The Truth About High Income Investments and Retirement Safety - 560

Summary

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.

---

Transcript

[Andi Last]

How risky is that 10% yield you've been hearing about? And why does no free lunch so often mean say goodbye to your principal? Today on youn Money, you, wealth podcast number 560, join Big Al's spitball business development company funds for Edward in Illinois before diving into buckets of cash, T bills, decumulation and Roth conversion timing for pebbles and Bam Bam. Plus the fellows help 34 year old Keith in Connecticut figure out if he's actually on track whether he's taking too much risk or just worrying too much. They also spitball on the six figure annuity gain that Gus in Philly's 95 year old dad has amassed. Finally, why yelling never pay an advisor on the Internet doesn't necessarily magically turn mygas into the perfect investment for everyone. While Joe and Big Al enjoy a little seasonal downtime, enjoy this encore presentation of these questions from a January 2025 episode. You know, back when we were all still catching up from last year's holiday hangover, I'm executive producer Andi Last, and here are the hosts of youf Money, you, Wealthy Joe Anderson, CFP and Big Al Clopine, cpa.

[Joe Anderson]

Edward, he's in Illinois. He's like I have been buying BDC funds. They are paying close to 10% dividends and at least recently, slight nav growth, net asset value. I don't completely understand the risk of these funds. I know they make loans to businesses that can't get traditional financing. I'm just wondering what the risk is. By the way, I drive a 2022 Toyota Highlander. Enjoy Miller Lite after golf. I played 100 rounds this year. Too bad most of them are forgettable. 100 rounds, that's a lot.

[Big Al Clopine]

And do you, how many do you.

[Andi Last]

Play, Joe, in a year?

[Big Al Clopine]

Let's see, you're probably close to 100.

[Joe Anderson]

I'm probably over 100.

[Big Al Clopine]

But do you wait for after the round to be.

[Joe Anderson]

No, I have my beer. That's what I thought before the round, during the round and after the round.

[Big Al Clopine]

That's what I thought. By the way, BDC is business development company funds, which are risky from the standpoint that these are companies that can't otherwise get traditional finance.

[Joe Anderson]

It's almost like it's like a private credit fund.

[Big Al Clopine]

Yeah, right.

[Joe Anderson]

Private credit today is unbelievable. It is giant.

[Big Al Clopine]

It's. It's the latest thing, right?

[Joe Anderson]

Well, there were some laws that passed in regards to the bigger banks and so for smaller companies to get financing, these banks started going private. Private lending. BDC would be an example of that.

[Big Al Clopine]

Right.

[Joe Anderson]

Where there's smaller companies are a little bit more risky. There's probably underwriting that they couldn't get a traditional standard loan.

[Big Al Clopine]

Right.

[Joe Anderson]

And so I don't know how many trillions of dollars are in private credit.

[Big Al Clopine]

But as long as the economy is good, you're probably fine. But when economies turn, sometimes these things can have problems. Remember the subprime loans that essentially caused the Great Recession?

[Joe Anderson]

Well, if you think about return, there's no free lunch. So if you're getting a good return on the money because there's added risk, it's a loan. So they're lending these dollars out to these organizations. And if these organizations are not around because of any type of turn in the economy, well, there's the return on Monday. The return on your money is going to be zero.

[Big Al Clopine]

Right. And so said just very simply, you loan your money to a company, the company goes bankrupt, that loan is gone, you're done.

[Joe Anderson]

Right.

[Big Al Clopine]

So that's the risk, is the risk of losing principal.

[Joe Anderson]

So you're getting a little bit higher rate of return. 10%. So it's paying close to 10%, Al.

[Big Al Clopine]

That's a good rate. So there's got to be risk. And that's, that's what it is.

[Joe Anderson]

All right. Yeah. So 100 rounds. Impressive. I wonder what the handicap is. We are talking money. We got myself, Joe Anderson, we got Big Al, Andy Last, Aaron Townsend. He doesn't. He just likes to stay under the radar, doesn't he?

[Big Al Clopine]

He doesn't even like to hear his name. I know, that's why we keep saying it. Hello, Aaron. And if you missed that, Townsend.

