Are #RothConversions Really As Good as They Sound? - 440

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just how bad is it to rely on the lottery for retirement but first join Big Al's spitball retirement strategies for three military families I'm producer Andy last and here are the hosts of your money your wealth Julie Anderson cfp and Big Al Khloe Pine CPA now go to your moneywealth.com click on that special uh not special offer what are we doing ask Joe to dig out on air yeah thank you I think Cole did that didn't he that's what he did Alan Andy it's good to talk to you guys again my name is Cole and I am currently driving my 2020 Hyundai Sonata in white I called into the show probably three or four years ago I've still been listening here and there whenever I get the chance and I just kind of want to give an update to my situation my question that I had all those years ago was something about I think like investing into a brokerage and then like selling it if it's under fifty thousand dollars and if it would give me like zero percent capital gains tax if it was long-term capital gains something along those lines has had this whole plan I've made over fifty thousand dollars a year so I've never really been able to utilize it for my brokerage account but I just kind of wanted to give a rundown on some numbers then ask a philosophical question so I'm making approximately 72 000 a year right now although because I'm in the military some of it is non-taxable allowances bah slash Bas currently in my tsp I have a hundred and five thousand dollars and about 76 000 of that is Roth I also have an individual Roth account with 37 000 and a brokerage account with around thirty thousand I think it's slightly less uh in addition I have cash reserves of around thirty thousand dollars anyways with all this being said I'm 22 years old turning 23 pretty soon and I was just wondering do you ever feel like wish you spend saving as much I know that usually people don't have that sort of problem but in my head I'm like wow I kind of wonder if maybe I should be actually spending more money even though I do have a lot of experiences that I really enjoy I went to Paris and Barcelona a couple months ago uh I went to Puerto Rico actually last month so I traveled two or three times a year but I'm just wondering from your personal experience has there ever been a situation where somebody's been like wow you know what I wish I did X Y and Z when I was younger anyways thank you so much I appreciate all of uh your content over the years and I hope that you're doing well oh now that I can drink I like Coors Light and whiskey sours awesome have a good one bye now that he can drink yeah well any messages three or four years ago he was only like 18. yeah so that's pretty good that's coal you can drink all right you're part of our group yeah I think everyone says I wish I would have done things differently anyone says you know I live my life perfectly uh 100 agree uh what what went into my mind with this question call is uh we've got this little plaque in our in our um family room that says enjoy the journey because to me that's what life's all about of course you've got a long-term goal of retirement or whatever it may be you're saving for that make sure you're you've got you're on track with your savings goals but boy oh boy yeah enjoy the life do the things you want to do travel Hobbies right take a little more time off whatever it may be you will never regret that so yeah yeah wholeheartedly uh go ahead it sounds like you're saving plenty you got a couple hundred thousand dollars in your what 22. that's amazing so I'm not worried about your your savings uh make sure you have fun though that's uh that's yeah that's that's what that's my thought yeah I mean a couple hundred grand and 22 years old is pretty impressive you looked at a lot of people in their 60s don't have a couple hundred thousand exactly right in fact for some people they aspire to 200 000 right yeah yeah and it's a huge chunk of change so at 22 he's in the military depending on how long he stays in the military he could uh receive a military pension and you know and so that would be added savings form as well um but you look at 200 if he never saves another dime that thing it'll probably double every seven years or so right well so when he's 30 he's got 400 when he's 37 38 right he's got 800 at 40 some he's got a couple million bucks just with compounding interest um of of those dollars doubling every um you know seven to ten years depending on what rate of return they use but yeah I think that's what planning's all about too you know just figuring out what you want to do long term when do you want to retire when you want to be financially independent when you want to you know have work optional um but I I think at the end of the day you want to take care of your older self as well when we meet with clients in their 60s and they have millions they're not going back and saying damn it I wish I wouldn't have saved us much they're pretty happy that they have millions so I I think the the strategy is looking at hey don't forget about your older self but making sure that you're enjoying the journey as as Al said as his plaque in his living room I think uh thanks Carl uh good job there hello Joe you know my name is Adam I'm 27 and a bit of a nomad at the moment but Nomad not sure what the Nomad is that means don't really have a home just traveling around oh Gypsy I like that