Podcast Summary: "The Truth About High Income Investments and Retirement Safety"

Your Money, Your Wealth – Episode 560
Hosts: Joe Anderson, CFP® & Alan “Big Al” Clopine, CPA
Date: December 16, 2025

Episode Overview

In this eclectic and humor-filled episode, Joe and Big Al tackle financial listener questions that run the gamut from high-yield business development company (BDC) funds to the nitty-gritty of Roth conversion timing, home purchases, and the realities of retirement income. The pair continues their unique approach to making personal finance education accessible—combining deep technical knowledge with candid, often playful banter. Key themes include risk and reward in high-income investments, strategic decumulation in retirement, annuity gains, the realities of tax-efficient giving, and the never-ending debate about whether paying advisory fees is ever justified.

Key Discussion Points & Insights

1. Understanding the Risks of High Yield Investments—BDC Funds

(Starts ~01:03)

• Listener Edward in Illinois asks about BDC funds with 10% dividend yields and seeks clarity on their risk.
• Big Al: Explains that BDCs (Business Development Companies) lend to companies that cannot secure traditional bank financing, inherently increasing default risk.
• Joe: Compares BDCs to private credit, noting the explosion in such funds post-regulatory changes limiting bank lending to smaller firms.
• Memorable Quote:

  “If you think about return, there’s no free lunch. If these organizations aren’t around due to any economic downturn, the return on your money is going to be zero.” —Joe Anderson [03:03]

• Big Al: Shares that as long as the economy is good, the risk is manageable, but downturns can quickly make BDCs problematic, analogizing to subprime loans before the Great Recession.

2. Buckets, Decumulation, and Roth Conversions—Pebbles & Bam Bam’s Multi-Part Query

(Starts ~04:20)

Pebbles and Bam Bam (Kentucky) provide a complex, real-world case study on managing a multi-million dollar retirement portfolio.

• Assets: Multi-million in qualified accounts, cash, T-bills, Roth, and I-bonds; detailed Social Security strategies.
• Main Questions:
  1. Is $650,000 in T-bills too much for $120k/year in expenses plus $74k in taxes?
  2. Best holding for qualified money—index mutual funds vs. ETFs?
  3. Difference between traditional vs. rollover IRA?
  4. Missing anything—especially regarding replenishing cash and decumulation phases?

Hosts’ Spitballing:

• T-bill allocation is sensible given 1-2 years of liquidity needs.
• Mutual funds vs. ETFs: negligible difference for the average investor, very slight ETF tax efficiency.
• Traditional vs. Rollover IRA: Functional equivalence for most, slight technical differences due to origins (401k rollover vs. personal contributions).
• Decumulation logic: Use cash/T-bills first, then brokerage ETFs, keeping 5-10 years’ worth of needed expenses in safer assets.
• Roth is the last pot to touch; maximize conversions without neglecting immediate liquidity.
• Memorable Quote:

  “Pebbles and Bam Bam are out here running a retirement plan that looks like a NASA control panel.” —Andi Last [11:14]

3. Early Retirement and Risk—Keith’s Assessment at 34

(Starts ~12:01)

Keith, a USPS mail carrier, asks about risk, retirement readiness at 57, and brokerage account prioritization.

• Assets: $80k in TSP (government 401k), $20k Roth IRA, good HSA balance, $6k in CDs.
• Portfolio: Index-heavy, S&P500, total market, and small-cap value—“quadruple tax advantage” via HSA, Roth 401k, and IRA.
• Hosts’ Analysis:
  • For a 34-year-old, Keith’s savings and asset allocation are outstanding.
  • Adjustable risk: No need to reduce risk before retirement is closer; review allocation within 10 years of retirement.
  • Home purchase: Sensible to save via cash or CDs if buying in ~6 years; renting is fine if market/home prices are too high.
  • Brokerage investing should come after maximizing other tax-advantaged accounts.
  • Memorable Quote:

    “The people who have a great pension end up in better shape than those who saved a lot, but never learned how to live within their means.” —Big Al [15:45]

  • For HSAs: Invest for growth unless drawing soon for healthcare.
  • Overarching advice: “Stop worrying!”—Keith is ahead of the curve for his age and income.

4. Dealing with Large Annuity Gains—Gus’s 95-Year-Old Dad’s MYGA

(Starts ~17:57)

Gus asks how to minimize the tax impact of a $120k gain on his father’s multi-year guaranteed annuity (MYGA).

