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📉 The Perfect Withdrawal Strategy for Early Retirement, Inner Voices, and Conspiracy Theories!🕵️♂️
488 Plays10 days ago
🛠️ What does it take to master the perfect Early Retirement Withdrawal Strategy? In this episode, we talk tax-efficient withdrawals, bridging the "gap years," and the best tactics to optimize Social Security—all with a fun twist of inner monologues and conspiracy theories!
Watch and Subscribe on YouTube
🌟 Whether you’re navigating the complexities of early retirement or seeking peace of mind about accessing your funds, this episode is packed with actionable insights and lighthearted moments.
In this episode, we discuss:
1️⃣ Strategic Withdrawals: How to optimize taxable, traditional, and Roth accounts for retirement.
2️⃣ Managing Gap Years: Tactics for the time between early retirement and age 59½.
3️⃣ Tax-Efficient Plans: Capitalizing on Roth conversions, taxable accounts, and ACA planning.
4️⃣ Required Minimum Distributions (RMDs): Simplifying strategies to minimize tax burdens.
5️⃣ Social Security Optimization: When to claim benefits for long-term stability.
6️⃣ Peace of Mind: Building a withdrawal plan that works for your lifestyle.
7️⃣ Conspiracy Theories and Monologues: Ending with a laugh and thought-provoking reflections.
🔗 Sean’s Links:
🤔 Accessing Retirement Accounts Prior to Age 59 ½
🔗 David’s Links:
💡 The Perfect Passive Portfolio for Early Retirement
🚀 Secret IRS Rule 72(t) Explained
🍏 Forget About Money on Apple Podcasts
🎧 Forget About Money on Spotify
#retirement #financialindependence #tax #seanmullaney
🎧 Listen & Subscribe: Join us for more episodes about financial independence, retirement strategies, and lifestyle design. Don’t forget to hit subscribe and turn on the bell 🔔 for updates!
📜 Disclaimer: The discussion is intended to be for general educational purposes and is not tax, legal, or investment advice for any individual. David and the Forget About Money podcast do not endorse Sean Mullaney, Mullaney Financial & Tax, Inc., and their services.
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Transcript
Introduction and Financial Independence Focus
00:00:00
Speaker
Welcome back to the Forget About Money podcast. In our last episode, we focused on how to construct a portfolio during your working years so that you could be best positioned to withdraw tax efficiently and optimized whenever you reached your magic number and became financially independent.
00:00:18
Speaker
In this episode, we're going to focus on the distribution aspect of that portfolio after reaching financial independence.
Retirement Gap Years and Income Sources
00:00:24
Speaker
And Sean is here again, Carla is here again, and we are going to walk through how a person can use all of that net worth that they built up over the last number of years to then pay for their lifestyle.
00:00:37
Speaker
This conversation is going to be in a few parts. We're going to focus first on the gap years, so which is represented by the time that you retire to the time that you may get some other kind of supplemental income, like a pension, social security, annuity income. So Sean, thank you very much again for joining us. Thanks for having me back.
00:00:58
Speaker
Yeah, we're really excited for this next episode because I feel like the last episode was sort of the slog to financial independence and now we get to think about what happens once you're already there. So that's a pretty fun stage of life to be in. I guess I'd like to start with just sort of a big broad question of how you think about that gap period, Sean, and what your approach is Yeah. So, and Carla, I'll actually say there may be two gaps to think
Tax Benefits of Using Taxable Assets First
00:01:26
Speaker
about, right? One gap is date of retirement to date of social security for most people. Maybe it's date of retirement to date of pension, but either way, right? So that's one gap. And then the second gap for many in the audience could be date of retirement to age 59 and a half.
00:01:43
Speaker
right Because people worry about, well, wait a minute, I got this money in a traditional 401k, I'm not 59 and a half, how do I access it? right and So thats those are the two gaps. And the first tactic I'm going to mention solves for both those gaps very well, which is live first off taxable assets. For most early retirees, to my mind, that's the best path for a number of reasons.
00:02:06
Speaker
There's a big tax advantage to doing that, right? So, say David builds up a portfolio of you know domestic equity index funds, international equity index funds, it's in a taxable brokerage account, and he's he's got $100,000 of living expenses in his first full year of ah retirement. Okay, great.
00:02:25
Speaker
Will you say, is he going to be taxed on selling $100,000 of those index funds? Is he going to be taxed on $100,000? The answer is no. right The answer is he's going to be taxed on $100,000 less his basis. right He invested something in those funds. right Maybe it was $20,000, $30,000, $50,000, $60,000, who knows, but it's something.
00:02:47
Speaker
So is taxable income on that 100,000 of living expenses might only be 40,000 or 60,000, right? So that's one way which the taxable accounts is very advantageous, but it gets better because for federal income tax purposes, most of that income isn't going to be ordinary income subject to the 10% rate, 12%, 22%.