if it has booze I will probably drink it when I'm not drinking or working I drive a 2015 BMW 3 Series because a foreign car is what every 20 some year olds should drive I'm learning from my poor purchase decision slowly and I balance my time between a job that takes me all over the world and the air oh at the International Guard and the Air National Guard he's got two jobs oh thank you during this allows me to keep my costs extremely low and Save A Lot my question is both employers give me a 401k I'm wanting to max out contributions this year but will both give me a match and I'm unsure the best way to go about maxing out the contributions I know that you guys say to avoid over contributing but we pay being variable at both places of employment and better spitballs to easily hit the max contributions besides a long drawn-out math question and adjusting percentages as years go on I don't know if that made any sense whatsoever but you kind of read it a little bit of a jumble but yeah I'll uh I'll take a chance at it Joe I think I think what Adam is asking is I got a couple employers with 401ks and I think he's alluding to the fact that you can only give twenty two thousand five hundred dollars in all 401ks you can't do 22 500 which is the max in one plan and then again in another plan you're limited to that as a total and so I think where he's going uh is what's the best way to do it with two employers and if that's the question the best way to do it is to make sure you're getting full match at each employer so it's not just you putting money in but it's your employers as well that way you'll maximize the money going into your overall accounts and then monitor both because you want to try to get to that 22.5 if you go over uh what happens is you just have to record some of that as income on your return because you got a deduction and now you didn't weren't allowed it so I guess that's not the end of the world but yeah try to hit that 22 500 try to get the most match you can from each company oh I'm finished at con uh it's actually caught all the time and I'll tell you why because the um uh the tax software out there catches it and adds it back to income if you do it manually I guess it wouldn't catch it all right cool Scott from Alabama writes and he goes He jumping out been listening for a couple of years really enjoy your podcast uh you guys do a great job providing spit balls with humor interspersed first with humor that's good that's good yeah that was accurate Joe you've read it appropriately I I'm rapidly approaching retirement at the age of 59 this December wanted to get your take on the soundness of my Approach uh we will be relocating after retirement to the OKC area life is four years older at 63 here's a quick rundown all right now projected retirement expenses 135 000 inclusive of taxes UH 60 000 is discretionary and plan for travel Hobbies spoiling grandchildren Etc assets total 1.63 million no debt 930 000 in a retirement account 50 Grand in a Roth 650 000 in equity in a paid off home that we plan to roll over to a new residence in Oklahoma pensions 55 000 a year military pensions uh with colas twenty five thousand dollars a year and another government pension uh colad after age 62 Social Security is 40 000 for me spouse sixteen thousand at age 67 increasing to nineteen thousand when she converts to her spousal benefit at seventy one and she converts to her spousal benefit at seventy one okay I assume that means she's going to take oh her own and then switch to spousal it's 71. I don't know why that may not be she's quite technically right but it's quite close but that's what that's trying to refer to you got it so it looks like I have about eighty thousand dollars of expenses covered by my pensions it would need to draw about sixty five thousand dollars a year from our retirement accounts for three years until my wife turned 67 and Social Security kicks in then I will drop to fifty thousand dollars a year for the next four years when I turned 67 I began drawing my Social Security after that it looks like we'll need to withdraw seven thousand dollars per year just based on straight math without factoring in inflation uh compounding or colas it looks like it would be drying down 400 or so uh before Social Security starts I've run the numbers through several calculators and based on historic historical and Monte Carlo projections they say we got 100 chance of not running out of money before I reach 90 and my wife is 94. I assumed a three and a half percent rate inflation five percent real rate of return on equities anything you'd be concerned about this approach since we'd be drawing down the traditional balances significantly before we hit rmd age we're not really worried about the r b impacting our taxes and aren't planning on any Roth conversions make sense I'd appreciate any thoughts concerns you may have to share you know if I might be overlooking something we drive a 2016 Lexus in 2022 Ram that pulls our Airstream all over the country I enjoy a beef eater ginatonic and my wife likes her Pinot Grigio thanks for the spitball Scott in Alabama not my real name okay we'll call you Scott though anyway thanks Scott Scott's doing pretty good Al yeah I'd say Scott you're right on I mean right simple math the only thing is the Social Security I'm kind of a little jacked but yeah I mean something's a little left there but I mean so here's the way we think about it so he got about a million dollars of liquid