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May 6, 2023 - Money Matters Podcast

The true value of a financial plan, where money should come from to help a loved one, and why tax time should be all the time.

On this week’s Money Matters, Scott and Pat explain why having a roadmap for your dollars is crucial. A 62-year-old asks whether $9,000 in monthly income will be enough to fund his lifestyle once he stops working full-time. You’ll hear guidance for a Montana woman who wants to know where she should pull money from to help her son-in-law. Then, Scott and Pat take a deep dive into tax planning for 2024 and beyond. Finally, they help a caller with a question about a lump-sum pension payout.

Join Money Matters:  Get your most pressing financial questions answered by Allworth's CEOs Scott Hanson and Pat McClain live on-air! Call 833-99-WORTH. Or ask a question by clicking here.  You can also be on the air by emailing Scott and Pat at

Download and rate our podcast here.


Man: Would you like an opinion on a financial matter you're dealing with? Whether it's about retirement, investments, taxes, or 401(k)'s, Scott Hanson and Pat McClain would like to help you by answering your call to join Allworth's Money Matters. Call now at (833) 99-WORTH. That's (833) 99-W-O-R-T-H.

Scott: Welcome to Allworth's Money Matters. Scott Hanson.

Pat: Pat McClain.

Scott: I'm so grateful that you are with us today as we talk about financial matters. Myself and my cohost, we're both practicing financial advisors, have been advisors since...

Pat: Way too long.

Scott: Why does that sound negative? "Way too long."

Pat: I didn't mean it to come out like that. I have been blessed to be a financial advisor for over 30 years. It sounded better, than "way too long."

Scott: Yes, that does sound better. You love it so much that you continue to do it year after year.

Pat: Yes, that's exactly right. So, anyway.

Scott: In fact, I don't know what else I would do.

Pat: We help people like yourself try to find peace in their financial situation through all different kinds of methodologies, tax, estate planning, asset allocation, 401(k)'s, 403(b)'s, 457, pensions, pension lump sums, all kinds of decisions surrounding that. And it can be quite complex or it could be super easy. It's an interesting thing, having done this radio show for 26 or 27 years. I would say about 40% to 50% of the time we end up answering questions that the clients never...or the people that call the program never asked.

Scott: It is the majority of the time, yes, for sure.

Pat: We end up, they call with...someone calls with one question and it leads us down a path where we can answer that question, but then we say, "But have you thought about this, this, this, and this?" And that's financial planning.

Scott: And oftentimes people don't...they don't know the questions to ask.

Pat: You don't know what you don't know.

Scott: They don't know enough about it. I had a roofer out this last week. We built our house 18 years ago and we needed to do a... Our roof has been leaking since day one. So, finally, like, got to redo it, which is... So, I had some roofer, a highly referred roofer, come. And I stopped them. I said, "Can you use language that I would understand? Because I don't know what you're talking about here." It's because it's different language. Like, "Speak to me and someone who knows nothing." Because I know nothing about roofing, right? And so I had them break it down and kind of explain a little more.

And so it got me thinking about what it's like for most people as they approach the world of financial planning and investments. It's like, look, I know what a roof tile is. I know we have, like, the cone-shaped S curve, I heard. I didn't know it was an S curve, but it's an S. It's either flat or S, or it's the composed granite, or whatever it is, composite. But I started thinking about, like, "How much...what would I have to go through to have the knowledge to actually do a great job on my roof so I wouldn't leak for the next 30 years, like a company that that's what they do professionally?"

Pat: Yeah. And it'd be almost impossible. Because a large part of that, actually, you couldn't read in a book. It just takes experience, right?

Scott: Right. I'm sure I could watch a video on how to reroof your house.

Pat: Yes.

Scott: YouTube's got probably several.

Pat: Yes. Yes.

Scott: Anyway. I just... I often try to... I don't know what it's like to hire an advisor. Right? And I don't know what it's like... One of the things we...our advisors...we like to talk about with our advisors... We have 100-and-some-odd advisors at Allworth. And I like to think when someone comes in and talks with you, whether it's in person or over Zoom, like, that first meeting, that's got to's got to be a little scary.

Pat: Oh, yes. You don't know whether you've done a good job or a bad job, or whether your portfolio is right, or know, "Is this person going to tell me I'm crazy or that"...

Scott: "Or are they going to poke at the financial mistakes I've made in the past?" And, I mean, I always try to put myself in, "What's it like in the shoes of a person as they're trying to figure out their financial plan and their investment program and that sort of thing?" So, every once in a while, when I'm dealing with something I don't...I'm not an expert in, I try to step back and think about my own emotions and...

Pat: Well, Scott, this is the quality...the value of a financial plan, it just happens to be at our firm that this person did a financial plan. My brother-in-law, for years and years, would ask me questions about his finances. Years and years. And I love my brother-in-law and sister-in-law dearly, and their children, and we spend a lot of time with them. And finally, I said to him, "You know what I'm going to do? I'm going to pay for a financial plan to be done by Allworth for you. Because you are picking parts of your financial plan and asking questions about it, but what you really need to do is take an overall view of your financial situation."

That was three years ago, that he... Quite frankly, I offered to pay for it, but he is my brother-in-law and I am the CEO. So, they waived the fee, Allworth did.

Scott: So nice to them.

Pat: He retired four weeks ago. He retired four weeks ago. And he was telling me, he said, "I would have never, ever had the confidence to retire if I hadn't gone through this process." And I'm not just saying Allworth. Any good financial advisor.

Scott: Good financial advisor.

Pat: Fiduciary.

Scott: The big Wall Street firms, the big national banks, they will state in there that they cannot provide tax advice. They do not provide tax advice. So, one of the challenges of your advisors, one of those things they state, they cannot...they're not allowed to provide tax advice. Some of the firms don't even allow them to state that they're a certified financial planner, because part of being a certified financial planner is providing tax advice.

So, if you work with an independent advisor, first of all, they're not going to sell any products or not...

Pat: The fiduciaries.

