How Do You Minimize Taxes in Retirement?

00:00:00.000 | Welcome to Portfolio Rescue, where we're always happy to hear your comments and questions.

00:00:20.160 | Remember, our email here is AskTheCompoundShow@gmail.com.

00:00:24.480 | Today's Portfolio Rescue is sponsored by Innovator ETFs.

00:00:26.740 | This week's Wall Street Journal had a story about buffered ETFs, which anyone who's been

00:00:30.200 | watching this program knows about.

00:00:32.520 | So here's what they said.

00:00:33.520 | "A popular set of exchange-traded funds that claim to guard against investors' losses up

00:00:36.360 | to a point by limiting potential gains.

00:00:38.400 | These buffer funds have attracted $6 billion of inflows this year, already doubling last

00:00:42.080 | year's record of $3 billion in inflows."

00:00:44.240 | John, throw the chart up here.

00:00:45.400 | Do a chart on of the assets here.

00:00:48.300 | Just piling in.

00:00:49.300 | You can see people want some more defined outcomes.

00:00:51.440 | They also mention Innovator ETFs in here.

00:00:53.320 | They say, "The J.P. Morgan Hedged Equity Fund won, and the U.S. Equity Power Buffer ETF from

00:00:57.960 | Innovator Capital, two of the biggest funds in the space, are easily beating the market

00:01:01.280 | this year, down 6.3% and 5.7% respectively."

00:01:05.000 | John, do a chart on of the performance here, which kind of shows.

00:01:08.440 | You can see both of these hedged funds beating the equity market this year.

00:01:12.960 | They said, "During the first half of the year, both of these funds were down about 11% compared

00:01:16.960 | to a 23% drop from the S&P, but then after the market bottomed and rose a little bit,

00:01:21.280 | they didn't quite catch up the same," so that's kind of the trade-off here, is that you get

00:01:24.680 | a little downside protection, but you don't always go up as much when we have these bear

00:01:28.400 | market rallies, at least that's what they seem.

00:01:30.800 | Pretty interesting.

00:01:31.800 | Innovator tells me that they're closing in on $10 billion in asset center management,

00:01:35.880 | which is a relatively new firm still.

00:01:37.320 | Pretty interesting.

00:01:38.320 | They've brought in $3 billion this year alone, which is crazy.

00:01:42.320 | To learn more, remember InnovatorETFs.com.

00:01:44.400 | Duncan, a couple weeks ago, I mentioned that I didn't necessarily want the stock market

00:01:50.200 | to race back to all-time highs.

00:01:52.280 | I said, "I don't like this rally very much, because I want people to be able to invest

00:01:55.720 | at lower prices."

00:01:56.720 | I wasn't making a prediction, per se, but maybe more of a request to the market gods.

00:02:02.640 | And it looks like I got my wish.

00:02:05.080 | I think sometimes an extended bear market is good.

00:02:07.040 | So, we're on month eight now.

00:02:08.480 | It's September, the market peaked the very first day of the year.

00:02:12.360 | I think it's pretty safe to say we're on an extended bear market.

00:02:14.080 | John, let's do a chart on here.

00:02:15.880 | This is every S&P 500 correction since 2008, when one got over.

00:02:19.960 | So, you can see, this is the number of trading days that they've gone.

00:02:24.000 | And the blue line you can see here is 2022.

00:02:26.840 | The only one that took longer to recover is 2011.

00:02:29.320 | So, I guess if we recover in the next couple weeks, we could still beat that one, potentially.

00:02:33.080 | But 2011 stocks were already going back up at this point.

00:02:36.440 | Right now, they're going down again.

00:02:38.640 | We're in an extended bear market.

00:02:39.640 | You can see all these other corrections that we had in bear markets in the past had already

00:02:43.200 | made their money back up and gone back to all-time highs.

00:02:46.480 | You can see, even the 34% drop from 2020, at this point, at this length of time, had

00:02:51.840 | already gone down that 34% and made money back to all-time highs.

00:02:55.560 | So, this is an extended bear market.

00:02:58.300 | On last week's Animal Spirits, Duncan, I know a lot of people don't go in the YouTube comments.

00:03:02.560 | I put my hazmat suit on and I go into the comments, because I'm a man of the people.

00:03:05.640 | Right?

00:03:06.640 | I'm not one of these coastal elitists that won't check the comments.

00:03:09.600 | I look at them.

00:03:10.880 | And someone said, "You guys are way too bearish lately."

00:03:13.820 | Now, this is the first time in my life I've ever been called bearish.

00:03:17.240 | I've been labeled a permable before, but never bearish.

00:03:19.680 | And I think what we're doing is, we're just kind of reporting what's going on around us.

00:03:22.560 | Because the Fed has said, in the last two weeks, they're openly rooting for the stock

00:03:26.460 | market to go down.

00:03:27.460 | Interest rates are rising.

00:03:28.460 | Inflation's at 9%.

00:03:29.460 | There's plenty to be negative about right now.

00:03:31.080 | My whole thesis on life, though, is that we get through stuff, and this, too, shall pass.

00:03:36.720 | And I wouldn't even consider myself being bearish, I'm just trying to be realistic.

00:03:40.400 | But I think my whole thing on this is, it's okay to be bearish.

00:03:43.400 | It's not okay to stay bearish.

00:03:44.760 | That's the problem for too many people, is they get bogged down in the negativity and

00:03:48.200 | negative headlines, and it seems like there's a lot of negativity these days.

00:03:51.320 | I think the problem is when you get stuck in that mindset and don't realize that we'll

00:03:55.600 | get past this.

00:03:56.600 | We always do.

00:03:57.600 | But I think the longer-term bear market, it's good if you're saving money.

00:04:00.980 | Just keep putting money in.

00:04:01.980 | I mean, you're pointing out negatives in the market, and the market has a bunch of hurdles

00:04:06.840 | to face.

00:04:07.840 | It's not like you're shorting the S&P or anything.

00:04:10.200 | No.

00:04:11.200 | I'm still following my rules.

00:04:12.200 | I'm still following my plan.

00:04:13.200 | Same thing.

00:04:14.200 | Just kind of trying to point out what's going on.

00:04:15.200 | Right.

00:04:16.200 | Okay?

00:04:17.200 | This is probably the only time I've ever called bearish in my life, so I'm just going to take

00:04:19.280 | it.

00:04:20.280 | Maybe I'm going to read Zero Hedge today at lunch.

00:04:21.960 | I don't know.

00:04:22.960 | We'll see.

00:04:23.960 | First time in a while.

00:04:24.960 | Let's read the first question.

00:04:25.960 | Maybe we have you do the next show wearing a bear suit.

00:04:26.960 | All right.

00:04:27.960 | First question.

00:04:28.960 | Okay.