assets and you're starting out by drawing 65 000 a year so simple math that's a 6.5 distribution rate which if you listen to our show that's a little high usually we'd like you to be four percent or less depending upon your age but here's the key that's 6.5 percent is only for a few years right then it goes down to 50 000 okay so that's a five percent distribution rate and then it goes down to seven thousand when Social Security fully kicks in now you're less than one percent distribution rate so I would say there's a highly there's a high likelihood of being successful I would never give anything a hundred percent there's no guarantees in life but I would say you're in the high 90s of making this work this is the way I look at it the the biggest thing that I see here is that he's right in the first several years of retirement he's got a large distribution rate so what is his withdrawal strategy a sequence of return risk is probably his biggest risk because he's taken six and a half percent out plus taxes you know maybe it's closer to seven I don't know and then let's say the market Falls thirty percent how's he invested is it all equities is it all bonds is it you know a mixture of both how is he pulling the income from the portfolio because basically he's going to be pulling everything from a traditional IRA it's going to be fully taxed right he's going to have pensions he's going to have social security in just his cost of living of 135 000 right given inflation might put them in the 25 percent tax bracket so I wouldn't Overlook conversions just yet um I'm not sure if it it makes a ton of sense but if tax rates continue to go up and you don't have very little if you have very little diversification and how you're pulling the money you know maybe it might make sense to at least contribute to Roth as you're still working um and and grow that overall pool of money um but yeah the the biggest risk that I see in his overall situation he's loaded up on all ordinary income he's got a military pension a government pension Social Security in the tsp Ira all of that is taxed at ordinary income rates so the distribution rate is going to be at too high in the beginning so if the market blows up on them that could be but but he's got good fixed income I mean if the if his retirement accounts go to zero he's not going to be on the streets yeah right and the other thing that you do in this situation is some of that million dollars have in very safe Investments so if the market goes down those investments will hold their value you just pull from those Investments and let the market recover that that's how people get around this one all right very good thank you Scott I've posted some Financial Resources specifically for military families in the podcast show notes so click the link in the description of today's episode of your favorite podcast app to get there to get your own retirement spitball analysis click the ask Joe and Al on air Banner there in the podcast show notes tell the fellas the relevant details like your name ages and location and the name can be whatever you like but the ages and locations should be real for a more accurate spitball also when do you and your spouse if you have one want to retire how much do you think you'll need to spend annually in retirement how much do you make and save now how much do you already have saved and in what types of accounts 401K brokerage Roth Etc and then provide any other details that are relevant to your financial question then to help Joe better visualize your whole situation tell us where or how you listen to ymyw what you drink because that's important to Joe and anything else you want to share because this show would not be a show without you again just click the link in in the description of today's episode of your favorite podcast app to access all these resources right before the episode transcript hey guys uh so you might be surprised to hear me say this but I'm not sure I'm not so sure if Rob conversions are good as they sound oh oh okay oh we're gonna have a little Point Cross Point debate yeah a little debate yeah like I have an opportunity to convert one hundred thousand dollars this year to the top of the 24 tax bracket to do this I would have to sell non-qualified retirement assets and pay a 15 capital gains on those to pay the tax I owe this year so to net twenty four thousand dollars for the tax on the conversion and have enough to pay the 15 capital gains tax I actually have to sell 28 000. with 28 000 no longer growing for me do I really come on ahead I need to factor in the loss of 20 years of growth for the twenty uh eight thousand don't I hear the calculations I did looking 20 years down the road in assuming money doubles every 10 years for ease of calculations all right so she's saying this is Christine from yeah her calculation so she's saying all right well here I have this money in a retirement account that's going to grow for me and then I have this money outside of a retirement account that's gonna grow for me let's compare because I have this other money that's going to the IRS if I pay the tax so I don't think this makes sense to do a round conversion right so she's going to convert a hundred thousand dollars and pay the tax bill up front uh yields 288 thousand dollars that comes out tax-free 100 000 minus twenty eight thousand tax on conversion equals 72 000 times 2 is 144 000 growth of ten years is twenty eight thousand you following that