• Problem: Original $40k deposit, grown to $192k; limited penalty-free withdrawals.
• Tax Implications: Annuities’ gains are ordinary income on withdrawal.
• Options:
  • Withdrawals should be timed to stay at the top of the current low 22% bracket before it reverts to higher rates; take more out now if feasible.
  • Consider beneficiary’s (Gus’s) tax rate if he is set to inherit—sometimes better for father to realize gain now.
  • No real way to avoid taxes; withdrawal timing is the main lever.
  • Charitable options: If charitable, bunch contributions to offset part of the tax.
  • Quote:

    “There’s no secret here—it’s taxable. The only question is how much you want to take each year to maximize the right brackets.” —Big Al [21:57]

5. Should You Ever Pay Advisory Fees?—YouTube Comments from Ken

(Starts ~23:07)

Ken claims he built a $2M portfolio using only bonds and MYGAs, never paid an advisory fee, and doesn’t believe anyone ever should.

• Hosts’ Response:
  • Acknowledge that a lot of people “don’t know what to do” with investing; that’s why advisors exist.
  • Fees pay for ongoing asset allocation, tax planning, retirement strategy—not just investment returns.
  • Underline that all investments, even no-fee options, have embedded costs—there is truly “no free lunch.”
  • Notable Exchange:

    “Doesn’t he know there’s some sort of cost in the mygas he’s in?” —Joe Anderson [26:32]
    “Everything’s going to cost you a little bit.” —Big Al [26:38]

  • Joe: “If you’re happy with what you have… God bless, that’s great.”

6. Listener Tips & Tax Residency Lessons

(Starts ~28:15)

• Tax Residency: Story about California’s aggressive pursuit of “snowbird” returns—newspapers, utility bills, and more used to determine residency.
• Main Message: Don’t assume you can “trick” states—get expert help, especially with dual residences.
• Listener Ed: Requests more spitballs for regular folks, not just those with $6–12M in assets.
• Listeners chime in: On primary residence for rental conversions (IRS proration of capital gains exclusions), the difference between a pension's value vs. lump-sum equivalent, and the soft side of retirement (“PERMA”—Positive Emotion, Engagement, Relationships, Meaning, and Accomplishment).
• Hosts: Agree personal fulfillment and purpose are crucial to retirement, but as a finance show, financial questions dominate.

Notable Quotes & Memorable Moments

• “No free lunch. Everything’s going to cost you a little bit.” – Big Al [26:38]
• “Pebbles and Bam Bam are out here running a retirement and investing plan that looks like a NASA control panel.” – Andi Last [11:14]
• “How many people have $1M? Not too many… But they have a $40,000 pension, and that’s almost like having $1M that you would have to invest.” – Joe Anderson [33:37]
• “For right now, growth—at age 34—growth is important, but what he’s doing is way more sophisticated than most.” – Joe Anderson [17:37]
• “If you pay 22, if you’re in the 22% tax bracket and you want to get it out in the 22…might as well max out the 22%, right?” – Joe Anderson [20:59]

Timestamps for Key Segments

• [01:03] Risks & Yield of BDC Funds
• [04:20] Pebbles & Bam Bam’s Decumulation, Roth Conversion, Cash Bucketing
• [12:01] Keith’s Early Retirement Plan & Asset Allocation
• [17:57] Managing Large Annuity Gains & MYGA Withdrawals
• [23:07] “Never Pay an Advisor” Debate & Strategic Bond/MYGA Investing
• [28:15] Tax Residency Lessons, Listener Feedback, & Pension Value Calculations

Episode Tone & Takeaways

As always, the YMYW team maintains a light, conversational tone—mixing real, actionable advice with banter, one-liners, and behind-the-scenes quips. Listeners come away with both technical answers and big-picture clarity:

• High income yields come with high risk—it’s all about trade-off.
• Decumulation requires careful planning, especially with multiple account types and income streams.
• Early, disciplined savers (even with moderate incomes) can be on solid footing—keep worrying in check!
• Annuity gains are taxable; plan the timing, but there’s no shortcut.
• Advisor fees buy more than just portfolio management, but DIY can work for the engaged and knowledgeable.
• “No free lunch” applies across finance—returns, fees, and planning alike.

For Listeners Interested in Similar Topics

Joe and Big Al routinely field questions on Social Security, IRAs/401ks, Roth conversions, tax management, and retirement sustainability—always with an eye toward helping “regular” savers as well as wealthier clients.
Send in your situation for a “retirement spitball,” and you’ll get both technical depth and a friendly roast, free of charge.