[Joe Anderson]

Yeah, hello to the YMYW team. It's a follow up from Pebbles and Bam Bam in Kentucky. Stone, following your non advice spitball from last year, here's the new skinny following up on four questions.

[Big Al Clopine]

Oh, gosh, a four parter.

[Joe Anderson]

All right, 67 years old, Pebbles is 70. All right, 67 year olds retired, Pebbles 70 in 20, 27 and 62 year old Bam Bam. House paid, no debt. Pebbles has a qualified account of $3.4 million, $1.1 million and a Roth brokerage account of 260. We got T bills of 700. We got I bond of 10 grand.

[Andi Last]

Collecting one damn I bond.

[Joe Anderson]

Collecting Social Security at $4,000 a month and then bam bam. Move 401k to a Vanguard IRA that's worth $1 million, still earns $50,000 a year and will collect Social Security at age 70. That's $3,000 a month. Right. You got all this big Al?

[Big Al Clopine]

Yeah. So if you're keeping track, that's about $6,400,000.

[Joe Anderson]

Okay, you're good. Our goal is to.

[Big Al Clopine]

We're done with all the questions.

[Joe Anderson]

Yes. Our goal is to move money to the Roth IRA up to the 24% tax bracket as often as we can, while maintaining the cash to live off of and pay the taxes. Here's our question 1. Is this too much money sitting in T bills? Even though the purpose of $10,000 a month living expenses $120,000 a year and the estimated quarterly payments of $60,000 federal, $14,000 state, while we convert about 250 to $300 a year to Roth. Is it too much sitting in t bills? Number one question. $650,000 on it. No, not at all.

[Big Al Clopine]

No, not at all. Because you're using $200,000 a year for living and taxes, so you're fine.

[Joe Anderson]

Okay. Number two, during the decumulation phase, where is the better place for qualified monies to sit? Low index mutual funds OR Low Indexed ETFs? Does it make a difference? What's the rationale for either? I think either or is just fine.

[Big Al Clopine]

I agree with that. I mean, if they're exactly identical, ETFs have a few slight advantages, but for the average investor, it's almost nothing.

[Joe Anderson]

Yep, I would agree with that. Is there any difference between a traditional and a rollover ira? Yes. A rollover Iraq is where you can roll it out of the IRA. So let's say it's coming from a 401. You're going to set up a rollover IRA. You roll your 401 into the rollover IRA. If you ever want to move it out of the ira, you can roll it out of the IRA into another qualified account. A traditional IRA is something that you set up that you made contributions and took the deduction. Or you might have basis.

[Big Al Clopine]

But they have the same rules and you can actually put the accounts together.

[Joe Anderson]

Yeah. Is there a better strategy to consider? What part of hey, we don't give advice does he not understand here? He's asking very specific type of questions, but.

[Big Al Clopine]

Well, we're just spitballing.

[Joe Anderson]

All right? This is not advice, just little compliance, FYI. Okay, what are we missing? I. E? Should we be refilling cash buckets too? Love the show, Listening while walking or carrier in the woods? Pebbles loves old fashioned since we live in bourbon country and drives a 10 year old Lexus and Bam likes the port and drives a Honda convertible as he's more continental. Thank you. Kisses to the team. There you go.

[Big Al Clopine]

Oh, you like that, Aaron? Okay, well, is there anything else to consider?

[Joe Anderson]

I don't know. Yeah, I think you should fill up some cash as you're rebalancing the overall account. So this is where it gets a little bit more complex is he needs $120,000 a year and he has roughly several million dollars in a retirement account that he's converting. So he's converting the IRA into a Roth. You probably don't want to touch the Roth dollars. So to create the income that he needs to live off that he has about $650,000 in cash or T bills that he's going to live off of as he's spending those down, he's going to run out of non qualified dollars at some point.

[Big Al Clopine]

At some point.

[Joe Anderson]

So the three month T bills, all of that dollars is going to be gone. The brokered ETFs, he's got about $268,000 there. That's probably the next pool that he needs to draw from. So all of those dollars will be drawn down and then your IRA and Roth monies will continue to grow. And then at some point you have your RMD that you'll have to take from your retirement account. And that's probably going to be over and above how much money that Pebbles and Bayman needs to live off of. But he has to look at how much money needs to come from the portfolio to have a lifestyle and then that's how much money that needs to be. Probably a little safer than your standard stock or stock ETF or index fund.