math Al 288 000 yeah yeah so ten years it becomes 144 after 20 years it becomes 288 000. yeah which I agree that's that's that's a that's a correct back of the envelope assumption all right if I don't convert that twenty eight thousand dollars that she would have paid to taxes is gonna keep working for me and I have 512 000 that's taxed when I take it out a hundred thousand plus Twenty Eight times two equals 256 000 and then 20 years of growth 512 000. if my thinking isn't flawed then it must be it seems I could pay a roughly 44 tax rate in still net the same as if I do conversions now and I don't think my tax rate will be that high in retirement at least I hope not it's summer so I'm drinking Mount gay and tonic with a line about a gin and tonic drinkers yeah and I think you gotta switch start being a gin and tonic guy I thought well okay I mean I like rum but maybe I'll give it a shot all right um that's a smooth golden Barbados rum by the way not gin yeah so you're talking my language now yeah well kind of just talk too soon didn't I yeah I know it's not Jim Andy's always right don't knock it until you try it very smooth and refreshing you know you might even like a little splash of pineapple oh uh Christine I'm positive I would like a splash of pineapple on that one I would vomit look forward to hearing your spitball and probably make fun of my throwing all these numbers around and using terms like net and non-qualifying like I know what I'm talking about I'm talking to you Joe but I love you all anyway and I appreciate you Christine in Seattle for the heart thank you Christine yeah thank you God I must just like blown a lot of people up over the years apparently that's what seems that but Christine still loves you and in fact Christine loved the hearts keep him coming we like to we like to feel loved uh all right her math is flawed it is flawed agreed what do you see I mean yeah I don't know what calculator she's using maybe it's an abacus well I I can tell you what she did wrong so the the hundred thousand you don't add 28 to it it just means you didn't pay 28 000. so let's start there so the hundred thousand after ten years multiplied by two is we're 200 000 times another 10 years times two becomes 400 000 not 512. but you take four hundred thousand I'm just going to use the same tax rate that she used 28 okay 20 tax and four hundred thousand is 24 shoes yeah well she's 28 in her other characters oh because if you had to pay some capital gains 24. yeah so same same right so 112 000 is the tax subtract it from four hundred thousand what do you know you get that same exact figure 288 000. and that's true every time you do this calculation and for people that think they're falling behind because they got less assets you've got the same spending purchasing power because you don't have to pay the tax now how this gets better by the way is maybe you put out your investments in your Roth that have a higher expected rate of return right or maybe you convert in a lower tax bracket and so you end up paying taxes later there's lots of ways that this can work but that's that's what's wrong with this calculation it's actually same thing so to say it another way let's say because I want to use her example in the sense of saying all right let's say I have a hundred thousand dollars that's in a IRA and I have 25 000 I'm going to keep the math even simpler just so doubling purposes all right okay okay I got hundred thousand dollars in a retirement account I have twenty five thousand dollars outside a retirement account so when I look at my statement from whatever brokerage house it's going to say I have a hundred and twenty five thousand dollars So Christine listens to this terrible show called your money or well and she converts the hundred thousand dollars into a Roth IRA the IRS is going to say you know what Christine you owe me twenty five thousand dollars for that conversion because you're in the 25 tax bracket please send twenty five thousand dollars So Christine sends them twenty five thousand dollars now she looks at her statement and she only has a hundred thousand dollars shown on the statement so in most people's mind they're like yeah why would I do a conversion because a hundred and twenty five thousand dollars is going to to grow to a a bigger dollar figure than a hundred thousand and I agree with that a thousand percent but if you ignore taxes because now I have a hundred thousand dollars let's say I converted it's in a Roth IRA that hundred thousand doubles over ten years and then it doubles again so I have 200 now I have four hundred thousand let's just say it doubles over 10 years and 10 years from now I have two hundred thousand dollars in a Roth that's all mine I bought out my partnership from the IRS I can take that money and do what I want with it however in the other example I had a hundred thousand and twenty five in ten years that doubles so my retirement account grows to two hundred thousand and my brokerage account gross to fifty thousand so I have two hundred fifty thousand dollars so at that point if I pull the two hundred thousand dollars out of the retirement account and 25 what is that that's 50 Grand it's the same same no matter how you want to look at this how it becomes to your advantage to have different pools of money is a you get the partnership in the middleman out of the game so now all of that money is a hundred percent yours tax-free you take the on the the likelihood of future