00:04:29.960 | Up next, or up first today, we have a question from Will.

00:04:32.640 | This is a long one, but a good one.

00:04:35.180 | What do we need to think about in downgrading to one income?

00:04:37.440 | My wife and I welcomed a pandemic baby, which I didn't know that's what people were calling

00:04:41.080 | them, but I guess that's the thing.

00:04:43.080 | Makes sense.

00:04:44.080 | We welcomed a pandemic baby almost a year ago.

00:04:46.480 | I work at home and have some childcare help from grandparents, but we are thinking of

00:04:50.000 | having me go part-time or less in order to care for the kid.

00:04:53.240 | Work from home with an energetic one-year-old is way different than work from home with

00:04:56.200 | a baby that spends half the day napping.

00:04:58.500 | We also hope to be blessed with one more kid before we hit 40.

00:05:01.920 | I worry that these are my prime earning years, but watching our child grow up is priceless

00:05:06.020 | and childcare is fairly expensive in our area.

00:05:08.600 | I can also support my wife's career, which she finds meaningful.

00:05:11.620 | My career is in spreadsheets, and while it doesn't make me want to throw myself off the

00:05:16.000 | roof, it's not particularly exciting either.

00:05:19.200 | We also started having kids late, age 37, so we are fortunate to have a nest egg, $150,000

00:05:25.280 | income, $40,000 to $50,000 of spending a year, 2.5% mortgage.

00:05:30.080 | Look at that.

00:05:31.080 | That's pretty nice.

00:05:32.080 | That's $50,000 for retirement and a six-month emergency fund.

00:05:37.700 | I had dreams of retiring early and this would slow it down.

00:05:40.180 | What are your thoughts?

00:05:41.900 | My wife and I went through a similar decision-making process during the pandemic.

00:05:45.580 | When we had our twins in 2017, that's when she decided to go part-time because we already

00:05:49.820 | had another child, so twins was a lot on our plate.

00:05:53.140 | She'd always kind of thought about retiring to take care of the kids from her job, and

00:05:56.340 | the pandemic kind of forced her hand because it was so difficult going on and off and on

00:05:59.620 | and off with school and all this stuff.

00:06:01.700 | So she quit about nine months into the pandemic.

00:06:04.000 | This person's at a different stage in life than we were, but I understand where they're

00:06:06.760 | coming from.

00:06:07.760 | We've talked about the high cost of childcare on the show before.

00:06:11.640 | This is actually the first year all three of my kids are in public school.

00:06:15.860 | My birthday was a couple weeks ago, or last week, I guess, and two weeks ago, and someone

00:06:20.580 | had said, "Happy birthday," and they said, "Are you celebrating?"

00:06:23.140 | I said, "No, I'm celebrating the fact that my kids are not on daycare, I'm not paying

00:06:26.280 | anymore."

00:06:27.280 | That was more important to me than my birthday.

00:06:28.280 | I've got to have priorities here.

00:06:31.140 | Assuming the grandparents can't stay full-time with childcare, your decision basically boils

00:06:34.920 | down to, are we a one-income family or daycare, right?

00:06:38.740 | And you said it's fairly expensive where you are, so it's pretty easy to do the cost-benefit

00:06:42.380 | there, right?

00:06:43.380 | And for a lot of people, childcare can be almost as expensive as one parent's income,

00:06:47.460 | depending on how much you make.

00:06:49.000 | And you told us, again, it's expensive where you live, so I mean, this could obviously

00:06:52.220 | tack on a few years to your early retirement, but I don't know, are you really going to

00:06:57.220 | regret spending more time with your child if you do this?

00:06:59.700 | I don't think so.

00:07:00.700 | I don't think my wife regrets it.

00:07:02.020 | Here's a few things to consider that we went through in this process.

00:07:05.460 | Number one is benefits, right?

00:07:06.780 | My wife had really good benefits at her former employer.

00:07:09.660 | She had a really solid 403(b) match, and we had to give that up, and so that's kind of

00:07:15.020 | tough.

00:07:16.020 | So you have to think through what are your benefits, what that change is going to be

00:07:17.380 | like if you leave your job.

00:07:18.900 | Do you think you'll be able to get another full-time job when kids go full-time or maybe

00:07:22.900 | part-time?

00:07:23.900 | Do you want to go back to the working world maybe when the kids go back to school?

00:07:26.380 | That's something to consider.

00:07:27.580 | Do you even want to go back to work, or is this going to be a full-time thing?

00:07:32.220 | Have you tried living on your wife's income and being a one-income family for a couple

00:07:36.020 | months?

00:07:37.020 | Try that for a few months.

00:07:38.020 | See if it works, and just bank your money for now as savings, because you're going to

00:07:41.300 | have to do it someday, right?

00:07:42.300 | Might as well start now.

00:07:43.300 | And then the other thing is, psychologically, are you okay giving up on the working world?

00:07:48.660 | Because you're going to be asked some insensitive questions, right?

00:07:52.540 | You know, "Oh, you decided to stop working and your wife's working."

00:07:55.980 | It shouldn't be that way, but it is that way.

00:07:57.580 | And for any parent who does this, my wife gets asked all the time, "Well, what are you

00:08:00.380 | going to do when the kids go back to school?"

00:08:02.580 | And her answer is, "I'll do whatever I want, whatever I need to do to get done," right?

00:08:05.260 | And so I think there's a lot of insensitive and sometimes inappropriate questions people

00:08:08.740 | get asked on this, but my answer to that is screw them.

00:08:12.300 | You do what works for you, what works for your family.

00:08:14.460 | Don't worry about what other people think and if other people are going to judge you.

00:08:17.940 | I think it helps that you already have your finances in order.

00:08:19.660 | You obviously have a high savings rate.

00:08:20.660 | If you're spending $40,000 to $50,000 a year and you have $150,000 income, you're doing

00:08:25.580 | pretty good in terms of your spending-to-income ratio.

00:08:27.820 | So it sounds like you're as ready as anyone to pull this off if you can, if you want to,

00:08:32.460 | but those are just some things to consider.

00:08:33.860 | Yeah, no, I mean, I think you hit the nail on the head there.

00:08:37.420 | It sounds like they've thought it through really well and they're just kind of wanting

00:08:40.020 | some encouragement to do what they want to do.

00:08:43.540 | But yeah, like you're saying, this is bigger than just the...

00:08:46.300 | This is bigger than the financial side of things.

00:08:48.460 | Yeah, if you have the financial stuff taken care of, it's probably the emotional and psychological

00:08:52.100 | impact is bigger than anything, but I don't think this is something that you're going

00:08:55.700 | to regret in the years ahead.

