What’s the Future of Social Security Under the New Administration? - 521

Summary

Podcast Summary: What’s the Future of Social Security Under the New Administration? (Episode 521)

Your Money, Your Wealth hosts Joe Anderson, CFP®, and Big Al Clopine, CPA of Pure Financial Advisors delve into the pressing question: What’s the future of Social Security under the new administration? Released on March 18, 2025, this episode blends expert insights from the American College of Financial Services' inaugural Horizons Conference with practical listener case studies, providing a comprehensive analysis of Social Security's sustainability and its implications for retirement planning.

1. Introduction

The episode kicks off with executive producer Andi Lask outlining the primary focus: examining the future of Social Security amidst political shifts. She hints at upcoming episodes that will draw from leading financial experts' research and forecasts, ensuring listeners are well-equipped to plan for a secure retirement.

2. Insights from the Horizons Conference

Guest: George Nichols II, President of the American College of Financial Services
Timestamp: [00:00 – 03:36]

Joe Anderson welcomes George Nichols II to discuss the mission and significance of the American College of Financial Services. Nichols emphasizes the college's dedication to applied financial knowledge, ethics, and societal benefit. He highlights the recently hosted Horizons Conference in San Diego, the college's first event tailored specifically for retirement professionals. Nichols outlines the college’s strategic focus areas:

• Specialization: Doubling down on retirement education as a critical area for America's financial well-being.
• Representation: Growing the financial planning profession by bringing together retirement specialists and thought leaders.

A notable moment occurs at [02:07], when Nichols states, “We believe that people's financial security and well-being is helped and influenced by a really good financial advisor,” underscoring the importance of competent financial guidance in enhancing societal financial health.

3. Expert Opinions on Social Security's Future

Following the introduction, the podcast features a panel of experts from the Horizons Conference: Eric Ludwig, Steve Parish, Jeff Levine, and Jamie Hopkins. They collectively explore the viability and future reforms of Social Security.

Key Discussion Points:

• Current Challenges: Social Security's sustainability concerns, including the projected depletion of its trust fund by 2031-2033 ([05:21]).

  Jeff Levine counters common misconceptions about fraud within Social Security, clarifying that retiree benefits experience minimal abuse. At [04:50], he states, “Social Security is the single most efficient financial instrument that's ever been built in the history of the world.”

• Potential Reforms: The necessity of adjusting either the incoming taxes or outgoing benefits to maintain solvency. The consensus leans towards benefit adjustments over tax hikes, given the public's reluctance to support higher taxes ([05:54]).

• Political Implications: Ty Bob emphasizes the strong political influence of senior voters and organizations like AARP, suggesting that drastic reductions in benefits are politically unfeasible in the near term ([08:26]).

• Impact on Different Demographics: The percentage of retirement income derived from Social Security varies across wealth spectrums. Eric Ludwig notes that more affluent individuals may see Social Security as a smaller income component, while it remains pivotal for lower-income retirees ([07:30]).

Notable Quotes:

• Steve Parish at [06:07]: “The break evens on these are maybe age 80. So as long as you're going to live to age 80 or longer, it pays to wait on Social Security.”
• Jeff Levine at [09:00]: “Social Security's total overhead runs at 0.3%. So every time somebody's like, oh, we need something better and more efficient, I'm like, that's nonsense.”

4. Listener Case Studies

Case 1: Lucy and Ricky from Wisconsin

Timestamp: [14:07 – 19:05]

Scenario:
Lucy and her husband Ricky anticipate inheriting approximately $100 million from Ricky's parents. Faced with this potential windfall, Lucy questions whether they should continue saving for retirement or rely on the inheritance.

Analysis by Hosts:

• Uncertainty of Inheritance: Both Joe and Big Al advise against planning retirement based solely on uncertain inheritances. They highlight risks such as estate taxes and the likelihood of the inheritance being distributed through complex structures like family limited partnerships or charitable trusts ([16:59]).

  Joe Anderson emphasizes, “Pretend like it's not there if it comes in, great, but pretend like it's not there,” advising Lucy to focus on her own financial planning irrespective of the inheritance.

• Estate Planning Complexities: The hosts discuss the probable use of estate planning tools to minimize tax burdens and ensure efficient wealth transfer, cautioning that actual inheritance might be significantly less than anticipated due to taxes and strategic allocations ([17:36]).

Key Takeaway:
Do not rely on potential inheritances for retirement planning. Instead, maintain independent savings and investment strategies to ensure financial security.

Case 2: Ty Bob from Arizona

Timestamp: [19:05 – 33:05]

Scenario:
Ty Bob, a 67-year-old recent retiree living in Arizona, seeks advice on optimizing the timing of his Social Security benefits, considering Roth conversions, and choosing between Medicare supplement plans versus Advantage plans. He holds substantial retirement accounts, including a traditional IRA, Roth IRA, brokerage accounts, and an inherited IRA.

Analysis by Hosts:

• Social Security Timing:
  Jamie Hopkins recommends delaying Social Security benefits until age 70 to maximize payouts, citing a break-even point around age 80 ([21:08]).

  Steve Parish concurs, advising not to overreact to potential benefit cuts and to treat Social Security as a stable foundation of retirement income ([07:10]).

• Roth Conversions and 72T Distributions:
  The hosts critique Ty’s plan to execute a 72T tax election (SEPP) to withdraw funds early from his IRA without penalties. They highlight the rigidity and potential risks of such withdrawals, especially during market downturns.

  Jamie Hopkins explains at [28:34], “72T tax election... allows you to take money out of a retirement account under the age of 59 and a half without having to pay a 10% penalty,” but also warns of its long-term constraints.

• Medicare Plans:
  Joe Anderson advocates for Medicare Advantage Plans (ABD) over traditional supplement plans, suggesting they offer broader coverage and flexibility ([22:11]).

Recommendations:

• Delay Social Security Benefits: Wait until age 70 to maximize monthly benefits.
• Moderate Withdrawal Rates: Suggest a lower, sustainable withdrawal rate to extend retirement savings.
• Flexible Retirement Strategy: Incorporate part-time work or other income sources to reduce reliance on rigid withdrawal plans like 72T.