00:03:09
Speaker
it's going to be subject to the long-term capital gains rate, which starts at a nice 0% rate. We like that tax rate, don't we? We sure do. There is a way to keep income low. And the other thing too is maybe David has, you know, David's single and maybe it's a big gain. Maybe it's 80,000 a gain in that example, right? Well, first of all, it's still better than ah paying tax on a hundred thousand, but if it's an $80,000 gain, he will pay 15% long-term capital gains tax on some of that by my quick already math here. But on a lot of it, he still pays 0%. David can do very well from an income perspective and still get that benefit of the 0% rate on at least some of that. So that's that's where we start this conversation. And then we have to move into more of the retirement accounts, where a lot of the folks are just going to get to retirement and aren't going to have all these taxable brokerage accounts. But boy, if you can get to early retirement with a decent amount of these taxable brokerage accounts, to my mind, that's the first place to play in the sandbox.
00:04:08
Speaker
So that would mean your traditional 401ks, your taxable accounts. Is this right? Well, no, you you would first take from your taxable brokerage. right Okay, so your brokerage account. Yeah. And you're you're paying long-term capital gains for most of your income, which means for many early retirees, maybe you're going to go out at 0% without any other additional planning.
Roth Conversion Strategy
00:04:27
Speaker
Now, this is where a lot of people in the fight community then add a Roth conversion to that plan, because they say my income is so low, my taxes are so low, I might as well add in a Roth conversion.
00:04:38
Speaker
you know And by the way, there are some people for whom they may have to add in the Roth conversion because maybe they're living on cash instead of capital gains for the first few years of early retirement. I tend not to like that strategy as much, but that's a strategy that you'll hear out there. Oh, save up three three years of living expenses in cash.
00:04:55
Speaker
you know and We could debate that all day, but if you did, that would have a nice healthy benefit of keeping your taxes low. And then it's like, okay, I better turn on some of these Roth conversions, take advantage of the standard deduction. Sometimes if your income is so low and you're on an ACA medical insurance plan, you might have to turn on a Roth conversion to create income to qualify for the so-called premium tax credit.
00:05:16
Speaker
you know So basically, the way I look at it is you start with the taxable brokerage accounts, and as they get depleted, you start saying, well, wait a minute, there's not that much left in the taxable brokerage. I better switch to like a 401k IRA, Roth IRA, and then there are separate tactics for that you know for accessing those things
Optimizing Bonds in Retirement Accounts
00:05:35
Speaker
early.
00:05:35
Speaker
So before we get to that, one question I have is you've got your taxable brokerage account, hopefully, right? That's a very lovely thing to have to cover this gap that we're talking about here. But I'm curious if you would advise people to adjust to the allocations of maybe stocks versus bonds that they have within that taxable brokerage account as they are actually approaching this drawdown phase or as they're in the drawdown phase, do you advise people to shift a little bit more towards bonds? How do you think about that?
00:06:06
Speaker
So, there's your global asset allocation over all your accounts. so And that is, to my mind, you should do that based on all your facts and circumstances, your level of wealth, your annual spend, your capacity and tolerance for risk, those sorts of things, right? But what I'm a big fan of is I call it tax basking, some people call it asset location. So, recall last episode, we did talk about, you know, jail Collins portfolio, there's probably going to be some bonds there, particularly at retirement. He talks about his own portfolio at retirement. I think he started at 20% bonds, 5% in cash. Well, so I think it's a fair statement to say, look, we're not giving investment advice in this podcast, but it's a fair statement to say that most early retirees in the five community are going to want to have some bond holding, right? And I think it's a fair statement to say most of them want to have less than half that of their wealth in bonds. right? That's sort of my experience. I'm not giving you investment advice. So you say, okay, you want to have some bonds, less than zero, or yeah, greater than zero, less than 50%. So somewhere in there, let's just say, well, where do most people, even in the FII community have most of their wealth? 401ks, traditional IRAs, right? So you have more than half your wealth in a traditional IRA or 401k or a combination thereof, and you want to have less than half your wealth in bonds.
00:07:25
Speaker
haven't we just come up with a great pairing? right Couldn't we put all the bonds in the traditional retirement accounts? And then still maybe in the traditional retirement accounts, we still have some equities. right Roths, we have equities. And then the taxable brokerage, we have equities. So what What have we done there? right We haven't changed our portfolio allocation. We've just shifted it among the different baskets available. And why do we do that? Well, bonds sit great in traditional retirement accounts. Bonds kick off more income in terms of interest than equities kick off in terms of dividends. So it's a higher number and it's not preferred income, right? Those dividends tend to be this qualified dividend income, the bonds, it's ordinary income. So why not hide out that income in a tax deferred account in a 401k or a traditional IRA so it doesn't hit our tax return.
00:08:15
Speaker
The other thing that we're thinking about is growth. right Part of the reason we love like something like the Roth is the Roth has tax-free growth. Bonds don't tend to grow that much. They grow a little bit. It's not like they have no growth. right But you know the tech stocks are not in the bond funds. right They're in our... And techs are volatile, you know no guarantees. Why not have the growth in the Roth accounts or even the taxable brokerage accounts and then put those deferred put those bonds that are creating that disadvant you know that tax unfavored income that's higher, put those in the 401k of the traditional IRA and keep that off our tax return. And yeah, eventually we'll have RMDs to worry about, but we'll talk about that later. But yeah, that's a great way of hiding out that bond income from the tax man by putting it in a traditional IRA or 401k.
