Episode summary
These Tax Strategies Let You Spend More in Retirement
Your Money Your Wealth
· · Hosts: Joe Anderson, Big Al Clopine
Summary
The episode focuses on how tax-aware withdrawal and account-location choices can make retirement spending more efficient. The hosts explain that advisory fees taken from a pre-tax IRA or 401(k) are effectively paid with pre-tax dollars, which can create a tax discount for retirees under 59½. But if the same advisory relationship also includes Roth assets, the fee is generally allocated proportionally across account types, so some fee still comes out of the Roth unless the fee is paid entirely from a taxable brokerage or trust account.
A second theme is Roth conversion planning for a couple with about $4.4 million in liquid assets, a planned retirement around age 67, and spending needs around $250,000 to $280,000 a year. The hosts argue the plan is realistic, but the couple likely does not need to force huge Roth conversions into the 24% bracket. They suggest pushing Social Security to 70 to increase flexibility, then using a mix of portfolio withdrawals and conversions to manage future RMDs and lifetime taxes.
The final discussion covers annuities and target-date funds. The hosts say qualified annuities inside retirement accounts can usually be exchanged without tax, while nonqualified annuities need more scrutiny because gains are taxed as ordinary income. They also prefer a simple three-fund portfolio over target-date funds for investors who want more control over asset location and risk exposure.
Key takeaways
- Advisory fees paid from pre-tax retirement accounts can effectively be discounted versus paying them from after-tax money, but Roth assets are usually billed proportionally too.
- For the couple with $4.4 million, the hosts say retirement is realistic and the portfolio can likely support the bridge to Social Security.
- The hosts suggest delaying Social Security to age 70 to create more room for Roth conversions and lower lifetime taxable income.
- They think the couple may only need enough Roth conversions to stay near the 22% bracket, not large conversions into the 24% bracket.
- The hosts favor a simple three-fund portfolio and argue asset location matters more than target-date-fund simplicity for retirees with both pre-tax and Roth money.
Notable quotes
“Financial advisory fees can be taken directly from a pre-tax retirement account. What's that you say? No kidding”
“if you do have a Roth IRA that your advisor is managing, you can't say do not take it out of the Roth, only take it out of the pre-tax”
“I would push it to um to age 70”
“I would much rather have them do that than target date funds”
How the episode opens
Heidi from the Space Coast of Florida found a money-saving tidbit in a past episode that completely changed how she thinks about her financial advisor's fee. Join Big Al expand on the strategy today on Your Money, Your Wealth podcast number 584. Laverne and Shirley have 4 million bucks, Roth conversion questions, annuity questions, and retirement plans so detailed it may require a diagram.
Finally, Bess and George from pure Michigan are already retired, already on social security, and already losing sleep over their investments. So, why are they so stressed? Join Big Al's debate about a 1% advisory fee gets a little spicy in that one.
Apple podcast users, you now have the option of listening or watching YMYW just like our friends following us on YouTube or Spotify. Leave your honest rating and review even if it's just to tell us that we have faces for radio. I'm executive producer Andy Last and here are the hosts of Your Money, Your Wealth, Joe Anderson CFP and Big Al Clopine CPA.
We got Heidi, Space Coast of Florida, all right? You ever been to NASA? — I have not. Have you? — No. — You ever want to be an astronaut? — Never. — I think I was I wanted to be an astronaut when I was five, but that didn't last long.
Not even close. — Didn't want to see it. I first wanted to be — Not want to go to space. I'd be freaked out. I'd be like claustrophobic. I think I There's no way I'd be an astronaut. — Well, I think that's what I realized that too. I first wanted to be a cowboy, but then astronaut was cooler. Yeah.
Uh all right. — I just got the cowboy vision.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- retirement tax strategies
- roth conversions
- aum advisory fees
- rmds
- target date funds
Companies and tickers mentioned
- Pure Financial Advisors
Watch the episode
Watch “These Tax Strategies Let You Spend More in Retirement” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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Is a $400K Roth Conversion at Peak Income a Mistake? -
Should You Do Roth Conversions in a Down Market?
Your Money Your Wealth, this episode and its artwork belong to Your Money, Your Wealth. Octagon is not affiliated with the show; this page is an independent summary.