Key Takeaway:
Adopt a balanced and flexible approach to retirement withdrawals and Social Security timing, avoiding overly restrictive strategies that may pose financial risks.

5. Listener Comments: Gilligan's Story

Timestamp: [33:05 – 38:00]

Listener Testimonial by Gilligan (Thurston):

Gilligan shares a compelling personal journey from financial hardship to substantial wealth accumulation. Starting with a modest income of less than $15,000 as a laboratory scientist, Gilligan emphasizes disciplined saving, investing in low-cost index funds, and living below means, ultimately amassing over $7 million in investable assets by age 44.

Key Points:

• Financial Discipline: Gilligan attributes his success to consistent saving, strategic investing, and avoiding lifestyle inflation.

  Jamie Hopkins highlights at [38:00], “Pay yourself first, placing it in investments because you are worth it,” reinforcing the importance of prioritizing personal financial growth.

• Overcoming Adversity: Gilligan’s experience with family financial struggles underscores the value of financial planning and resilience.

• Impact of Education and Habits: Continuous learning through investment books and podcasts played a crucial role in Gilligan’s financial achievements.

Hosts' Response:

Joe and Jamie commend Gilligan’s disciplined approach, reinforcing the message that financial independence is attainable through prudent planning and consistent effort.

Key Takeaway:
Financial success is achievable through disciplined saving, strategic investing, and prioritizing personal financial goals over lifestyle inflation.

6. Closing Remarks

In the episode's conclusion, Andi Lask promotes Pure Financial Advisors' comprehensive resources, including a free Financial Data Guide and retirement readiness tools. She teases upcoming episodes featuring expert interviews and additional listener scenarios.

Final Thoughts:

The hosts reiterate the importance of proactive and independent financial planning, emphasizing that while Social Security remains a critical component of retirement income, individuals should not solely rely on it. They encourage listeners to leverage available resources and seek personalized financial assessments to navigate the complexities of retirement planning effectively.

Notable Quotes with Timestamps

• George Nichols II:
  “[02:07] We believe that people's financial security and well-being is helped and influenced by a really good financial advisor.”

• Jeff Levine:
  “[09:00] Social Security's total overhead runs at 0.3%. So every time somebody's like, oh, we need something better and more efficient, I'm like, that's nonsense.”

• Steve Parish:
  “[06:07] The break evens on these are maybe age 80. So as long as you're going to live to age 80 or longer, it pays to wait on Social Security.”

• Jamie Hopkins:
  “[38:00] Pay yourself first, placing it in investments because you are worth it.”

Key Takeaways

1. Social Security's Future: While facing financial sustainability challenges, Social Security remains a vital safety net. Delaying benefits can maximize payouts, especially for those with longer life expectancies.

2. Independent Financial Planning: Relying on uncertain inheritances or rigid withdrawal strategies (like 72T) can pose significant risks. Proactive, flexible financial planning is essential for a secure retirement.

3. Financial Discipline Pays Off: Consistent saving, strategic investing, and living below means are fundamental to building substantial wealth and ensuring long-term financial security.

4. Expert Guidance is Crucial: Consulting with knowledgeable financial advisors can help navigate complex retirement planning strategies, optimize Social Security timing, and manage retirement income effectively.

Looking Ahead

Listeners can anticipate future episodes delving deeper into retirement income strategies, personalized withdrawal plans, and expert interviews from leading financial thought leaders. The podcast continues to offer valuable insights and practical advice to empower individuals in achieving a financially secure and fulfilling retirement.

---

For more insights and personalized financial guidance, visit Your Money, Your Wealth and access free financial resources, including episode transcripts and the 2025 Key Financial Data Guide.

Transcript

[Andi Lask]

What does the future hold for your Social Security under the new administration? Big Al Clopine, CPA and I recently attended the American College of Financial Services first ever Horizons conference, an event by retirement professionals for retirement professionals. Over the next several episodes of ymyw, we'll share the research, wisdom and forecasts of this country's foremost financial thought leaders on issues that matter most to you as you plan for retirement. Today on youn Money, you, Wealth Podcast 521, we'll hear from a number of those experts on the topic of Social Security Security. Plus, should Ricky and Lucy in Wisconsin even bother saving for retirement? They're expecting to inherit about $20 million. When should Ty Bob in Arizona collect Social Security and are Roth conversions right for him? Speedy Racer in Georgia needs a retirement spitball. And Gilligan in New York shares insight for other Gilligans trying to avoid a retirement shipwreck. I'm executive producer Andi Lask with the hosts of youf Money, you, Wealth, Joe Anderson, CFP and Big Al Clopine, cpa. We'll kick things off with George Nichols ii, president of the American College of Financial Services, giving Big Al an overview of the college and the Horizons conference.

[Joe Anderson]

Well, I've got George Nichols here. You are the president of the American College of Financial Services. And it's so nice to have you on our show.

[George Nichols II]

It's an honor to be here. So thank you for having me.

[Joe Anderson]

Thank you. So I'm fascinated by the college, what you guys do, what's the mission?

[George Nichols II]

The college was founded on applied financial knowledge, ethics and benefiting society.

[Joe Anderson]

I like that.

[George Nichols II]

We believe that people's financial security and well being is helped and influenced by a really good financial advisor.

[Joe Anderson]

Yes.

[George Nichols II]

So our ability to benefit society is by educating, making advisors more competent and more confident in their business and their practice in order to serve their clients. That's what we do. And the beauty of it is we are the only independent, private, accredited education institution that's clearly focused on financial services.

[Joe Anderson]

Right, Right. That's lovely. That's great to hear. So we're at the Horizons Conference in San Diego. You guys put this on. So tell me about why that was important for the college to do.

[George Nichols II]

So our three strategic focus areas are one, specialization. Two, is that even though retirement is in that specialization.

[Joe Anderson]

Yeah.

[George Nichols II]

It is so important to America.

[Joe Anderson]

Right.

[George Nichols II]

That we said, you know what, we're gonna pull it out, we're gonna double down and we're really going to dig in. And we want to be the premier place that you think about when you think of Retirement education. And so that was part of that. And then the third one is representation. How do we actually grow the profession? So then we say, what if someone like us, which is probably the only group that could. If we could bring in all these practitioners, all these PhDs that specialize in retirement and put them in one place over a few days and have this event that was designed for retirement specialists, by retirement specialists.