[Big Al Clopine]

Yeah, and there's some different variables here. Like BAM. BAM is still working. So 50,000 of the 120,000 spending need is already covered. And then when Social Security kicks in for both of them, it's about 80,000. So they may not need tons from their portfolio. I do agree that with the thinking which is convert as much as they can because they are going to have a tax problem. In fact, it's over $4 million in tax deferred right now. So. Yeah, no, I like what they're thinking. I agree with you, Joe, that you want to get as much into the Roth as you possibly can, but you have to be mindful that you need some of this money to live off of too.

[Joe Anderson]

And so the amount of money that you'd live off of, whatever the shortfall is right now, I think it's if they're spending $120,000 a year, so what they need about $70,000 from the portfolio yeah. And so maybe at 70,000, you go out five to 10 years and keep that pretty safe. So just to keep the math simple, 70,000 times 10 is $700,000 that you would want to have somewhat liquid. And he has $670,000 roughly in E bills. So I think he's right on track there. As he's distributing those dollars, he probably needs to backfill the next years of income, depending on how conservative he wants to be.

[Big Al Clopine]

Right, Right. Yeah. Makes sense.

[Andi Last]

Pebbles and Bam Bam are out here running a retirement and investing plan that looks like a NASA control panel. If the moving parts of your own plan feel a little overwhelming, we've got a resource that can help ground you. 10 steps to improve Investing Success breaks down the core principles that really matter, like why you should resist the urge to chase whatever did well last year. How to diversify in a way that manages risk instead of creating new problems. And how to stay disciplined when the markets act like toddlers on sugar. It's all in plain English. It'll help you focus on the things you can really control in your portfolio and retirement plan. And it's free. Click or tap the link in the episode Description to download 10 Steps to Improve Investing Success and share it with your buddy who keeps buying. Yesterday's hot stock picks today.

[Joe Anderson]

All right, we got Keith from Kentucky. I was hoping to get a second opinion on asset allocation, asset allocation and location. And if I'm taking on too much risk in my portfolio and if I'm in a good spot to retire at 57, that's the earliest age I'm eligible for a full pension from the government. If I wait till 62, I get a 10% raise on my pension. The multiplier becomes 1.10 instead of 1.0. I'm 34, very single, in a USPS city mail carrier. All right, Very cool. That's what my aunt was, a mail carrier.

[Big Al Clopine]

Oh, no kidding.

[Joe Anderson]

Yes. Salary gross is $58,000 a year, $80,000 in a TSP, roughly $32,000 of that is in a Roth. All right. Roth IRA is $20,000. He's got a little small cap value ETF in there. He's got some HSA cash, HSA investment. Are these good funds for my time horizon? So his funds, Al, are like the s and P500. He's in the total stock market. He's in some small cap. He's 34 years old. I think those funds are just fine.

[Big Al Clopine]

I do, too. And TSP, he says 40% C fund, which is common stocks, S&P and 60% S funds, which is like 4,000 different stocks, kind of more representative of the market. Yeah, I agree. That's fine.

[Joe Anderson]

Okay, so if so when should I. If I should take less risk? I have a USA pension plus Social Security, whatever left that even if it's 80% of what it could be. I currently only do the 5% match and put that into the Roth TSP. Then I max out the Roth IRA and HSA through payroll deductions. All right. Quadruple tax advantage ASAP. They match 100% of my 5% and my insurance provider gives me $1,000 towards my HSA annually. He's got a six year CD at $6,000. Okay. No brokerage account. I had a question about a brokerage. In your opinion, if someone is not maxing out all of their tax advantaged accounts like HSA, IRAS, 401 first, should they not touch a brokerage account? I do not own a home, but may want to buy one in six years when the CD matures. I have a six year old German shepherd named Ellie. She's a good girl. Would you recommend saving for a down payment on a house? Keep renting. Stop worrying so much. How would you invest the hsa? This is just rapid fire Big Al. A lot of questions thrown at us.

