

Yes, you did. I can tell. Aaron, thank you for just hanging out and looking at Instagram.

[Andi Last]

Hey, he helped you.

[Andy]

He told you about Slovenia.

[Joe Anderson]

Sclavania.

[Big Al Clopine]

Yes, Slovenia.

[Joe Anderson]

Alright, that's it for us. We'll see you next time. Show Scout youn Money and Wealth Next week.

[Andi Last]

YMYW is all about the when should Fine and Dandy sell his business now at age 42? Or wait, BB and Shell have just one more year to save for retirement? Should they save pre tax or post tax? Joel wonders when to take the first required minimum distribution from retirement accounts for the most tax benefit. David asks for pointers on protecting his assets before experiencing any potential cognitive decline. And Brian wonders when it makes sense for retirees to have an emergency fund and how much don't miss it. Make sure you're following us in your favorite podcast app and subscribe and turn on notifications in YouTube so you can watch as soon as the new episode drops. And do us a favor and tell a friend we're over here making fun of finance at yout Money, you, Wealth. Now be honest. Do you have your own retirement plan figured out or are you relying on a spitball you just got from ymyw? If it's the latter, then it's time to schedule a one on one financial assessment with Joe and Big Al's team of experienced professionals at Pure Financial Advisors. It is also free, just like a Spitball, but it's tailored specifically for you and your needs in retirement, not generalized for everybody watching or listening.

[Andy]

Today.

[Andi Last]

You can meet in person at one of our many offices around the country or meet on online via Zoom. The Pure Team can help you build a retirement income plan, cut your taxes now and in retirement, and give you confidence about your financial future. Click or tap the free assessment link in the episode description to book yours or call 888-994-6257. There is no obligation and it might just be the smartest step you take toward a stress free retirement. Pure Financial Advisors is a Register 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.