How to Plan for 35 Years of Retirement Spending With Smart Roth Conversions - 506
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What's an S W R or safe withdrawal rate for one guy and one gallon oma c california to have thirty five years of guaranteed retirement spending? How aggressively should they convert their retirement savings to warp? I should the bond family move from silicon valley to a no income tax state in retirement? Can dcc in san Frances go quit work in the eight years when his daughter starts college, Robin kins, a city, and his wife and their late thirties and have two million dollars, say, can they retire early, join biga football for all of them today on your money, your wealth podcast number five, o six plus we ve got home equity at lisa in fremont, has more than the capital gains exclusion for a married couple of five hundred thousand dollars were of IT.

How much will this cost her and will kill her army? Should happy camper er and joy pumpkin take their pensions monthly, annually or the one some page? And finally, lloyd in south dakota is not a fan of retirement accounts and he wants to file to talk some sense into him. I'm executive produce andy last, here are the first, your money, your will joe Anderson, C, F, P, and bigger copy. Cpa.

got hello. It's one kind. Go in north kl, sona county. You might imagine our drinking choices, a nice piano or short name, but also like to make a pala on the warm days we drive at twenty seven camera hybrid, camera two thousand and .

seven camera hybrid.

a two thousand seven camry hybrid. I grave, a company car, is not excited about buying a new car in retirement. Fifty eight.

My wife is spitting six new of the show, but absolutely love IT enjoy the numbers and good humor. All right, you get both on this pocket. That's being sure.

Here's the details. Bag out and cute. Thousand years. Why does create a work and bring home twenty thousand and thousand a year?

Expecting twenty twenty five between milk and something work will make another hundred thousand dollars a year. So no income. Twenty, twenty six beyond hundred thousand and nine of R S.

Best in the next four years. Three grown kids between us all launched in the independent. Okay, want to come there.

You assuming .

no ahead ance, but very likely to receive one in a million dollars ge, you just like to throw them in there. What's playing out in inherits? But but.

but going to be a new.

And if you just want to kind of throw out in there, just put that on the side.

Just the case and I .

just almost there. If i've short throat in about good, don't worry about IT. That's going I never brought IT out right right yet. Their parents in the eighties, incredible health we are born savers in currently save one hundred twenty five thousand dollars year. Both went through divorces about ten years ago, so I had to rebuild our well. We currently spend hundred sixty five thousand ology here, hundred k on everyday expenses included in the mortgage, sixty five bon vacations, eating outline and porges. Expecting february, we will have the following assets before twenty and twenty five work income in our use.

Alright, two and five million dollars to four accounts, one small parking here, the eight sixty k in raw four one cake, one point six million dollars in the tax for element count, three hundred twenty five in equity in rent property which generate six thousand a year of free consider selling them three to five years, four Young king in primary residents, four hundred hundred hundred thousand alone with thirteen years remaining, you have stop working in twenty twenty five. So security will be sixty two hundred dollars a month at eight seventy in today's dollars. Football advice not focused on, can I retire? Are we going to stop full time work february twenty five already put in. I notice he's done. He's that way at first.

to say .

focus is on spending in taxi patients. Es, specifically, what is a viable angle span that is guaranteed the last thirty five years? Don't know the S W R analysis, simply draw rate. Is that what S W R is? I think when .

I initially looked IT up, IT was standing wave ratio. So you have to put in that is a financial analyst you looking .

for i'm again seeing is a safe atrovent. And now yes, I use your retirement calculator.

Casual analysis .

calculates are S W R one seventy five per year for thirty five years, thirty five years. And we can spend two hundred twenty five and assets in the first ten years while paying up the mortgage. Keep getting the same answer. But we're in disbelief that we can spend more money than we are today and never run out of assets.

Love to hear if you agree, how aggressive should we convert off? I right, knowing that we have seven and nine years of private health turns, costs to obama care, if we do large conversions, calculate helps plan to be about twenty thousand and year confidently. We will always fill up to twice percent tax racket.

But wonder if he makes sense for the twenty two of things for consideration to the football. okay. So when I go yeah looks like you've saved one a bit of money.

Two point six, one point six. I don't care about the equity and you're primary. You're going to pay that off. I don't know you're going to use that.