00:09:03
Speaker
Yeah, that's a very helpful answer. So let's shift our thoughts to somebody who maybe doesn't have enough in a taxable brokerage account to cover this gap period.
Strategies for Financial Gaps Before 59.5
00:09:15
Speaker
So I think that's true of a lot of folks in the Fi community. Maybe they have, let's just use some nice round numbers here. You have a million dollars in your 401ks and you've only got maybe 400, 500k and a taxable brokerage account. So are there other ways to bridge that gap? Because that four or 500K is probably not going to cover your expenses, especially if you're looking at, you know, something approaching like a 20 year time horizon. Yes. If you can access your tax, your post-tax accounts. So, i mean or pre-tax accounts, sorry. So yeah, can you talk about ways that people might think about covering that gap if they don't have a big, juicy taxable brokerage account?
00:09:55
Speaker
Absolutely. and And so this is, hey, you know we're not 59 and a half yet, but we most of our wealth is in these deferred accounts or even Roth accounts. How do we access that? And I've got a little pecking order. What I'm going to do is I'll send you guys for the show notes, ah a link to a blog I did on this.
00:10:12
Speaker
the first Peck in the pecking order is any inherited retirement accounts so this is gonna happen more and more in the audience right the baby boomer generation is going to pass and they're gonna leave folks with traditional ira's most people go have to drain those in ten years they turn out to be this great asset for early retirement because you're going to have to drain it anyway in 10 years. You're
Utilizing Inherited IRAs and 72T Plans
00:10:36
Speaker
not allowed to Roth convert it. So you might as well live off of it. And there's no 10% early withdrawal penalty. You could be 40 years old with an inherited IRA. You just take your you take some out of it, live off of it. Great. No penalty. You pay tax, but okay, fine. So that's the first place I would look. If I was early retired, didn't have much in the taxable brokerage, I'd be looking at my inherited retirement accounts and more and more people, that's going to be a rule.
00:11:00
Speaker
All right. Well, I don't have any of those. Where else could I look? Maybe I left my old job with a 401k in the year I turned 55 or later. There's something called the rule of 55. You leave that old 401k there, you take distributions from it. You got to look at the plan ah particulars. They may not allow partial distributions like that.
00:11:19
Speaker
But it's called the Rule of 55. People love it. You don't pay the penalty if you use this Rule of 55, but it requires leaving a job in your 55th birthday year or later and keeping the plan there. You can't roll to an IRA. So that's another one. Another one comes from a episode of the Forget About Money podcast.
00:11:40
Speaker
David had Eric Cooper as a guest and he talked about 72 T payment plans. And that's a very good tactic. So literally one of David's former guests, Eric Cooper had this issue where he said, hey, you know, a bunch of my wealth is in an old 401k or I think it was a traditional IRA or 401k into a traditional IRA. You know, it tends to be a ah traditional IRA. Basically what you're doing there is you're setting up a spreadsheet.
00:12:05
Speaker
And that spreadsheet has a little calculation and it says every year I'm going to take a certain amount from this traditional IRA. And you're essentially making an agreement with the IRS, even though there's no contract signing or anything like that. But you're essentially telling the IRS, I'm going to take this money out every year until I turn 59 and a half or if I'm closer or or at least for five years, the the longer of that timeframe. And that's become a much better way of of doing it in the last few years. There's been some law changes on that that have been very helpful. So that's another way. And you just go back to forget about money with Eric Cooper. Watch that episode. There are other resources out there on that, but that's a great resource. And then another one I'll mention, and there are other ones out there, is the 457B.
00:12:49
Speaker
So some people work for government employers. They have a second 401k, essentially. It's a 457B. Those things can be taxed or accessed without the penalty, even if you're not 59 and a half. So that's another one. It's really just about getting intentional and saying, look, I get that there are these tactics out there that I can use. Another one I'll mention is Roth Basis.
00:13:10
Speaker
right So your old contributions to Roth IRAs can be harvested. so There's a hyper version of that called the Roth conversion ladder. that's That's another one out there. I'm not here to say I have the answer for anyone in the audience, but there are more tactics available out there than you would think based on, oh no, I'm not 59 and a half. I can't get this money. Well, you probably can. And the 72T is something anybody's allowed to set up basically as long as they have a traditional IRA. It's a very possible thing to do.
00:13:38
Speaker
Yeah, that should give a lot of hope to folks who are wrestling with that problem. There's so many ways to address it. I feel like there's all these different tactics out there. So yeah, those are some really, really helpful ones to highlight. And yeah, we actually just had Eric Cooper on again. Everyone should go back and listen to that episode with Eric because he does a really good job of breaking down the 72T. So yeah, that's a great option for a lot of folks, I think.
00:14:00
Speaker
Sean, in your experience with your clients as as a general rule, if they show you their portfolio and they're in this situation, is there a recurring theme of you're like, you should have done that? Or why didn't you think of this 10 years ago? Or why did you liquidate that? And was it and this is why you shouldn't have. what What do you run into in real life as far as people missteps or miscues in their portfolio management?