00:08:56.980 | So if you have to rip the bandaid off, do it, but I just make sure you can live on one

00:09:00.340 | income for a while and try it out and again, bank your money so you have some more savings.

00:09:04.340 | Yeah.

00:09:05.340 | Let's do another one.

00:09:06.900 | Okay, up next we have a question from Martin.

00:09:10.380 | My wife and I just had a baby and we live in one of the nine states that offer a prepaid

00:09:14.580 | college plan.

00:09:16.060 | By making either a monthly contribution or a lump sum payment, we can walk in the current

00:09:20.460 | cost of in-state tuition, which is about $30,000 in Florida.

00:09:23.980 | If our son chooses not to go to college, the money can be refunded.

00:09:26.580 | Do you have any thoughts on this type of investment?

00:09:28.980 | How do you expect the cost of college to inflate in comparison to potential compounding growth

00:09:33.340 | in a 529 or brokerage account over 18 years?

00:09:36.540 | This one's triggering me a little bit, right, because we know the direction college tuition

00:09:40.220 | seems to...

00:09:41.220 | Yeah, John, throw the chart up here.

00:09:43.460 | This is the CPI of college tuition and fees versus the regular consumer price index.

00:09:49.140 | This is since the late 1970s.

00:09:50.340 | You can see college has basically doubled it up on an annual basis, like 6.5% almost,

00:09:55.220 | to roughly 3.5% for the CPI.

00:09:57.340 | You can see in the early 2000s it just took off like a rocket ship and went even higher.

00:10:02.020 | I don't know.

00:10:03.340 | Can this growth continue?

00:10:04.340 | It can't go on like this forever, right?

00:10:06.500 | But I don't know.

00:10:07.500 | My dad said people said that 20 or 30 years ago, and it still did.

00:10:12.660 | There's a lot of financial problems like this that you're trying to plan for that don't

00:10:15.380 | have a perfect answer.

00:10:16.380 | How much do I need to save for retirement?

00:10:17.380 | Well, I don't know, how much do you spend?

00:10:19.420 | What returns should I expect to earn in the market?

00:10:21.020 | Well, I don't know.

00:10:22.020 | Who knows going forward?

00:10:23.020 | What should I set as a baseline for inflation expectations?

00:10:26.460 | This past couple of years has told us that we don't know anything about that.

00:10:28.780 | What will my future tax rates be?

00:10:30.180 | I don't know.

00:10:31.180 | What is the government going to do?

00:10:32.180 | What are the politicians going to do?

00:10:33.180 | So, this is another one where how much will college cost when my child reaches that age?

00:10:37.300 | It's impossible to know, right?

00:10:38.980 | And here's the other thing.

00:10:41.540 | College probably isn't going to be as expensive as you think, depending on your situation.

00:10:45.220 | So, Ron Lieber wrote this book called "The Price You Pay for College."

00:10:47.380 | He had a few stats that kind of blew me away.

00:10:49.620 | The average first-year full-time student, this is in 2019 and 2020, got a discount of

00:10:53.460 | 52.6% off the list price.

00:10:55.380 | So, we see these huge list prices in the sticker shock you get.

00:10:58.900 | Most people don't actually pay that.

00:10:59.900 | The average grant for public universities is more than $4,100 per student.

00:11:04.420 | 89% of students at private colleges get a needs-based or merit-based discount on tuition.

00:11:10.140 | And so, the people who end up paying full freight are mostly international students,

00:11:13.660 | very rich people, and then people who want to attend more selective schools.

00:11:17.220 | So, the average price people pay for private colleges, including room and board, is like

00:11:21.300 | $24,000 a year.

00:11:22.300 | For in-state public universities, it's around $15,000 a year, a couple years old for these

00:11:26.300 | stats.

00:11:27.300 | So, it's not nearly as bad as you might think.

00:11:29.180 | So, I think a lot of this boils down to how much certainty do you want?

00:11:33.460 | Like, how important is it to pay for your child's education?

00:11:35.700 | I know for some people, this is a huge priority.

00:11:38.340 | Other people say, "I'm going to do my oxygen mask first, and I'm going to save for retirement,

00:11:42.660 | and then the kids can figure it out either through working in college, or getting a scholarship,

00:11:47.140 | or going to a lower-paying college, or a community college, or whatever it is."

00:11:50.060 | It sounds to me like this is probably a priority for these people, so, I mean, I don't know.

00:11:54.860 | One of the worries people say, "Well, what if online education is much bigger in the

00:11:59.500 | years ahead, and it's cheaper?

00:12:00.700 | And what if your child doesn't want to attend that public university in Florida?

00:12:03.900 | And what if the government actually does something about the cost of college?"

00:12:06.260 | So, a lot of this depends on how much do you want to plan?

00:12:09.580 | Because no one knows what it's going to be in the future, but if you can lock it in now,

00:12:12.540 | and that certainty is more important to you than for your financial planning than anything,

00:12:16.060 | and you can get that refunded, if that's a priority, I don't see a problem with it if

00:12:20.020 | you're taking that uncertainty, if the uncertainty is a big problem.

00:12:22.180 | Because I know a lot of people say, "Well, who knows what college is going to look like

00:12:25.300 | in 15, 20 years, or whatever it is?

00:12:27.460 | So I'm just going to roll the dice and see what happens."

00:12:30.060 | If you want to take that uncertainty off the table, I can see the appeal of that.

00:12:33.620 | Well, I've never heard of this before, but I'm guessing it's not all or nothing, right?

00:12:37.660 | You can put whatever amount you want in towards the college, right?

00:12:41.560 | It's not like you have to pay the full tuition price right now, or do you know?

00:12:45.340 | I honestly don't know.

00:12:47.340 | We don't have this in Michigan, for sure, so that's a good question.

00:12:48.940 | Yeah, I've never heard of this, so yeah, kind of a cool idea.

00:12:51.580 | Someone send us an email and let us know if they know us more on this.

00:12:53.300 | I honestly don't know.

00:12:54.300 | All right, let's do another one.

00:12:57.300 | Up next, we have, "Recently, my father passed away, leaving roughly $150,000 to me as an

00:13:04.620 | inheritance.

00:13:05.620 | I'm trying to figure out if I should save or invest it.

00:13:08.220 | I'm 26 years old and served four years as an Army officer.

00:13:11.820 | I will be separating honorably soon, where I will go back to school and may need to access

00:13:15.700 | these funds.

00:13:16.820 | I also may need to use them to buy a future house or get married.

00:13:21.200 | I'm afraid of investing the funds short-term, less than three years, due to market volatility.

00:13:26.140 | CDs and some bonds seem like low returns when interest rates are rising.

00:13:29.860 | Shouldn't I wait to purchase a CD if interest rates continue to rise?