tax rates off the table wherever tax rates change to if they go down if they go up you bought the tax today and you take that off the table I think more importantly when you have a strategy that you can take money from different pools to control your taxes in retirement this makes the biggest difference in the world also there is no required minimum distributions in a Roth IRA also as it continues to grow and compound if you die prematurely and it goes to your spouse it goes to your spouse tax free if you die both spouses die prematurely goes to kids or grandkids or nieces or nephews it goes to them tax-free it is forever forever tax free so we talked about this last week yeah would you rather have seven million dollars in a Roth IRA I'm going to cut you a check right now today or 10 million dollars in a retirement account what would you rather have yeah I'll take the 7 million any day because it's I've got complete flexibility on on pulling money out see that's the thing is if all your money is in an IRA and you want to pull extra out for a trip or for to buy a car and it throws you at a higher bracket you're stuck but if you got a Roth you can pull whatever out of your IRA that you normally do and then get the rest from the Roth stay in that same lower tax bracket you just have so much more flexibility right so you have to look at the purchasing power of the money not necessarily what's on your statement so hopefully that clears that up hi Joe Big Al Andy this is Eric from California uh my wife and I found your podcast last year and I've been binge listeners ever since love love love your shows now thank you Eric um I drive a 20 year old Toyota my wife drives a 10 year old Mazda drink of choice water I know we are boring people yes you are we are not going to finish this email that's it that's it uh here's some background information I'm 69 years old and planning retiring the next year wife is 60 stay-at-home mom annual salary is 200 000 net rental income after all expenses thirty thousand equity on primary residence is 2 million in a million dollars in the rental is a million my traditional IRA and 401K is 3 million two million in equity markets 400 and several deferred income annuities that will give us roughly thirty thousand dollars of joint lifetime income if we start taking them next year six hundred thousand dollars in another rental property held in self-directed IRAs which generate fifteen thousand dollars of annual net incomes that blows back into the IRA of ten thousand in mutual funds brokerage count 200 my wife's Social Security at 70 is 56 wife's Social Security and fra is 18 on my Social Security's 56 wife's 18 annual expenses 120. I wish I had listened to your podcast and started Roth conversions a little bit earlier I know it's kind of too late but never late is but late is better than never there we go my questions are number one when and how much should I be converting each year on top of our living expenses after I retire my wife will still need health insurance before we qualify for Medicare all right most of his what is he got everything's in a retirement account so it's like three million uh two million dollars or three million dollars in 401ks yeah that's the majority um yeah even it's rental properties in an IRA for example yeah self-directed I would also like to convert those traditional IRA annuities to Roth IRA annuities before initiating lifetime income so that all annuity incomes will come out tax-free I understand that all IRAs are aggregated but what do I do to avoid the five-year rule on earnings distribution in case that my first Roth contribution account on those annuity are held in different companies okay what to do with my traditional self-directed IRA rental property what is the best withdrawal strategy man this guy's got a lot of questions what is the best draw strategy to fill the gaps um and we would also like to leave a legacy anything else Eric do you want to just that help on this this is like a whole show Joe just like eight questions this is a full retirement plan spitball analysis here like thank you very much where do you want to start can we get my calculator I gotta get some software I gotta get a drink oh yeah I gotta hire some staff just to help us run some numbers yeah uh well let me I'll tell you what I'll I'll take the first one on the fly yeah okay how much should my converting each year um well first of all uh it's never too late so you didn't miss the party it's you can still do it 69 years old you're probably gonna live till 90 or 100. got plenty of time um so I'm just gonna go on what you told us you got an annual salary 200 000. I'm just gonna go with that just make this super simple so the top of the 24 bracket which is a pretty low bracket based upon historical times is like 365 000. So based upon this one number you could convert about a hundred sixty five thousand dollars and stay in the 24 bracket which would not be a bad idea however you have to have the money to be able to pay the tax so you got to figure that out but if you just look at the tax brackets you're in 24 is not staying the 24 bracket is going to be 28 and just just a couple three years so that would be a good idea if you could afford the the tax to pay but that's how you think about conversions is you look year by year look at your tax bracket and you fill up whatever tax bracket makes sense based upon your retirement plan yep um all right so I would also like to convert those