The Retirement and IRA Show

Jim and Chris discuss listener questions on Social Security retroactive payments and delayed retirement credit timing, share a listener PSA on horse speed, and answer questions on fixed indexed annuity default credits, a living benefit rider with a proprietary index, and RMD rules for an inherited account. (15:45) A listener asks if the lack of a prior formal application affects eligibility for retroactive spousal benefits following the GPO repeal.(27:30) The guys address a question about how delayed retirement credits are calculated based on specific months and what to consider when not claiming exactly at full retirement age or 70.(37:45) Georgette shares a PSA on an earlier episode’s horse speed discussion.(44:00) A listener seeks clarification on how a fixed indexed annuity with withdrawal benefits might outperform a DIA, particularly how default credits and fees interact.(1:07:30) Jim and Chris respond to a listener who shares details about their nationwide annuity with a living benefit rider, its performance, fees, and expected income stream.(1:25:45) George asks whether RMD rules for an inherited account require a distribution in the year of his mother’s death, despite the Vanguard calculator indicating otherwise. The post Social Security, PSA, Annuities, RMD Rules: Q&A #2534 appeared first on The Retirement and IRA Show.

Chris’s Summary Jim and I review catch up contributions across IRAs and workplace plans using questions from the Ed Slott training quiz. We clarify the $1,000 IRA catch up (now indexed), explain the age 60–63 super catch up in 401(k)/403(b) plans, and outline the Roth mandate that will require high earners’ catch ups to go to the Roth side. I focus on what’s actually changing and where these rules create practical planning tradeoffs. Jim’s “Pithy” Summary Chris and I dig into the latest Ed Slott quiz, focusing heavily on catch up contributions and how Secure Act 2.0 continues to reshape the rules. We start by clarifying what’s true and false about the standard catch up, then dive into the new super catch up available between ages 60 and 63. I explain why I find this provision frustrating, since adding a few thousand dollars so late in the game hardly moves the needle compared to what earlier compounding could have achieved. And here’s the part that drives me nuts: Congress pats itself on the back for giving people in their 60s this special window, but where was that option decades earlier when it really mattered? If you let someone in their 30s or 40s make bigger contributions, you give compounding time to actually do its job. Instead, they created a rule that looks generous but, in practice, is mostly symbolic. From there, we tackle the Roth mandate for higher earners. If your wages exceed the threshold, your additional catch up dollars must go into the Roth side of the plan. That’s going to be a big surprise for many workers who are used to putting everything pre-tax, especially in higher-cost states where salaries above the threshold aren’t unusual. The upshot is that many workers in this situation will find their catch up contributions directed into a Roth account, which takes away the immediate deduction but allows those dollars to grow and be withdrawn tax-free later in retirement. The post Catch Up Contributions: EDU #2534 appeared first on The Retirement and IRA Show.

Jim and Chris discuss listener questions on Social Security spousal benefits, filing logistics and spousal eligibility with a disabled child, an inherited Roth IRA, and IRMAA concerns.(14:30) A listener asks why his spouse’s Social Security spousal benefit is less than half of his primary benefit amount.(21:45) George asks about the process and documentation needed when filing for Social Security benefits that will also increase payments for his spouse and disabled adult son, and about eligibility for a spousal benefit while delaying his own claim.(40:30) The guys review a ChatGPT summary of Inherited Roth rules and whether there are RMDs for a non-spouse beneficiary that inherited in 2023.(1:03:30) Jim and Chris address a question about an IRMAA increase caused by a lump-sum Social Security payment. The post Social Security, Inherited Roth, and IRMAA: Q&A #2533 appeared first on The Retirement and IRA Show.

The conversation dives into Robert Merton's retirement income framework, comparing discretionary spending strategies. The hosts emphasize the importance of liquidity and principal protection for funding those treasured 'Go-Go' years. They critique the notion of sacrificing passions during market fluctuations and explore the potential pitfalls of high-risk investments for non-essential expenses. Listeners gain insights on how to balance guaranteed income with aspirational spending, making retirement enjoyable while safeguarding their financial future.