00:13:33.340 | I did purchase IBONS with a 9.62% interest rate, but I still don't like the idea of the

00:13:39.020 | rest of my money sitting in a savings account yielding almost nothing.

00:13:42.600 | Is sitting in cash the safest bet short-term?

00:13:44.700 | Sorry for your loss, and also, thank you for your service."

00:13:49.260 | Two weeks in a row of inheritance questions.

00:13:50.820 | Again, I said this was going to be coming, and we got another one this week.

00:13:55.520 | This is obviously a follower of Portfolio Rescue, because they're in the IBONS.

00:13:58.300 | They listened to us there.

00:14:00.140 | As we know, there's a cap on there.

00:14:01.920 | The good news is, this person has their risk profile and time horizon figured out.

00:14:05.300 | They know this is short-term money.

00:14:06.620 | They don't want to take a huge risk.

00:14:07.700 | They want to earn a little bit of yield, but they don't want to risk.

00:14:09.860 | And again, we talked about the emotional baggage behind this.

00:14:13.300 | Because this is an inheritance, it could have a little more to it behind it.

00:14:16.060 | So, this person sounds like they got the good first step.

00:14:18.580 | The bad news is, for a lot of investors, the Fed is raising interest rates, and they're

00:14:22.340 | trying to bring the stock market down.

00:14:24.140 | But the good news is, for savers, those interest rates mean higher yields that you can earn.

00:14:28.340 | So, John, do a chart on the Treasury yield curve here.

00:14:31.680 | You can see, especially on the short end, interest rates have come up a lot.

00:14:34.780 | So, at the beginning of the year, we're talking a handful of basis points for 3 months Treasuries,

00:14:38.380 | which is basically the short-term T-bill rate.

00:14:40.420 | It's like 3% now.

00:14:41.460 | It's gone up almost a full 3% on the year.

00:14:43.940 | A lot of short-term yields for Treasuries are now yielding more than long-term.

00:14:47.600 | And that is the biggest bang for your buck right now, because the Fed is raising rates,

00:14:51.220 | and long-term rates aren't going up as high.

00:14:52.940 | So, the reason this matters is because short-term bonds have much less interest rate risk than

00:14:57.220 | long-term bonds.

00:14:58.220 | In the past, investors were being forced out on the risk curve.

00:15:02.020 | That's not the case anymore.

00:15:03.540 | Now it's the opposite.

00:15:04.700 | Rates are higher on short-term bonds than long-term bonds, and it's like you're being

00:15:07.540 | paid to take less risk.

00:15:08.980 | This is a good thing if you're looking to save cash or cash equivalents, especially if

00:15:13.420 | you're looking for safety of principle.

00:15:15.260 | So, here's some simple options we've talked about before.

00:15:18.260 | SHY, ZI Shares, 1 to 3-year Treasury ETF.

00:15:20.540 | I looked today.

00:15:21.540 | The average yield to maturity is 3.5% on that fund.

00:15:25.420 | That's higher than the rate you get on TLT, which is a 20-plus year bond market, which

00:15:28.780 | is down 20% or 30% right now from the highs.

00:15:31.720 | You could also look at muni bonds, like the iShares Short-Term Muni Bond Fund.

00:15:34.540 | I think it's SUB.

00:15:36.100 | That shows an average yield to maturity of 2.4%.

00:15:38.380 | So, depending on your tax rate, we could do a tax equivalent yield where we back it out

00:15:42.420 | if this is in a taxable account.

00:15:44.020 | We're talking probably 3% to 3.5% on a tax equivalent yield, depending on your tax rate.

00:15:48.620 | Marcus, the one that I use for an online savings account, now yields 1.7%.

00:15:52.220 | I think Ally, I looked today, was more like 1.85%.

00:15:54.740 | Capital One 360 is 1.75%.

00:15:57.260 | I think those will go up as the Fed continues to raise rates, assuming they do.

00:16:00.500 | So, savers can finally earn some yield on their cash.

00:16:03.020 | You can't exactly move to the beach and live off the interest on this anymore, but at least

00:16:07.700 | it's something, compared to the past, where you're basically getting nothing.

00:16:10.340 | So, you're right, you don't want to put it in a brick-and-mortar bank, where you're still

00:16:13.140 | probably earning 10 to 20 basis points, which should, frankly, be criminal, if I'm being honest.

00:16:18.500 | The fact that the banks still don't pay anything.

00:16:20.940 | They're earning 6% on mortgage rates, and they're paying out 10 basis points on their

00:16:24.540 | savings accounts.

00:16:25.540 | Share the wealth.

00:16:26.540 | Seriously.

00:16:27.540 | I mean, you do still have to deal with a high inflation rate, but compared to the 0% you're

00:16:31.740 | earning years ago, I'd say don't accept anything below 2.5% to 3%, if we're talking short-term

00:16:36.940 | bonds.

00:16:37.940 | And again, you could match up the duration of the bonds now with your actual maturity

00:16:42.020 | of when you want to spend this money.

00:16:43.460 | So, like I said, there's a one-to-three year treasury.

00:16:46.020 | You can kind of match it up.

00:16:47.020 | So, anything below 2.5% or 3% today probably doesn't make sense if you're looking for a

00:16:51.420 | short-term something or a CD.

00:16:53.740 | My question for another day is, with stocks and bonds both down double digits in the last

00:16:56.740 | year, will more investors now start allocating to cash or short-term bonds?

00:17:00.260 | I think that'll be interesting to see.

00:17:02.180 | That's a question for another day.

00:17:03.420 | But there's another element here.

00:17:04.820 | This person is leaving the military.

00:17:07.420 | And so, why don't we bring in our favorite former armed service member, Bill Sweet?

00:17:11.740 | Because there has to be something else going on here.

00:17:13.620 | Bill, any other special considerations for someone who's leaving the military in terms

00:17:17.740 | of their finance?

00:17:18.740 | Because I have to imagine there's a lot of stuff that I don't even know about.

00:17:20.660 | So, what do we got here?

00:17:22.300 | Yeah.

00:17:23.300 | A lot of great, great things that could potentially help.

00:17:25.660 | I want to start, though, saying I was decked out for this show, pre-show.

00:17:29.460 | And Duncan made me change my shirt.

00:17:31.620 | He told me I can't wear white before or after Labor Day anymore.

00:17:35.340 | I don't want to get canceled.

00:17:38.220 | So I changed.

00:17:39.220 | You had like three days.

00:17:40.220 | You could have still stayed in white.

00:17:41.220 | I know.

00:17:42.220 | And again, Ben, I know you claim to be a man of the people, but maybe you've got something

00:17:46.620 | going on there with Duncan.

00:17:47.620 | Duncan runs a tight ship here.

00:17:48.620 | I mean, just don't mess with him when he gets in your wardrobe.

00:17:51.620 | I know.