traditional IRA annuities to Roth IRA annuities so I don't know how many annuities that he has but he has four hundred thousand dollars in several of them so I don't know you have room to stay in the 24 tax bracket you could convert one annuity two annuities three annuities whatever right you convert and you just pay the tax on the conversion so some annuity companies might let you break the contract as long as you keep it with that same annuity company um I don't know where your annuities are held we don't sell annuities um so it depends on what he wants to do he wants a guaranteed lifetime income stream so that's tax-free sounds good to me so convert the annuities let's say you got I don't know five of them in they're a hundred thousand seventy five thousand fifty thousand whatever you have room of at least a hundred plus thousand in that 24 tax bracket just convert one each year I don't know yeah I like that too yeah check with your annuity company because they have different rules on how to do this and I think most of them allow that wouldn't you say Joe yeah sure I mean the IRA rules but then you look at okay well what how did you fund the IRA well he funded it with a product that will give him a guaranteed lifetime income stream right so instead of funding it with a mutual fund or with a stock or with the CD or whatever it's just an investment so if you want to convert the IRA it doesn't necessarily matter what's in the ira you can convert it as long as you pay the taxes on the IRA and then that investment holds true and then when he turns the the guaranteed income on it's going to come out tax-free because now it's in a Roth versus in uh retirement account right I guess the uh what what to do with the traditional self-directed IRA rental property so you know what you may not know that you can have an IRA that invests in in real estate it doesn't have to be stocks and bonds or you know that sort of thing it could be like a rental property but you have to have a special kind of Ira it's called self-directed and there's certain companies that do this you know the Schwab Vanguard uh Fidelity no they don't do this it's a separate company to hold property so it looks like Eric has property in a self-directed IRA you can do whatever you want you could sell the property in the ira you don't pay any current tax because it's in in an IRA then you could roll that money to another Ira if if you want to you could keep the property in the ira that it's just personal choice that the tough thing about properties in a in an IRA is they're they require a lot of work and a lot of times when people get older they may not want to be the property manager and do all this stuff that you have to do so you might want to sell it but you don't have to you can just keep it in there you will have to take a required minimum distribution right and if that's your only Ira which it's not but if it were were you have to take a retired required minimum distribution and if there's no money in the rental property uh self-directed Ira then you're you're in trouble right you can't distribute property to count as a as a as a requirement of a distribution to me without spending like a half an hour there's a lot of reasons I don't like to have real estate inside of a an IRA but it can be done and if you have it which you do it's personal choice you do whatever you want yep I agree I mean we could yeah I'm not a huge fan of having um real property inside a retirement account the retirement accounts are awful from a tax transfer especially if you have an illiquid asset um as that alluded to you back in 08 remember that when people I mean some people absolutely love real estate and that's all they believe in and that's all they want and they have these retirement accounts so they just either load up on you know first and second trust deeds in real estate and then in 0809 we saw you know disasters happen with you know people lost so much in real estate it was in their retirement account you can't take losses in a retirement account but if it was outside of a retirement account you can you have the better tax advantages if it's outside of your retirement account as well but um he's got it there you can keep it you can tell you can do whatever hopefully that helps Eric thanks for uh for listening to us in binge binging scary stuff do you ever bit do you ever binge our show never I've done it have you ever heard one yeah one episode of listen to one episode did you make it all the way through no no I don't think I've made it through an episode either wow so all right you know but for me Joe it's because I already did it I don't have to relive it that's right that's right live the journey buddy right see at a glance all of the numbers that affect your financial strategies as you live that Journey get this year's 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 when you download the 2023 key financial data Guide from the podcast show notes it's the exact same guide that Joe and Big Al use when they're spitballing for you during the ynyw podcast one listener recently said that basically this guide alone is worth the price of admission in other words it is priceless to download the 2023 key financial data Guide to ask Joe and Big Al your money questions and to share ymyw with your friends just click the link in the description of today's episode in your favorite podcast app go to the show notes you'll see all of that right before the episode transcript