You got yeah two two two hundred dollars a month once to spend one hundred sixty five gram alright, post tax puts the cost of living, right? So you go on the calculators and you put in all your assumptions. Those assumptions are dangerous. Well, because it's a straight line, it's a sequence of return, really what he needs a care .

about yeah well, so the first, the first, the question, what's the viable annual spend that is guaranteed? There's no guarantees anything. So so if if you don't want to run out of money, spend zero.

you could buy some sort of guanches product, but that product won't end.

yeah. But if if you want to wait to think about this, you've got four point three million dollars. Uh, you retired fifty eight, although you've got lots of money coming in for the next four years, including the R S.

use. And I don't know there's a lot of factors here, but what what if we so let just go conservative. Four point three million at three percent distribution, right? Just to be conservative.

That's one hundred twenty thousand. Add six thousand running, so that's one hundred thirty six thousand plus social security when that received. So yeah two hundred is she's probably I mean, eventually, I mean, it's based upon whatever assumption you put in the retirement calculator, but that, that probably could be true. But as what what's too and almost every case of retirement, there's uneven cash flows. And so it's hard to just say here's your number because you get all these different calculations .

to make yeah each year to be a little bit different of you have to be thinking about a right. The first step of all, all of this is how much answer that you have and how much money that you want to spend. And then you look at what is your fix income sources, and then you find your shortfall.

You kind to buy that by four three percent, which is kind of the standard ball. But he wants a little bit more info here. He's going to different calculators he's got on the internet in his is using acronis like S W A.

S W R.

S W R, right? yeah. The safe withdraw rate analysis. So all that is a rule of them. The S W R is just to see if here in the ball park that you have enough access once you retire, would you already put in the paperwork? This is when the real work begins, is like, all right now you have to create the income front, the portfolio at some point.

And what is that portfolio look like? You we're are you gonna pulling the money from. So he's got rock dollars, he's got pretax dollars and he's got some equating some rentals, so he's going to convert to the twelve percent. But then he's worried about the the affordable care act premiums. yes.

So you have to calculate that as an and attacks if you convert higher than the twelve percent tax bracket because if you're spending two hundred thousand dollars a year, just think you're first ten years you're spending two million dollars out of domestic bus tax plus I cost of living. You have four million dollars today or four point two million dollars, you're going to spend almost half of that mistake in ten years, right? So if the market goes sideways, if the market goes down, if you don't do this with a tax efficient kind of mindset, I mean, right, it's not going to completely blow up on them. But I think with all these different calculators that people run, IT might give them pose confidence that they can spend a lot more than they probably should.

Well, I I think that's right. yeah. I mean, you tell tell you whether you're in the ballpark. But but here's here's the reality is, is life happens, right? The stock market goes down ten percent for four years in a row.

Now what right? So every year, you're making adjustments based upon your life, what's happening in the market, your investments here, ability to have a risk and all kinds of things, your health now, your kids, your grandkids or whatever they might need, all they you need to spend money for this or that, show things change. And so these calculators give me an idea, can I retire that you can partly retire? Is this the number for life? No way life is changes.

And that's why a financial plan and IT is IT IT. IT happens over time. It's not something you do once and you got your number. You've got ta do every year, maybe even multiple, maybe look at each quarters to make sure you still entry.

But yeah, I think he's been a really good job of saving his born saves. Can forget about a million dollars that we're not really counting but he wants us to count. Um no.

I mean, so so you're right. So taking another step back, this is an amazing story. So they both get divorce and probably I lost a bunch of money, but they they they buckle down another ten years saved a lot of money.

So so the truth is there are a great spot theyll be also have a great retirement. But there there's no such thing as a single number or guarantee or anything like that. Financial planning is a process you do throughout your life.

Yeah, but I guess my point is that he needs to figure this stuff out, and I think he can he's already doing some the research now, but he might be looking in the wrong areas, he said. Here you have to figure the distribution plan and strategy. The the same withdraw rate is a rule of fun as we just talked about, but is got wrong as IT.

And he's got pretax assets. Two point six is pretax. So how much should he be converting? He wants to go to the two one percent to avoid. You know, a little bit more premium on affordable caret, but is acting a bite them later as that defer that continues to building grow where IT, he could save a lot more tax and premium if he did this correctly around the numbers, maybe a little bit differently.

Well, and and I would say if if you converts the top of the twelve percent bracket, IT would be very expensive because now you've got all that that that affordable caret credit that you gave up, right? So you probably want to convert to the top of the twenty two or the twenty four. If you're not, if you gna, then avoid not.

Let me try to figure how to say this properly. You're giving up the credit, right? And so to say that again, right, right.