Jim and Chris discuss listener questions on Social Security timing strategies, Roth conversions in an RMD year, annuity return calculations, account sourcing for SPIA purchases, and Rule of 55 withdrawal rules.(12:30) A listener asks whether his brother should delay claiming Social Security to age 70 for better longevity protection despite a narrow breakeven.(35:15) George asks if he can complete a Roth conversion before taking his first RMD and when a QCD would fit in that sequence.(58:15) Jim and Chris respond to a question on how to calculate the return on a lifetime income annuity.(1:11:15) The guys address which account—IRA, Roth, or brokerage—is best for funding a future SPIA purchase.(1:19:45) A listener asks if they can take penalty-free withdrawals from a previous 401(k) under the Rule of 55 while working elsewhere, and whether the rule would apply to both plans after leaving the current job. Show Notes: This is from the IRS final RMD regulations: (f) Determination of whether a distribution is a required minimum distribution —(1) Determination for calendar year of distribution. Except as provided in paragraphs (f)(2) and (3) of this section, if a minimum distribution is required for a calendar year, then the amounts distributed during that calendar year are treated as required minimum distributions under section 401(a)(9) to the extent that the total minimum distribution required under section 401(a)(9) for the calendar year has not been satisfied (and accordingly, those amounts are not eligible rollover distributions). For example, if an employee is required under section 401(a)(9) to receive a minimum distribution for a calendar year of $5,000 and the employee receives a total of $7,200 in that year, the first $5,000 distributed will be treated as the required minimum distribution and will not be an eligible rollover distribution, and the remaining $2,200 will be an eligible rollover distribution if it otherwise qualifies. If the total section 401(a)(9) required minimum distribution for a calendar year prior to the calendar year of the distribution is not distributed in that calendar year (for example, when the distribution for the calendar year in which the employee reaches the applicable age is made on April 1 of the following calendar year), then the amount that was required to be distributed, but not distributed, is added to the amount required to be distributed for the next calendar year in determining the portion of any distribution in the next calendar year that is a required minimum distribution (and, thus, is not an eligible rollover distribution). The post Social Security, Roth Conversions, Annuities, and Rule of 55: Q&A #2532 appeared first on The Retirement and IRA Show.

Chris’s SummaryJim and I review a recent article featuring Robert Merton’s views on retirement income versus savings, using it as a springboard to unpack income planning fundamentals and annuity projections. While we agree with many of Merton’s framing points—especially the focus on secure income—we also note several key areas where academic theory diverges from real-world retirement dynamics. Jim’s “Pithy” SummaryChris and I dig into an article summarizing Nobel Prize winner Robert Merton’s take on retirement income, and I must say—it gave us plenty to talk about! We agree with the premise: retirement is about income, not just a pot of savings. But as always, I’ve got thoughts. Merton’s framing—that income matters more than assets—misses how closely tied the two actually are. You can’t generate income without savings, so they’re not distant cousins—they’re spouses, hand in hand! We also explore his idea of guaranteed income and how it relates to our own Minimum Dignity Floor approach. His categories echo ours—he starts with guaranteed essentials like food, housing, and healthcare. Sound familiar? He even lists sources like Social Security, pensions, and annuities. But when he suggests a 3% inflation-adjusted annuity from a “highly rated insurer”? Well, good luck finding one. Those vanished after COVID. Today, most annuities with inflation protection are just fixed increases—and even those come at a steep cost. That leads us into a deep dive on how we handle inflation during the delay period. I explain why projecting future income shortfalls isn’t about guessing—it’s about monitoring trends and setting up flexible reserves. Chris walks through how we model that gap using actual quotes from insurance companies to estimate how much a future retiree might need. Do we recommend buying now? Nope. We wait. Because retirement plans need recalibration every few years— and they’re far more effective when you understand the math and monitor the risks over time. Show Notes: Article: Why Retirement Income is More Important than Retirement Savings The post Retirement Income Versus Savings: EDU #2532 appeared first on The Retirement and IRA Show.

Jim and Chris discuss Jim’s relocation experience to Ohio, a listener PSA on Medicare, questions about Social Security payment timing and divorce eligibility, Roth 401k withdrawals under the rule of 55, and close with an annuity comparison answer so long it practically qualifies as a mini EDU. (17:00) A listener PSA reminds others that Medicare Part A only covers hospital costs and that Parts B, C, and D must still be actively enrolled in. (24:30) A listener asks whether it’s normal for his Social Security payment date—initially based on spousal benefits—to remain the same after switching to his own record. (31:45) Georgette asks what Social Security benefits she might be eligible for after divorce, given she’s receiving Disability and will have been married 11 years. (39:15) Jim and Chris offer clarity on how the rule of 55 applies to Roth 401k withdrawals and confirm whether earnings would be taxable before age 59½. (55:30) George asks whether it’s better to use a fixed indexed annuity (FIA) with living benefits or a deferred income annuity (DIA); the guys break it down in an extended segment that might even earn you CPE credit. The post Ohio, Medicare, Social Security, Roth 401k, and Annuities: Q&A #2531 appeared first on The Retirement and IRA Show.