[Andi Last]

I have a dog, should I buy a house?

[Joe Anderson]

I can buy ETFs, mutual funds, individual stocks, etc. How do I stop worrying? I hear on the show about all these people with like $6 million and they're wondering if they can retire. And I'm over here not even making $60,000 annually. I have no idea how much I'll spend in 30 years. I spend $2,600 a month now. That's what I take home. Roughly two paychecks. I'm healthy, I don't smoke, drink alcohol, I exercise and I drive a six speed manual. 2020 suburban cross. Check. That's paid off. Thank you. And I hope to hear my rambling message on the show. Go Huskies. Keith from Connecticut.

[Big Al Clopine]

There's a lot there, but these are pretty easy to answer.

[Joe Anderson]

So. Okay, first of all, Keith, I think at 34 years old, making $60,000 a year, you have a total of about $150,000 saved. So I think that is awesome.

[Big Al Clopine]

It's phenomenal. Yeah. And the fact that you have a great pension plan, you're going to be in great shape. In fact, Joe, in many cases the people that are government workers that have a good pension end up in better shape than all these people that saved all this money and never learned how to live within their means.

[Joe Anderson]

Right. Should he save for a home? Sure. I mean, I think you got some money sitting in a non qualified brokerage account. 6 or in your CD, $6,000. Continue to build up the cash and that will give you a nice little nest egg for a down payment. Keep renting. I mean, I think if you wanted to keep renting, the only thing is just outpacing inflation with rent.

[Big Al Clopine]

Right. I think it's preferable if you can eventually buy a home. But it depends on the location that he lives. It's in Connecticut. So it depends what part of Connecticut whether it might be expensive or not. But yeah, I would say. And then the other part is, when should I take less risk? You only start thinking about that when you get much closer to retirement and you're going to need have access to the money. Or if you just can't stomach the fluctuations of the market, then you take less risk, you have more safety so your, your portfolio doesn't go up and down so rapidly.

[Joe Anderson]

I would say when you get about 10 years from retirement, that's when I would look at revamping the overall portfolio.

[Big Al Clopine]

Yeah. And you may not even make a change, but that's when you start looking. Right.

[Joe Anderson]

You're 34 now, you're going to retire at 57.

[Big Al Clopine]

And chances are with your pension, it's going to cover a lot of your expenses. So you may not need a lot of safety. On the other hand, you may want more safety because maybe you want to increase your lifestyle in retirement. So there's different ways to think about it. But for right now, growth is at age 34, growth's important, but what he's.

[Joe Anderson]

Doing is way more sophisticated than most.

[Big Al Clopine]

Of course. Yeah.

[Joe Anderson]

He knows. Okay, so he's in small value. He's in an extended market.

[Big Al Clopine]

Right.

[Joe Anderson]

You know, he's in the C fund. So what he's doing is.

[Big Al Clopine]

It's amazing.

[Joe Anderson]

It's pretty good.

[Big Al Clopine]

Just keep it up, know you're on a good path and then don't worry.

[Joe Anderson]

Stop. Yeah, stop worrying. We got Gus in Philly goes. Hi, Joe, Big Al and Andy. Thank you for my favorite podcast. Thank you. Great mix of information and lighthearted humor. My dad's 95 years young and still pretty active. His drink of choice is Kilimadoo and he drives a Buick Lacrosse. It's a tank. Drives 95.

[Big Al Clopine]

Proves it. Yeah, that's very good.

[Joe Anderson]

All right, he has a MYGA that started with a deposit of $40,000 that has now grown $192,000 over many years. It yields 4% and will mature on 1:1. 2026. He has the ability to take out $19,000 out without penalty in 2025, which we plan on doing to put into his brokerage account. At his advanced age, it is unlikely that he'll be able to roll the MYGA over into another multi year option. So I'm looking for options that he can pursue that will not cause him to take a tax hit on the $120,000 gain. $198,000 balance, $40,000 principal, $19,000. 2025 plan withdrawal. $20,026 plan withdrawal equals $120,000 gain. Can you spitball some options that may allow him to defer the $119,000 gain so he can contribute to.

[Big Al Clopine]

Continue.