Scott: Many of them, not all. The good ones can provide tax advice along with that. In firms like Allworth, we have our own tax department internally. But, like, to your point, Pat, you're not trying to pitch Allworth. It's, like, just the whole benefit of having that financial plan.

Pat: It makes it easier.

Scott: I had a very different experience with my brother-in-law, with one of my brother-in-laws. So, years ago...

Pat: Okay, this is...

Scott: It's kind of funny.

Pat: Okay, let's hear it.

Scott: Well, this can kind of poke, I don't know.

Pat: Let's hear it.

Scott: Years ago, he asked if I could invest. He had an IRA or something, and so I invested wherever I invested. And then he transferred it somewhere else a couple years later. It's like...and like, "Hey, what happened?" "Well, I was going to try something else." I'm like, "All right, whatever." So, then he comes back to me, maybe 15 years ago, and asked about wanting to just do some financial planning. I said, "I'll tell you what." I said, "I'll have you work... I'm not going to help you, but I'll have you work with one of our advisors. They'll go through everything, put together a financial plan."

They put together the financial plan. I didn't really get involved, but he called me like a month or two later and said, "Hey, can I get your advice on something here?" I said, "Yeah. What?" He says, "Well, your advisor recommended this, this, and this, but I was talking to a local person and they were recommending this, this, and this. So, what do you think of this, this, and this?"

Pat: Like, "I'm not going to have this conversation."

Scott: That's exactly what I said, "I'm not having this conversation."

Pat: Right?

Scott: It was weird. Then after that, he told me about how awesome his...the local financial advisor was. Until a couple of years ago, when suddenly the account balance dropped dramatically, and the guru local financial advisory had. I'm like, "What?" It's just weird. I don't know why I started on that.

Pat: You need to go to some family counseling with your brother-in-law.

Scott: I don't think so. I love the guy.

Pat: Let's go to the call.

Scott: We all have our...

Pat: If you want to join the show, (833) 99-WORTH. That's (833) 999-6784.

Scott: Let's start off with Jim. Jim, you're with Allworth's Money Matters.

Jim: Hi, guys. I've been listening to your show for way too long.

Scott: Oh, good. I don't know if that's a compliment or... If you're telling me you're about to file bankruptcy, then I'm going to think it was a waste of your time.

Pat: What can we do for you, Jim?

Jim: Hey. Thanks for taking my call. So, I'm 62 years old, planning on retiring when I'm 67. And I think I have a plan that's going to allow me to retire, but I wanted to give you the high points and see if I'm on track.

So, where I'm at right now is, well, in 2015, I was recently divorced and had zero net worth. At this point, I own a home that's worth $700,000 that's going to be paid off November of 2026.

Scott: Awesome.

Jim: I have got a pension that, when I retire in January of 2028, will be about $5,000 a month. I'm projected to get about $4,000 a month of Social Security. I've got a 401(k) that conservatively will be worth $500,000 when I retire. I do have retirement medical. And I'm going to probably have a couple thousand dollars of income post-retirement just from doing some welding and fabrication, because I want to be able to do some kind of work.

Pat: How much money do you make now?

Jim: So, last couple years, I've made $210,000.

Scott: And how much are you saving of that towards retirement?

Jim: Right now, 16%. But I'm also...I'm making $4,500-dollar house payments so that I can have my house.

Scott: Yeah.

Pat: Yeah, I get it. Okay.

Jim: So, got...socking away a bunch of money, as much as I believe that I can. So, you know, my plan is to, you know, live off of basically $9,000 a month. I want to downsize to a home in know, a lower cost state.

Pat: Why? Oh, why?

Jim: Well, I just think it's really expensive to live in California.

Pat: You can afford it though.

Scott: Well, maybe he doesn't want to stay in California.

Pat: I'm just telling him. That's why I asked why. I'm not telling him he has to stay.

Jim: Yeah. So, yes, it's cheaper to go other places, and then there's other reasons why I'm kind of getting tired of it here.

Pat: Okay.

Jim: But...

Scott: Oh, I get it.

Jim: Yeah. Yeah.

Scott: There's not a month that doesn't go by I'm like, "Why am I in this state?"

Jim: Right. Well, I can just get so much more property and value in a place that, you know, could be potentially just as nice for a fair bit less money and headaches, honestly.

Scott: And what's your main question for us?

Jim: Oh, so, is this a plan that's sound?

Pat: It's golden.

Jim: Or is inflation going to...

Pat: No, it's golden. It's golden. It's great. It's unbelievable. Does your pension have a cost-of-living adjustment on it when you retire?

Jim: No. Yeah, it does not.

Scott: But Social Security does.

Pat: But Social Security does, and your 401(k).

Scott: And your house... I mean, you're going to have a house...

Pat: Paid for.

Scott: You're single, a house paid for, with $9,000 a month income.

Jim: Yeah.

Scott: You should be able to make it work.

Pat: Yeah, you're golden. You're fine. You're...

Jim: Okay.

Scott: But the question is, so, if you're going to...if, in fact, you will be retiring in another state, I would question whether it makes sense for you to be working on getting your house paid off or socking more money in your retirement account.

Jim: Okay.

Pat: What's the interest rate on the home?

Jim: That is...that's part of why I called, is, you know, I've concocted this plan myself. And, you know, people like you who know more about this might tell me that it's a better idea.

Scott: Well, I mean, look, we're big fans of having homes paid off for retirement. Not for everybody, but 90-plus percent of people. Just the peace of mind alone. And you never have to worry about a house being foreclosed upon if it's paid off.

Pat: Yeah. And... But I'm going to... That, Scott, I completely missed that. Thank you very much. That is a great idea, to not accelerate the payments on the mortgage. What do you care? You plan on selling the home anyway. And you probably have a low interest rate.

Jim: Yeah, it's 2.85%.

Pat: There we go. And so you should put everything...

Scott: It's actually a good's a good time to be investing because prices, of particularly companies, are down.