[Joe Anderson]

I like that.

[George Nichols II]

Then we think we can do something really unique. And so this is our inaugural event. How is the best way to educate that new advisor coming in in order for them to be successful and keep this business going?

[Joe Anderson]

Right.

[George Nichols II]

If you come here, I expect when you leave, you've already got a list of things that you're going to carry out to do.

[Joe Anderson]

Right, right.

[George Nichols II]

Because you learned something. And I can't tell you the last time I went to a conference where I learned anything.

[Joe Anderson]

I love that. George, thank you so much for your time.

[George Nichols II]

I appreciate it.

[Joe Anderson]

When I grow up, I want to be like you.

[George Nichols II]

Oh, my God, you're in trouble, man.

[Joe Anderson]

You're in trouble.

[George Nichols II]

Thank you for having me. Thank you for being here at the conference. I mean, you're making it. You're elevating our game.

[Joe Anderson]

Oh, thank you. It's been my pleasure. Thank you. Awesome.

[Andi Lask]

Now, from the American College of Financial Horizons Conference, let's hear from thought leaders Eric Ludwig, Steve Parish, Jeff Levine and Jamie Hopkins.

[Joe Anderson]

How should people be planning or thinking about Social Security these days?

[Eric Ludwig]

Yeah, man, that's the trillion dollar question.

[Joe Anderson]

I know, right?

[Steve Parish]

None of us have the answer. That's obvious. And when we're talking right now, a lot is going on.

[Eric Ludwig]

Yeah. It's obviously been in the news a lot lately.

[Joe Anderson]

Right.

[Eric Ludwig]

And we have the doge in there cutting jobs and things like that.

[Jeff Levine]

There is fraud, more likely in the disability side of Social Security. That's the area that honestly needs more of a reform. When you hear about it, the actual Social Security, the retiree benefits, has very little fraud, very little abuse. And actually, even through the review here, I don't think there's actually been much of a finding of that. They said they found a bunch of 150 year olds. That's a coding thing. If you actually look at it, there aren't 150 year olds getting a single payment. There are zero.

[Joe Anderson]

Right.

[Jeff Levine]

That's actually very clear. Social Security puts out the ages of the people who get checks. There are zero going there. So, like, that's not a thing. Although it is in the media. But it does need changes. Right. It can't continue on the path that it's been on forever. But it's a money in and money out system. So either you turn down the money that's going to go out of Social Security or you turn up the taxes that go in. I think most people right now aren't clamoring for higher taxes. So then the other way to make it more sustainable is to slow the money that's going out of it.

[Joe Anderson]

Obviously it's had issues before and there's, there's been fixes. I mean, you increase the retirement age or you increase the percentage withheld or you increase the cap. Do you see these things happening again in the future to keep it a little bit more solvent or, or should we really be worried that we're going to the trust fund is going to run out and we're just only going to have maybe 70, 75% of the promised benefits.

[Eric Ludwig]

So I think that's where some of these concerns come in. Right. As if there's going to be changes to the funding status of Social Security. How is that going to change the planning conversations around that?

[Jamie Hopkins]

Right.

[Eric Ludwig]

Like if they start to extend the age, that's sort of the normal retirement age. If people want to still take it at 62, is that going to now represent an even smaller portion of their retirement income when normally it was a larger portion?

[Steve Parish]

One thing that we do know is you can start at 62 or as late as 70. The longer you defer, the more you're going to benefit from it. Now you tell me when you're going to die and I'll tell you what to buy.

[Joe Anderson]

I know, exactly. Right.

[Steve Parish]

But the fact is the break evens on these are maybe age 80. So as long as you're going to live to age 80 or longer, it pays to wait on Social Security. Now the question we get is yes, but in 2033 it's going to go down 20%.

[Joe Anderson]

Right.

[Steve Parish]

And right now could be even more because of all things that are going on with the government.

[Joe Anderson]

Sure.

[Steve Parish]

We've done a lot of runs on that. And the fact is everybody's would go down if it goes down.

[Joe Anderson]

Sure.

[Steve Parish]

So it still makes sense to delay unless you just know you're going to die.

[Joe Anderson]

Right.

[Steve Parish]

So really I'm telling people, don't overthink this right now. It's still a great annuity. It's still your base plan. And so sure, maybe you're going to get a haircut and on benefits.

[Joe Anderson]

Right.

[Steve Parish]

But don't suddenly say, well, I want my money now because I can't trust the government. I don't buy that because I think the American voices will say, no, we got to fix this.

[Eric Ludwig]

The things that aren't changing are that when you think about the percentage of retirement income that comes from Social Security, that's relatively stable.

[Jamie Hopkins]

Right.

[Eric Ludwig]

So we know that you're more affluent client Social Security is going to be a smaller percentage. Whereas if you're sort of lower on the wealth scale, Social Security can be up to 40% of your total retirement income.

[Jeff Levine]

Two thirds of Americans in retirement, it's more than half of their retirement income. For one third of Americans, it is their only source of retirement income. Right. One third of Americans end up saving less than $10,000 for retirement when they get there. There is no system for them. If we turn off Social Security for.

[Ty Bob]

Those who are in or approaching retirement right now, I don't think too much will change. And there's a lot of reasons behind that. One of them is simply the, you know, the political climate. I mean, you don't take away things from people who vote for you. And the greatest voting block is seniors. I mean, the AARP is one of the most powerful lobbies in Washington. So it seems unlikely from a political perspective that you want to be the one on record saying, yes, I reduced your benefits.

[Steve Parish]

But a few things to think about is the voting power of the American public. Yes, I still am comfortable, even confident that we'll have some kind of Social Security system because it's such an important safety net.

[Eric Ludwig]

What will actually take place, we won't know.

[Jamie Hopkins]

Right.

[Eric Ludwig]

And I think the thing that kind of worries me a little bit is that those in office may not even.

