The Retirement and IRA Show

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.

Chris and Jake address listener questions on Social Security, single premium immediate annuity (SPIA) taxation, IRMAA impacts from NQDC payments, and Roth conversions. (9:45) George asks whether the restricted application strategy for Social Security spousal benefits is still possible, and if so, whether birth year requirements apply, along with what changed after the 2015 law change. (22:15) The guys share a PSA about a listener’s experience with the Social Security application process, explaining how failure to submit a marriage certificate caused delays when applying for spousal benefits. (31:00) A listener asks whether untaxed tip income affects the amount of Social Security benefits a worker may receive in retirement. (36:00) Georgette asks whether SPIA payments purchased using Traditional IRA funds are considered taxable income for life. (45:15) A listener asks if ongoing NQDC payments will be included in MAGI calculations and impact IRMAA. (55:30) Chris and Jake discuss whether taxes owed from a Roth conversion can be paid when filing taxes the following year, or whether quarterly payments are required to avoid penalties. (1:09:15) A listener asks whether living in a state that exempts Social Security from state taxes should impact Roth conversion planning. The post Social Security, SPIA Taxation, IRMAA, Roth Conversions: Q&A #2529 appeared first on The Retirement and IRA Show.

Jim and Chris answer listener questions on Social Security filing and its effect on HSA eligibility, Social Security means testing, the timing of annuity purchases in IRAs, the Roth and Roth TSP 5-year rule.(7:30) Georgette asks whether the six-month Medicare Part A lookback is triggered by her husband’s Social Security application date or benefit eligibility date, and how that affects HSA contributions.(22:45) A listener worries about possible future Social Security means testing for those who are past full retirement age but not yet claiming.(36:30) George questions whether buying a Fixed Indexed Annuity inside an IRA is problematic if RMDs begin before maturity and whether turning on a living benefit might help him spend more.(56:00) Jim and Chris weight in on an office debate on the Roth conversion 5-year rule.(1:05:55) The guys clarify the Roth TSP 5-year rule and whether the clock resets when transferring to a new Roth IRA. The post Social Security, Annuities, Roth and Roth TSP 5-Year Rule: Q&A # 2528 appeared first on The Retirement and IRA Show.

Chris’s SummaryI am joined by Jake and Paul to discuss OBBBA tax changes and retiree impacts from the Inflation Reduction Act. We cover changes to brackets, deductions, personal exemptions, and estate limits. Paul explains how new SALT caps, Social Security deductions, and ACA credit rollbacks affect planning opportunities for retirees, especially those near income phaseouts or considering Roth conversions and business deductions. Jim’s “Pithy” Summary Chris, Jake, and Paul talk through a range of retiree-focused updates, including several OBBBA tax changes and provisions from the Inflation Reduction Act. These aren’t just technical adjustments—they have real planning implications, especially for people navigating income limits, deductions, and benefits. They cover updates to itemized deductions, new limitations for higher earners, and what’s changing with the lower tax brackets and standard deduction. Paul walks through how these changes might help—or get phased out—depending on your situation. There’s also a new personal exemption for those over 65 that sounds straightforward but includes some cutoff points retirees need to know about. The Social Security deduction comes up too, and it’s not what most people think. Paul clears up who qualifies and how it works. They also talk about the rollback of enhanced ACA premium credits and how enrolling in Medicare affects HSA eligibility. Some of the rules people have counted on in the past won’t function the same going forward. They touch on other updates as well—charitable giving, estate and gift exemptions, even vehicle loan interest. Not all of it applies to everyone, but plenty of retirees could be caught off guard by the fine print. The post OBBBA Tax Changes Explained: EDU #2528 appeared first on The Retirement and IRA Show.

Jim and Chris answer listener questions on Social Security family maximum rules, spousal and disabled child benefits, defined benefit pension concerns, and 401k managed payout funds.(7:45) A listener is trying to understand how the Family Maximum Benefit might reduce the amounts paid to his spouse and disabled adult child once he claims his own retirement benefit.(16:45) Jim and Chris respond to a listener who has a disabled son and is planning to claim a spousal benefit based on his wife’s record. He asks how the family maximum could affect his son’s eligibility for SSDI and future Medicare access.(30:00) George asks for input on whether to take monthly payments or a lump sum from his pension weighing the potential risks if the company eventually transfers the pension to an insurance company.(49:00) The guys address a question about a “Managed Payout” fund offered in a 401(k) plan and whether this might be a good way to generate retirement cash flow compared to annuities. The post Social Security, Pension Buyouts, and Managed Payout Funds: Q&A #2527 appeared first on The Retirement and IRA Show.