Pat: Go back to the minimum payment on the mortgage. Put every excess dime you can into your 401(k) on a pretax basis.

Scott: But what do you have in savings? Cash in the bank.

Jim: So, in just cash savings, I only have like $12,000.

Pat: You're fine. You make a lot of money.

Jim: I do. Yeah.

Pat: Yeah. Yeah. No, no, you're great. Look, you've recovered nicely from this divorce financially.

Scott: Yeah. I would take...I would calculate this on an after-tax basis of whatever that extra amount that you're paying on your mortgage. How much are you paying, extra are you paying? $3,000 a month or something?

Jim: I'm paying $2,500 extra.

Scott: Okay, $2,500 extra. So, that might mean... Well, you're going to be maxing out your... Do you work for the state of California?

Jim: No, I work for a utility.

Pat: Yeah.

Scott: Okay, utility.

Pat: Yes, yes.

Scott: All right. So, you're going to be're going to be hitting the max.

Pat: Yeah.

Jim: Yeah. I think I'm... Well, I'm already within hundreds of dollars of hitting the max now.

Pat: That was the other thing.

Jim: So, that would be my question. If I did change my plan, would I... That's where I'm at.

Pat: Just see how much room you have in the 401(k) and move it up to whatever you can, the highest you possibly can.

Scott: And then where's he saving the extra?

Pat: I'd put it in the bank. I'd get a little bit more buffer cash.

Jim: Okay.

Pat: I wouldn't be in a hurry to pay off that mortgage.

Scott: I would agree with you. And it'd be better if you end up with a chunk of cash that you can go home shopping in four years in some other state.

Pat: Yes. Wouldn't be in a hurry. And if you plan on selling that house anyway, the mortgage will pay off when you do the transaction.

Scott: The more I think about it, if you have some money to be in a position where... I mean, if you can find the house that you want, even if you use a mortgage for a short period of time, had the money for a down, bought the place, then turn around and sell the place in California, that would give you that luxury to be able to do that.

Pat: Yeah.

Scott: As opposed to trying to sell a contingent and all that.

Pat: So, no, you're doing great. Those were just minor things around the edges. But if you walked in with this and said... I mean...

Scott: At the low interest rate you're on your mortgage, having cash in the bank today is going to help you out.

Pat: That's right.

Jim: I just don't...I don't have a lot of wealth. That's my concern.

Pat: Okay. All right.

Scott: Jim. Jim. If you do a discounted...

Pat: Cash flow of your monthly pension.

Scott: And Social Security, you've got tons of wealth.

Pat: You've got all kinds of money, you just can''s not in a lump sum.

Jim: Okay.

Pat: But what happens when people retire is they actually turn their lump sums in streams of income. You have the streams of income with no lump sum.

Jim: Got it.

Pat: You're like the guy with a ham under his arm crying poor. Don't worry about it, you're doing great.

Jim: Okay.

Pat: Not crying poor. The guy with a ham under his arm crying hungry.

Scott: I don't know what you're talking about. I don't know if I ever heard that one. But anyway.

Jim: Fair enough. I just...I see people who have made way less money than I have and end up having $5 million dollars...

Scott: No. That's right.

Jim: So, okay.

Scott: Jim.

Pat: You're doing great.

Scott: Jim. I know it's human nature. We all... Not... Most of us do it. Don't compare yourself to others. And if you really want to look at yourself to others, just even on the U.S. If you look at the typical 62-year-old, your financial situation, you're in the top 2%, if not...

Pat: Maybe even 1%.

Scott: Maybe even 1%.

Pat: Yeah.

Scott: It's retirement income?

Pat: You're doing fine.

Jim: Okay. All right. Really appreciate the help.

Pat: And so what do you do for this utility?

Jim: I manage large infrastructure projects.

Pat: Okay.

Jim: That makes sense?

Scott: Yeah.

Pat: Yes. Yeah, yeah, yeah.

Scott: All right, Jim. Glad you called.

Pat: Hopefully... Yes. Hopefully you're making the network that provides us services more secure.

Jim: Oh, absolutely.

Pat: I'm guessing I know what utility you work for. And probably...

Jim: Yeah, yeah. That's a whole different phone call.

Pat: My little brother works for exactly the same utility.

Jim: I'm happy to hear that. I hope he's enjoying his time.

Pat: He loves it. He loves it. So, appreciate the call.

Jim: Good to go.

Scott: Yeah. Thanks, Jim.

Jim: All right. Take care, guys. All right.

Scott: Had you gone to work for a utility 30, 35 years ago or whatever, most of those gals and guys are pretty pleased because they're one of the last industries that still have pensions.

Pat: Yes. Not only pensions, great pensions.

Scott: Let's head to Montana. We're talking with Leslie. Leslie, welcome to Allworth's Money Matters.

Leslie: Hi there.

Scott: Hi, Leslie.

Leslie: Thanks for having me.

Pat: Thank you.

Scott: Good to have you.

Pat: What can we do to help?

Leslie: Well, I have about three questions that are pretty much related. My husband and I just retired last year. He's 66 and I'm 62.

Scott: Did you guys live in Montana or did you just move to Montana?

Leslie: Yeah, we've been living in Montana for 18 years now.

Pat: Okay.

Leslie: Yeah. Yes. Unlike everybody else that's moved here in the last three years.

Scott: That's why I was asking.

Pat: I know.

Scott: You're like a local now.

Leslie: "Yellowstone." Yeah.

Pat: The series "Yellowstone" has ruined neighborhoods in Montana, hasn't it?

Leslie: Don't even get me started.

Pat: Like, all of a sudden. You notice they don't film the... I've only watched the "Yellowstone" things. Do they film in the middle of winter? Do they ever show what it's like in Montana...

Scott: Wind is howling and it's...

Pat: the middle of winter where you guys are...

Scott: ...two degrees.

Pat: You look like the Donner Party up there.

Leslie: You'll be happy to hear, surprised to hear, that I've never watched the show. But they were actually...they did...I did watch one episode, because they filmed it at the hospital where I was working.