Chris’s SummaryJim and I are joined by Matt Kaufman, Senior Vice President and Head of ETFs at Calamos Investments, to discuss buffered ETFs vs stocks and cash, focusing on AQR’s recent critiques. We examine the flaws in AQR’s methodology, the broader history of buffered products, and why these tools can offer certainty in retirement planning. Matt explains how buffered ETFs differ from accumulation strategies and why they may suit specific roles in a distribution-focused portfolio. We also touch on annuity comparisons and institutional adoption by endowments. Jim’s “Pithy” SummaryChris and I welcome back Matt Kaufman from Calamos Investments to talk through the controversy around buffered ETFs. AQR recently published two articles criticizing these tools, and I had some questions—not just about their numbers, but about their motives. If you understand how we use buffered products, especially in retirement distribution, you’ll see why I don’t think these critiques hold up. We talk about the emotional side of retirement—how people freeze up when they’re supposed to start spending. My dad warned me about the Debbie Downers in his assisted living facility: folks who had money but waited too long and couldn’t spend it anymore. That’s why we look at buffered ETFs as a way to give retirees confidence, not as accumulation tools. When I saw AQR lumping these products together and treating them like they were all the same, it reminded me of the way Ken Fisher says “I hate annuities and so should you.” That kind of broad-stroke bashing doesn’t help anyone. Matt walks through the technical flaws in AQR’s analysis—especially how they mischaracterized equity exposure and ignored how buffered ETFs are actually used. We compare them to annuities, explain cap rates, and look at why institutions like the University of Connecticut are dropping hedge funds for these products. There’s more nuance here than some people want to admit, and it’s worth taking the time to understand how these work—especially if you’re in retirement and trying to protect the money you spent 40 years building. Show Notes: For those who would like to read the AQR articles discussed in this episode you can find them here: https://www.aqr.com/Insights/Perspectives/Rebuffed-A-Closer-Look-at-Options-Based-Strategies https://www.aqr.com/Insights/Perspectives/Buffer-Madness The post Buffered ETFs vs Stocks and Cash: EDU #2531 appeared first on The Retirement and IRA Show.

Dive into the world of Social Security as the hosts answer listener questions about its taxation and payment timing surprises. Explore transition planning strategies, focusing on protecting assets and optimizing Roth conversions. Discover how to position retirement funds across various accounts while managing income and avoiding IRMAA. The discussion also includes practical insights for maximizing deductions before Required Minimum Distributions kick in. It's an engaging mix of tax tips, personal stories, and retirement strategies!

Chris’s SummaryJim and I explain living benefits on annuities, covering how guaranteed income riders work and why they can appeal to those hesitant to annuitize. We describe what we call noun annuities (pre-annuitization) and verb annuities (post-annuitization), then unpack how living benefit riders like guaranteed minimum withdrawal benefits provide income without giving up access to principal. We also discuss what we refer to as the “pretend account,” alongside actual account balances and the significance of guaranteed versus hypothetical projections. Jim’s “Pithy” SummaryChris and I finally deliver the long-promised show on annuity living benefits! After wrapping up Annuity Awareness Month, we realized this topic still needed its own deep dive—so here it is. I explain how living benefits evolved from death benefits to guaranteed accumulation and now to income riders that let you turn your noun annuity into a verb without actually doing so. Why? Because people hate the verb! They don’t want to give up their lump sum—they want to “keep a noun a noun,” as I say—and still get some income out of it. We also talk about the trickery behind what I call “pretend accounts”—those “mystical magical” numbers insurance companies use to calculate your guaranteed income while your real account shrinks from fees. I explain how the ten percent growth you’re promised isn’t on your actual money—it’s on that “pretend account.” And yes, your fees? Those are based on the “pretend account” too, not your real balance. It’s all sizzle, no steak for most people—unless you’re like me and you’re actually using the income. I share that I own one of these riders myself, but only because the guaranteed income benefit made sense for my Roth IRA. Bottom line: these products aren’t always terrible. If you know you want income and you understand what you’re paying for, some of these living benefit riders might actually make sense—even after you account for the outrageous fees. But the key is understanding what you’re buying and not falling for a hypothetical illustration that doesn’t tell you what you’re actually getting. The post Living Benefits on Annuities: EDU #2530 appeared first on The Retirement and IRA Show.