00:17:52.620 | Duncan, I'm not going to call you what Michael said yesterday.

00:17:53.620 | Oh, my God.

00:17:54.620 | Yeah.

00:17:55.620 | I'm not going to do that.

00:17:56.620 | But I'm also happy.

00:17:57.620 | So, yeah.

00:17:58.620 | So, thank you very much for your service.

00:17:59.620 | Do we have a name for this listener?

00:18:00.620 | I didn't catch it.

00:18:01.620 | Actually, it got lost in the copy and paste.

00:18:03.260 | Yeah.

00:18:04.260 | Sorry.

00:18:05.260 | So, but thank you very much.

00:18:06.260 | And again, my brother, for taking on arms, especially the last couple of years.

00:18:08.100 | I think it's been a very difficult time.

00:18:09.820 | But no, I think the number one thing that popped in my mind was post-9/11 GI Bill benefits.

00:18:14.100 | And Ben, I don't need to get too much into details, but I did about six years active

00:18:17.500 | duty.

00:18:18.500 | And I'm qualified for like 40% of tuition to a public university, and they can subsidize

00:18:23.060 | some things.

00:18:24.380 | The really neat thing about the GI Bill is that you also qualify during your school time

00:18:28.020 | for BAH, Basic Allowance for Housing, which is this tax-free benefit for military personnel.

00:18:33.100 | It's a very powerful thing.

00:18:34.620 | So I definitely look there, but I do want to give the listener credit.

00:18:39.080 | They're prepared.

00:18:40.080 | They're thinking about all the right questions.

00:18:41.080 | Ben, I love your answer.

00:18:43.140 | If you're getting 5% for corporates and taking corporate risk and about 3% for munis, it's

00:18:47.380 | really hard to argue there.

00:18:49.300 | And I would say for any taxpayer, if we're going back to school, I'm guessing there's

00:18:52.540 | not going to be a lot of income in that year.

00:18:54.700 | Standard deduction this year is almost $13,000, right?

00:18:57.620 | And so if you're putting that 150K and you're earning 3%, that's about $4,500 a year.

00:19:03.060 | And in theory, if your income is low enough, that comes all tax-free, right?

00:19:07.060 | Treasuries are completely state tax-free.

00:19:09.160 | The only other thing I would mention is about IBONs.

00:19:11.200 | I know that you guys did this in the past, but one of the things that's interesting about

00:19:14.160 | them, the limit is $10,000 per person per year, right?

00:19:18.480 | We're about four months today from the end of the year when you can refund that with

00:19:21.840 | another 10,000.

00:19:23.240 | If you happen to be married, you can have one for your spouse.

00:19:25.420 | You can have a spousal account.

00:19:26.480 | If you have two kids, you can have a child's account too.

00:19:29.840 | And the really interesting thing is for LLCs, trust, basically anything with their own EIN,

00:19:34.200 | you can also fund up to $10,000 for IBONs.

00:19:36.900 | So there's a bit of cost-benefit analysis.

00:19:38.600 | Is it going to cost more to put up an LLC just to invest in IBONs?

00:19:42.720 | But there's nothing that we can tell that would prohibit you from doing so.

00:19:45.640 | Obviously, consult with your legal and tax advisors.

00:19:48.000 | But Ben, I think you pointed them in the right direction.

00:19:51.140 | One other thing I want to add here that I can't believe you didn't do because it's a

00:19:54.040 | layup.

00:19:55.040 | So they have 150 grand.

00:19:56.040 | I think they're not going to spend it all.

00:19:57.400 | I think you take, what is it?

00:19:58.520 | What's the max limit for IRA?

00:19:59.920 | 6,500?

00:20:00.920 | 7,000?

00:20:01.920 | No, 6,000 this year.

00:20:02.920 | So take 6,000 of that and max out your Roth IRA, right?

00:20:05.360 | Yeah, 100%.

00:20:06.360 | Yeah.

00:20:07.360 | Because if you realize later you need all that money for the wedding, you can still

00:20:10.520 | take your contribution out.

00:20:11.520 | So I think you should probably, especially as a young person, max out that IRA for a

00:20:15.880 | year and at least get that out of the way and help yourself there get that started on

00:20:19.840 | the right foot.

00:20:20.840 | Yeah, I think you're right.

00:20:21.840 | And the other nice thing, so Roth IRAs didn't pop into my mind, Ben, because that's more

00:20:24.280 | of a long-term vehicle, right?

00:20:25.560 | There's no qualified distributions until age 60.

00:20:28.440 | But if you get a little bit over your skis, A, out of the total inheritance, that's a

00:20:31.600 | small amount, right?

00:20:32.760 | That's less than 5%.

00:20:33.760 | It's about 5%.

00:20:34.800 | And then you can take non-qualified Roth distributions, get your basis back tax-free.

00:20:39.420 | So if you get over your skis, you find the perfect house, you can take that distribution

00:20:43.320 | early from a Roth.

00:20:44.400 | So I think that's a great answer, Ben.

00:20:45.720 | Yep.

00:20:46.720 | All right.

00:20:47.720 | Duncan, one more.

00:20:48.720 | OK.

00:20:49.720 | Up next, we have a question from Dave.

00:20:53.480 | My mom is retired and receiving about $1,100 a month from Social Security.

00:20:58.200 | She has about $50,000 saved and is interested in investing the money.

00:21:01.920 | Unfortunately, she doesn't have an IRA, and I read that she can't open a Roth as a retiree

00:21:06.680 | without any earned income.

00:21:08.360 | I was looking at opening a brokerage account for her, but I have some questions.

00:21:12.040 | Will the investment income from this account be tax, dividend, and equity growth?

00:21:16.280 | I read that if her Social Security benefits plus additional income don't exceed $25,000,

00:21:21.120 | she doesn't have to pay taxes.

00:21:22.800 | Any advice would be greatly appreciated.

00:21:24.280 | All right, Bill, this is your time to shine.

00:21:27.380 | This can happen.

00:21:28.380 | You mentioned that standard deduction.

00:21:29.380 | It was someone who has a low income and not a lot of assets.

00:21:33.020 | She could potentially pay zero taxes in retirement.

00:21:34.840 | Is this true?

00:21:36.240 | It is true.

00:21:37.240 | It is true.

00:21:38.240 | And I think that they brought Social Security to the top of the question.

00:21:40.160 | I think that's a smart place to start.

00:21:42.160 | And the listener is correct-- Dave is correct-- that if your income is below a certain threshold,

00:21:47.040 | I believe, for individuals around $30,000, $40,000, your Social Security benefit is 100%

00:21:51.800 | tax-free.

00:21:52.800 | And so that ends up being a pretty powerful thing.

00:21:54.400 | Average Social Security benefit in the US is about $1,200, $1,300.