Scott: What town do you live in in Montana? Montana is beautiful.

Leslie: Missoula.

Pat: It is absolutely... I spent some time in Missoula this last summer, it's absolutely beautiful. For the five days I was there, it was gorgeous. My wife's like, "What do you think?" I'm like, "You got to come up here in January." Anyway, your question.

Scott: Back to you, Leslie. Okay.

Leslie: Yeah. Yeah, no.

Pat: As we digress.

Scott: What'd you do in Missoula, Pat?

Pat: Oh, it was great. We went to this brew pub.

Scott: Okay.

Pat: Okay.

Leslie: Yeah. Those abound. Yeah, no, it's a's a wonderful place to live.

Scott: It is.

Leslie: I love it here. People...when we retired, people said, "Are you going to stay?" I'm like, "Yeah."

Pat: Exactly.

Leslie: "Why would we not?"

Scott: Okay. What's your question?

Leslie: Yeah. The question part. So, they're all kind of related. So, with retirement, we, you know, kind of limped along just with some savings for last year. Because with the economy such as it is, we didn't really want to start pulling things out, necessarily. And now we're kind of to the point where we are trying to sort of figure out where to pull from.'ve had something come up where my son-in-law has gotten into a situation where he would be best served by borrowing some money from us. And I can explain that a little bit more. So, we're kind of trying to figure that out. And then trying to figure out when to start taking Social Security.

Pat: Okay. So, let's start with this.

Leslie: Yeah.

Pat: What do you have in 401(k)'s, IRAs, that sort of thing?

Leslie: Yeah. In 401(k)'s and... Well, we have probably, in 401(k)'s, IRAs, about $2 million. And then we have probably another $340,000 in Roth.

Pat: Okay.

Leslie: So, that's that part.

Pat: In brokerage?

Leslie: And in brokerage, we have about $500,000. And then there's also an inherited IRA that I have that's about $100,000.

Pat: Okay. And is your home paid for?

Leslie: Yeah.

Scott: And what's it worth?

Leslie: About... Well, thanks to everybody moving here, a lot more than it was about three years ago.

Pat: Okay.

Leslie: Probably about $900,000, I guess.

Pat: And how much money did you make, you and your husband, when you were working?

Leslie: Well, we kind of tapered down. Because I was...probably for the last few years, I ended up just working part-time. So, do you want to know the...

Pat: Yeah, at the end, at the end.

Leslie: [crosstalk 00:22:03] retired?

Pat: Yeah.

Leslie: Yeah, probably about $150,000, $160,000, something like that.

Pat: Between the two of you?

Leslie: Between the... We're actually more like, let's say, $180,000, probably, between the two of us.

Pat: Okay. And will either of you receive a pension?

Leslie: No.

Pat: Okay. And, okay, so your question for us is... And you've been living off your brokerage account?

Leslie: No, we actually...we had some other money that I had just...that we just kept in cash that I had set aside for the first year.

Pat: So, tell us about your son-in-law, and he wants to borrow money. What for?

Leslie: Yeah. So, he... Well, my daughter and he live in Scotland and he's a UK citizen. And they were hoping to eventually move back to the U.S. And so he's actually gotten into grad school, that's a one-year program at Harvard, that he was thinking that would be the first step in trying to get transitioned to the U.S.

Scott: What type of school? What's the degree?

Leslie: It's going to be sort of a real estate development program that they have. He's actually a city planner right now in Scotland. So, he's kind of looking to get more into the private sector, he's been working for the...

Scott: And the reason I ask is because there's can get a PhD from Harvard. But if it's in a field that's not a highly compensated field, you can...

Pat: And how much would this cost...

Leslie: Right.

Pat: How much would it cost to go to Harvard?

Leslie: I think it would be about $80,000 for the one-year program. Which is shocking to us, but I guess that's what it is to do these kind of programs.

Pat: And he wants to borrow the money from you?

Leslie: Yeah, borrow the money. And they're hoping it would be just a short term. They were going to... They own a flat in Glasgow that they were going to sell. And they were probably going to clear close to the amount that the tuition is going to be.

Pat: Okay.

Leslie: However... Yeah. The only problem is, however, it's turning out to be very complicated. Because for him to get a student visa, he has to prove connections to the UK, that he doesn't just want to come to the U.S. and live. So, they can't... Now, they just recently found out they can't sell their flat, in order to get that student visa.

Scott: So, what's your main question for us here then?

Leslie: Yeah, sorry about that.

Scott: What's the flat like? Is it a two-story?

Pat: Okay.

Leslie: The main question is advice on where to take the money. And, you know, obviously, the other question is, "Is this not a smart thing to do?" But I think we've already kind of made peace with the fact that we should go ahead and help them along with it.

Pat: Yeah. So, the first place you should take the money from is the inherited IRA.

Leslie: Okay.

Pat: If you're going to start income.

Leslie: That was what I was thinking. Yeah.

Pat: That's the first place.

Scott: Why do you say that?

Pat: Just because it's the easiest.

Leslie: And, yeah, [crosstalk 00:25:06] the reasoning.

Scott: What about the brokerage? Is there anything that didn't have much capital? I would disagree with you.

Pat: No. They've got no income coming in.

Scott: I know. But it's an opportunity this year, could do a nice Roth conversion.

Pat: That is correct. That is correct.

Scott: The inherited IRA, what year did you inherit that?

Leslie: In 2017.

Scott: Okay. So, she''s's little distributions over her life expectancy.

Pat: Yes. I get that. So, I would, most certainly... Well, I shouldn't say the first.

Scott: Do you there some part of your brokerage account that doesn't...that wouldn't trigger a big taxable gain? Is there some fixed income in there?

Leslie: Not really, no.

Pat: So, here's what I would do. I would actually look at...I'd look at Roth conversions.

Scott: Hold just a moment, Leslie.

Pat: Okay. We'll just bring you over the break.

Scott: We got to pause for radio.

Leslie: Okay.

