Your Money, Your Wealth

Joe Anderson, CFP® and Big Al Clopine, CPA discuss a two-decade study on the character traits of America’s wealthy and uncover the lessons that can be learned from the millionaire next door, on episode 65 of the YMYW podcast. Original publish date September 17, 2016 (hour 1). Note that content may be outdated as rules and regulations have changed.  00:00 - Intro 06:41 - “Successful people often spend more time early in life focusing on bettering themselves which leads to higher income the remainder of their lives.” 06:50 - “We need to keep investing in ourselves all throughout our career – things are changing so rapidly that we have to stay ahead of the curve.” 13:23 - “The first check you write every single month should be to yourself – to your 401(k) or IRA. If you can automate it, all the better.” 16:12 - “If you’re thinking about saving money in taxes in retirement, having some of your dollars come out tax-free is key because that’s what is going to keep you out of higher brackets later.” 19:11 - “A lot of people don’t realize they can take control over their taxes and especially in retirement.” 22:00 - “If you’re not maxing out your 401(k) plans and Roth IRAs, you have to get there.” 24:52 - “A lot of you underestimate how much you are actually spending.” 31:11 - “The fee-only community is pretty small. The really good fee-only advisors have minimums of millions of dollars.” 32:07 - “Right now we have a tax system that starts at a lowest bracket of 10% and goes up to 39.6%. Hillary wants to keep that in place but an extra 4% if you have more than $5 million in income.” 32:30 - “Donald Trump wants to change the brackets to be 0%, 12%, 25% and 33%.” 34:35 - “Couple more things – for the alternative minimum tax, Donald Trump wants to eliminate it all together, and Hillary wants to expand it a little bit by having a 30% minimum rate for incomes over $1 million.”

Joe Anderson, CFP® and Big Al Clopine, CPA discuss the good, the bad and the ugly of baby boomers’ retirement plans in episode 64 of the YMYW podcast. Plus, Big Al quizzes Joe on retirement and investing questions. Original publish date September 10, 2016 (hour 2). Note that content may be outdated as rules and regulations have changed.  00:00 - Intro 03:30 - “There is talk about how to fix Social Security. I personally think what they’ll do is they’ll raise retirement age; they may raise the rates, or the amount we put in Social Security...” 08:49 - “How will you make your money work for you while reducing your risk? How will you avoid the retirement tax trap that we’ve been talking about that could cost you thousands of needless taxes?” 16:10 - “There are ways that you can increase your possibility of working longer; one is staying healthy, one is performing well at your current job…going back to school and learning new skills.” 18:07 - “As you near retirement, tax planning becomes more important than ever, but you must use a forward-looking tax strategy.” 21:42 - “True or false? If you take your Social Security benefit early, you’ll lock in reduced monthly payments for life.” 24:08 - “At what age do you qualify for the maximum Social Security retirement benefit? 68, 70 or 72? If you wait until age 70 you get the maximum benefit.” 30:22 - “How do I avoid filing a trust return every year?” 33:27 - “I am a non- U.S. citizen living outside the U.S. and trading stocks through a U.S. internet broker. Do I have to pay taxes on the money I earn? 34:22 - “How do Roth IRAs gain interest?”

Oregon’s State Senator Ron Wyden is proposing a limit on Roth IRA accounts so high-income households would face restrictions on this tax-advantaged retirement account. Would this solve anything? Joe Anderson, CFP® and Big Al Clopine, CPA discuss in episode 63 of the YMYW podcast. Later, 6 reasons to convert to a Roth IRA in your 50s and 60s. Original publish date September 10, 2016 (hour 1). Note that content may be outdated as rules and regulations have changed.  00:00 - Intro 02:50 - “People who have a retirement plan through their employer tend to have more money in retirement.” 05:17 - “There’s no such thing as a mega-Roth IRA.” 07:12 - “Taxpayers ‘are pouring dollars into incentives for retirement savings, but still far too many Americans struggle to set money aside after they cover their basics. Tax incentives for savings ought to be available to more working families and more generous to middle class.’” 11:49 - “The IRS is getting their tax money upfront when you put money into a Roth.” 14:19 - “At age 70 ½, you have to take a required distribution.” 23:18 - “What does a [company] match mean? It’s when you put a dollar in and your company matches it.” 26:50 - “If you have extended your tax return or even if you have not…and you did a Roth conversion last year, you’re allowed until October 15 to re-characterize that amount.” 30:53 - “If you pass away with a retirement account, the IRS wants their tax money…When you pass away, it will go to your named beneficiary…your spouse has different rules.” 33:58 - “Roth IRAs do not have a required distribution to the owner but if I’m a beneficial owner it doesn’t matter what type of retirement account it is…they will have to take that requirement.”