If you're gna go to the top twelve up to the credit, don't do IT yeah .

because that's a really high.

So you go to the top of the twenty two if you're going to give .

up the and that's i'm try.

No, that's well said.

One guy in gale used our free financial blueprint to calculate the retirement readiness. Have you look for the link to IT in the episode de description? Just answer all the questions that asks. And it'll analyzed your current cash flow, your assets and your projected spending for retirement.

Then it'll calculate three different scenarios to forecasts your probability of retirement success that outputs a detailed report that includes future taxes and actionable steps you can take now to reach your retirement goals. But as joe said, even if IT says you're in great shape, a lot can happen in a thirty five year retirement. This is not a set of and forgetting kind of thing.

This is where meeting with a real life human financial adviser comes in schedule. The time to review your financial blueprint was one of the professionals on joe, bigoted and poor financial advisers. They'll you develop a thorough plan for retirement that's not only constructed to meet your personal financial needs and goals and your tolerances for risk, but also designed to weather economic changes and market volatility with adjustments as you proceed on your past retirement, calculate your free financial blueprint, then schedule a free assessment with a financial professional at pure financial advisers. Click the links in the episode description to get started now back in episode five o three join pigalle discuss for skipping the IOS is residency requirements when splitting time between locations when one is a no tax state and I think that may exert this next question to ask your money questions or to get your own retirements football analysis click ask john bigger on air in the episode description and send us an email or a priority voice message .

like this one this is bond, James bond. This is not my voice because too many of my friends listen to the show. So i'm using a combination of A I tools to produce this first time.

So forgive me if it's amaist. Where is you when you need? I am nine years old, I find made an honest woman out of monopolies and married her.

SHE is fifty one years old. He retired four years back. We have three grown and self sufficient children.

We live in the silicon valley. We have absolutely no debt. We own two houses with a combined total of about one eight million.

One is in rio, brazil. We planned to rent the silicon valley house once we pull the trigger and leave the valley. That's part of my question.

We have about two million dollars in traditional I I accounts million in rai, about two million dollars in a broker account and one hundred thousand dollars in the online bank as part of the emergency fund, have five hundred thousand dollars in a 4O1k and and converting that to rough about three quarters done， but want to start converting the traditional I and have fifteen years to do IT. Before I M D kick in, my question is getting a bit tired of the silicon valley as it's getting too busy and too danger expensive. We are thinking about moving to another state, ideally a tax free state.

I went back to work due after in at fifty two, but my job is succeedin ly easy. I basically use IT continue to fund rough s and pay for some living expenses, though we don't need that really just nice to have when we want to start converting the traditional ias into rough I S in the not too distant future. We're thinking about being in a state like texas or nava where no state income tax.

We travel all the time. So an actual physical location is not that big of a deal. We would stay in the state as long as require to meet the residency requirements. But other than that, this would just be a rental or something just to have the local address and tax treatment for these conversions. The thought of moving to another state doesn't bother us at all because, like I said, we travel all the time anyways, so want to get your people on.

If this works, does that make sense to relocate to a tax free state for a few years in order to convert L S, not pay state income tax as we do now? Right now, the Austin Martin D B, five is in the shop. The lotus spirit is too small for a joyce size person like I am, and is unreliable, so we drive something possible when home is usually parked.

I like my Martini taken up stud manifestly does not drink because he cannot sadly allergic to alcohol. Love the show. Been listening for years, so keep IT up. Thanks, guys, and goal. Cheers, James.

Wo James Brown listen .

to the show .

was very difficult.

The notice spree is too small for a joash sized person. I .

like that. H, I, yeah. I like catch for what that was.

Yeah, I know that you can.

Um so was he questioned. He wants IT will move to a tax state to do the rap conversions yeah, because he travels all the time and doesn't necessarily know well. You got five billion dollars. Five point six million.

correct? yeah. So that's what he's got five hundred .

thousand dollars left in the four. One key that is going to convert is saving into the four one k but he's got another two million dollars.

twenty two million and traditional area as well. So two to ha million two. So basically he wants to convert his tired to silicon valley.

He wants to move out of california. He would like to do rather conversions. He's fifty nine years old, sounds like he wants to retire, right? And so then he does conversion.

If he does a conversion, tax conversion or rough conversion are out of state, out of california. When I have trouble this, I get IT. I can stick with me.