Man: Can't get enough of Allworth's Money Matters? Visit to listen to the Money Matters podcast.

Scott: Welcome back to Allworth's Money Matters with Scott Hanson and Pat McClain. We're talking with Leslie here. And we're trying to figure out how to best come up with $80 grand to help her son.

Pat: Well, it's not just that, it's not the $80 grand just for the son. It's income to live on, correct?

Leslie: Yeah, it's kind of a bigger picture.

Scott: Yeah.

Leslie: Yeah. And also, with the caveat that maybe that $80,000 will come back to us.

Pat: Well, that would be the hope. That would be the hope.

Leslie: Yeah, the hope. I think when I was framing my question that I sent in, I was saying to my husband, "Well, what is it that makes us think that we're not going to be a cautionary tale lending this money?" And he goes, "Well, because Joseph knows that if he doesn't give it back, I'm going to come find him and kill him."

Scott: Well, I think, also, look. I mean, you've got a decent size net worth. And the kids would...I think at some point in time, would expect something in inheritance down the road.

Pat: And it is $80,000 to go to Harvard for a...presumably a degree that would help him move through his career faster.

Scott: What's going to drive this is the makeup of that brokerage account and the tax...what tax implications there are on...

Leslie: Right. Got you.

Scott: And then it might be... And I said the Roth conversion. But, Pat, it might make more sense to... Because of the way capital gain tax laws work, without any really other income, you could could trigger a large capital gain this year and pay nothing.

Pat: Zero tax.

Scott: I mean, you could have almost $90,000 of capital gain. And if that's your only income, there's no tax whatsoever on it.

Leslie: Okay. Got you. Yeah.

Scott: And does Montana have a state income tax? I don't recall.

Leslie: Yeah, they do. It's fairly hefty.

Pat: Yeah. So, I would... So, if I was going to go into any qualified dollars, IRAs, you don't think you should do any?

Scott: I don't... Look. It's impossible to give an answer without knowing the structure of that $500,000 in the brokerage account.

Pat: That's right.

Leslie: Yeah.

Pat: Right?

Leslie: Yeah.

Pat: Yeah.

Leslie: I mean, it's just, it's a...

Pat: Like how much is much embedded gain do you have?

Scott: And then you need to run the numbers. Are we better off doing a Roth conversion or taking advantage of... It might make more sense to take advantage of a low capital gain, but it depends on what's in there. And if there's something in there that's a total stock market fund or an S&P 500 fund that you're probably going to own for years, that's one thing. If you're over-concentrated in a company that this provides a tremendous opportunity to diversify away from that, that's completely another.

Pat: So, the answer to your question, Leslie, is we have no...

Scott: It all depends.

Pat: We don't know.

Leslie: Right. Yeah.

Pat: Because it's...

Scott: We can't figure that out on a 10-minute phone call on a radio program.

Pat: Yeah.

Leslie: Right, got you. Yeah. So, I guess, like, the question, just thinking about pulling it out from the inherited IRA, would be, you know, in theory that money would be able to then go back into something, but then we couldn't put it back into...

Pat: That's correct.

Leslie: ...the IRA.

Pat: That's correct. But it might be a combination of three things.

Scott: A bunch of things.

Pat: Right?

Scott: It probably will be.

Pat: My guess is at the end, it will probably be, "Do we keep the distribution from the inherited IRA at the required minimum distribution or do we actually increase it a little bit? Do we do a Roth conversion, and then we take some money out of the brokerage account, depending upon the tax implications there?"

Leslie: Got you.

Pat: My guess is...

Scott: "And then when do we start Social Security?"

Pat: Correct.

Leslie: And this is the other question I had. Yeah.

Pat: Yeah. My guess is that...just having done this for 30 years, that it's probably going to be a little bit of everything.

Scott: Yeah, yeah.

Pat: And I would probably defer Social Security until I could take advantage of this, depending upon the embedded gains in the brokerage account. How long have you owned that brokerage account?

Leslie: Not so very long. Maybe about... I think it was small for about five years now, and then I inherited some more money. So...

Pat: How long ago did you inherit the money? You said 2017?

Leslie: Some in 2017 and some in 2020.

Pat: Okay.

Scott: There might be some where there's no gain at all.

Pat: My gosh, yeah.

Scott: You might even have some where there are some losses.

Pat: Yes, yes, yes.

Leslie: Yeah. We... I mean, there were losses that we took this last year.

Pat: Well, there might be almost...

Scott: It might be carry-forward.

Leslie: Yeah.

Pat: Yeah. Yeah.

Scott: You might have some carry-forward.

Pat: And if you have not...if you don't have a ton of gain, then you'd actually...then you'd lean over to the Roth conversion.

Leslie: Right. Which I did do this last year.

Pat: Okay.

Leslie: Some. So, yeah. And then, so, and that just kind of ties into everything of us really trying to strategize where to pull money from in general...

Pat: That's right.

Leslie: ...after... Yeah. Because it's just been, after spending all these years putting money into these accounts, it's kind of hard to start thinking about pulling out.

Pat: It's really hard.

Scott: That's right.

Pat: It's really hard.

Leslie: That was the part, I guess, we didn't realize about retirement, that you had to actually start taking all the money out.

Pat: It's... Psychologically, it's difficult, isn't it?

Scott: And I know...

Leslie: Yeah.

Scott: Look, and let me just ask you this question, Leslie. Have you guys worked with a "financial advisor" in the past, have you had experience in that? And is it a good experience, a bad experience?

Leslie: Yeah.

Scott: Because you're in a...this is a fairly complicated situation right now.

Leslie: Got you. Yeah.

Scott: And your number one solution is to call us, which we take as a great compliment. But is there an apprehension to talk with...hire a financial advisor? And if so, why?

Pat: Tell us about the experience with the last financial advisor.

Leslie: Oh. Well, so, we've kind of had a few different things. So, we have, of course, a financial advisor through the TIAA with our 401 and 403(b) stuff.

Pat: Okay.