uh we got Billy from Joplin Missouri I love the podcast I'm a disgruntled attorney that would like to quit um I like Coors Lights I like a nice fruity cocktail with some vodka and Juice I'm 57 years old my wife is 60 years old you have no dad and owner home we have about a hundred thousand dollars in stock index funds inside our Roth we have 2.4 million in stock index funds and 250 000 and a bond index funds that are traditional IRAs we have 200 grand in cash have a deferred income payment that will pay me a hundred thousand dollars per year for 10 years starting in 2025. I'll be near the maximum Social Security payment when I take it around 69 years old I think our retirement budget will be 155 000. can I retire now uh um all right scrantal attorney I think all attorneys are somewhat described well I was I don't think I know one that's not disgruntled but maybe there's one or two out there yeah anyway you know what I think financial planner yes for that too so so you want 155 000 you're getting a 100 000 a year for the next 10 years so that's probably a deferred cop program yep so you need like 55 000 or you know compared to two and a half million that's like a two percent distribution rate checked that's just fine but that hundred thousand goes away so you're just gonna have social security whatever that is so your distribution rate's gonna go up but so are your assets because you're only using about two percent so that you should be growing your assets you should be just fine Billy I'm going to spitball and say yeah I think you can retire yeah the only issue that he has is that he doesn't get that Deferred Comp until 2025. so he's got got to bridge the gap right you got to bridge the gap of 155 000 he's got two points for you so you take a couple hundred from there let's just call it he's got two point two he's gonna take a um you know one or two percent um on top of the Deferred Comp call it two million two million is going to grow to four four times four is 160 000 plus the Social Security he can even draw down more of that 2.4 uh Billy yeah I give it a go I give it a green light Charlie here me too two thumbs up yep quit your job stop being disgruntled have some fun play some golf stop suing people against that from Tuscaloosa Alabama Hey Joe Al love the podcast my wife says it drives her crazy when we go on long road trips in the car although she's starting to warm up to Big Al and I always ask me why his wallet so big that is a good question giant wallet very successful individual right there uh it's kind of like George Costanza's wallet but full of hundred dollar bills versus coupons yeah I don't keep credit cards I have just the good stuff just cash I told her I have no idea anyway my question today is sort of a goofy question but how bad of an idea is relying on the lottery as an answer to retirement I have family members who go across state lines just to play and they say that they haven't hit big yet but believe that if they play long enough they are due to win big I want to show them how investing can be just as exciting for their future as playing the lottery but how should I go about doing so should I show them analytics over the past 30 years about the stock market has performed or should I create a PowerPoint presentation by taking today's dollars in illustrating what it could be in 20 years with a reasonable rate of return I'd appreciate any wisdom either of you have on this matter and also Joe you really have Mellon out over the past few months love to see it what the hell's going on with this the softer side of you is coming out maybe now that you're married with with children yeah I don't know I don't think so I'm more stressed than I've ever had in my life Maybe uh my wife and I usually drink a little hanky-panky from time to time drinking some hanky-panky I think they missed the word I think my wife and I usually drink beer and sometimes have a little hanky-panky I think it's not mess with them there is actually a hanky-panky it is uh gin vermouth uh frenet branca so yeah it is a drink little Hanky Panky twist a little sex in the driveway or sex in the driveway yes that was the other one yeah I got it okay all right and we only drive one car it's 2017. smart or too pure and I've got it up on screen for you it's a little tiny car oh one of those little tiny ones but it's actually called the 2017 Smart 4-2 pure yeah never heard that name I've seen those cars on the road though actually I should say I've seen them I've seen them in the neighborhood I don't think I've seen one on the freeway weren't one of those isn't that the whole um same car that you could like jump in you would park it anywhere and then you could jump in another one smart cars I think you're thinking about one of those businesses that where you can kind of drop off and pick up cars yeah right yeah downtown San Diego yeah right I've seen one of those in years just like with the whole scooter phase remember like people you rent a scooter and then you would just throw it anywhere yeah right yeah it was just like litter everywhere apparently Zach and his wife actually bought one yeah I've never been I think you can still park it anywhere because it's so little you can fit then you just have to worry about somebody else trying to get into it and drive it away but I haven't seen one I don't know if that business is still in yeah I can't remember what they were called smart cars right no I'm talking about the business where you