So if if he moved to texas, they moved to texas, uh, or washington state or in a vada, for example, there's no state taxes. And joe, that does work. You can move to another state, do iraq conversions and pay no state tax on the conversion.

However, you just have to be careful because california and other high tech states are under the same. Here's what they looked for. They look to make sure you actually move.

They want to make sure you have a new residence you acquired or you're leasing a new residence and you sold your old residence or you least your old residents, you set up your driver's license in the new state register, your vote, your bank accounts, your brokerage statements, your doctors, your your all your life is in the new state. Maybe that's where your buying groceries that's for your cable bill is so on and so on. And if you can prove that you know that's that's one thing.

The other thing is spending one hundred and eighty three days in a particular state, uh, is that over half the year. So that would be important to but some people that travel don't get to the one eighty three. So IT could be the majority, but there's a lot of factors, but you really have to move is something you can't fake. And one more thing i'll say is if you're doing this for uh, just avoid state taxes so you can immediately move back in the california that doesn't go over very well in tax court.

There's no real added on the days there. Just judge if if IT comes to added, there's no way they can track on any days. They're going to look at the bill when you grow for four months or yeah eleven months in the battle when you buy groceries there for a month .

yeah so here here's the cases in the past that have failed like like people that got A P, O box in last bigger and they call that there. That doesn't work, right? Or they they have a five million hour home in silicon valley and they and they bought one hundred thousand and other condo and what? taxes? Taxes so, you know, uh, real taxes somewhere, right? sure. And they and they don't spend yeah that's that's how these things fail.

But even people that do everything, right? If they if you move out a state, you go ahead and avoid state taxes for whatever transactions you want to do, whether selling your company right or bath conversions, and you move back into that same state, chances are that high tech state like california may want 了。 我 look at that and you may have to pay all that， all that back tax money that you should. You were old plus penalties and interest. So just just aware that.

Alright, thanks, James. Um have you ever watch the James one movie?

Yeah they .

have favorite. Who's your favorite James one?

You know I I started watching after shanks ny retired. Uh so um although i've seen the old ones and then he was great. Roger Moore was James burn when I first started watching and I really kind like him because that's what I got used to. That was kind of my initial frame of reference. No.

how about you? Yeah, i'm probably but I like.

come yeah 点 and see your Younger。 So there you go.

a dad or crag there are now. Yeah, i'm a big dream dreams pon guy. I enjoy the movies.

We got dog from sanford cisco, because i'm fifty four years old, uh, single data, a ten year old, uh, two thousand and twenty two toilette to come. A probably be my last vehicle in drink of choices, teetotal, uh, title buckets, solar water in line. Why would that be his last vehicle?

He's figuring it's a toyoy to come. A so it's gonna for .

the next forty years. He's fifty four. He's easily.

Makes .

keep him here, bunny guys on the park cast and enjoy your show. When I walk in my dog in the morning, he found, found you guys on the podcast so he found on the podcast, yeah.

what is up? What is a in a row .

five one hundred thirty thousand and cypher penchant from my parents of eight hundred dollars a month for life personal pension on twenty thousand year at eight sixty five it's going to claim so security sixty seven uh or at sixty five is twenty five hundred and sixty seven and thirty one hundred i'm sorry. Twenty five thousand dollars here at sixty five is the pension he's got twenty five hundred dollars a month at age sixty seven for society or thirty one hundred dollars a month at eight seventy so why does he put pension annually in social security?

Monthly to next year?

Doesn't search the security actually. They quote based on the amount that you are going to get monthly. So he just didn't do the the annual calculation for you.

That's the correct same man. And why are they? They say monthly so they could, he could said two thousand dollars among tension, but he said twenty five thousand a year .

he's got a repeal income. The generate about three thousand and dollars a months, and the home is played off. Life is live, a simple life. No extra bc gan purchases, but would like to take my daughter and next expecations every summer, maybe a budget of six thousand dollars my rent to seventeen hundred dollars a month. Want to continue working part time and hoping to be done working when donor enters college in eight years not and thanks seven things all like, duck you're fifty four, you want na retire and eight years sixty two um you spend how much much?

Well you have to IT looks like this budget is six thousand dollars. When I first said this, I thought that was what he want to spend on his vacation. But I think maybe that's what he wants to spend ongoing monthly. That's so let's go with that.

That's how I read IT too.