[Jeff Levine]

Know this is one. I have a completely different view than the mass audience and I've been hammering this one for a long time. I actually wrote an article about this too. My concern of this self fulfilling prophecy that a lot of people and you looked at Americans saying, look, I don't think it's going to be there for me. And what I was concerned about this is this goes back almost 15 years. I said, eventually, when people say that enough, it's going to lead us to this ability to actually cut back on Social Security. Everybody can disagree with me on this, but if you actually look at the numbers, Social Security is the single most efficient financial instrument that's ever been built in the history of the world. There's conversations about fraud and all those things. Social Security's total overhead runs at 0.3%. So if you think about any company ever, there is no company that runs at 0.3% overhead. So every time somebody's like, oh, we need something better and more efficient, I'm like, that's nonsense. You can't run it like that. They don't have marketing, they don't have training, they don't have sales. They don't have all the things that build overhead in traditional companies. And maybe that's some of the people's criticism. If you ever go into a Social Security office, you can't really get a great answer. But they don't spend on it and everybody's part of it. It has been an incredibly efficient system. And if you look at our senior population in the United States. Right. It has kept them out of poverty at a higher rate than the average of the United States. It's been very, very good for that.

[Ty Bob]

Now, for younger individuals, I think there likely are going to be changes. I mean, if we just. We have to have changes, whether it's delaying the age at which Social Security may begin or increasing the Social Security taxes, some combination of all of those things.

[Jeff Levine]

Now, does it need changes and some adjustments? Yeah, because it is running out money in the sense of we had a big baby boomer population come in, people live longer than we were expecting. And so that's put stress on the calculation, but it's money in and it's money out.

[Ty Bob]

Congress historically has given people a pretty good Runway for when they made changes, and they're pretty good about estimating the changes and how well they will do. For instance, right now, a lot of people probably are familiar with the fact that if you have fairly modest income, none of your Social Security is taxable. If you have some more income, up to 50% of your Social Security is taxable. In some cases for higher earners in retirement, up to 85% is taxable. Those changes, along with the fact that right now there's a transition period where full retirement age is going from 66 to 67. Those changes all were made in the year I was born, 1983. So it has literally been 40 plus years since those changes were enacted. And at the time, well, first off, the full retirement age thing, 60, 67 is only starting to impact people now. They gave people 40 years to plan, and when they made those changes, they said, we think Social Security, by doing this, will remain solvent for another 50 years. That was their projection. Well, right now, Social Security is projected to run out of money in about 2031, 2033, depending upon what study you believe, that's 50 years. Like, they were really good. When you had large numbers of people, you can make pretty accurate projections. So I think there'll be some tough decisions in Washington as to where to draw those lines and who to make changes for and who not to. But I think if you're in your 40s, you're probably not looking at the system being exactly what it is today. But if you're in your, you know, mid to late 60s, I think you can count on whatever you're getting today or projected to get today to be there for you.

[Joe Anderson]

And yeah, I feel like that's one thing that can be fixed and solved. And yeah, maybe tough decisions. And I feel like politicians don't want to make those decisions because they're unpopular. But we have in the past and it seems like we will moving forward.

[Ty Bob]

We'll get there. Unfortunately, the farther we get towards 2033, the more drastic those changes need to be.

[Joe Anderson]

Good point.

[Ty Bob]

And so, you know, there may have to be larger changes than necessary because our politicians may not have the courage to act sooner rather than later, but eventually they're going to. I mean, it is an important component of so many individuals retirements that they're going to have to find a way to fix it. Again, it's probably some combination of changing the full retirement age, changing the tax rates, maybe changing the amount of income that is subject to the tax rates. I mean, there's lots of levers that they can pull. And then ultimately it's probably going to be a combination of several of them.

[Andi Lask]

Thanks to the American College of Financial Services for making it possible for us to bring insights from all of these thought leaders right to you, our YMYW audience. Check the links in the episode description to read about them and their long and impressive list of financial designations and certifications. Over the next several weeks, I'll be posting full interviews with them and several others exclusively on our YouTube channel. So subscribe and turn on notifications this week on youn Money, you, Wealth TV. Also on our YouTube channel, Joe and Big Al help you figure out if you're on track for retirement or going off the rails. Chances are you've got some money put away and you've got some ideas of what you want to do with your time once you say goodbye to your day job. But do you know if you're really ready to retire? How much is truly enough? Joe and Big Al put retirement numbers and strategies to the test with a pre retirement review. Click or tap the links in the episode description to watch are you ready to retire? And to download the retirement Readiness Guide for free.

[Jamie Hopkins]

All right, let's get to it.

[Joe Anderson]

Yay.

[Jamie Hopkins]

Hello everyone at your money you wealth. My name is Lucy. I live in Northern Wisconsin with my husband Ricky. We're middle aged with children. My drink of choice is a brandy Old Fashioned sour. I drive a 2024 F150. I need your help spitballing a hypothetical future scenario. My husband Ricky's parents are quite wealthy due to success in selling a large business. His parents are relatively secretive on how much money they have or how they plan to pass it to him and his four siblings when they do pass. Other than that, the children will receive the estate. In estimate, I think the total estate will be worth over $100 million. I believe that the children receive all of this divided equally, of course. My concern is that we are going to spend our prime earning years saving money, spending money and worrying about how to maximize our current and future financial situation without knowing what that inheritance will look like or how it will be structured. Of course we can maximize our Roth contributions and take advantage of our company match at our employers. But I wonder beyond that if we should even save for retirement instead pay off any debt and live comfortably until we receive that inheritance. Do you have any idea what their advisor would be telling them to do with their money? What type of investment tools and strategies would someone like this be using to pass their wealth onto their children? Do you have any other thoughts on what we should be preparing now for that inheritance? Thank you, Lucy.

[Andi Lask]

Lucy's got designs on Ricky's inheritance there.

[Jamie Hopkins]

Yeah, I wouldn't bet a dime on that inheritance. They're going to spend it and they're probably going to give it to charity. A lot of it's going to go to estate tax.

[Joe Anderson]

I got to concur with you. I mean, you don't plan your own retirement based upon an inheritance that you know nothing about. So yeah, what if they give it all to charity? Just like Joe said it could happen. They haven't told you about it. I mean, you don't know it's going to be divided equally. Sounds like you don't know any of these things. And plus, I would say this. Pretend like it's not there if it comes in, great, but pretend like it's not there. Live your life. You'll feel more satisfied and more fulfilled just by doing this yourself. Right? So pretend it's not there if it comes in, great, then send us another question and we'll help you out with the. With, with what to do with all that with that big lump sum.