Leslie: And, of course, they have their own perspective. And then we have our...

Scott: And their own products.

Leslie: Their own products.

Scott: Yeah.

Leslie: Yeah, which are limited. And then we...and then the financial advisor, of course, where the investment thing is. And then I did meet with a financial advisor last year, who is just an independent financial advisor, and kind of got some strategies going there. But they had just...that was the last they were doing on just sort of pay-as-you go meet with them. And then they were transitioning over to just managing all your funds for you, which...

Scott: And you didn't see the value there.

Leslie: Yeah, that didn't make sense since we know, with these other people, as well. So, that's where we are with that.

Pat: Who was the schoolteacher?

Leslie: The schoolteacher was my husband. I worked...I was employed by a medical school for a while when I first started working.

Pat: Did your husband...

Leslie: That's how I had...

Pat: Did your your husband getting a pension?

Leslie: No. They... No. It's just no pension.

Pat: Okay.

Leslie: Yeah. It was at the University of Montana.

Pat: Okay. Got it, got it, got it. Okay. All right. There we go. And for the rest of the listeners, we knew that there was something to do with education because TIAA-CREF stands for Teachers Insurance and Annuity Association-College Retirement Equity Fund.

Scott: Look at you.

Leslie: That's impressive.

Scott: That's 30 some years in the industry.

Pat: And absolutely of no value.

Scott: That's how to get people to walk away from you at a cocktail party.

Pat: No value whatsoever. Anyway, you've got some planning to do.

Scott: Yeah. I would look at this... You'd have some planning. But I'd look at this as a blessing to be able to help your daughter and her husband. That's what really this is.

Leslie: Yeah. And we are. And we are looking at that way.

Scott: And, I mean, it is. And you... Look, you didn't accumulate these dollars out of luck.

Leslie: Right.

Scott: You worked hard to save these dollars. There were times you guys sacrificed. And other families were doing such and such, and you guys said, "No, we can't do that. We don't have the money." Because you were disciplined in your savings. Right?

Leslie: True.

Scott: Yeah. That's why you've got this. But...

Leslie: And then we inherited some.

Scott: "Then we inherited some." But it's... What a great opportunity to be able to help your daughter and her husband.

Leslie: Yeah. You're very right. I agree with you 100%.

Scott: Yeah. What a blessing.

Leslie: Yeah. Yeah.

Scott: Whether you got this way through hard work or luck, regardless, what a blessing to be able to be in that position.

Pat: So, appreciate the call.

Leslie: Yeah.

Scott: Yeah. Wish you well, Leslie.

Leslie: Well, thank you so much.

Pat: Thank you, Leslie.

Leslie: All right. Thanks. Thanks. Bye-bye.

Scott: She was nice.

Pat: She was very nice.

Scott: Yeah, I know. It's funny, there are some people it's like, "I don't really like them." Seems like the kind of person I would enjoy sitting and having a conversation with about other things. Maybe not. You never know. Let's...

Hey, before we take another call, we're going to be joined with our... Allworth Financial, we have a tax department, an internal tax department, headed by a CPA, with a bunch of CPAs, that we do...not only do we do taxes for our clients, some of our clients, I should say, but we also are able to provide kind of that tax planning throughout the organization and with our advisors on complicated matters.

Pat: Like the one that we just talked to. Leslie, we just talked to. We'd pull someone...the financial advisor would probably pull someone in from tax in order to, you know, bounce around the best idea, and then do some pro formas or projections on taxes, if we do it this way or that way. And that's the benefit of actually bringing in-house tax advice.

Scott: And you might be thinking, "Wait a minute, we just got past April 15th and you already want to talk about taxes?" And we actually thought this is a good time. Because a lot of people are on extension, but a lot of people have already paid their taxes and done their...completed their taxes. And it's like when you're sitting with your accountant and doing your taxes, it's pretty much too late. You're just looking in the rearview mirror at what's already happened, and you're recording it, and paying the taxes. Tax planning is the work that's done throughout the year to mitigate not only your current taxes, but future taxes...your taxes in the future, as well.

And so Michael Mouriski is joining us. Michael heads up our tax team, Allworth's Tax Solutions. He's the Vice President of Allworth's Tax Solutions. Michael, thanks for taking a little time to join us.

Michael: Sure. Thanks for having me.

Scott: Yeah. You survived tax season.

Michael: We did. Yes. It was tough, as always, but we survived.

Scott: Yes.

Pat: I thought you were going to take a couple of days off. Is this your day off?

Michael: This is my day off.

Pat: Well, thank you. Even on his day off, we ask him to work.

Scott: You could have said "no," by the way.

Pat: You could have said "no," you don't want to be on this.

Michael: That's okay. I slept all day yesterday, so I'm good to go.

Scott: And by the way, this is recorded a little early, before it was aired. So, what are some of the most... Actually, I mean, taxes can have a tremendous impact on our investments, particularly in retirement. And I think most people don't really pay attention that closely to that. Why do you think that is?

Michael: Well, I think there's a number of reasons. I think some people just don't get advice, or they get, you know, bad advice. A lot of CPAs and accountants, tax preparers, they're not always tax planners. Oftentimes, they just prepare taxes, and then they're done. And they don't really offer planning services for their clients. And, you know, a lot of people just don't understand, like you said, it's a year-round adventure to be planning, you know, proactively all the time. Right? It's when you do your taxes, it's a rearview mirror, like you said, it's after the fact.

Scott: And what are some...what are a handful of some good planning techniques for somebody who's maybe they're in retirement or approaching retirement age? What are some of the major tax planning strategies you see people ignore?

Michael: Well, oftentimes, you know, they don't consider what their income is going to be. So, for example, you know, they may end up in a year right after retirement where their income is really low and they're in a low tax bracket. And if you don't plan for that, you know, you could have a missed opportunity. There's a number of things that you could consider. You could take some extra income and not have to pay any incremental taxes. You could consider a Roth conversion. You could also harvest some capital gains. I think on your last call, you talked about an example of, you know, with little to no ordinary income, you may be able to take a large amount of capital gains tax-free.