Investing expert Larry Swedroe joins Joe Anderson, CFP® and Big Al Clopine, CPA to discuss his new book on factor-based investing in episode 62 of the YMYW podcast. Larry also discusses smart beta, his take on the upcoming election, and how investors should react depending on the outcome. Original publish date September 3, 2016 (hour 2). Note that content may be outdated as rules and regulations have changed.  00:00 - Intro 02:02 - “Can the IRS take the property from my trust?” 04:38 - “How much can I collect in widow's benefits?” 08:24 - “Can I re-gift a stock?” 12:35 - “A 401(k) plan will allow someone to put an amount directly into their paycheck into an account that will grow 100% tax-deferred…it’s out of sight, out of mind.” 15:02 - “When you start tapping your retirement nest egg, there are all types of rules – if you don’t have a retirement nest egg, you have nothing to tap.” 15:50 Start of Interview with Larry Swedroe 18:27 - “We identify eight factors in this book – six for stocks and two for bonds…” 20:12 - “We should have a risk-based explanation for these premiums and/or a behavioral explanation that should hold up.” 20:20 - “The book goes through all of these issues for every one of the factors we recommend, and shows you the historical evidence.” 22:47 - “Now there’s something that’s called smart beta. What’s your take on that? That’s just factor investing with a marketing ploy isn’t it?” 24:49 “That, to me, is smart beta because it’s patient trading and over time will outperform the index.” 25:44 - “There is a thing that you can call smart beta, but 98 or 99 percent of what the industry calls smart beta is marketing hype.” 29:19 - “Never let your political views influence your investment decisions. You should have that well thought-out investment plan that has your asset allocation. The only thing you should be doing is 1) rebalancing if necessary and 2) tax managing if the opportunity to harvest a loss is there.” 33:38 - “The more you look at your portfolio, the more hazardous it potentially is to your wealth.” 35:35 - “If you can’t ignore the noise of the market…don’t check your value.” 35:55 End of Interview with Larry Swedroe

Joe Anderson, CFP® and Big Al Clopine CPA answer your burning financial questions in episode 61 of the YMYW podcast, ranging from how to avoid gift taxes to why it’s worth it to invest in a 401(k). Original publish date September 3, 2016 (hour 1). Note that content may be outdated as rules and regulations have changed.  00:00 - Intro  04:17 - “When we talk about long-term care planning, a lot of people assume we mean you have to buy insurance and that’s one way to solve an issue, but not the only way.” 06:20 - “Medicare covers skilled care; they don’t necessarily cover custodial care. Custodial care means you’re not necessarily going to get better. Skilled care can patch you up and get you out the door.” 11:20 - “What type of loan should I use to buy out my sibling for inherited property?” 16:59 - “You may have a will or a trust and that will spell out how the assets will be divvied up, but a letter of instructions and meeting beforehand goes a long way.” 20:24 - “Can I avoid paying gift tax? Can a grandparent gift a grandchild money for college and not have to pay a gift tax? Would the grandchild have to pay taxes on it too?” 27:55 - “I think it’s really important to take advantage of the tax laws that are given to us. If you are a business owner, you can pay your child do something for your business and it becomes a deduction for you.” 28:20 - “If you really understand what the rules and opportunities are, you can take some control over your taxes.” 30:45 - “I recently opened an LLC and landed my first client. Is there a limitation to how much income I can make off a single client?” 31:51 - “I withdrew $8,000 from my 401(k). I have retired at 59 and have not cashed the check. If I send it back, what happens? Will I still be penalized?” 34:56 - “How much capital gains tax will I pay on a home I sold after living in it for only 13 months?”