Let's say seventy two thousand dolla year is is .

spending seven two okay um .

yeah and so um so if we if we go with that, so at least we get because otherwise were just there's no answer. We we need a spending number. We're going to go with that. So joe h, just a little bit of math for you. So if you if you start with six hundred twenty thousand and for eight years at six percent, I assumed this adding nothing.

I I don't know IT doesn't say so just what would happy in eight years of a million bugs OK? And if he's spending seventy two thousand and eight years at three percent have been ninety one, kay. So his current income between Randall and I don't know the eight hundred dollars a month from parents, but would just go with that.

So ten thousand dollars, so that's forty six thousand. So shirt falls about forty five ground. Ah, now I didn't do I didn't do inflation on the other income.

So maybe it's a but less than forty five thousand and to a million and four and height percent distribution rate uh, and that would be at age sixty two. That's probably pretty close given that he's got A A pension of twenty five grand and three years later. And then so the security so yeah, it's said that probably works.

You get ninety one thousand and have fixed income at sixty seven.

Yeah that's right.

Yeah so he wants to retire sixty two so he's got a .

bridget gap from the bridge.

And if you want to spend seventy, eighty thousand dollars, I think he's right. He's going to tell her distribution rate those first seven years or yeah five years, maybe he wants to work part time too is what he said. He's got a pretty simple life yeah. So no, I think he's right on track for sure given um the fixed income that is gonna have once he reaches eight sixty seven I D to .

and that here's an example he .

can bought through all of this liquid assets and if he spends nine, one thousand and thousand years sounds like this gonna pretty happy .

yeah yeah because that's the pixton camp. So here's an example of sometimes we just say in your sixty or you know sixty five four percent distribution rate is just kind of a ball park, right? So here's foreign half at sixty two that too high. Well, there's fixed income coming. So probably that there's probably okay.

all right, good luck. hopefully. Um we got those numbers right. We got a big job. And andy, this is wrong from kind of city. I had a big pan of the shell listening for a few years now. I wanted to ask you my own financial spitball, thirty nine years old, about thirty eight.

We drive two thousand and seven six old legacy twenty seven toys at a highlands and drinks and choice or low local pale l and a glass of red line. We've done a good job savings over the air, but we've started to wonder, are we really on track? Life is hectic right now with three kids between the ages of five and ten, so it's hard to project the next twenty five years.

Please send to these numbers. I love a little spit ball. And how are doing on especially as we juggle competing financial goals like actions, home improvements, funding the kids education in even in early retirement, at least downsizing to a less stressful career with a lower income. Here's where we stand. Kind of feel what is going through big.

Now you you can relate. I came a little little bit.

Three tax, four one k five hundred grand rop, four one k six hundred. After tax investments, one fifty total number at one point two, we got five, twenty nine for the kids, is about a hundred grain, and cashes, thirty total network is one point eight, and I make around three hundred thousand, which has doubled over the past six years. But IT comes with a lot of stress, and i'm not sure how is sustainable.

IT is long term. My wife, for its part, time is around fifty thousand years, which is great when our kids are Young. I'm willing to push through for now.

But I love the scale. Back in my mid forties and possible retired my mid deputies, we'd probably live off one hundred and fifty thousand and alledge year. But I know a lot of that is discrimination spending I think we can manage about hundred thousand.

And but I also know how easy is to spend more. When you are careful, two hundred k would be one of the question. If we get a little loose, give on our savings, income and future goals.

I love to hear your thoughts some whether were on track and how to baLance everything moving forward. Thanks, follow up. And but I did forget to mention is our current savings plan.

We currently max both mind in my wife right for one case as well as my age and see an additional sixty thousand dollars per year towards longer term expenses and financial times like those above actions, renovations, children's education and possibly and early retirement. Okay, one point two a million dollars for rob in kansas city. He is saving uh, sixty thousand dollars per year.

Roughly into that one point two million dollars is what? Forty years old? Thirteen.

nine, third night. So here's what I did. So I said, you, if I just go with his scenario, wants to work at current pace through mid forty to forty five, six years from now.

So I did in charge.

Well, we tell them that six percent six years at sixty program a year has got two point three million. Then what I said is, now he wants to downsize. What if he could pay for all the expenses, but just not add to savings? What happens for another ten years? So now you got two point three million ten years, six percent no ads, and that's four point one million, just got four point one million beauty five. So you're .

saying he downsized his career, a less stressful .

job and then he's .

not saving at .

a he has couple million dollars when he does that and then blew that grow and then IT goes to four.

got IT. So five is probably a real alister number for four retirement in seam. Forty five could be realistic .

for per down .

for thirty thousand, sixty thousand dollars to add the expenses.