00:14:27
Speaker
So it seems to be a recurring theme is the cats and dogs, right? J. O. Collins writes about this and some pet to wealth. I see more and more folks who started early in in good ways and bad ways, right? And ultimately, I think it's a good way, right? It's better to have invested in some individual equities early than to have not invested at all. But I see that where it's like, Oh yeah, I got all these index funds. you know But I also have a bunch of these old cats and dogs of individual equities. Why do you have those? Oh, I was 30 years old. I didn't know any better. And I'm not here to say an individual equity can't be a good outcome. And for some of these folks, it's like, oh boy, you got a big capital gain in that thing. It it went really, really well.
00:15:10
Speaker
So that's a recurring theme that I see. And you know I think from a diversification perspective, that's dangerous. The other thing that's sort of dangerous about that is luck. So what I mean by that is, if you're in the audience right now, and you are 30 years old, you buy an individual stock, and it goes up, that could be a problem for you. Because now you think you could beat the market. Now you think you're a successful investor and stock picker.
00:15:38
Speaker
And maybe it was just luck. Sometimes the all the market goes up, sort of correlated with each other. And so there can be upward drift that just helps all the stocks even if they're not all that great. And so I worry about learning the wrong lesson about invest investing in an individual equity. It goes up and now you think you could beat the market and now you do it you try to do it second, third time and you start losing money. So that would be one where I see some recurring themes like, why do you these old equities. Oh, I know sometimes it's I inherited from a parent, right? Because a parent did that. But sometimes it's hey, I was 30 years old, I didn't know any better.
00:16:17
Speaker
Yeah, always good to keep that hubris in check. I think that's very solid advice. So should we go ahead and move to this second phase where you are now this magic number of 59 and a half or maybe even a little bit older and you've got maybe some pensions coming in the door. You've got some social security coming in the door, but you very likely in the fight community still have like a nice big 401k still sitting there or a traditional IRA.
Roth Withdrawals and HSA Strategies
00:16:44
Speaker
So talk a little bit about What strategies do you recommend as folks are hitting this next phase of life?
00:16:51
Speaker
Yeah, so here it's, the world's still your oyster, right? And I still like spending down remaining taxable accounts even at this point for a number of reasons. It's good to let the deferred accounts and the Roth accounts grow, their creditor protected. Now, a lot of early retirees should be thinking about personal liability, umbrella insurance, regardless of their portfolio. But broader point is just that the retirement accounts have creditor protection in a way the taxable brokerage accounts don't, but umbrella insurance can solve for just issues there.
00:17:21
Speaker
So that's one point. But then second, yeah, now the world's your oyster. You can tap into traditional retirement accounts or Roth retirement accounts. I'm going to make ah two points here. One is, and this is something that I've been noodling on more and more, is I think some early and conventional retirees should think about strategic Roth withdrawals.
00:17:42
Speaker
right So that's where, hey, you know I'm in my 60s and I've been funding mostly with my traditional IRA. Great. i'm near it's It's November, December. I'm thinking about my last distribution for literally the last living expenses of the year. And I'm near that top of the 12% bracket. Maybe what I do to fund that distribution is take a Roth withdrawal. Why do I do that? I do that so it's not taxable. I don't kick myself into the next tax bracket.
00:18:07
Speaker
That would be something I would be thinking about. And then another one for the fi community is the HSA withdrawals. So HSA's are fantastic, right? We get the tax deduction on the way in, tax free on the way out if done right. I mean, that's fantastic. But there is a lingering issue with the HSA we don't talk too much about, which is the death. right So at death, it goes to your spouse, becomes their HSA, no problem. But eventually the second spouse dies. right And then it goes to the next generation. Maybe it goes to a charity, but if it goes to the next generation, it's fully taxable in the year of death. So that's not the greatest asset to leave to the kids. So maybe what you do is you start spending that down in a tax efficient way. And how do you do that? One is, I have the saying, and it sounds like an expletive, but it is not. I call it puck me.
00:18:53
Speaker
Previously unreimbursed, qualified medical expenses, puck me, right? So you track, you know, you you keep records, track your unreimbursed medical expenses, and you reimburse yourself for that. And one that I like for a lot of folks in the Fi community is literally at age 65, you're gonna start Medicare, right? Unless you're still working but for a large employer, but most people in the Fi community, 65, you go on Medicare. Well, you have a part three premium every month, right? That's for your doctors, your outpatient, that sort of thing.
00:19:21
Speaker
Why not? and then Right now, I think the premium is $174.70 a month on that. Don't quote me. Well, that qualifies as a medical expense. You could just take that money. Hey, every month, I got $175s going out the door for Part B. Why don't I just take $175 in the door from the my HSA? It's a reimbursement for my Part B premium.