00:21:58.260 | And so ultimately, if you can get $12,000, $13,000 tax-free, and then stack other income

00:22:03.300 | on top of that to take advantage of that standard deduction, which is actually higher for seniors,

00:22:07.720 | it's about $15,000, $16,000, you stack those benefits up, and ultimately, mom's in a great

00:22:12.140 | position for that.

00:22:14.700 | So even if we're talking 5% to 8% on that $50,000, and she's getting that back in capital

00:22:20.080 | gains when she sells, or in interest income or dividends, probably with that standard

00:22:25.340 | deduction, still not going to be paying any taxes in retirement, right?

00:22:27.500 | Yeah.

00:22:28.500 | I would think so.

00:22:29.500 | And the listener's specific question is, what should I do with mom's assets, right, because

00:22:31.700 | I don't want to mess up this really perfect tax picture.

00:22:35.100 | I think where they're going is the right thing to do.

00:22:37.180 | You probably don't want to generate a ton of current income.

00:22:40.820 | And so I think some sort of-- I mean, the IBON is perfect for this, because ultimately,

00:22:44.420 | all that interest compounds until the year of distribution.

00:22:47.060 | So therefore, you have a little bit of control over when that income gets realized.

00:22:50.780 | But I think the absence of that, which is just-- it's this perfect sweet spot of Treasury-protected

00:22:55.460 | high interest income, I think some sort of brokerage account where you can control when

00:22:59.420 | the income gets realized makes a lot of sense for this listener.

00:23:02.820 | And for $50,000, that $10,000 limit is going to be 20% of the account, right?

00:23:06.380 | Correct.

00:23:07.380 | So it's actually a meaningful amount here.

00:23:08.380 | Correct.

00:23:09.380 | Yeah.

00:23:10.380 | And going back to the prior question, that popped in my head too.

00:23:11.380 | Like, so let's say the individual's going to school.

00:23:13.000 | They don't have any earned income.

00:23:14.100 | You cannot fund a Roth IRA.

00:23:15.300 | You cannot fund a retirement account if you don't have earned income in the present.

00:23:18.520 | So I think the suite of options is kind of limited for this question, listener.

00:23:22.540 | I would, again, point to IBONs.

00:23:23.540 | I think that's a great place to start.

00:23:25.260 | And then after that, look at a brokerage account.

00:23:27.760 | This could be just the government does weird things.

00:23:29.660 | Here's something I don't understand.

00:23:31.820 | So we pay into Social Security taxes.

00:23:33.420 | Why is it taxed when we get it back?

00:23:36.140 | Why do they tax it again?

00:23:37.700 | Yeah.

00:23:38.700 | Logic and reason need not apply when it comes to federal benefits.

00:23:40.780 | Don't ask these questions, Ben.

00:23:41.780 | Come on.

00:23:42.780 | I'm just a simple man here.

00:23:43.780 | Yeah.

00:23:44.780 | I think the concern is that if you're below a certain income-- so it's this means-tested

00:23:51.740 | thing, right?

00:23:52.740 | The federal government in the last three years, I believe, has spent somewhere in the neighborhood

00:23:56.540 | of $3 or $4 trillion more than it's taken in.

00:23:59.380 | So that's part of the answer.

00:24:00.420 | I think the other part of the answer is, like, why not police?

00:24:02.940 | Why not firemen?

00:24:03.940 | Why not folks that work for the government?

00:24:05.500 | Why is their income taxed?

00:24:07.520 | It's all part of the same system.

00:24:08.660 | And I think the general answer is you probably don't want to create a lot of privileged classes

00:24:13.420 | within society, right?

00:24:14.420 | I think that's probably the right answer.

00:24:16.220 | And ultimately, it is tax-free if you're below a certain income.

00:24:19.100 | I don't really philosophically have a problem with the means test on tax.

00:24:22.540 | It doesn't hurt me.

00:24:24.220 | Progressive taxes are a pretty good thing for society, I think.

00:24:27.340 | Bill Sweet, a man of the people.

00:24:28.340 | All right.

00:24:29.340 | Duncan, another question.

00:24:30.340 | Also, Bill just said the name of what his podcast would be if he was doing options trading.

00:24:34.020 | I think you said the suite of options.

00:24:36.180 | Suite of options?

00:24:37.180 | I like that.

00:24:38.180 | Would that be good?

00:24:39.180 | I bet.

00:24:40.180 | Yeah.

00:24:41.180 | Not my thing.

00:24:42.180 | I'm a low-cost index fund.com guy.

00:24:43.180 | OK.

00:24:44.180 | But God bless you, day traders.

00:24:45.180 | Yeah.

00:24:46.180 | I think we have some watching, usually.

00:24:47.180 | So yeah.

00:24:48.180 | Love it.

00:24:49.180 | Shout out day traders.

00:24:50.180 | Great work.

00:24:51.180 | Yeah.

00:24:52.180 | All right.

00:24:53.180 | Great to be back.

00:24:54.180 | I was listening to your episode on real estate being an inflation hedge, and I heard Bill

00:24:57.220 | Sweet talk about the tax advantages of doing a 401(k) rollover into a Roth account during

00:25:02.060 | a market downturn.

00:25:03.500 | If I were to do a rollover with my self-directed 401(k) and I currently have unrealized capital

00:25:08.220 | losses, how would those losses be treated on my taxes?

00:25:11.700 | Could I use that loss to offset any capital gains I might have from other investments?

00:25:15.920 | If so, would offsetting be treated differently for short-term or long-term capital gains?

00:25:22.020 | All right.

00:25:23.020 | Bill, the people are listening here.

00:25:24.020 | They want that succulent tax-free withdrawal from a Roth.

00:25:26.620 | Now I assume people who have just started making contributions in the last couple of

00:25:30.500 | years, those are the people who are going to have some losses, and they're the ones

00:25:32.700 | who want to roll them over.

00:25:34.200 | So how does this work?

00:25:35.860 | Because it's all-- you think it's segmented, but it's all one pool.

00:25:38.940 | So how does this work for offsets and other stuff here?

00:25:41.060 | Yeah.

00:25:42.060 | Very succulent.

00:25:43.060 | Again, this is a dangerous episode here.

00:25:45.100 | We're hitting some really uncharted territory when it comes to taxes.

00:25:48.980 | But Ben, we've got to back the truck up.

00:25:51.500 | When we're talking about tax accounts, there's really two different types in the world, right?

00:25:55.220 | There's tax-qualified, and your Roths go in there, your 401(k)s, your traditional IRAs

00:25:59.660 | go in there.

00:26:00.660 | The theory there is any income, any distributions, any capital gains, anything that's going on

00:26:04.780 | in the account doesn't get taxed until you distribute the asset.