And I count that only because he said that was for vacations, renovations, kids college.

So yeah, that's greatly yeah.

that's what I mean, some of that's possible, early retirement. But I just said, what if that was all gone? right? So I think he ends up with over four million dollars if he works another six years at at my assumptions right then then at ten years after that doesn't add anything, just lets a girl so I yeah four million, five, fifty five. I think you could have a great retirement.

No, no. I think rob is doing a great job. I mean, he makes a ton of money, but also that comes with the sub stress, right? So he, man and I can power through maybe a humor years, but that I would love to get out of this.

yes. Hi, here, here. Remember what I was thinking?

That is punched almost .

almost to make my money in real state. Great reception. I went back to work.

You work and still um all right, rob bergan.

whether you are a millennial like rob, a genta like joe and me or a baby boomer like the stakes are high when you're trying to create financial security for your watch, financial planning at every age on your money, you are well T V as join big out guide you through the financial strategies and goals that each generation should implement that can mean the difference between a retirement of scarcity or a retirement of abundance.

Click the link in the description of today's episode and in your favorite podcast APP to watch financial planning at every age. Then click through to our youtube channel to subscribe and to join the conversation in the comments. Also download the retirement reading this guide for free to learn this secrets to controlling your taxes in retirement, creating income to last a lifetime, making the most of your retirement investing strategy and much more these plays will boost your retirement readiness. Ss, despite the uncertainties of market volatility and inflation and rising health care costs and the future of social security and medical care, just click the links in the description of today's episode in your favor podcast APP to access all of these free financial resources.

Let's go to three months. california. Hi guys, andy. We waited too long to move god comfortable in now our equity way over the five hundred thousand election when we're looking to sell we bon our house for three hundred thousand.

And now it's probably with one point two or more. How will this access equity be charged the time in the twenty four percent tax rate? You will kick me over the twenty five. You kill my arma. Kill my arma.

wow.

What's that? Your arma? How can we move now and manage this tax bill? Love the show. okay. Erma, yeah.

yeah.

Well, go my erma. Also, like you say, killing the relative something.

Yeah that's referring its uh medicare premium that should pay two years or now. okay. So let me let me tell you, uh, elisa, it's probably not quite as bad as you think, and I just did a little calculation.

And what if you sold your home for one point two million? You probably have hundred thousand close just come up for real ter and other cost. So you probably at one point one million like and you bought IT for three hundred thousand, but you probably put improvements in IT.

So let's just say hundred thousand improvements, so four hundred thousand versus one point one. So the game in is seven hundred thousand. In that example, exclusions, five hundred thousand, so maybe have a taxable gain of two hundred thousand.

And just with the assumptions I came up with now, even if you're in the twenty four present breakfast means your capable again to be tax at twenty, probably maybe maybe some fifteen. And I should say at twenty, right, some twenty three point eight percent for the net investment income tax data. California, yes, remote call IT nine point three.

So let's others togethers, about a third, about thirty three percent a third have two hundred thousand dollars and sixty seven thousand color. Seventy, you sell your house, you walk away with one point one million to pay seventy. No one likes to pay seventy. But I don't think it's gonna.

It's done as bad thing, yes, but it's but .

is to kill arma, he said. It's not.

So what what's I going to do to arma? Well, is going to increase the amount of income that you have. So yeah, it's going to increase the amount that you pay to medicare.

Yeah, for a year. I I won't worry too much about that. I think a lot times people think about .

you bought a house for three hundred thousand.

Any any for what point to is like that's a great problem, right? I i'm just saying the taxes in medicate like cases like this are not as bad as as you probably think.

So my parents bought their house in like nineteen seventy four, okay for like fifteen OK. And then they sold IT when my dad I years ago, but my when my mother sold IT SHE sold IT for like eighty grand thirty five years later.

Wow, okay, well, made .

a nice .

profit of .

him. And so you want to pay a little bit of attacks. And right, right.

Hello, joe. Bg, andy, love the show. Been listened for over five years.

And listen, the pod has well exercise in the morning I live in the beautiful data was sanson I drink. The choice is a little nice Amber. L right.

My husband choice to drink is a bitter I P A or a good whisky for today show our names are happy camper in jolly pumpkin. We will drive company cars, but that will change your retirement. We'll need to purchase two use cars in twenty twenty five.