So, it's really understanding what your situation is going to look like, and then taking advantage of that.

Pat: How much do... How much... Well, you work mostly with Allworth clients. So...

Scott: You're not seeing [inaudible 00:39:36], hopefully.

Pat: Right? You're seeing the advisors actually take advantage.

Scott: Well, and they do planning. They are CPAs that do tax planning, not tax preparation.

Pat: That's right, that's right.

Scott: Preparation is the grudging work that happens at tax season, and then the planning is what happens the rest of the year.

Pat: Yeah. So, tax preparation is reacting to what you've created throughout the year.

Scott: And, Mike, why don't you state that, why it's a challenge for people to get good tax planning the latter part of March, first part of April, as opposed to another time in the year?

Pat: And why it's okay and sometimes a good idea to file an extension?

Michael: Well, you know, most tax planners are tax preparers. And they' know, this crunch period is, you know, starting in February through April, you know, all we really have time for is the preparation. And so it's hard to set aside time to do real planning because you're trying to get tax returns prepared.

So, you know, doing an extension is helpful. You know, a lot of things, like you said, are after the fact when you're preparing the tax return, but sometimes they're not. You know, for example, if you are a small business owner and you might want to consider a retirement contribution, going on extension would allow more time to take a look at that and decide if it's helpful or not.

Scott: Because you would have until October 15th for a contribution for the previous year, right?

Pat: Yes.

Michael: That's right. Correct.

Scott: All right. So, what... Last question. What is the number one mistake your team sees, in general, that investors overlook when it comes to how taxes impact their investments?

Michael: You know, in general, it's's not understanding the tax implications of their strategy or what they're going to do. Oftentimes... Well, you can't fix it after the fact, right? So, if you don't understand what you're doing, you either have created a situation potentially negative or you missed an opportunity, right? You had low income and you didn't fill up a low bracket, for example. Or you sold some investments at a gain and you also had some that you could have sold at a loss and offset them, and you didn't look at it and didn't take advantage of that.

Scott: Yeah. Well...

Pat: Exactly.

Scott: Michael, appreciate you taking some time. And it's just a reminder why it's so important to do that tax planning.

Michael: Absolutely.

Scott: Yeah.

Pat: Thanks for being here.

Scott: Thanks for joining us and for being part of [crosstalk 00:41:58]

Michael: You're welcome.

Pat: Thanks. You know, Scott. So, I think probably one of... I'm going to try to state this. One of the most exciting things in investments that has occurred in the last couple years is the use of technology for tax in the allocations, in the portfolios.

Scott: Now, with retirement accounts, 401(k)'s, IRA, it's irrelevant.

Pat: Yeah. But in brokerage accounts, there's things such as direct indexing. Which is it used to be very, very expensive and very cumbersome to actually to do. It was a manual process.

Scott: Which is essentially putting together a bunch of securities. Not trying to think you're going to outsmart the market, but you're trying to mimic an index, mimic the S&P 500. Instead of buying an ETF, you buy...maybe it's 180 different... It's all driven through technology to get you as close as possible to that index. And then it creates tremendous opportunities for tax-loss harvesting. And then if you're going to be charitably inclined, to give some of your highly appreciated individual securities, as opposed to ETFs. And then, Pat, to your point, even with...if you own mutual funds and ETFs, there's some great technology that will track your cost basis and when dividends are reinvested, and all that, and will look for opportunities to...

Pat: To actually either take loss or...

Scott: Harvest a little bit of gain.

Pat: And this is...there's two things that took place that make this possible. One is what we call friction, which is the trading cost on a platform such as Fidelity or Pershing or Charles Schwab, those have all gone away.

Scott: Yeah, most of the time it's free, or close to free.

Pat: So, there's not a lot of friction there in the trading cost to buy one and sell the other, which used to...

Scott: Used to be massive.

Pat: Used to drive some of the decision-making. And the other is the use of technology to actually go through these portfolios using, you know, AI.

Scott: You click a button and...

Pat: And it does it, and then makes recommendations. And the advisor is like, "Yes, do that. No, don't do that." So, ultimately, you could put a human stop in it, but this stuff didn't exist four or five, six, seven years ago at the levels. And, look, how investments are made has changed significantly in the last few years based upon the use of technology. And I don't think most consumers are aware of that.

Scott: Probably not.

Pat: Nor should they be.

Scott: Let's continue on with the call here. As always, if you want to join us, you can call our number or you can send us a question...send us an e-mail and we'll schedule a time. Or you can simply call (833) 99-WORTH. Let's talk with Frank. Frank, you're with Allworth's money matters.

Frank: Yeah, hi. Thanks for taking the call.

Scott: Hi, Frank.

Frank: Great show, by the way. Very interesting, and you're not repetitive, and you're comical the way you banter, it really makes it interesting.

Pat: Well, thank you.

Frank: But two questions here. One is...the main one is on, like, a lump sum decision. And the other is spousal Social Security.

Pat: Okay.

Frank: So, for the lump sum, it's know, kind of like would be an $800,000-dollar lump sum, versus like $52 K.

Scott: So, just to understand what's happening. So, are you retiring and you have an option to take your monthly pension over?

Frank: Yeah. I mean, you know, over the next couple of years. And it's not a COLA situation, but it's a regular corporate pension.

Pat: Okay.

Frank: And so...

Pat: Is the 52... Sorry, Frank. Is the $52 K a joint survivor or life only?

Frank: It's joint survivor, yeah.

Pat: Okay, thank you. You're doing it against the're measuring it against the right thing. Okay.

Frank: And, you know, it's just kind of like, you know, it's supposed to be an overfunded pension and the whole bit. But at the same time, you know, you're locking yourself in every year. So, kind of what's your view on just...on possibly, you know, doing more of know, an asset allocation on that, or even just a fixed income, to try to yield at least what I would have gotten on the [inaudible 00:45:58].