00:19:42
Speaker
And it's part of how I fund my living expenses. And it's a way of starting to drain that HSA just so that we're not leaving ah a six-figure amount to the next generation. Now, look, if you want to leave the HSA to charity, fine. You you don't have to worry about that as much because the charity ain't going to pay tax on it no matter what. So those are a few things to be thinking about in your 60s. And I think like the Roth basis strategically and the HSA-puck me, I think makes some sense in the sixty in your 60s and early 70s to be thinking about For some reason, I'm just thinking of a joke. it was If anybody's pucking in their 60s, they're still doing pretty well. It's okay, I won't put that in, but it just big me that's what I thought of in my head, which is terrible, but it's funny. All right. I think that's an amazing hack, Sean. I don't think I knew that, that you could use your HSA to pay for your Medicare premiums, but that that makes perfect sense. And that seems like a great use of those funds.
00:20:37
Speaker
Carla, just real quick, my my understanding on that is that Part B and Part D work, medicaid Medicare supplements don't work for that. Double-check my math on that, but that is my understanding. So you just got to be careful. But i think it's like yeah I think it's a great tool to pay those Medicare premiums. And still, you you still may have expenses when you go to the doctor or other medical. So yeah, you can use it for that too.
00:21:00
Speaker
right yeah Yeah, the HSA seems like a very solid and choice for for early retirees. Okay, well, that's a pretty solid rundown. One question that I was going to ask you is about required minimum distributions.
Managing RMDs and Social Security
00:21:15
Speaker
So I'm curious if you see folks running into those and having to pay big tax bills because of them, or is that kind of a paper tiger? i The way I think about it is Seems like kind of a good problem to have, right? if you're If you have so much money that you're having to think about big required minimum distributions. I love that term paper tiger. So truth be told, most of my clients tend to be in their you know late forties to early to mid sixties. So I don't work really but often with clients with RMD issues now, but I've done a lot of work on this in terms of content creation and thinking about those types of clients.
00:21:53
Speaker
down the road on my YouTube channel, I've gone through this. The RMD tends to be overhyped as a problem in the world. So what is an RMD? It's a so-called required minimum distribution. and you know the The IRS, the Congress has said, look, we've given you tax deferral on these traditional retirement accounts. We don't want this to go on forever. So in your 70s, we're gonna start having you take out minimum amounts every year and that creates taxable income. People get all worried about it. And I've run the numbers and they tend not to be as onerous as people think from a tax perspective. But let's talk about it, right? Because it's still a concern, right? you know Even though I say it's a little more, it's overhyped, but it's absolutely a concern. So let's go back to that. I made a point about this tax basketing. Let's keep our bonds in our 401ks and traditional IRAs. Well, that has a nice ancillary effect.
00:22:45
Speaker
it limits growth inside those retirement accounts. So this is sort of dynamic thinking. Let's do things that give us benefits today and tomorrow, parking our bonds and our deferred accounts. There's still going to be growth in those accounts, but it's going to dampen that growth. And then that dampens the future RMDs, right? So that's a big one.
00:23:03
Speaker
Second thing is for the early retired is the the Roth conversions, you're going to have opportunities in most cases to use Roth conversions at low amounts and that will get the money from the traditional retirement account to the Roth retirement account well where it's now not going to be subject to the R&D rule. So that's good. And then there's a third one that I like where we're doing our charitable giving starting at age seven and a half outside of our, from our traditional IRA.
00:23:29
Speaker
We call the institution or go on the internet portal and say, hey, I have this money in an IRA. I want to send $1,000 to my church. Don't send it to me. Send it directly from my IRA to my church. Starting at age 70 and a half, that is not taxable to you. So it's a tax-free bailout of the traditional IRA. You don't get a deduction for it, but you don't need it, right? You just took tookk a taxable distribution and made it tax-free.
00:23:53
Speaker
And oh, by the way, that reduces our future RMDs. So there's plenty of tactics out there that are not all that sophisticated. ah Some of them, you know, Roth conversions, depending on your situation, can be very sophisticated, but it doesn't, it's not going to require rocket science to manage these um RMDs. And then I've done extreme examples on my YouTube channel where Boy, it's just not that onous it's just not that bad from a tax perspective. So, Carla, you raise a great issue. It's it's certainly an issue, but it's not something to lose sleep of. And and I find that typically, even if even if you don't do the planning, it turns out to be more of a good problem than a bad problem, but certainly something to be thinking about. And why not employ some of these tactics to mitigate it?
00:24:34
Speaker
Sounds like we're very much on the same page and that's comforting to hear. So yeah, I love that answer. Okay. Any other tax or withdrawal strategy questions we should ask Sean before we move into our silly topics for the day? So you do reach at some point social security and or pension and or you might decide an annuity is right for you. We're not going to have the annuity right or not right conversation right now, but let's assume you have some kind of additional supplemental income. We talked about RMDs, but this would happen a little bit before you got into the RMD situation. we We're talking about between the ages of 55 and 70, probably.
00:25:11
Speaker
Would you significantly change anything in your spending, the pots that you'll be pulling money from? I know you talked about it a little bit, but how how does that... well Do any of those throw a wrench in it or do you just say, just spend more money and live a bigger life? they What they tend to do is throw a wrench into the tax planning.