We plan to return next year. Sixty one and sixty two, we are empty nesters and the kids are up to payroll. Uh in our sufficient in doing well financially. My question is whether I should take an anal passional limon, the annual pension will be thirty eight thousand dollars per year for life for no cola or love.

Some of five hundred and twenty thousand dollars have no, there are more gage the houses worth seven hundred fifty s many expenses in retirement, our hundred fifty will both plan takes so security and eight seven estimated so security pay will be fifty five thousand and others year for each of us. Currently investments are in broad index funds. Pretax savings is one point seven million rows savings thousand nine hundred brog can three hundred I bounds a hundred H H A A hundred grand total, little over three million.

The question.

should I take the pension on the lumps in my good financial a position to return twenty twenty .

five um .

uh right um did you do any uh, calculation? I did. How old do you see?

Sixty one or two so joly.

pumpkin or SHE happy camp.

Here's what what do you think I think.

well, she's she's .

probably sixty one only because he sounds like he wrote and SHE pay put her age first but I but .

one of the names more current who's a happy camper.

who's jolie point I would guess that that means that is, again, SHE put her self first so she's a happy camper and he's the jolley pumpkin yeah.

we go at them. I don't know. Anyway, here's all I did you think of a jolie pumpkin?

You think male or female?

Well, I would think female for jolie. Pup, pup, yeah.

I I was thinking .

more in terms of what the shape of the person might be, but could go either way OK.

我要 happy .

caper and sounds like I like rugged camper。 Yes, I like, I do IT .

does for me. I know.

I know. I don't want to be sexy. I don't want someone to right in, but I just think IT, alright, he someone's got that overall and you know, can like that you know not saying that women can be farmers or campers, i'm sure.

So here's what I did. I did. I said, right? So what's the net present value of thirty thousand a year?

For twenty five years? I used to five percent this Carried. I know that's good later. Now I get five hundred thirty five thousand, which is about the .

same as the five .

twenty you put for in in fba camp, let's say so thirty eight thousand, uh is your payment and twenty five years and four percent the present values, five ninety three come what? So but when you think when you think that I mean, in terms of what you could make on your investments, so could be six percent.

could be six percent, which have then bring that down to probably five hundred.

yeah, about five hundred. So IT depends upon your disc. So I guess the point where what we're doing is we're trying to to decide which is Better, Better for and they're relatively .

people in terms of numbers, right? So it's gonna rely on life expectancy. So you live thirty five years. The the numbers are .

going to twenty five years or twenty five years.

sixty, sixty one, sixty two years old right now. So if you have longevity in the family, you're probably onna make up a little bit more if you take the pension um if you want more flexibility, if you want to invest the money, if you want to take on more risk, then you take the lum sum. If you want to certainty of a fixed income on top of you so security, then I would take the pension. Um you have three million dollars of other liquid assets, uh, that you can do right conversions with that. You can take on a little bit more risk if you think about having a really strong base line in regards to fixed income, that maybe I will take the annuity, postal security and then you can maybe you create a larger legacy for the kids yeah by by taking on maybe a little bit more risk .

with the liquid yeah I like you thinking and partly when I think about the sixty one, uh, and i'm not going to collect social security till seventy, that's nine years of going through my nesting. I think I kind elected of the pension so my mistake doesn't take such a big hit waiting for social security.

I guess the point is it's not a huge discrepancy. It's huge mistake because of how the discount rates are working with this particular pension. I mean, we've seen before that the lumsden g is a lot Better than the annuity, and we've also seen where the annuity is a lot Better than the lumpsum. Doing the math here, given a certain life, expecting ency of the numbers are almost the same either from the numbers perspective.

we are right on. So are they in a good position to retire? Uh, just quick math, hundred fifty thousand expenses if they take the pension thirty eight ground shirt falls one twelve and the three million three point seven percent distribution rate age sixty one sixty two yeah that looks pretty good.

looks very good um again, there's a lot of forces that are unknown and yeah creating the it's pretty good .

uh but they've done na really .

good job savings first. Then it's like, all right, well let's see you take the love some um or you you like you take the pension, you still have to take one hundred and ten thousand dollars a distribution.

You do right?

So are still drain in the portfolio quite a bit. So then you're thinking, all right, so I have seven years of pulling one hundred and ten .

thousand dollars up.

even years. Yes, i'm sorry. So again, that's A A million us dollars that you're pulling out of your three million dollars. So a third of your next day is taking out of the portfolio before you reach full source of you.