00:26:08.220 | Meanwhile, you have a non-qualified account in your second bucket.

00:26:11.640 | Non-qualified is what we were talking about a second ago.

00:26:13.060 | You open a brokerage account.

00:26:14.820 | If you sell or gain at a loss, you have capital gains, you have losses.

00:26:17.900 | But the difference is everything happens in a current tax year versus before bucket one

00:26:22.700 | is deferral.

00:26:23.700 | So again, bucket one, deferral, bucket two, taxable.

00:26:26.660 | I believe what Zach is asking about is 401(k), and a 401(k), there's no capital gain to be

00:26:32.740 | discussed there.

00:26:33.820 | More than likely, Zach took a tax deduction.

00:26:35.800 | He did not pay on any tax when he funded that 401(k), and so any distribution, including

00:26:41.180 | unit conversion, is going to be taxable based on the value of the conversion, not based

00:26:45.500 | on the gain in the account.

00:26:46.860 | That's a very important distinction to keep in mind here.

00:26:49.920 | And then ultimately, what we get from that is tax-free growth in the Roth, right?

00:26:53.580 | So there's a trade-off.

00:26:54.860 | But the ability to-- Right, so the taxes are paid either way, whether

00:26:57.620 | those gains or losses.

00:26:58.620 | That's what I'm getting at.

00:26:59.620 | Yeah.

00:27:00.620 | So I don't think capital losses in a 401(k) are a thing at all, because the benefit there,

00:27:04.140 | the benefit of using these tax-deferred vehicles, including Roths, is you're not paying tax

00:27:09.100 | when the income's received.

00:27:10.580 | Therefore, the capital gain is probably moot, and therefore, this question is not terribly

00:27:14.980 | relevant, unless we're talking about funding a Roth IRA from non-qualified assets, which

00:27:18.580 | I don't think was the question.

00:27:19.580 | Right.

00:27:20.580 | So the point is, if you're going to do that rollover, you're just going to want to make

00:27:23.220 | sure you're having the ability to pay the taxes that you already deferred in the first

00:27:26.460 | place.

00:27:27.460 | That's it, 100%.

00:27:28.460 | And point of privilege, when you're doing this, if you are doing a conversion from a

00:27:32.980 | 401(k), from a traditional IRA to a Roth, you really want to make sure that you're paying

00:27:36.220 | the tax from outside the account.

00:27:38.260 | Because ultimately, if you're paying tax, if you're doing a tax withholding on the conversion,

00:27:42.500 | that just means you're not converting the whole balance that you possibly can.

00:27:45.620 | Just do a smaller amount, right?

00:27:47.200 | So if you're thinking about, "Okay, $10,000 is what I can afford, I'm going to pay out

00:27:51.100 | $2,500 in taxes."

00:27:52.100 | Convert over $7,000, do the lower conversion, and then pay for that with non-qualified assets.

00:27:57.780 | Do not tax withhold on a Roth conversion, if you can help it.

00:28:01.100 | Also, credit to Duncan here.

00:28:02.300 | He's paying attention.

00:28:03.300 | He asked, he said, "I think this person's thinking about it the wrong way when they're

00:28:05.620 | doing this rollover."

00:28:06.620 | Duncan spotted this one beforehand.

00:28:08.300 | He did.

00:28:09.300 | He smelled it.

00:28:10.300 | Yeah, I know.

00:28:11.300 | We're proving Michael wrong.

00:28:12.300 | He's 50,000 miles away.

00:28:13.300 | Nice work, Duncan.

00:28:14.300 | All right.

00:28:15.300 | One more question.

00:28:16.300 | I took a practice.

00:28:17.300 | What is that intro exam that you have to do for finance, the S-I-E or something?

00:28:21.740 | I can't remember.

00:28:22.740 | I took a practice one recently.

00:28:23.740 | I got like a 50.

00:28:25.420 | Wow.

00:28:26.420 | That's great.

00:28:27.420 | All right.

00:28:28.420 | Three years.

00:28:29.420 | Three years at the firm.

00:28:30.420 | Last week.

00:28:31.420 | Yeah, exactly.

00:28:32.420 | Congratulations.

00:28:33.420 | We're getting there.

00:28:34.420 | Okay.

00:28:35.420 | So last but not least, we have a question from Kendall.

00:28:36.420 | And this one is going to make a lot of us that live in very expensive places very jealous.

00:28:39.980 | "I'm 22 and live in rural Missouri, one of the cheapest places to live in the United

00:28:44.780 | States.

00:28:45.780 | Not to brag, but my rent for a studio apartment is $300 a month.

00:28:50.240 | I max out my Roth IRA, which is my sole retirement account, and will fulfill my retirement goals.

00:28:55.420 | No 401(k) option at work.

00:28:58.580 | While it is great to think of all my retirement money that will be tax-free in 45 years, should

00:29:02.980 | I be setting aside part of my IRA contributions into a traditional IRA?

00:29:07.320 | My thought behind that question is if I have no taxable income in retirement, my deductions/credits

00:29:13.460 | would be going to waste every year after I retire.

00:29:16.020 | Would setting aside, say, $500 on my max contribution for a traditional IRA be something to consider?"

00:29:21.660 | They've kind of lost me on this.

00:29:22.660 | So I'm curious to hear what you have to say.

00:29:23.660 | The impressive thing here about them maxing out the Roth IRA is that their Roth IRA contribution

00:29:28.100 | every month is bigger than their rent.

00:29:30.220 | Yeah.

00:29:31.220 | Right?

00:29:32.220 | This is impressive.

00:29:33.220 | It's amazing.

00:29:34.220 | Pay yourself first.

00:29:35.220 | I love it.

00:29:36.220 | This is the second person that's looking to minimize taxes in retirement.

00:29:37.220 | This is a big Roth guy.

00:29:38.220 | We've already established that.

00:29:39.420 | But what do you think about diversifying your tax base if this person wants to have some

00:29:43.540 | diversification in retirement?

00:29:44.740 | Does that ever make sense in your mind?

00:29:46.820 | It does.

00:29:47.820 | However, let's talk about Kendall's situation.

00:29:50.140 | So just like Ben, Kendall's looking down on us with his Midwestern bias and his low rent.

00:29:55.140 | But leaving that aside, I love this idea.

00:29:57.140 | I would advocate for diversification in tax, diversification of portfolio.

00:30:01.920 | But talking about tax, there are three types of accounts you can have.

00:30:05.180 | And I would argue for you want all three of these.

00:30:07.100 | When you hit your 60s, you want to have a traditional IRA bucket, right, or 401(k).

00:30:10.980 | You want to have some taxable income that you can manage.

00:30:13.820 | You want to have a Roth bucket that's tax-free.