[Jamie Hopkins]

But yeah, when you look at an estate that Large. There's a lot of different things that, you know, you need to do to avoid large estate or death taxes.

[Joe Anderson]

Yeah.

[Jamie Hopkins]

And, you know, with the appropriate planning, you know, it gets super complex.

[Joe Anderson]

Right.

[Jamie Hopkins]

And it's not like, all right, well, here there's four siblings. He's got $100 million, so cut me a check for 20. Right. Or there's, you know, check me. It's going to be significantly less than that. A lot of it probably goes into different foundations.

[Joe Anderson]

Yeah.

[Jamie Hopkins]

I'm pretty sure it probably goes into limited partnerships. It probably goes into all sorts of more complex type of strategies and structures because you have to give up a lot of control to try to mitigate any type of estate tax.

[Joe Anderson]

Right. And estate tax is high 40%. Right. So it's going to be a lot. Or you buy life insurance deposits, pay the estate tax, or you set up.

[Jamie Hopkins]

But in a seat of $100 million, you're not going to buy that big of a life insurance contract.

[Joe Anderson]

It'd be difficult. Right. So you probably do a lot of other things, like a family limited partnership, like you said. Maybe you do some outright gifts, a qpert, a charitable lead trust, a charitable remainder trust. I wouldn't think that they're going to get the whole 20. Not even close to it.

[Jamie Hopkins]

Yeah. And it's probably going to come to them payments over a long period of time.

[Joe Anderson]

Right.

[Jamie Hopkins]

So, yeah, I would just think of this as gravy on top of it. Unless they specifically say, hey, this is the. This is your inheritance. But it sounds like they're pretty secretive and you're guesstimating on what those dollar figures are.

[Joe Anderson]

So a lot of people with that much money will give a bunch of money to charity because they don't want to have the kids.

[Jamie Hopkins]

You know, they're $100 million because look at Lucy's already like, hey, I'm gonna stop saving.

[Joe Anderson]

I know.

[Jamie Hopkins]

You know, I guess I could put money into a Roth.

[Joe Anderson]

I don't really want to.

[Jamie Hopkins]

I don't want to.

[Joe Anderson]

We want to live it up. Right.

[Jamie Hopkins]

Come on.

[Joe Anderson]

And that's why parents are secretive. They want you to continue your life and be motivated and fulfilled on your own. So I'm not surprised. Hopefully this happens. Right? And maybe it will. Probably will. I don't know. But I wouldn't count on it for your own planning.

[Jamie Hopkins]

All right, we got hello to Andy Jo and Al Tybo here. And my drink of choice is a Hazy IPA or a dark lager from a Crest Brewery. Those are two of the worst beers that I Think I I have in my fridge today.

[Joe Anderson]

Now I like hazy, so I'll take that.

[Jamie Hopkins]

All right. How your show was recommended to me by a friend last year. Love the show and have recently referred my brother who is now addicted in listening to back episodes of your programs. I'm single, live in Arizona, the bedroom community of four California defectors. State income tax here is about two and a half percent. Spending exclusively of income tax is currently $6,000 a month and this includes $1,500 allocated to travel. I recently retired. I'm 67 and looking for a little spitball analysis on the timing for when to draw Social Security and when other Roth conversions should be considered in my retirement plans. Can you also give me your thoughts on Medicare supplement plans versus Advantage plans? Got a brokerage account of $4 million. Wow. Couldn't you lead with that type, Bob? Got cash, about $100,000. Inherited IRA of $200,000. Traditional IRA $1,200,000. HSA $160,000. Roth IRAs 160. Thanks for making a boring topic entertaining. Boom.

[Joe Anderson]

Ty, Bob, you know why he didn't lead with that? Because you would have made fun of him. You know when you say you're just, you're just trying to rag.

[Jamie Hopkins]

But he's looking for Medicare Advantage plans. He's got like $8 million. Dude, get the Cadillac. Okay, check that one out the box.

[Joe Anderson]

Yeah.

[Jamie Hopkins]

If you need to do conversions. Yes, you need conversions. You got $1,200,000. You probably are spitting out a bunch of income from your brokerage account, your RMDs. What is he, 67? So he's got another eight years. So that's going to be $2.5 million roughly.

[Joe Anderson]

Yeah, actually he's got till 73, but still. So yeah, got six years.

[Jamie Hopkins]

He's got $80,000. He's single. It's going to be $80,000 plus his Social Security. I would push out Social Security at least until age 70. I would do Roth conversions to age till 73 for sure.

[Joe Anderson]

Yep.

[Jamie Hopkins]

And you still probably want to do some conversions depending on how much that you can get those RMDs down.

[Joe Anderson]

I think so. I think you do the conversions right now. You live off the non qual and you know, as far as Social Security, probably 70, it doesn't say whether he's single or married or whether he has kids. Single. Okay. All right. So yeah, you wait till 70, unless you've got health issues or impaired life expectancy and then take it sooner. Right. But break even is around age 80ish. Depending upon the assumptions you use. So generally, when you have a lot of money and you can afford to wait, you wait. Unless you got health issues.

[Jamie Hopkins]

What, you got some Medicare advice from since.

[Joe Anderson]

Yeah. Go. Go for the Cadillac. Go for abd.

[Jamie Hopkins]

Is that what you got?

[Joe Anderson]

I'm not even on it yet. I'm too young anyway. Yeah, the AB&D is like. Like a PPO, if you will. And C is like an HMO. You just have more chances, more opportunities to go to who you want to. With a B and D. Yeah.

[Jamie Hopkins]

Well, congratulations, Tybo. Hell of a job. Yeah. I had some boys from Arizona in over the weekend.

[Joe Anderson]

You did?

[Jamie Hopkins]

Yeah, a little golf tourney. It's a good time.

[Joe Anderson]

Yeah. Cool.

[Jamie Hopkins]

It was high slope. High scores with high slope.

[Joe Anderson]

Yeah, yeah, yeah.

[Jamie Hopkins]

He did a little bit on the old radio show.

