Episode summary
Roth vs. Traditional 401(k) at $275K Income: What's the Right Move?
Your Money Your Wealth
· · Hosts: Joe Anderson, Big Al Clopine · Guests: Paul, Angela, Mike, Edward, Blanche Devereaux, Mr. Smith, Mrs. Smith, Jeff, Holly
Summary
The episode centers on retirement timing and tax strategy for several households in very different positions. For Paul and Angela, the hosts estimate that their combined $2.4 million, continued savings, and eventual Social Security could support retirement in their 50s, but they caution that the real question is not just whether one spouse can stop sooner, but when both can stop together without overcommitting to spending. They also argue that a full retirement-plan software analysis is better than a quick back-of-the-envelope answer when the timing question gets complicated.
For Mike’s mother, the hosts say an inherited IRA left separate can be rolled into her own IRA even years later, as long as the required minimum distribution is first satisfied. They emphasize that this is a tax-free spousal rollover and that consolidating the accounts would simplify future RMDs. On Edward’s bond question, they push back on overthinking monthly income and say bond funds should be judged in the context of the whole portfolio, with reinvestment handled based on overall goals rather than the coupon alone.
They also address Blanche’s $1.1 million traditional IRA, Roth balances, and $275,000 to $300,000 income, recommending pretax 401(k) contributions now and Roth conversions later in retirement. For Mr. and Mrs. Smith, the hosts think 59 is probably aggressive for a $7,000 monthly retirement target, though close. They close by correcting an NUA point and clarifying that a MYGA is an insurance-company CD-like product with tax deferred treatment until payout.
Key takeaways
- Paul and Angela appear close to retiring, but the hosts say the harder issue is coordinating both spouses’ retirement dates and spending needs, not just one person leaving work early.
- Mike’s mother can roll her inherited spousal IRA into her own IRA years later, and the hosts say that move is tax-free once the year’s RMD is taken.
- Edward’s bond funds should be managed as part of the whole portfolio, not as a separate income bucket to obsess over, according to the hosts.
- Blanche likely should favor pre-tax 401(k) contributions now, then consider Roth conversions later when her retirement tax bracket is lower.
- The hosts think Mr. and Mrs. Smith are close to retiring at 59, but that target may be a bit aggressive if they want $7,000 a month plus travel.
- The hosts correct a prior NUA explanation and say a MYGA is more like a tax-deferred insurance CD than an immediate annuity.
Notable quotes
“when it comes to a back of the envelope scenario then I can say or people ask can I retire at 62”
“I don't really like it when people segment their investments”
“I would go pre-tax. Me, too. And then I would start converting in five years”
How the episode opens
Paul and Angela in Florida are 52 and 45. What's the earliest the two of them can walk away from work at the same time so Paul can spend a whole lot more time in the boat? That's today on Your Money, Your Wealth podcast number 593.
Then the fellow spitball for Mike in Riverside. His mom inherited his dad's IRA at age 84. Can she still roll it into her own?
Edward in Illinois is watching his bond funds lose value even while they pay him interest and he's wondering if treasuries are the fix. Blanch Devo in California is 55 with $1.1 million in pre-tax. Should she go all Roth for her last five working years and Mr.
and Mrs. Smith on the Carolina coast want to know if they can afford to retire at age 59. Jump into our YouTube comments and tell us what you think of Joan Bigal's spitballs today and whether you would do something different.
I'm executive producer Andy last and here are the hosts of your money your wealth Joe Anderson CFP and Big Al Cloine CPA.
Hello wise gentleman and wiser Andy agree with that. — Which one? They say we're wise or Andy's wiser. — Paul in Angela in Florida. Anything there? — I don't think it's a thing but I'll I'll double check while you're reading. — All right. Uh need a big spitball on our situation. Paul 53 in September 26 and Angela 46 in September 26. So there's seven years difference, Joe. Oh, we're cracking jokes, are we?
Already. — Angela drives a 23 tellide. — Damn. — In likes a Mick Ultra. And Paul drives a crappy company car that enjoys a yingling. Yingling. What's that beer called? Yingling. — Yingling is how I usually.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- roth vs traditional 401(k)
- early retirement planning
- inherited ira beneficiary rollover
- bond funds vs treasuries
- myga vs immediate annuity
Companies and tickers mentioned
- Pure Financial Advisors, LLC
Watch the episode
Watch “Roth vs. Traditional 401(k) at $275K Income: What's the Right Move?” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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