[Joe Anderson]

Oh, so we can continue to take about $20,000 a year out of gains over time. Insane. A reasonable tax bracket between his pension, Social Security and dividends. He already is in the 22% tax bracket without taking any gains. Thanks for the show, guys from Philly.

[Big Al Clopine]

Well, first of all, MYGA is a multi year guaranteed annuity. We'll just get that out there. So it's an annuity.

[Joe Anderson]

Right. So we put $40,000 in. It's grown to $192,000. So any growth that's in an annuity is taxed at ordinary income rates. Correct. So he's got a little bit of a tax issue here of saying, all right, well, I'm pulling out $20,000 a year to keep him in the 22% tax bracket. Why isn't he pulling more out? Because he's well into the 22%. Just take more out to max up.

[Big Al Clopine]

And just tell it's done.

[Joe Anderson]

Because the 22% is going to go to. It could. It's slated to go to 25%. I would also look at who's the beneficiary. Mm. And what is the. The options at death. Is it a lump sum or can you annuitize?

[Big Al Clopine]

Right.

[Joe Anderson]

And different options for beneficiaries. So Gus is. Maybe he's inheriting this. What tax bracket is Gus in?

[Big Al Clopine]

Sure.

[Joe Anderson]

Versus his dad.

[Big Al Clopine]

Right. Yeah. And if his dad. I mean, there's nothing wrong with just taking $19,000 a year or whatever the amount is, whatever the plan should be. So you slowly get rid of it without getting into. I have a tax bracket. That's what I would do.

[Joe Anderson]

Yeah. Or you could potentially take out more.

[Big Al Clopine]

Right.

[Joe Anderson]

Just maximize the bracket. It's like if you Think. I mean, 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?

[Big Al Clopine]

Yeah. Now, if Gus inherits it and he's in a higher bracket, maybe the father just takes a lump sum and pays the tax.

[Joe Anderson]

Yeah.

[Big Al Clopine]

Calls it. Calls it good. Or if there's no way out of the tax.

[Joe Anderson]

Right? Yeah, there is no way out of the tax. You're going to have to pay the tax.

[Big Al Clopine]

There's no secret here. It's taxable.

[Joe Anderson]

Yeah. The good news is you get a $200,000 gain.

[Big Al Clopine]

That is the good news. Right.

[Joe Anderson]

So, yeah, there is no magic bullet here. You got to pay the tax. And it's just when you want to pay the tax and minimizing the taxes. And now is there charitable. Speaking of charities, maybe you could offset some of the tax if Gus gives money to charity, maybe he can front.

[Big Al Clopine]

Load some stuff if he's above the standard deduction. I mean, there's things that can be done, but the basic answer is it's taxable. So you just have to decide how much you want to take each year to maximize whatever tax brackets you can.

[Andi Last]

Joe said some magic words right there. Give to charity. And here's the thing. Most people give the simple way you write a check, send it to your favorite nonprofit, which is great, but the IRS would love it if you kept doing that forever because often it gives you zero tax benefit. But this week on YMYW tv, Joe and Allison Alley walk through six smarter ways to give tax efficiently as your window to do so this year is about to close. Find out how to get bigger tax deductions for your donations, how to skip capital gains tax with your charitable giving, and a strategy to let you both bypass the IRS entirely while you help others. Click or tap the links in the episode description to watch YMYW TV and to download the Free Tax Smart charitable giving guide. Then share them with a friend who still thinks that clicking donate on Facebook is a tax strategy. Let's go to ken on page 24.

[Joe Anderson]

I just buy MyGas from eight plus companies on the peaks when the rates go above 5%. I have a bunch at 5.5 for five years. Good tax referral, 10% free withdrawals.

[Andi Last]

This is a comment on our YouTube channel. So I said thanks for watching and sharing your strategy. Hopefully you've got it mapped out to account for future taxation and how the mygas fit in with your overall asset mix. To which Ken replied Yes.

[Joe Anderson]

June Roth conversions each year, especially with the Trump tax rates as low as they are. I built a 2 million portfolio using bonds and MyGas only. P.S. i've never paid an AUM fee. No one ever should. Okay. Okay, Wonderful.

[Big Al Clopine]

Great.