Pensions in lump sum vs monthly payments, 401(k) rules, the fiduciary standard, and more as Joe Anderson, CFP® and Big Al Clopine, CPA answer listeners' investing and personal finance questions on episode 60 of the YMYW podcast. Original publish date August 27, 2016 (hour 2). Note that content may be outdated as rules and regulations have changed.  02:00 - “Does the early withdrawal penalty on my IRA apply to me?" 04:40 - “Never use your IRA (individual retirement account) for anything other than retirement.” 05:23 - “Do 401(k) contributions have any effect on MAGI (modified adjusted growth income)?” 08:40 - “Think of ‘above-the-line’ as things like income and direct expenses to that income whereas ‘below-the-line’ is generally personal expenses.” 11:14 - “Which should I take, a monthly pension or lump sum buyout?” 16:56 - “Why should I hire a fiduciary advisor?” 20:03 - “Everybody needs a financial plan, but not everybody needs a financial planner.” 23:08 - “If you can save money on taxes, your money is going to grow that much further and you can take less risk.” 23:51 - “Are high-yield bonds a good investment?” 26:26 - “A high-yield bond is going to be ordinary income, and you have to pay ordinary income taxes at the highest rate.” 29:50 - “Do I need to pay capital gains tax on the sale of my retail space?” 33:27 - “Which income option is best for a 70-year-old?” 35:45 - “You have to look at so many different options, you can’t look at this stuff in a bubble or you might make big mistakes.”

Did you know there are strategies you can use to reduce your required minimum distributions (RMDs) from your individual retirement account? In episode 56 of the YMYW podcast, find out six ways to do this so you can keep more of the money you've earned, saved, and invested through your entire working life. Original publish date August 27, 2016 (hour 1). Note that content may be outdated as rules and regulations have changed. 00:00 - Intro 01:45 - “Once you turn 70 ½, you have to start pulling money out of an IRA (individual retirement account). If you are 70 ½ and still working, and own less than 5% of the company, you can delay your required minimum distribution until you retire.” 04:13 - “Once you turn 59 ½ you can withdraw money from your tax-deferred accounts without paying a 10% penalty.” 06:54 - “A lot of people don’t realize that you can do these Roth conversions even before 59 ½. You could be any age and do a conversion.” 10:45 - “This is a valid way to reduce your RMDs – invest in a QLAC (quality longevity annuity contract).” 12:20 - “You can invest in your IRA up to 20% of your IRA or 401(k) or $125,000 – whichever is less.” 13:04 - “Another way to lower your RMDs is to use tax-deferred accounts for bonds and bond funds, and use taxable accounts for stocks and stock funds.” 16:30 - “If you invest in stocks outside of your retirement accounts and you hold a stock or stock mutual fund for at least a year and you sell it, it’s subject to a special long-term capital gain rate.” 23:38 - “(Another option is to) donate your required minimum distributions.” 29:42 - “A lot of men and women are living into their nineties and hundreds…if you haven’t really thought this through, it sort of messes up your retirement plan.” 32:30 - “If we’re living a lot longer, how do we adjust our retirement plans to be able to accommodate that?” 34:43 - “The old rule used to be ‘save 10% of your income.’ A lot of advisors are now saying 15%, that’s what we say.”

Joe Anderson, CFP® and Big Al Clopine CPA answer personal finance questions about real estate investments, financial planning in your 20s, retirement, and controlling income taxes from Investopedia in episode 58 of the YMYW podcast. Original publish date August 20, 2016 (hour 2). Note that content may be outdated as rules and regulations have changed. 00:00 - Intro 02:49 - “I have 2 town home units, 9 & 10. I lived in #10 since 2006 and rented #9. I want to sell both and buy a new larger home using capital gains. I will have approximately $200,000 from #10 and $150,000 from #9 in capital gains. The new home will cost approximately $500,000. If I use these gains as down payment for a new home, do I qualify for capital gain exclusion under Taxpayer Relief Act of 1997?” 07:21 - “If you’re in a divorce situation and this applies to you, you want to be careful how you do the property selling.” 08:10 - “How do I become financially strong and independent at 22 years old? I have one full time job ($10,800 annually before taxes). I am 22 years old, single, and have no kids. I have no establish credit. I need to buy my first car and get an apartment or trailer before 2016 ends. Where should I start investing with $1,000? Should I put it in savings or look into binary options?” 09:38 - “Try to set aside 15% of your income at any age and keep doing that throughout your career; you’ll have plenty of money when you retire.” 11:39 - “My mother-in-law is in her 70's. She will live comfortably on her monthly social security check and has 1/3 of her assets in the bank. She will come into the other 2/3 when she sells her home. What do you suggest she does with the money she gets from the sale? Should she get an inflation hedge and some appreciation while being conservative at her age?” 15:52 - “A lot of times, people put investments in front of the planning, and that’s where they fall into problems." 16:53 - “My father sold a piece of property that he inherited in order to pay for assisted living expenses. He passed away the year of the sale. His income was less than $15,000. Does his estate pay capital gains on the property, which gained $144,000 in value from the date of inheritance?” 24:05 - “Do I qualify for backdoor Roth IRA?” I own a 403b, 457b, and DCP account. Do these count towards the pro-rata rule?” 27:36 - “How should I manage my extraordinary tax year?” 35:40 - “Unfortunately, tapping your nest egg comes with all sorts of new rules but also opportunities if you understand the strategies.”