[Joe Anderson]

He sure did. Yeah, he did. What, college basketball or college football? Football. Yeah, that's right. Football.

[Jamie Hopkins]

High scores with high slope. Check the archives out in that one.

[Joe Anderson]

Yeah, right.

[Jamie Hopkins]

That was.

[Joe Anderson]

That was a while ago.

[Andi Lask]

I don't. I wasn't here for that, so I'm not even sure those archives still exist.

[Joe Anderson]

That was way before you. That's when we did it live in the studios.

[Jamie Hopkins]

Yeah.

[Joe Anderson]

Yeah.

[Jamie Hopkins]

God, can you believe we've been doing this 20 years?

[Joe Anderson]

It's hard to believe, but that's about right.

[Jamie Hopkins]

Okay.

[Andi Lask]

Time flies when you're having fun.

[Joe Anderson]

Truth.

[Jamie Hopkins]

All right, let's go to. Hi, Andy. Big Al in Little Joe. Oh, we haven't heard that joke.

[Joe Anderson]

How about that?

[Jamie Hopkins]

This never gets old. Never ever gets old.

[Joe Anderson]

That's a good one.

[Jamie Hopkins]

I appreciate a spitball in my situation. I'm hoping to retire in the next few years. As soon as possible preferred. I'm 50, single, two furry kids, mutts, drive a VW Golf and ride motorcycles. Beverage of choices, Monster and vodka.

[Joe Anderson]

Wow.

[Jamie Hopkins]

And I listen to your podcast while working out. Of course. He's getting jacked. Do a little back and buys chests and tries. All right, as I work out daily, I mean, what do you bench, bro? What do you got? As I work out daily, I'm going to need you to increase your podcast. Chop, chop.

[Joe Anderson]

Well, we got. How many? We got 500. Some prior episodes.

[Andi Lask]

Yeah, we're up to 521 now.

[Joe Anderson]

Okay. All right, that should do it for you.

[Jamie Hopkins]

All right. Salary is 120 annual, plus bonuses. I max out my Roth 401 through my employer with a 6% match. And I add $1,000 monthly to my brokerage account. My nest egg is $1,500,000 in my traditional $500,000 in a Roth, $400,000 in a brokerage account, $15,000 in HSA. House is worth $700,000, $100,000 remaining on the mortgage. Social Security at $70,000 will be $50,000. I assume I stop working today. Each year I keep working, only add $750 a year to my Social Security payment. Based on my earnings record, given the underfunding of Social Security, I assume I'll only collect 75% of that or $35,000 annually. My initial plan was to execute a 72T tax election on the IRA to cover me until 59 and a half. The current Fed midterm rate is 120%, which is that. The AFR rate, 120 is 5.4, which delivers $80,000. My living expenses are $100,000, including taxes. So I figured the 72T tax plus a small distribution from my brokerage account could cover inflation. Should be sufficient until I reach 60. At that point. Man, this guy really wants to get the hell out.

[Joe Anderson]

He does, doesn't he?

[Jamie Hopkins]

At this point, I'll adjust my IRA distributions to zero out of my traditional IRA accounts over the next 15, 18 years. So I'll be living off of Social Security and Roth distributions for the rest of my life. Well, I might be missing out on a bit of the standard deduction for tax purposes after 75 to 78, though, of not having to pay taxes in my elderly years. Sounds very promising and simple. My assumptions are a conservative 6% growth rate in my nest egg, 5% inflation on medical expenses, 3% inflation on everything else. Based upon my spreadsheets, this covers me until age 100 with a million dollars of broth left over. I would adjust my future spending to minimize the leftovers. Thoughts? Okay.

[Joe Anderson]

Okay. Well, we got. He's 50 years old.

[Jamie Hopkins]

He's a speedy racer in North Georgia.

[Joe Anderson]

He's got about $2,400,000. Wants to retire now. Right. So we got to look at the numbers right now. Right. So there's 2.4. Wants to spend $100,000. He's got 2.4. That would be a 4.2% distribution rate without regards to Social Security, which will come later.

[Jamie Hopkins]

50. Okay.

[Joe Anderson]

And Social Security won't come for a while, depending upon when he takes 20 years. Yeah. Call it 20 years. Age 70. So you got to make that 4% distribution rate work all the way to Social Security if you take that at 70. Me, personally, if I were retiring at 50, I would want a closer to a 3% distribution rate, which on 2.4 million would be closer to $70,000. So if I was going to retire at 50 with these numbers, I probably would get a part time job, make $30,000 and call that good. That's what I might do.

[Jamie Hopkins]

Okay, let's explain a 72T tax election because I think his numbers, I would have to run it through our calculation. There's so a 72T. Doesn't that seem high?

[Joe Anderson]

It does, but I ran it because it seemed high to me.

[Jamie Hopkins]

Oh, you did?

[Joe Anderson]

I did. And I got $60,000 in one calculator and $80,000 in another. So I guess it's okay.

[Jamie Hopkins]

So a 72T tax election is basically allows you to take money out of a retirement account, an IRA, specifically under the age of 59 and a half. But it's called SEPP, separate equal periodic payments. So you have to take the money out of the retirement account at least for five years or 59 and a half, whichever is longer. And there's a calculation that you have to run through an AFR rate, applicable federal rate, and you put it through. There's three different choices. There's the rmd, there's the amateurization, and another one, annuitization. Maybe. Don't quote me on this, don't record me.

[Andi Lask]

Too late.

[Jamie Hopkins]

So you run those three through and then it's like, all right, well, he did that. It sounds like Speed Eraser did. I don't know if that's a male or female, but it was like, all right, Well, I get $80,000 a year from that and I can take the money out of my retirement account without having to pay a 10% penalty. I still have to pay the taxes on the dollars, but I can avoid that 10% penalty. So it's a great way to get money out of the retirement account and avoid the 10% penalty. But it's a horrible way to take money out of a retirement account because you're stuck with that distribution for his case until he's 59 and a half, which would be close to 10 years.

[Joe Anderson]

I know, but if he wants to spend 100 and let's say it's right, it's $80,000 then actually that's okay.

[Jamie Hopkins]

Yeah, but he's got to take $80,000 out. What happens when the market tanks?