[Joe Anderson]

Glad it's working for you. What our response was. You're just having conversations here with Ken.

[Andi Last]

Well, it's for everybody on YouTube to see.

[Joe Anderson]

Got it.

[Big Al Clopine]

Okay.

[Joe Anderson]

Now that I have safely landed in retirement with my 5 plus percentage conservative investments, I'll use strategic investing for my excess cash in long term efficient capital gains investments. What is strategic investing now?

[Big Al Clopine]

Whatever it means to him, it doesn't say.

[Joe Anderson]

All right, well, I think this is great.

[Big Al Clopine]

Yeah, I do too.

[Joe Anderson]

Wonderful. Ken.

[Big Al Clopine]

I think strategy. Yeah. 5%. That's great. I mean, the stock market over the last 100 years has done 10. But. But yeah, this can be.

[Joe Anderson]

If I could get a guaranteed 5%, I would take that all day long. Why would.

[Big Al Clopine]

Why not? Right.

[Joe Anderson]

It's just that you built a $2 million portfolio.

[Big Al Clopine]

Yeah. It's probably enough, right?

[Joe Anderson]

Yeah, but. All right, so here's this next comment here. How many times do I hear CFPs say past performance does not indicate future performance?

[Big Al Clopine]

Well, okay, probably often that's true.

[Joe Anderson]

Yet they always then tell you to put their money in the market, even though it could take a couple decades to recover from the Downturn 2008.

[Big Al Clopine]

So we still haven't recovered. We have to wait until 2028. I think if you look at all the indexes, they're quite a bit higher than they were even at the low of 2008.

[Joe Anderson]

Yep, it's like the CYA. But then they need to get their money from their portfolio with AUM fees. So they put your money in the market. What do they care? It's not your money. It's not their money yet.

[Big Al Clopine]

Okay, sounds like Ken doesn't want to invite. Which is great.

[Joe Anderson]

Land your retirement by laddering 5% or higher bonds in Myga on the peaks for five or five to seven or more years after you land your retirement income stream. Then you can invest excess cash in the markets for the long term for growth and inflation protection and tax optimization.

[Big Al Clopine]

Okay, fair enough. I'm not sure that strategy didn't work for the last 20 years when interest rates were 1 and 2%. But now it's not a bad idea.

[Joe Anderson]

I'm not going to argue with him. Whatever. If that's what he wants to do, that's what he wants to do. I don't know why he's harping on A1 fees. Doesn't he know that there's probably some sort of cost in regards to the mygas that he's in?

[Big Al Clopine]

Yeah, well, that's the bonds that he's in. Good point. Yeah.

[Joe Anderson]

There's no free lunch. Everything's going to cost you a little bit.

[Big Al Clopine]

Right.

[Joe Anderson]

So then you just have to weigh out the cost of what you're paying versus the value that you're receiving.

[Big Al Clopine]

And some people say there's no cost, but it's in the return. You got lots of returns. Right.

[Joe Anderson]

How do you think banks make their money like a CD there? Well, there's no cost in the cd. Well, they're taking your money and they're investing it elsewhere and they're getting a lot higher rate of return.

[Big Al Clopine]

Correct.

[Joe Anderson]

And it's called a spread.

[Big Al Clopine]

Right.

[Joe Anderson]

So there is no free lunch anywhere. So if you're happy with whatever return that you have and you're happy with the investments that you're in and you landed your retirement, then God bless, I think that's great.

[Big Al Clopine]

And especially if they're safe and you're able to pull this off, go for it.

[Joe Anderson]

Go for it.

[Andi Last]

So when he says he's never paid an AUM fee and no one ever should, what would be the reason somebody should pay an AUM fee?

[Joe Anderson]

Well, there's multiple, there's thousands.

[Big Al Clopine]

Many people don't. Investing is a mystery. Right. So they just don't know what to do. Right. Or maybe they need help. Can I retire? Or maybe while they're retired, am I spending too much and it's ongoing planning or maybe I'm paying too much in taxes. What can I do to save taxes? On and on and on. I want to buy a house. Oh, I got to save for college. How do I go about that? That's why people hire advisors. Quick answer. There's more than that, but that's what came off the top of my head.

