Episode summary
We Reverse-Engineered Their $6.5M Retirement. Here's What We Found
Your Money Your Wealth
· · 45 min · Hosts: Joe Anderson, Big Al Clopine · Guests: Michael, K & J, Tracy, Sean, Dallas, Leeloo, DG, Fish Sean
Summary
The hosts reverse-engineer several listeners’ retirement plans by working backward from what they have saved, their expected income, and an assumed spending level, because none of the emails gave a complete spending number. For Michael in Pittsburgh, they argue that with $5 million in a traditional IRA, $1 million in a Roth IRA, and $500,000 in taxable Tesla and Nvidia, Roth conversions make sense if he is staying in the 24% bracket, especially since future RMDs, survivor tax brackets, and potential tax-rate increases could all create a larger tax bill later.
For K and J in the Cascades, the hosts use the same framework to suggest pulling from the IRA for living expenses and then converting additional dollars up to the top of the 22% bracket, rather than obsessing over getting the traditional IRA down to a specific target. For Tracy in California, they back into a spend estimate and conclude that retirement looks feasible if spending is around $100,000 a year, given a $1.5 million 401(k), continued savings, and projected Social Security.
They also cover Shawn in Orlando, whose mix of deferred compensation, 401(k), IRA, Roth, brokerage, and cash leaves him in good shape to retire in two years at 56, with tax-efficient drawdown likely centered on using tax-deferred assets first and converting some amounts while he is still single. Later, they answer a question about charitable giving by contrasting donor-advised funds with charitable remainder unitrusts: the DAF is better for the charity and a bigger immediate deduction, while the CRUT is better for the donor who wants an income stream.
Key takeaways
- The hosts say Michael’s plan points toward Roth conversions at least up to the top of the 24% bracket because his future RMDs could be around $240,000 and survivor tax brackets could rise.
- For K and J, the hosts recommend funding spending first from the IRA and then converting additional amounts up to the top of the 22% bracket instead of targeting a specific ending IRA balance.
- Tracy’s retirement looks workable if spending is roughly $100,000 a year, since her $1.5 million 401(k) and ongoing savings can support a roughly 3.6% draw rate after Social Security.
- Shawn appears able to retire at 56 with $4.4 million, and the hosts favor drawing from tax-deferred accounts for spending while using conversions to build a more tax-efficient legacy.
- The hosts say there is no such thing as “too much Roth,” because tax-free growth and no RMDs usually beat having too much money in pre-tax accounts.
- For charitable giving, the hosts say a donor-advised fund is better for the charity, while a CRUT is better if the donor wants an income stream and a partial tax deduction.
Notable quotes
“We need to know how much you're spending to be able to have an appropriate spitball”
“if you're going to be in the same tax bracket or higher, you convert”
“what's better for your personal enterprise, it's not that one”
How the episode opens
It is that time again. The ninth annual YMYW podcast survey is officially open and this is your chance to tell us what to keep, what to cut, and what would make Your Money, Your Wealth your favorite retirement podcast. I've always said it, this is your podcast. We just make it for you. The survey is how you steer it.
Answer all 16 questions, leave your email and you're in the running for a $100 Amazon e-gift card. Find the survey link in today's episode description and use the password YMYW, all lowercase, to access it. You've got until 5:00 p.m.
Pacific time on August 31st and I'll announce the winner here on YMYW on September 1st. US residents only for the giveaway, no purchase necessary. Now, do it now before you get into the episode and forget.
Cuz today on Your Money, Your Wealth podcast number 592, Michael in Pittsburgh, J and K up in the Cascades, and Tracy in California all need retirement spitballs and Roth conversion plans, but none of them gave Joe and Big Al one of the most important numbers in retirement planning. How much they actually want to spend.
The fellows reverse engineer their spitballs to back into what might be the same numbers missing from your own plan. Plus, Shawn in Orlando wants to retire in 2 years at age 56 with $4.4 million without handing half of it to the taxman. And Dallas and Lila in Brooklyn are wondering if there's such a thing as too much Roth considering they're 48 and on track for a million in theirs.
Plus, we'll also talk about some charitable giving strategies. What exactly is the difference between a tap and a crutch? I'm executive producer Andy Last and here are the hosts of Your Money, Your Wealth, Joe Anderson, CFP, and Big Al Clopine, CPA.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- roth conversions
- retirement spending targets
- ira rmds
- charitable giving strategies
- dafs vs cruts
Companies and tickers mentioned
- Pure Financial Advisors
Watch the episode
Watch “We Reverse-Engineered Their $6.5M Retirement. Here's What We Found” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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