Your Money, Your Wealth (YMYW) Episode 551 Summary

Where Should You Take Retirement Money First If You’ve Saved $2M?

Date: October 14, 2025
Hosts: Joe Anderson, CFP® & Alan Clopine, CPA (a.k.a. “Big Al”)
Producer: Andi Last

Episode Overview:

This episode dives deep into the critical topic of which accounts retirees should draw from first when they have substantial savings, with an emphasis on tax efficiency, RMD avoidance, and risk management. Joe, Big Al, and Andi take on detailed listener questions—ranging from how to pay off debt pre-retirement, structuring Roth conversions, dilemmas with company stock concentrations, tough annuity situations, all the way to creative gifting to parents. As always, financial wisdom is served with a hefty side of humor and camaraderie.

Key Discussion Points & Insights

1. Can Mackie Retire at 55 With $2.6M but Some Debt?

[00:53–03:47]

• Mackie, age 54 from Florida, is eager to retire, has $1.5M in an ESOP, $1.1M in a 401(k), a $200K mortgage, and $30K in credit card debt.
• The hosts poke fun at the lack of detail (“Don’t know the drink, the car, the dog’s name… zero. I got a couple million bucks and 55. Get me the hell out!” – Joe, 01:41).
• Takeaway: It’s impossible to answer without knowing Mackie’s living expenses, income needs, and whether credit card debt is recurring or one-off.
• Tactical Tip: If retiring after 55, you can access your 401(k) without a 10% penalty (02:21), but details on the ESOP and spending are crucial.

2. Withdrawing From IRAs or Taxable Accounts: G Man & Nurse Ratchet’s Dilemma

[03:39–11:19]

• Retired couple (“G Man” and “Nurse Ratchet”), age 64–65, with $2M+ (“$1.5M in traditional, $600K in brokerage”), 55:45 stock-bond allocation, $90K/yr in pensions & Social Security, want to spend $130K/yr.
• G Man’s logic: Should I burn down my taxable account first, defer IRAs as long as possible? He cites classic advice but worries about future RMD tax spikes, especially for a single survivor.
• Hosts’ Take:
  • NO! Don’t just defer retirement accounts—the “conventional wisdom” will likely leave you with a “giant RMD bomb.”
    • “This is the opposite of what we would tell you to do. The exact opposite. So you would probably want to… start getting that money out.” – Joe (08:26)
  • Ideally, use taxable withdrawals up to the amount needed, but simultaneously convert/trickle funds from IRAs to Roths each year, at least up to the top of the 12% or 22% bracket.
  • “What makes you wealthy doesn’t always keep you wealthy.” – Big Al (22:24, echoed in other discussions)
• Memorable Moment: The segment is peppered with beer/vodka jokes, and a long riff on hangover stories, lightening the tax talk.

Takeaways

• Deferring all IRA withdrawals can force you to take huge RMDs at high tax brackets later.
• Consider annual Roth conversions in low tax years, especially between retirement and RMD/Social Security ages.

3. Mike & Carol (“The Brady Bunch”): Roth Conversion and Company Stock Strategy

[12:10–28:10]

• Background:

  • Mike (56, semi-retired M.D.), Carol (49, working, remarrying), “Brady Bunch” family (6 kids total), $6M+ net worth, including $2.5M in private company stock, $1.6M in IRAs, $500K Roth, $300K brokerage, $800K employee performance plan; no pensions/annuities.
  • Plan to work 3–7 more years, then live on ~$180K/yr before Social Security starts at age 70 ($60K/yr for Mike, $20K/yr for Carol).
  • Main Concern: How much IRA to convert now, and when? Is it worth converting at 24% bracket while working, or waiting for possibly lower brackets later? What to do with concentrated company stock?

• Key Spitball:

  • Priority #1: Manage company stock risk!
    • “That’s 44% of your net worth, that’s a lot. Sometimes what makes you wealthy isn’t what keeps you wealthy throughout retirement.” – Big Al (22:14)
    • Pursue a gradual, tax-aware liquidation plan for the private stock, even if that means paying significant capital gains—diversification is paramount.
  • Roth Conversion: Great idea—consider converting to the top of the 24% bracket while still working and immediately after, especially in years you aren’t selling company stock/realizing large gains.
    • Alternate: Alternate years between harvesting stock gains and Roth conversions, using tax mapping to avoid stacking income into the highest brackets simultaneously.
    • “If something happens to that company, your lifestyle could change a lot.” – Joe (23:29)
  • Sequencing:
    • Focus on utilizing low-tax years for conversions.
    • Use proceeds from stock sales to pay Roth conversion taxes if possible.
  • “I think you have a really good problem to have.” – Joe (28:06)