00:25:28
Speaker
Right. So, you know, we presumably if you've got an annuity or you're collecting Social Security, you live off of it, right? So it's less than you would have to take out from the financial asset portfolio. So maybe it's less taxable brokerage withdrawals. Maybe it's less IRA withdrawals, right?
00:25:44
Speaker
One thing some folks like mike mike myself don't like about something like an annuity is that it's an inflexible source of income, meaning it's going to be large you know somewhat taxable and not only is it somewhat taxable, it's inflexible. So we're we're sort of locking in a certain amount of taxable income, which makes our tax planning a little more difficult in the future. So that's something I don't like about annuities is their inflexibility. We can't say, well, this year I want more distributions. And this year I want less, so I do Roth conversions or whatever it might be. Generally, you can't do that. So that's something I'm i'm just not so fond of with annuities. But yeah, so that that's sort of how I would look at it. And it does mean we can use less from our portfolio. Now, people say, well, wait a minute. So should I take Social Security early because of that? So this is another point I'll make. And I tend to argue, no, look, I'm not giving you investment advice. I'm not telling you when to claim Social Security. But
00:26:39
Speaker
There are going to be people who get to who turn age 62, and they're going to have enough financial assets to live their life, and they're going to have Social Security. So some people say, well wait a minute, what I'll do is I will take the Social Security money and invest it. right So that essentially, I'm going to yeah i mean take less than Social Security, but take it earlier. So I put it into my portfolio. I tend not to like that because if you're in the audience,
00:27:02
Speaker
and you're 61 years old and some change, and you have more than enough to live off of, you've won the game financially. And you've done it through these volatile assets. like As much as I love these passive index funds, they are volatile. They're subject to volatility. Think about social security. Social security is subject to published rate schedules. right You delay so long, you get this percent increase. This is our inflation formula to increase the payout every year. right Social Security, I would argue vis-a-vis the passive index funds is a relatively non-volatile asset. If you're 61 years old and you've won the financial game, don't you need less volatility rather than more volatility? I would argue for that 61-year-old, decreasing volatility is a high financial goal.
00:27:48
Speaker
So how do you decrease volatility? You spend down your portfolio assets, whether it's taxable brokerage, 401k, IRA, Roth, I don't care. you know Just spend down those assets to live your life. And you're by doing that, you delay collecting Social Security. So by delaying, every year you delay, they increase by a percentage, the amount you'll collect every year.
00:28:08
Speaker
So you're building up your non-volatile, what's essentially an asset, a future income stream. So I like, you know, the social security claiming decisions, a whole other episode or episodes, but in a general sense, I like for those who have won financially, I like delaying social security so that we live off the volatile assets, thus artificially reducing them and then build up the non-volatile asset by delaying social security.
00:28:35
Speaker
I think that's a reasonable tactic. Yeah. I have not heard anyone phrase it quite like that before, but that makes sense to me. I will noodle on that approach for, for our own planning for the future. But yeah, I really liked that Sean. I think that's smart. Yeah. Sean, we we had a very impressive.
00:28:52
Speaker
woman on this podcast, Emma Von Wisey. I'm not sure if you know who that person is, but she explained social security to me in a way that I had... She's she's probably and almost half my age and she's wise beyond her years and just she was able to communicate that understanding. So if you're listening to this and you're still not worried, if you're wondering about when to claim social security, go back and listen to that episode. I learned a whole lot during that episode.
00:29:16
Speaker
Yeah, Emma is the best by any measure. She's a very, very impressive young lady.
Hosts' Personal Reflections
00:29:22
Speaker
Sean, I think we've talked enough money nerd stuff for this episode. Can we can can we please move on to something else? Yeah, absolutely. Okay, so this is a topic that I proposed, and I'm just quite curious to hear your answers to this.
00:29:36
Speaker
So here' here's the backstory of this question. When I was, I don't know how old I was when the movie What Women Want came out, but I remember watching that movie, and if you haven't seen it, the basic plot is that Mel Gibson can now hear what women are thinking. He can actually hear their thoughts. And the way that that inner monologue of like women's thoughts that we hear throughout the movie, like the way it played out, I just remember being so surprised by it and thinking, wait, is there something wrong with me? Is my inner monologue different from everyone else's?
00:30:05
Speaker
So I'm really curious, what goes on in your heads when you are not talking or writing? What is your just like normal dayto day to day inner monologue like? In this conversation, I generally don't have an inner monologue going on other than like maybe it's like, all right, Carla said something i'm like, all right, I got to say some point. So that'll pop into my head. You know, I work from home during the day and no one's here. Right. So where if I go on a walk or I go to the grocery store,
00:30:34
Speaker
Absolutely. I have an inner monologue going on 100%. And, you know, like you said, sometimes, sometimes I will reduce things to paper. So I'll say, okay, you know, for this project I'm thinking about, I got to put out my, you pull out my iPhone or something just to jot it down. But for the most part, I'm like thinking that even those arguments through in my head versus putting on a paper on a computer screen, I wish I had like less of an inner monologue going on. Sometimes, but absolutely, I've got an inner monologue. No, it it varies and maybe I'll daydream to some sequence of events, but I would argue it's probably more of like a monologue than a sequence of events. this Does that have a particular accent, Sean? Oh, yeah. Is it like your wrist? Do you hear your voice in your head? Is that like your mom's voice yelling at you? saying get you voice um
00:31:21
Speaker
And I'm not even sure it's yeah, I would say if if it's a voice, it's my voice. It wouldn't be somebody else's voice, right? It's not James Earl Jones or something like that. That would be very cool. That's my new life goal is to have an inner monologue of James Earl Jones. OK, David, what about you?