could actually pick up and drop off the vehicles I thought it was called a smart car but what's the name of the car yeah this one is a smart four two pure this is smart four two up here so all right Lottery um well I got nothing for you here here's what I have to say you're never going to convince them that stock market is is more exciting than a lottery I mean a lottery win that's got to be like near the top of the list but what you can show them show them a couple charts and show them you know what if you start with this today and you add this much per month you're going to end up with this you don't need a big long PowerPoint on that just just tell them and just say you know what it's not as exciting but it's more of a sure thing how about that what how much are we talking about here I wonder so these guys are talking about it's for the entire retirement well they're going across state lines so they're buying in Alabama they're going down to Florida yeah you know they're taking road trips to buy powerballs I wonder how much money we're talking about here on a monthly or annual basis because who knows you know from there then you could probably look at all right well this is what you're spending on Powerball tickets and take that same amount and put a seven percent rate of return on a monthly or annual basis and run that out over 20 years and say you know you probably have more certainty if you invested this and this is kind of what your end result is going to be versus you know I don't know what are the odds of someone winning the lottery it's like one in 100 million or something yeah it's quite quite low I I think so I used to know the scene the the so his strategy was to invest properly right a little bit at a time ready to return grows over time but he still did the lottery every week because that was going to be the difference between a good retirement and a great retirement that that was his thinking the actual Arts odds are one in 292 million or point zero zero zero zero zero zero zero zero three percent it's probably more likely to be hit by lightning 100 times before before you win the lottery yeah all right Zach good luck with that um I could just see Zach with this whole family we all got little hanky-pankys out drinking them well as soon as he pulls up the PowerPoint he's got the PowerPoint presentation ready to go ah boy all right well good luck well that's it for us hopefully you enjoyed the show keep the questions coming we'll uh keep answering them uh show us count your money as well Joe's opening frog his stalker and hijack in the derails at the end of the episode so stick around help the listeners find ymyw by sharing the show with your friends and colleagues and by leaving your honest reviews and ratings for your money your wealth and apple podcasts and any other podcast app that accepts them your money your wealth is presented by pure financial advisors click the get an assessment button in the podcast show notes at yourmoneyyourwealth.com or call 888-994-6257 to schedule your free financial assessment in person at one of our seven offices around the country or online at a date and time convenient for you no matter where you are chances are one of the experienced Financial professionals at pure will be able to identify strategies to help you create a more successful retirement pure financial advisors is a registered investment advisor this show does not intend to provide personalized investment advice through this broadcast and does not represent that the Securities or Services discussed are suitable for any investor investors are advised not to rely on any information contained in the broadcast in the process of making a full and informed investment decision hey if honest once again folks show us God your money your wealth joannerson here I'm a certified financial planner with Big Al qualify he's the CPA after a roaring start wow a little frog in my throat apparently I'm so excited to start this show um I got a stalker there's someone like what yeah there's someone that keeps looking in the studio here oh got it okay let's talk to you I did see someone peeking in I'm not sure who it was it was like like what scared me Alan have you heard of the show hijack uh yes have you seen it no I want to watch that that doesn't fit the mold of what I like to see well I expose you Hugh Grant's not in it so that's right is Harrison Ford in it forget about it no no I haven't even heard of it so no you have Apple TV no Apple TV but Alan you actually heard of it I have how did I'm impressed how did I hear I couldn't even tell you Joe but it's not on the Hallmark Channel why do you know it now somehow well sometimes things slip through that I hear yeah yeah I started watching that uh this week it's pretty good okay yeah I enjoy it but um I'm impressed that that you weren't expecting that were you no it wasn't man good job right

Channel: Your Money, Your Wealth

Views: 4,252

Keywords: Your Money Your Wealth, yourmoneyyourwealth, YMYW, Pure Financial, Pure Financial Advisors, purefinancial, pure advisors, pure fin, pure finance, pure financial advisers, pure finacial, peer financial, Certified Financial Planner, CFP, Certified Public Accountant, CPA, fiduciary, fee-only, Retirement spitball, retirement planning, tax planning, financial planning, saving for retirement, portfolio management, retirement podcast, financial podcast

Id: j1j6B_r1MmQ

Length: 48min 58sec (2938 seconds)

Published: Tue Aug 01 2023