• Quote: “What makes you wealthy does not always keep you wealthy.” – Al (22:24)

4. The $1.9M Variable Annuity Quandary (Mike in Utah Helping Mom, Age 90)

[29:25–40:41]

• Situation:
  • Mike’s mom bought a variable annuity in 2002 with $145K, now grown to $1.9M. She now faces forced annuitization or liquidation before age 95; basis is only $175K.
  • Current assets: $1.3M Roth, $275K brokerage, $290K IRA, $1.6M annuity; Social Security & pensions cover living expenses.
  • Mike began partial withdrawals to utilize mom’s 24% bracket but wonders what other strategies exist given huge embedded gains (all ordinary income).
• Key Points:
  • Annuitizing life-only is not advised—could lose principal if she dies early. Consider a 20-year “period certain” annuity if allowed, so payments continue to heirs.
  • If contract requires full liquidation by age 95, they’ll have to withdraw large chunks ($300K+/yr), which will be heavily taxed.
  • “This is the problem with annuities… you’re going to lose 20–30% to taxes at least.” – Joe (39:32)
  • If charitable, qualified gifts might help mitigate tax.
• Takeaway:
  • Next-best path: Withdraw in installments to maximize use of upper tax brackets, consider stretching payments if possible, and let listeners learn about the “no step up in basis” risk with annuities.

5. Gifting Appreciated Assets “Up” to Parents: Doc McMuffin in Minnesota

[41:03–48:12]

• Case:
  • Doc (41, doctor, earning $650K as a couple, 35% bracket) wants to gift $75K in appreciated brokerage assets to her parents (age 73, lower bracket) so they can remodel the family cabin.
• Tactic: Gifting up to parents enables the lower-bracket parents to sell, realize gains, and pay less capital gains tax versus if Doc sold them.
  • “When you gift assets, the recipient’s tax basis is the same as yours. So your parents sell, they pay the gains at their rate, and that’s totally fine.” – Big Al (46:08)
• Can you cycle this and have parents gift it back?
  • Not advised. If gifting is only for tax purposes, could run afoul of IRS intent—honor system, but don’t push it.
    • “There’s no ‘granny tax.’" – Joe (47:34)
• Gift tax question: Doc and spouse can each gift $19K to each parent, totaling $76K (2025 rules) without filing. Even over the threshold, it just requires a form—no gift tax due unless you have a very large estate.

Notable Quotes & Memorable Moments

• On classic withdrawal “wisdom”:

  • “This is the opposite of what we would tell you to do. The exact opposite.” – Joe (08:26)

• On concentrated stock risk:

  • “What makes you wealthy doesn’t always keep you wealthy.” – Big Al (22:24)

• On annuities and taxes:

  • “This is the problem with annuities… you’re going to lose 20–30% to taxes at least.” – Joe (39:32)

• On creative gifting:

  • “There’s no daddy tax or granny tax.” – Joe (47:34)

• Memorable Banter:

  • Long riffs on beer types, Sidecars, hangovers, and the Brady Bunch theme song. “He likes free. Got it.” – Joe, commenting on Mike & Carol’s drink preferences (16:54).

Timestamps for Key Segments

• 00:53–03:47 Mackie’s “Can I retire?” spitball
• 03:39–11:19 G Man & Nurse Ratchet: Withdrawal sequencing, RMDs, humor
• 12:10–28:10 Mike & Carol: Roth conversions vs. company stock risk, alternate-year strategy
• 29:25–40:41 Mike in Utah: Giant annuity, RMDs, contract headaches
• 41:03–48:12 Doc McMuffin: Gifting appreciated securities “up,” reporting rules, cycle-back

Practical Guidance & Takeaways

• Don’t blindly defer IRAs—combine taxable withdrawal with annual Roth conversions to avoid massive RMDs and high future tax brackets.
• Manage stock concentration risk, especially with private/company stock—even if it created your wealth, it’s risky to keep such a large allocation.
• Annuities in taxable accounts can lead to huge ordinary income tax burdens; fully review annuitization and payout options.
• Gifting appreciated assets to lower-bracket family members can reduce total family capital gains taxes, as long as not abused.

Final Thoughts

This episode is a masterclass in sequencing withdrawals, Roth strategizing, and recognizing hidden landmines (like RMDs and annuity taxation) in a fun, approachable tone. Joe and Big Al repeatedly stress customized, tax-aware strategies over “rules of thumb”—always with a wink and a laugh.

Recommended for anyone nearing retirement with $1M+ in assets or complex financial puzzles.

For more resources, transcripts, or to submit your own retirement plan “spitball,” visit YourMoneyYourWealth.com.