Pat: Okay. And you said the decision isn't for a couple of years, right?

Frank: Maybe a year or two, yeah.

Pat: How old are you?

Frank: 60.

Pat: How's your health?

Frank: Good.

Pat: Okay. So, here's the answer to this question. You're not going to make that decision until the day you need to make the decision. And the reason is there's three factors that actually will drive this. Right? The first one being, and the most important, is your health and/or life expectancy. So, you get to that date and you've got poor health, and hopefully not. But if you've got a shortened life expectancy, or believe you have a shortened life...

Scott: Of course, you want the lump sum.

Pat: You want the lump sum. Right? The other is the size of the lump sum is actually driven by an interest rate that you have no control over, nor does the pension plan. The lower the interest rate that...the prevailing interest rate that they're using at that particular time. So, they might be using the 10-year treasury or they might be using the PBGC rate at 100% or 120%. There's all these underlying numbers that drive this.

Scott: And they have to...there''s written by statute. So, they have to follow the law and they can't just pick a number out of their head. It's...

Pat: And some pensions use an annual interest rate and some use a quarterly interest rate. And so the higher that interest rate that they have to use internally, the lower the lump sum. Inversely, the lower the interest rate that they have to use, the higher the lump sum. And so you trying to make a decision today about what's the right way to do, you have pieces of information that you have absolutely no access to.

Scott: And so I can think of a time, Pat. This is back in the '90s. I remember working with a client, they wanted no risk. They were going to take... They had this same option, "Do I take a pension or do I take a lump sum?" It just happened to be in the market. I said... We were able to take the lump sum by U.S. treasuries, and at a higher income than the joint survivor benefit was going to be, with U.S. government... Which, I would argue, was more secure than his company pension. It was, because it was 100% guaranteed, as opposed to... There's limits on the PBGC.

Pat: And part of what drives the date you're going to retire is this interest rate. Because oftentimes, it is a published rate that is known 15 or 30 days prior to the date that they retire. So, as an example, on December 15th, if I know what the interest rate is going to be on that pension plan on January 1, you might be more inclined to leave in December because you've got a higher lump sum, or you might be more inclined to leave in January. So, there's lots of things that go into it.

Scott: My guess... Have you had a... Frank, are you quite a bit experienced on investing?

Frank: Yeah, I am.

Scott: Yeah, I got that just first talking to you. You're probably going to take the lump sum.

Pat: Yeah.

Scott: 90%.

Pat: How much more money is outside of this lump sum in 401(k)'s, IRAs, brokerage accounts, things like that?

Frank: $7.6 million.

Pat: Okay. Well, then, you're going to take the lump sum. You're going to take the lump sum.

Frank: Okay.

Pat: And we could do all the math in the world, but it makes up...

Scott: Unless it's just some really bizarre diamond interest rates or skyrocket or...

Pat: Yeah. And all that basically does is says that you're going to take the mortality risk in-house. Because you can build a portfolio that looks very similar to what the underlying portfolio is for the pension. Right? They have the...

Frank: Right.

Pat: They don't have any different access to the marketplace than you do.

Scott: I mean, another way to look at it. Would you take some of your $7.6 million today and go buy a commercial annuity, give control up to an insurance company in exchange for a fixed payment the rest of your life?

Frank: Probably not.

Pat: There you go. So, but in saying that, there are rare circumstances with someone like you where you might be driven to take the pension. But it's highly unlikely. It's highly unlikely.

Frank: Great. And then thanks. And as a follow-up, the other question is the spousal Social Security. You know, my wife would be eligible now.

Pat: You're going to take it as early as you possibly can.

Frank: Okay.

Pat: Yeah.

Frank: That's what I thought.

Pat: Yeah. Because...

Scott: I would, with this net worth.

Pat: With this net worth. When they go to cut Social Security benefits, do you think you'll be one of the first on the list that they're going to cut?

Frank: Maybe third, yeah.

Pat: Okay. Right?

Scott: Elon Musk first.

Pat: Right? Warren Buffet. And then Frank.

Scott: And Frank.

Pat: Yeah. And it's not driven by numbers at all, it's just driven by the fact that when they...this thing is going to run out of money.

Scott: It's just looking at probabilities. The same way... Frank, appreciate...really appreciate the call. But sometimes your advice on Social Security is a's counter to a lot of... If I'm going to look at any sort of long-term investments, whether it's do I take a lump sum or a pension, I look at probabilities of outcome, where's the pension coming from, all these other factors. If I'm looking at buying up a bond, what's the likelihood this company is still going to be in existence and can be able to pay me 10 years from now, 20 years now? Do I get the principal back in 30 years? Same thing looking at Social Security.

Pat: If you are afraid that you're not going to get to the end because of the change...

Scott: Lookit. If you're a wealthy retiree on Medicare, you're paying, what, $450 a month? As opposed to someone who's paying $100 bucks a month, $120 bucks a month, or whatever it is, for your Medicare. Four times as much. You're paying four times as much if you're a high-income retiree.

Pat: And this does have some precedent. They tax Social Security benefits. They didn't tax them 30 years ago.

Scott: Anyway, we're out of time. Hey, I want to let everyone know we've got some great live, in-person investment workshops, a workshop that's called The Investment Question. And we're going to be addressing the top four questions that folks like you are asking right now. You'll learn things such as how to generate income in retirement, how do you make the most of your cash on hand, what are some of the key facts about the SECURE Act 2.0, which changed the requirement on distribution ages and Roth conversions along with that, and strategies for asset allocation and diversification.

So, it's going to be on a variety of different days, a variety of different cities, but they're between May 10th and May 20th. Again, May 10th and May 20th. If you want to learn more, sign up, go to

And it's been great having you with us. We appreciate it. We'll see you next week. This is Allworth's Money Matters.

Man: This program has been brought to you by Allworth Financial, a registered investment advisory firm. Any ideas presented during this program are not intended to provide specific financial advice. You should consult your own financial advisor, tax consultant, or estate planning attorney to conduct your own due diligence.