[Joe Anderson]

Pitching your services, Big Al?

[Big Al Clopine]

I'm not actually even slightly. But I'm just trying to answer the question.

[Andi Last]

Certainly not to Ken. He doesn't need it.

[Big Al Clopine]

That Andy, just post.

[Joe Anderson]

We have some comments here. What are we doing here?

[Andi Last]

Yeah, you got. The first one actually was a comment that was emailed into me from one of our regular listeners in the rest of our YouTube comments.

[Joe Anderson]

All right.

[Big Al Clopine]

Okay.

[Joe Anderson]

Hey guys, heard a couple of shows. Hold on, let me start over here. Hey guys, heard a couple shows lately of people having homes in different states and where they file their taxes for residency. My buddy's 83 year old widowed mother has a house in California in Nevada. She always files her state taxes in Nevada. California audited her and wanted years worth of bills. California determined she was living in California more than Nevada from when she started and stopped her newspaper at each house. So if you have a CPA saying they will never figure it out, get a new CPA later. Wow, that's intense. Yeah.

[Big Al Clopine]

And that's from Greg.

[Andi Last]

And that pretty much confirms. Al, what I think that you said in those two episodes where we've talked about this is that they will find.

[Big Al Clopine]

Out, well, especially California. And California is very aggressive on this sort of thing. So you can Google on YouTube Nevada residency, and you can find someone that will rent you a P.O. box for $400 a year or whatever and try to say that that will work for state residency. It won't. And California is really good about catching these. Joe.

[Joe Anderson]

All right, we got Ed. He goes, hey, please favor questions when the couple asking for a spitball has less than 6 to 12 million dollars.

[Big Al Clopine]

You know, we just read them as we get them.

[Joe Anderson]

Many of us listen for guidance, and it's ridiculous when the scenario asks whether or not they can float $21,000 a month on luxury travel. Love the show, but it's slowly becoming geared only towards Thurston Hulv. Third. Yeah, we need more Gilligan.

[Big Al Clopine]

We do.

[Joe Anderson]

Yeah.

[Big Al Clopine]

Then send your Gilligan questions in.

[Joe Anderson]

Love it. Yeah. Six to 12. Sometimes it's like, come on. I know you're just writing in to brag, right? Not to brag.

[Big Al Clopine]

Well. And I have $50 million, and we even make fun of them sometimes.

[Joe Anderson]

It's like, yeah, you did a great job. Yeah, I want to spend, like, $7 a month.

[Big Al Clopine]

You're good. You didn't need to ask us permission for that.

[Joe Anderson]

All right, we got a little comment here from Keith. He goes, good video, as always. Good video. Yeah, Looking good. Way to go. Aaron Townsend, the first caller noted they are moving into their rental for two years to qualify as a primary residence. That may not save them as much as they think, as the rules are clear that the gain in the sale is pro rata. For example, if this was a rental for eight years, then they lived there two years after as a primary residence, and the gain was $500,000, then $400,000 would be taxable. It may even be more if they took depreciation or otherwise lowered their basis. All right, Keith's getting in the weeds here. I like it.

[Big Al Clopine]

And that's a true statement. And this has been true, I want to say, since, like, 2007. Eight, nine, maybe even earlier. But in other words, it used to be you could move into your rental, live there two years, and get that $500,000 exclusion if you're married to 50, if you're single. And then the IRS started saying no, you got to do a proration between years of residence and years of. Of rental. So that's a two slima.

[Joe Anderson]

The rule's different if I lived there as a primary residence first.

[Big Al Clopine]

Yeah. And that's what's weird, right? Yeah.

[Joe Anderson]

Because if it was my primary, then I moved out of it, I rented it out, then I moved back into it, then the proration is different.

[Big Al Clopine]

Yeah, there is no proration as long as you satisfy the two out of the last five years. But I think what the IRS was trying to say is you can't have 10 rentals and then just keep hopping in. Exactly.

[Joe Anderson]

All right. So, Keith. Hey, I was a bit surprised there was any discussion on a million dollars versus $430,000 per year as a break. Even is never.