00:31:38
Speaker
I think, see so I knew this was coming and I was like, okay, what what would mine be? and And I think it would be, it's like a how to characterize my inner monologue. It would probably be like a Sam Elliott, Wise, Grizzly, slightly Southern accent, cowboy type voice.
00:31:56
Speaker
and like from that matter of fact, a little bit deep and wise perspective. So for example, if you know if if I'm having trouble or or challenges with my son from a parenting standpoint, that inner monologue might be like, listen here, partner, kids don't need you to be perfect. They just need you to keep on showing up and try.
00:32:13
Speaker
or something like that. Or if it was, you know, I'm getting older, you know, bat my back hurts here and there. You know, like after I get it from this chair, I'm going to stretch out. I'm sure. So Sam Elliott would just be right there in my ear saying that back creeks and those knees grown because you put in your time. And it's a reminder that you got a lot more time to put in, you know, something like that. That's like, that would be my inner monologue. I think that's not the energy anyway.
00:32:36
Speaker
Is that a thing that actually happens though? Like, does you really, well like, if you get out on the floor and are doing some stretches, you're actually hearing Sam Elliott? Yeah. He's like, I'm way cooler than that. I'm glad that didn't happen to me. Oh, this is great. I just love this idea though. And it's kind of different for all of us. Yeah. I feel like I have to be focused on like a specific problem for me to have an inner monologue. And then, yeah, if I am like really focusing on a specific problem, I find it so much healthier, like easier for me to just sit down and write and then I can work through something much more easily.
Entertaining Conspiracy Theories Discussion
00:33:10
Speaker
Goofy topic number two for the day is, are there any conspiracy theories that you either actually believe in or just kind of a fan of? I'll go first. And, you know, I found this to be a little challenging because
00:33:24
Speaker
you know, the forget about money ethos is good natured, but then we're also talking about conspiracy theories. So I was like, Oh boy, that's a bit of a contradiction, but I found one that is both good natured and highly sinister. oh So remember growing up, right? You'd go to the hotel, you'd go to the holiday and express and what they have in the morning, they had continental breakfast, right? Right. yeah It was like, Oh, kind they got continental breakfast. They got, and I'll make up a waffle, which turns out those are pretty unhealthy for you, but okay, fine. and They had continental breakfast right at the hotel. And then this is like about 10 years ago, there was a show Key in pe on company central love them and Jordan Peele has this character, I think he's called the continental and he goes to a hotel continental breakfast and it's That's on YouTube. Hilarity ensues. It's so well done. And it's such a good commentary ah about continental breakfast and hotels. All right, so that happens. And what happens like in the next year until this day? You never hear hotels calling their free breakfast continental breakfast anymore.
00:34:31
Speaker
Like it was like that thing aired. And I think there was a meeting between like the Marriott got like Mr. Marriott, Mr. Hilton, Mr. Hyatt, like people, they don't even show to the public. And they're like, yep, we got to put the kibosh. It cannot be called continental breakfast anymore. Jordan Peele roasted it. And so now it's called like, oh, we have breakfast in the hotel or say like hotel breakfast or breakfast. They they dropped a term continental breakfast because Jordan Peele, it's a funny YouTube or it was on his show and now it's like all over YouTube. I think there was like some reaction from the hotel industry to that skit. By the way, you should watch the video. It is hysterical. Yeah, I'm going to do that as soon as we stop recording here today. That sounds amazing. Is that really true? I had not noticed that they'd stop calling it Transcendental Records. I'm just saying ah all I do is connect dots, right? That's all I'm doing here. I'm just connecting dots, right? Smoking like a crew conspiracy theorist.
00:35:29
Speaker
Okay, David, what about you? I am such a practical matter of fact. Like I need real facts. So I do not spend time thinking about conspiracy theories. However, there have been some things that turned out, you're like, okay, maybe that could happen. Like, I mean, I don't want to say the, I don't know if I can say Illuminati. Can you say that on a YouTube video and not get like searched out for somehow? We're definitely going to get canceled now. I'm definitely going to. ah to mute that part out as we see things unfold in our lifetimes. And then you get a little bit of wisdom and yeah observation skills and you connect the dots like Sean says. yeah I don't think it's unheard of to think that there are some forces out there and in high up positions who who operated a different set of rules that help shape our everyday for their own gain or for whatever gain.