[Joe Anderson]

Well, it's. Sure. I mean, he has to take. Well, then that's.

[Jamie Hopkins]

Now he's forced to pull $80,000 out of the account and maybe he goes back to work. Like, all right, now he's 55 years old and is like, I'm bored, I've already done anything. I traveled. And someone offers him, hey, you know what? We have this project for you. Then he goes back to work and he's making $150,000 or 200 grand. He has to continue to pull the $80,000 out. I mean, there's no flexibility there. So it's a terrible way to take the money out, I think.

[Joe Anderson]

Well, right, but let's just say he could be flexible on the spending or he gets a part time job, he takes the money out and he has extra money that he doesn't use. He just reinvested. So now it's reinvested outside of retirement.

[Jamie Hopkins]

I agree. But he's stuck paying the tax.

[Joe Anderson]

I agreed with that.

[Jamie Hopkins]

I'd much rather defer the tax and pay the tax or if I'm going to pay the tax, I'd rather convert, grow tax free. But I would not do a 72T tax election for 10 years. That just seems way too long, too restrictive.

[Joe Anderson]

Right? Yeah, that's a good point. I think my point, I guess I went to step two, which is I'm not sure the numbers even work. I think he's taken too much out of his portfolio before he hits Social Security, whether it's 72T or whether it's from his brokerage account or whether it's from his Roth. You got penalties on Roth. Although you could take out the contrib, you know. But do you really want to do that at age 50, start spending your Roth? Not really.

[Jamie Hopkins]

Yeah, yeah. I love the plan. I love the planning that he's doing. He's got spreadsheets galore and he's running it, right. He run it at a 6% growth rate, run 5% inflation on health care, run 3%, 3.5% because your nominal rate is a lot lower. So I'm fine using a straight line rate of return. If you're running a high inflation rate because your nominal rate is 2, 2 and a half, 3% versus, you know, 6% growth. It's like you're never going to get 6% growth on your money. You're going to get 8% and minus 4, then 12 and then whatever.

[Joe Anderson]

Yeah, minus inflation.

[Jamie Hopkins]

So. But that's why another, there's a risk factor here. Doing a 72T for that long is that back in the 2000, people did this when the dot com bust, right? Everyone was super rich and young and. But it's like, okay, well now my money went to hell and I still have to take these distributions out. Then they did a reprieve. The IRS actually was like, you know what, we could stop this at a one time deal because so many. Well, I don't know if so many people did. They had to have if the IRS stepped in. But after that, it's like, I was never a huge fan of the SCPP or 72T tax election.

[Joe Anderson]

Yeah. Well, maybe what he could do if he really wants to do this plan, is maybe. I think you can. Now, how does that work, Joe? Can you do. Can you have separate IRAs and just do 72T on one of them? So maybe you split it. Maybe you do a third of it. Maybe you do 500,000.72t on that, you take 25,000 out, do the rest in brokerage and get a part time job like I talked about. Then I think you got more flexibility.

[Jamie Hopkins]

Yeah. It seems like Speedy Racer here just. He wants to punch.

[Joe Anderson]

He wants out. I get it.

[Jamie Hopkins]

You know, he's got two furry kids.

[Joe Anderson]

He wants to ride his motorcycle.

[Jamie Hopkins]

He wants to cruise, Right?

[Joe Anderson]

Yeah. Well, he's still young enough. Yeah.

[Jamie Hopkins]

Smoke cigarettes and get on that bike and cruise around North Georgia.

[Joe Anderson]

Yeah, I get it.

[Jamie Hopkins]

I like it. Yeah. He's gonna get bored, I'm telling you.

[Joe Anderson]

Not necessarily.

[Jamie Hopkins]

You try to retire at 50.

[Joe Anderson]

I did. Yeah. But that's because I couldn't because the real estate market crashed.

[Jamie Hopkins]

Well, the stock market could crash and PD Racer is going to speed right back to the office.

[Joe Anderson]

True.

[Andi Lask]

Along with their email list and their HP12C financial calculators, the key financial data guide is a must have for Joe and Big Al to be able to spitball for you. Download a free copy for yourself from the link in the episode description. It'll show you at a glance the 2025 tax brackets and capital gains tax rates, retirement plan contribution limits, tax on Social Security, Medicare premiums, and all the current credits, deductions, exemptions, distributions and exclusions. All the numbers that affect your financial strategies as you plan for retirement. One listener said that basically this guide alone is worth the price of admission to ymyw. So it's priceless. Just click or tap the links in the episode description to download the 2025 key financial data Guide to ask Joe and Big Al for your retirement's spitball analysis. And to ask, access plenty of other free financial resources.

[Jamie Hopkins]

Gilligan. Comment. It's a comment.

[Joe Anderson]

Comment. Okay.

[Jamie Hopkins]

All right. So this guy's gonna blow us up. I guess we'll see. All right.

[Joe Anderson]

She.

[Jamie Hopkins]

She loves throwing those comments in there. Where. Yeah, like yeah, you guys are jackasses.

[Andi Lask]

Read on, Joe.

[Jamie Hopkins]

All right, here we go. Hi, Andy. Joe, Big Al. On a previous podcast, someone made a comment that they would rather hear from Mor Gilligan than hearing from Thurston Howe. Okay, I totally understand that comment and I agree, but I wanted to share a personal story of a Gilligan. I hope it helps you realize how impactful your podcast is and also gives hope to all the Gilligan's listening.

[Joe Anderson]

Oh, so this could be a positive.

[Jamie Hopkins]

Oh, okay. I earned less than $15,000 as a full time laboratory scientist out of college. My family was low middle class and actually had to use food stamps for a year and a half after dad was in a serious car accident. The importance of disability insurance is another important topic. When I eventually made $30,000 a year, I was making more than my parents who had three kids. I felt rich. I'm still a research scientist and did not make $100,000 until I was 44 years old. Probably average 3, 4% annual increases. I bought a small house at 26, 10% interest, 5.5% inflation and got married two years later. I had two children that lived a typical life. We saved, invested a small amount of money and lived below my means. I drive cars for at least 10 years and my best car lasted 20. I was never interested in impressing others and loved when they called my cars pieces of crap. While growing up, I listened to a radio show that talked about mutual funds investing in very basic concepts. I was fascinated and determined to be focused on investing. I feel embarrassed to say this, but my total investable assets are over $7 million.