[Andi Last]

This is from somebody who had asked whether or not a million dollars in bonds or a $40,000 a year pension is just like having a million dollars in bonds.

[Joe Anderson]

You could buy a risk free 30 year t bond paying 4.25 and get $42,000 per year, and 30 years later you'll have a million dollars that would go to your heirs versus zero with an annual payment. Very true. I don't remember what someone said, hey, If I have $40,000 pension, is that like having a million dollars? And I think where we were going with this is that sometimes people don't understand how much money that you would need in a lump sum to create the income of a $40,000 or $20,000 or a $50,000 pension.

[Big Al Clopine]

Right, right. Yeah. That's exactly what we were talking about. Given the choice, I'd rather have a million dollars for sure. Right. And then I can create my income for 40,000 and I still have the million. A pension goes away when you pass away. So. Yeah, Keith, that's a true statement. I think we were. That's what.

[Joe Anderson]

But how many people have a million dollars?

[Big Al Clopine]

Not too many.

[Joe Anderson]

Right.

[Big Al Clopine]

Yeah.

[Joe Anderson]

And so. But they have a $40,000 pension. And if they might have, let's say, a few hundred thousand dollars saved, it's like, well, no, you have a lot more than a few hundred thousand dollars saved. That 40,000 is almost like having $1 million that you would have to invest it.

[Big Al Clopine]

Yeah, yeah. Same similar tax consequence.

[Joe Anderson]

Yep. A lot of recency bias here with these high interest rates. Too.

[Big Al Clopine]

Boy, that's for sure. Right? I mean, some of these are great strategies today, and they weren't very good three years ago and the last 20 years before that, too.

[Andi Last]

Yeah.

[Joe Anderson]

All right, we got another question. Here goes. The math was easy. Okay, I'm not really. I don't know what this is in.

[Andi Last]

Reference to one of our TV shows called you'd 11 step path to Financial Freedom. He says the math was easy. So focus on perma after already. And I looked that up to find out what perma was and that is actually. It's the softer side of retirement. Positive emotion, engagement, positive relationships, meaning and achievement or accomplishment. Okay, so in other words, don't focus so much on the money side of it. Focus on what you're going to do with your time in retirement and how to flourish.

[Big Al Clopine]

You know what, Annie, we don't really talk about that enough, but I think that. I think what you do with your retirement, with your time, your what your purpose is, what gets you up in the morning, your. Your children, your grandchildren, your family, friends, your spouse, this is just import as important, if not more important. But this is a financial show. That's why we focus on that. But yeah, don't forget that other part.

[Andi Last]

And that is that that whole theory of perma is from Dr. Martin E.P. seligman, in case anybody wants to look that up.

[Big Al Clopine]

Okay, good.

[Joe Anderson]

That's it for us. Show Scott. You'd money you wealth.

[Andi Last]

If you enjoy ymyw, do us a favor and tell your friends. It helps us reach more listeners and viewers like you. And don't forget to leave your honest reviews, your comments, your ratings for your money, you, wealth in Apple podcasts, on our YouTube channel, and in all the other apps that let you do that, like Amazon, Audible, Castbox, Good pots, Pandora Player, FM podcast Addict, Podchaser. We're on all of them. Seriously, go just find us your money, you, wealth is presented by Pure Financial Advisors. It is two weeks until your end. It's almost too late. To make sure your retirement plan is truly working for you and that you're going to pay as little tax as possible in 2025 and beyond. Go beyond a spitball and get clarity on your taxes, your investments and your retirement income strategy for the year ahead, schedule a no cost, no obligation comprehensive financial assessment with the experienced professionals on Joe and Big Al's team at Pure Financial Advisors. Click or tap the free assessment link in the episode description or call 888-994-6257 and book yours now. Meet in person at any of our offices around the country or online right from home. Wherever you are, the Pure Team will help you create a detailed year end ready plan tailored to your unique needs and goals in retirement. Pure Financial Advisors is a registered Investment Advisor. This show does not intend to provide personalized investment advice through this podcast and does not represent that the securities or services discussed are suitable for any investor. As rules and regulations change, podcast content may become outdated. Investors are advised not to rely on any information contained in the podcast in the process of making a full and informed investment decision.