00:30:15.420 | And you also do want to have this non-qualified bucket that we just referenced a minute ago.

00:30:19.440 | You want tax diversification in retirement.

00:30:21.700 | But Ben, man of the people, Ben, when you were 22 compared to where you are now around

00:30:26.500 | your 40s, right?

00:30:27.500 | So I'm guessing that was a full 18 years in the rear view mirror.

00:30:30.020 | Are you earning less or more today than you were at age 22?

00:30:33.980 | Not to brag, I'm earning more money now than I was at 22.

00:30:35.660 | God bless you.

00:30:36.660 | Nice.

00:30:37.660 | I wish that for Kendall, too.

00:30:38.660 | I would say on average, people's incomes tend to increase through over time, right?

00:30:42.100 | Unless you're an NBA player, Kendall, unless you're a Jenner, more than likely what we're

00:30:46.500 | talking about here is your career earnings are going to increase over time.

00:30:49.460 | I wish that for you.

00:30:50.660 | Therefore, Ben, are you paying more taxes or less compared to age 22 today?

00:30:55.300 | You're my tax guy.

00:30:56.300 | You know I'm paying more.

00:30:57.300 | A lot more.

00:30:58.300 | I would advocate that your tax rate is exponentially higher.

00:31:01.380 | And therefore, I would argue in your 20s, your income is the lowest, your tax rate is

00:31:05.460 | the lowest, the Roth is beautiful, right?

00:31:07.280 | Because you're paying tax on that income before you contribute it.

00:31:10.300 | Now let's fast forward.

00:31:11.300 | Let's get into our 30s.

00:31:12.340 | Kendall is no longer paying $300 a month rent.

00:31:14.620 | He's paying $3,000 a month rent for like those of us.

00:31:17.380 | And that's a bargain, by the way, in New York City right now.

00:31:19.660 | And now at that point, when you're making 60, you're making 70, you're making $100,000

00:31:22.460 | a year.

00:31:23.460 | God bless you if you can make it that far.

00:31:25.140 | Now your income is being taxed at 30%.

00:31:27.180 | Maybe you move to New York, it's getting taxed at 40%.

00:31:29.580 | That's the time when you want to do this traditional IRA because your tax rate's higher.

00:31:33.380 | Do the Roth early.

00:31:34.380 | Kendall, you're doing it right.

00:31:35.940 | Max fund that puppy to the extent that you can.

00:31:38.380 | Focus on traditional IRA contributions later in life when you can take that tax deduction,

00:31:43.580 | when the tax deduction-

00:31:44.580 | And if you have some extra money, put it into a taxable brokerage account, maybe start building

00:31:47.380 | that up.

00:31:48.380 | Yeah, I love it.

00:31:49.380 | I love it.

00:31:50.380 | Especially if it's like an index manage.

00:31:51.380 | Let's say it's something that's doing taxless harvesting for you, absolutely, Ben.

00:31:54.180 | The buckets matter, but now's the time to do the Roth.

00:31:56.500 | Duncan, I'm telling you.

00:31:57.500 | You have the beard.

00:31:58.500 | It fits in Brooklyn, but it also could fit in Missouri too.

00:32:00.540 | Just think about it.

00:32:01.540 | Yeah, I'm considering it.

00:32:03.540 | All right.

00:32:04.540 | Bill, we have one more question to you from one of us.

00:32:05.540 | I'm not going to say who.

00:32:06.540 | One of us on this show completely paid off their student loans.

00:32:09.540 | One of us-

00:32:10.540 | Wow.

00:32:11.540 | No, one of us had some of their student loans forgiven.

00:32:15.420 | That person wants to know, is this a taxable event for them?

00:32:19.240 | That is a great question.

00:32:21.500 | Per the CARES Act law, which I'm going to detect in 2021, any student loan forgiveness

00:32:26.000 | abatement at the federal level, and this is important at the federal level, is not taxable

00:32:30.180 | through, I believe, year 2025.

00:32:33.220 | The answer is no.

00:32:34.220 | Assuming this Biden program survives the courts and legal challenges, then no, it will be

00:32:39.700 | not taxable.

00:32:40.700 | However, and there's always a catch, there are a bunch of states that de-conformed with

00:32:45.300 | the federal law, and so it's possible in up to 14 states right now per early analysis

00:32:50.160 | that the state may apply tax unless the legislators change-

00:32:53.380 | How about New York?

00:32:55.100 | New York complies generally, and so I believe that New York will not be taxable as income,

00:33:01.260 | but follow up with me on that in December.

00:33:02.960 | I'll be back-

00:33:03.960 | Score it down.

00:33:04.960 | ... on a rescue.

00:33:05.960 | Okay, cool.

00:33:06.960 | I've already spent that 10K on a Ford GT.

00:33:07.960 | That's great.

00:33:08.960 | That's why I was making sure.

00:33:09.960 | I love it.

00:33:10.960 | I love it.

00:33:11.960 | Let's move to Missouri.

00:33:12.960 | Also, I found out-

00:33:13.960 | What are we doing here?

00:33:14.960 | God.

00:33:15.960 | Our question three, our army officer is Richard.

00:33:16.960 | Richard.

00:33:17.960 | Thank you, Richard.

00:33:18.960 | Richard, thank you very much.

00:33:19.960 | I'm sorry.

00:33:20.960 | Sorry about your dad.

00:33:21.960 | Sorry to hear about that, but Richard, thank you for keeping us safe.

00:33:22.960 | All right.

00:33:23.960 | Thanks, everyone.

00:33:24.960 | Thanks, as always, to everyone in the chat.

00:33:25.960 | We appreciate you guys following along, making comments.

00:33:27.580 | Thanks to Bill, as usual.

00:33:28.580 | Like Ben's dad.

00:33:29.580 | Honest Dave is here with me in New York.

00:33:30.580 | Big Abe Lincoln fan.

00:33:31.580 | Happy Labor Day to those who celebrate, too, and are bringing kids back to school.

00:33:36.660 | I am.

00:33:37.660 | It's good times.

00:33:38.660 | Perfect.

00:33:39.660 | Yes.

00:33:40.660 | Is that what it's for?

00:33:41.660 | That makes sense to me.

00:33:42.660 | It is.

00:33:43.660 | If you're watching on YouTube, subscribe button, podcast, leave us a review.

00:33:45.540 | Keep those questions and comments coming.

00:33:47.060 | Askthecompoundshow@gmail.com.

00:33:48.820 | New Compound and Friends should be out tomorrow, and we will see you next week.

00:33:52.860 | Happy Labor Day.

00:33:53.860 | Thanks, everyone.

00:33:53.860 | Bye.

00:33:55.860 | [music]

How Do You Minimize Taxes in Retirement? | Portfolio Rescue

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