[Joe Anderson]

Wow.

[Jamie Hopkins]

Geez. Good for you, bro.

[Joe Anderson]

Yeah, that's a great story.

[Jamie Hopkins]

Low cost index funds and believe that time is key. Save early and often. I'm sure someone smarter could have done much better, but I also know I could have done much worse. Apologies, but I still have lots of questions and appreciate the knowledge that you share. I continue to read investment books and listen to several podcasts each week. Yours is the best.

[Joe Anderson]

Yes, in all caps.

[Jamie Hopkins]

All right. And I look forward to Tuesdays. Honestly, I have many more details to share, but I hope the above info is sufficient to give other Gilligans out there some hope. Thanks, Andy. Joe, Big Al. You are amazing people whose message will land on another Gilligan and change their lives in their children's lives. All the best to you and yours, Gilligan. Now Thurston.

[Joe Anderson]

I think Gilligan is now Thurston.

[Jamie Hopkins]

All right. Yeah, you go. Gee, drink little coconut milk. Well, of course, dude. You make 30 grand a year. You have a $7 million. You're going to hit coconuts off the tree in the island of Gilligan. Bamboo Island Taxi. What the hell is that?

[Andi Lask]

That's his car.

[Jamie Hopkins]

Oh, Bamboo Island Taxi.

[Andi Lask]

It's Gilligan. Get it.

[Jamie Hopkins]

Oh, got it.

[Joe Anderson]

There you go.

[Jamie Hopkins]

Got it. Pat. None. Oh, coconut. Got it. I'm so stupid. My wife works too, but did not earn more than me. I paid for my own college loans, never came back to money via inheritance, lottery, insurance, legal sentiments, etc. The only one stopping you from being fi is yourself. A higher salary will not help. You'll just spend more. Pay yourself first, placing it in investments because you are worth it. Very good. Nice final words there from Gilligan.

[Joe Anderson]

I love it. Thanks, Gilligan.

[Jamie Hopkins]

Yeah, I think that's the hardest thing to do because you're right. The more people make, the more they spend.

[Joe Anderson]

Yeah. I mean, how many people have we seen that have very high salaries and have very little saved?

[Jamie Hopkins]

I still will never forget the guy that made. He was an attorney, partner in a law firm, probably million dollar salary plus. And he's been making that for years.

[Joe Anderson]

Yes.

[Jamie Hopkins]

The wife and him came in and they had nothing. And he was in his 60s.

[Joe Anderson]

Right.

[Jamie Hopkins]

And then she's like, well, what do you think we could cut? Maybe you could cut the Pandora without commercials. I was like, what are you talking about? That's like $4 a month. You need to cut $400,000 a month.

[Joe Anderson]

And they all say the same thing.

[Jamie Hopkins]

Oh, we don't spend.

[Joe Anderson]

We're not lavish spenders.

[Jamie Hopkins]

No, yeah, we definitely spend with.

[Joe Anderson]

It's only 600,000 a year.

[Jamie Hopkins]

It's like, well, how much do you think you spend a month? Oh, I don't know. At least 3,000. That's it. $3,000. You make a million five and you have nothing. And you're 60. Say you spent $36,000 a year. What's your property taxes? Oh, that's right. Do you get robbed daily? Do you have a drug problem?

[Joe Anderson]

Gambling?

[Jamie Hopkins]

Oh, man.

[Joe Anderson]

Oh boy.

[Jamie Hopkins]

But yeah, put yourself first. I think that's the best advice you can absolutely give anyone because you are definitely worth it. I love that line. You are absolutely worth it. Think of your future self, right? I mean, God, we've been. Like I said, it's crazy how long, 20 years we've been doing this stuff. It's like, I'm 50. I never thought I'd be. I'm an old man.

[Andi Lask]

Hey, now, come on.

[Jamie Hopkins]

It's like, man, I'm ready to. I want to be like that one dude that was going to do a 72T tax election. I'm out of here.

[Joe Anderson]

You're done.

[Jamie Hopkins]

I'm fi. I'm done.

[Andi Lask]

And you are done.

[Jamie Hopkins]

Okay, we'll see you guys next week. We'll be back next week. Actually, I'm heading to Hawaii. That's where the island of Au.

[Joe Anderson]

You know, that's good for you. You're going to Maui, play a little golf.

[Jamie Hopkins]

I am. A little Kapalua.

[Joe Anderson]

I like that. I was just there in January volunteering, as you know.

[Jamie Hopkins]

I know.

[Joe Anderson]

Yeah.

[Jamie Hopkins]

All right, well, I'll fill you in. Thank you, everyone. Thanks, Andy. Thanks. Thanks, Al. We'll see you guys next week.

[Joe Anderson]

Bye. Bye.

[Andi Lask]

Many of you want to know how much you can afford to spend in retirement, but what is your retirement income style? Watch and listen next week as our interview series from the Horizons conference continues with Dr. Wade Pfau returning to YMYW to talk about your retirement income style awareness. Plus, Al Bundy in St. Louis asks Joe and Big Al for a spitball on his withdrawal strategy and what he should do with his IRA and 401k money. Join us then, won't you, please? Your Money, you, Wealth is presented by Pure Financial Advisors. Meet with one of the experienced professionals on Joe and Big Al's team at Pure for a financial assessment. It's a deeper dive than a spitball. There's no obligation and it's free. Call 888-994-6257 or click or tap the link in the episode description to schedule your free financial assessment. Pure currently has 10 offices around the US where you can meet in person and we're growing every day. But you can also get your free assessment right from home via Zoom. No matter where you are in the world, the Pure team will help you create a detailed plan tailored to meet your needs and goals in retirement. Now, this part is different, so listen up. Pure Financial Advisors is a registered investment advisor. Neither Pure Financial Advisors nor the presenters are affiliated or endorsed by the Social Security Administration. The information contained within this presentation is for informational purposes only. It's based on current Social Security rules and is subject to change in the future. Individuals are advised not to rely on any information contained in the podcast in the process of making a full and informed investment, legal or tax decision.