00:36:16
Speaker
Yeah, I can't completely disagree with that. I'm very much with you. I like Cole's hard facts, and I don't as a rule believe in anything that's kind of fanciful. But I do think conspiracy fear theories in general are just kind of fun and entertaining. So one that I read about recently was subliminal messaging as advertising, and that that's something that, you know, companies do. And I mean,
00:36:42
Speaker
That in a way is not ah really a conspiracy theory at all. We know that happens. It's called product placement, right? That's a thing that we all are very aware of, but it is kind of sneaky. And yeah, sometimes it's done more subtly than others. And when it's done subtly, it can kind of feel like subliminal messaging. I think a fun example of that.
00:37:01
Speaker
is that in the movie fight club there is a starbucks cup in every shot of the movie i haven't seen it in a while i can go back and watch it with an eye for that now but apparently that's true and yeah i don't know i'm not a coffee person but maybe maybe you really feel like having some Starbucks coffee after you watch Fight Club. But I will say the one that I really, really wish were true is the Loch Ness Monster. I just think it's so cool. I know it's almost certainly not real, but man, that would be pretty fun if we had an actual Nessie. So I'm going to hold out hope for Nessie to surface one day. That's fine. That would be pretty cool. That would be pretty cool. I'm sure Disney will make, if they haven't already, they'll make some kind of movie about it.
00:37:43
Speaker
Yeah, I will see that. Agree. 9-11 was an inside job. True or false? I've got questions about 9-11. Building seven, let's just put it that way. I think building seven is an interesting thing. You know, I am not here to make an an authoritative statement, but I think building seven is an interesting thing to look at. I don't know what building seven is, so I'm totally in the dark here from where I started. I think it was not an inside job. The JFK assassination, is it was there a second shooter or not?
00:38:12
Speaker
I do not believe Lee Harvey Oswald acted alone. And I would bet if I had to bet money, he probably wasn't even a shooter. That's my guess. Interesting. OK, my answer to this is I don't even care because Oliver Stone did such an amazing job of presenting it as a conspiracy theory in the movie JFK that he won me over. it And that's the reality that I would like to live in no matter what's real. But I don't know. Actually, I'm from Dallas. I lived in Dallas for most of my life.
00:38:39
Speaker
And at one point, we lived about a block away from the grassy knoll and you know where everything happened. But I just think the whole thing is very interesting. Also, there's a minor crush on Kevin Costner, so that helps. Very convincing. Wait, you're getting out of answering these questions, David. What's your answer?
00:38:56
Speaker
We have two more. Big pharma conspiracies. Cures for cancer and HIV exist that are hidden. True or false? Hmm. Yeah. Anything I say is not medical advice. the You know, on that stuff, I view like, I think we should be focused a lot more on preventions and cures. So like in that sense, like I think we Americans over medicalize their problems.
00:39:19
Speaker
So I think that's where like I'm not here to say there couldn't be cures that are being hidden. like i'm not That's not what I'm saying. I'm saying we ought to focus a lot more on prevention than on cures. I think we we say, oh, we have a medical problem. We need to see somebody in a lab coat. And I think that's the wrong approach.
00:39:36
Speaker
Yeah, this is, I have never heard of this. I feel like, I mean, I know people say HIV is not a death sentence anymore. I feel like they've gotten the treatments to a much better point. So I don't really, I question the underlying premise of this conspiracy theory. I'm not sure. i I don't know. I will answer this last one. True or false? The earth is a flat disk and evidence supporting its roundness is a hoax.
00:40:00
Speaker
No, I certainly think where's the sphere, right? It's it's an a round object. I do not believe, I certainly believe that the earth would be round and it's pretty, I mean, I guess it juts out a little bit at the poles, right? So it's not like a perfect circle, but it's for perfect, you know, whatever that is, but pretty close.
00:40:20
Speaker
Yeah. I am team sphere pretty, pretty firmly. I just think it's so silly. Like what a weird thing to get fixated on. I also just struggled to understand. I mean, you can look up at the moon and with your naked eye pretty clearly make out that it's a sphere. Like we know that other from photos of other planets that they're spheres do it. Why do we think that we're this weird, upset exception that we're not a sphere? Also, if you just think about the way that gravity works and the way that stuff like gloms together as it's forming just.
00:40:50
Speaker
makes a lot of sense that it would be something spherical ish. So yeah, this is one that I just cannot, cannot understand. It's not even a fun one, like the Loch Ness Monster. Like what's fun about the fact that we're on a flat disc as opposed to a round sphere. I don't get it. Don't get it at all. Well, it's not fun because the earth is flat and if you keep going, you're going to fall off. Okay. I don't really believe in physics or science or geometry. So it's flat. I mean, I don't see how anybody really can prove otherwise. Okay. Okay. So that wraps up this episode of facts. No, of course it's round.
00:41:26
Speaker
Good clarification. ah Yeah, this really was a ah great episode, Sean. All your wisdom and insights, I think, will be helpful to so many people. And thanks for indulging us and being a little silly here at the end with this one. Yeah, thanks so much for having me on, guys. Yeah. All right. bo We will catch you next episode. Thanks so much for tuning in, everybody. Thanks, Sean. And thank you all for continuing to tune in and listen to our shenanigans. We'll talk to you again soon.