So you Better have for some growth because that's that's how you need to do investment and retirement.

Sometimes I feel like we give a little bit of false confidence with people. Yeah, looks great back the in five years we're going to get calls I I think out yeah, you said, you said I alright, we got loving moy Christmas OK duma, duma. Hello, love the show. I'm not a fan of the idea, idea of retirement accounts right now .

on .

a small business we offer for k two employees, but I don't use IT. My wife, mary and I are approaching forty. So retirement is that much of a thought yet. We have four million dollars with the commercial real date, about two million in my business, about a million dollars in real date funds.

If SHE is about three hundred thousand knowledge in our four kate or C P A N C F P R poll telling me about the immediate a tax benefits of contributing to a four one k but i'm pretty sure effective tax rate will continue to go up as we age. I have no interest in pain. More taxes later if we did the right conversion.

We don't say taxes. Now i'm struggling with changing what we've been doing as it's been working. Talk some sense in the me. I've drinks anything but whisky. I drink anything but to kila law.

it's a brother range.

I say to love Christmas. So cola, keep doing what you do.

It's working.

It's working in you're forty. You ve got a network of blood.

Well, several million dollars yeah .

over seven million twenty three and tote you like real state yes, you got a business that we're two million .

box yeah that going well. So I I loyd, I I might offer one thing for you and that is your taxable accounts er in real state funds. Why not at least have a rough option in your form? K contribute to the rough and invest in your real state funds in the rough cause will be tax free, same same, except now you creating tax free income in the future.

Yeah, if you love, realize, just open up a rap or convert your wives and then you can still buy real state fans.

You buy real state funds, or you can even buy real state and a self directed, if you want really want to go there around.

I could probably little heavy on .

well so so my second comment is that reminds me somewhat of me at age forty, although the numbers were lot smaller, I would say, but I had a business and I real state, not much else, and I felt pretty good and tell the great recession hit. Then I didn't feel so good. Now I realize it's kind of nice to have a little bit diversification.

So that's just me. But I get I get that I like real state. I always but .

I don't think we got to talk some sense up, but I think there's other things that you could be potentially dealing that would benefit your long term. Diversities always good, bad, but concentrated risk is what makes people super successful and wealthy.

I know, and we don't talk about this often and enough, right? So we talk about diversification. So what is diverse ation that's having all these different asset classes because they go up down at different points and you have a smoothed ride.

But to get rich, the best way to concentrate in a single company or asset class. But that asset class or company or real state has to do really well, sometimes at work, sometimes that goes the other direction and you end up with very little concentration is a lot risk here. But sure, you can make a lot more money if you pick the right ash.

yeah. Well, he wants a business that's going to make him a lot of money and he's doubling down on his business and its work. Couple of million to our forty years old.

I have no idea what kind of business that is. What are the wealthy as people, the ones that take the most risk, but also you could lose your ass, is asset like very quickly here too. It's a double and sort.

So you just want to be careful. IT depends on your rist taller IT sounds like he has an appetite for rest. IT does.

But you just have to be aware that with risk I can go the other way. I knew that seven and a half million dollars that you have a total asset. How would do you feel if I went to two million? right? So like what bomb? Or three million would that lower up?

If not, then I think, alright, keep doing what you do. And I don't need a tag, but you have to look at the downside. If i'm not looking at the downside, what is the worst case scenario? I'm not saying that could happen, but IT may if you want to protect that, like most people are twice fearful or twice upset or twice made when they lose IT out than they .

are to again. So you've .

already done way more than most in accumulating the network of seven million dollars.

Now you just have to talk yourself to say, where do I want to seven million ago? Would I be twice as happy if the seven million went to forty million? Or how mad what I did there? Seven million went to three million, right? Is your lives gonna change all that much if that network went to ten or twenty versus if I went to two? That seven million, thousand and worth out.

that's a ton at age forty, that is a ton. And so if that seems like good a mount and think about diversifying. But what diversifying does is, is safer. IT allows you to hold on to what you've made, but you may not have the same upside that that's really what IT comes down to.

So loyd, his bodies, anyone knows his buddies? That was Harry. What was Harry's? Is last thing.

等等 吗？ Yeah, I don't.

And looks like here.

here.

then Harry. Done.

do you? And done. Speaking.

a .

downward. done. yes. Great job ending. Thank you.

Come youtube. IT is fun.

as always, in that we will see us next week. You'll cut your money OK.

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