In episode 57 of the YMYW podcast, Joe Anderson, CFP® and Big Al Clopine, CPA shed light on scary statistics regarding the rise of healthcare costs and share strategies to show how listeners can protect themselves. Plus, how traditional retirement planning has changed over the years. Original publish date August 20, 2016 (hour 1). Note that content may be outdated as rules and regulations have changed.  01:43 - “The typical inflation rate has been around 3% historically; we use about 3.7% to be conservative. Medically right we do about 5.7% because that’s what it’s been growing at.” 02:55 - “If you want to get an hour full of Medicare [education] go to purefinancial.com and check out our recent webinar.” 05:33 - “A lot of people don’t realize that Medicare does not cover [all] long-term care stays.” 9:00 - “Age 70 ½ is when you have to start taking your required minimum distribution out of your IRA and 401(k).” 15:45 - “When it comes to parents’ children and how much they’re spending on athletics…how much are they spending?” 25:25 - “A 25% tax bracket means you pull $100,000 out of your IRA and you pay $25,000 in tax.” 29:10 - “You have to make sure you understand what’s going to come to you as a guaranteed income source.” 30:59 - “When we’re trying to reduce taxes in retirement, probably one of the first things you have to know is your tax bracket.”      

Joe Anderson, CFP® and Big Al Clopine CPA answer frequently asked financial planning questions about divorce, tax deductions, business profits, Roth IRAs, IRA rollovers and more from Investopedia in episode 56 of the YMYW podcast. Original publish date August 13, 2016 (hour 1). Note that content may be outdated as rules and regulations have changed.  00:00 - Intro 02:32 - “I am paying off a loan for CDL (commercial driver's license) school, and wondering if it is tax deductible. Does it matter if I no longer work in the trucking industry? I'm fairly inexperienced in the area of tax deductions. I understand the interest on loans is the only part that is deductible, right?” 04:11 - “After a divorce, can assets be distributed to into an account that is not in my ex-spouses name?” 06:54 - “Can a company have an extremely high gross margin and negative operating margin at the same time?” 07:58 - “Will I have to pay capital gains tax on the sale of two different homes?” 11:20 - “Can I draw $30,000 out of my ROTH IRA and put it back within a short amount of time? 12:22 - “I am a high income worker (over $250K / year). I would like to do a Roth IRA for my wife using the back door method. What would be the benefits of a Roth IRA going forward? 16:24 - “My late wife and I bought a house 20 years ago for $450,000. My wife passed away 4 years ago to cancer, so for the last 3 years I have been filing my taxes as a widow. I'm planning to sell the house for $900,000 now. How much capital gain tax am I supposed to pay? And how much tax exemption can I get?” 20:42 - “Is a 401(k) QDRO distribution taxed twice?” 28:48 - “You can wait as late as age 70 to collect Social Security, and for many of you that’s probably a really good idea because you’ll get a lot more benefit doing that.” 29:47 - “A lot of you are behind in your planning, but a lot of you have done a great job. Here’s a way to do a little self-check; there are really five things that you need to consider when it comes to financial planning.” 34:34 - “Part of being successful [in retirement] is saving on taxes because what we see is that a lot of people have the majority of their assets in retirement accounts and when you pull those dollars out, you need to pay ordinary income taxes. Here’s the key: people have a lot more control over how much they pay in taxes than they might think.”