Now managing taxes anytime is a good idea and kind of understanding what you're doing and trying to minimize things. So what's unusual about retirement time? First, here's one of my favorite cartoons about a man on his death bed. Okay, now why is retirement income different from income at other times? And one of the main things is you may have more choices about where your money is coming from and every type of income you get during retirement is taxed differently because why would they make it easy. So in other words, when you're working, maybe you just get a W2 at the end of the year and it says, hey, you earn $30,000 and you pay whatever is the ordinary tax rate on $30,000. But in retirement when you're no longer getting that regular paycheck, you're not getting a W2 and your employer's not withholding taxes from it, you then have to think about where's your money going to come from. Now the word income can mean a lot of different things and in for accounting purposes income is a very specific thing. But right now what we're going to talk about is more like cash flow like where does the money come from to pay your expenses when you're retired. And some of that maybe income, depending on how you define retirement, maybe you still have some kind of a job or maybe you have rental income or maybe you are getting Social Security or let's see, I have a list of possible things. Yes, if you're very, very lucky, you may be getting a pension and then we have Social Security, we have investment income like capital gains and dividends and interest, you may have rental properties, you might be getting an inheritance. But then one of the areas where you have a lot of the most choice is here, if you have tax deferred accounts like 401ks and IRAs, the whole point of those is you want to spend that money on your retirement. You've been saving them for years and years so you can spend that money. But if they were tax deferred, then you're going to pay ordinary income tax when you take the money out. And ordinary income tax is relatively high. Basically, there are two rates that apply to you. One is your ordinary rate, one is your long-term capital gains rate. The long-term capital gains rate is lower. So when possible, you want to spend things that you pay that rate on. But your tax deferred accounts like IRAs and 401ks and step IRAs, they're all taxed at your ordinary income rate. So when you withdraw money from those is quite important in terms of what your tax bill is going to be. So more about how these are taxed. When you're working, you're taxed at your ordinary income tax rate plus payroll taxes. Payroll taxes are FICA or OASDI or Social Security and Medicare. So when you're working, most of your income will be taxed at 7.65% for that stuff, for Social Security and Medicare, plus your ordinary tax rate. If you're self-employed, same deal, except you're actually paying twice as much in the payroll taxes because you're paying employer and employee portions. Pensions are usually taxed at your ordinary income rates. But one little thing about pensions is usually you're getting taxed by the state that you live in when you are receiving your pension. So I usually use California as an example for things because a lot of us are Californians and also because we have very high taxes here, but I don't know too many California companies that pay a pension. So let's say for the moment that you worked your whole life for General Motors in Michigan and maybe you eventually earned a very high salary, you have a nice pension, you retired in Florida. Florida has no state income tax. So when you're receiving those pension checks, you're going to be paying federal income tax on your pension check at your ordinary rate, but you're not going to pay any state income tax because you're now a Florida resident. It is not taxed at the Michigan rate just because you earned that pension in Michigan. So that's an important thing some people don't know. But one other important point about states, if you are a Florida resident for tax purposes, you better really be a Florida resident. The IRS does not like when you try to fake it.  You need to really sever your ties in Michigan, move to Florida. If you really still live in Michigan or California or New York, don't try to pretend you live in Florida. And by the way, our California version of that is during the pandemic, many people who work in California realized, hey, why am I sitting around in my city apartment when I'm working at home anyway? I'm going to go over to my little Tahoe ski house on the Nevada side. And by the way, Nevada has no state income tax.  So that was just a little side note about states. Your pension is taxed to your ordinary income rates, but in the state when you're receiving the pension, not where you earned the pension.  Social security is kind of tricky. Social security is taxed at ordinary income rates, but your whole social security check is never taxed. Your social security tax for your social security retirement check, you pay your ordinary income tax on either none of that if you have quite a low income or half of it or 85% of it. But that doesn't mean you ever pay 85% tax. It means that for example, if your check is for $1,000, you will pay tax at your ordinary income rate, which might be 12% or 22%, but you will only pay that 12 or 22% on $850, not on $1,000. Another small bit of good news, California state does not tax your social security check. I'm not sure about other states, but California does not tax your social security. So you may pay federal income tax on it, depending on your income, you do not pay state tax on that. Roth accounts, here's the beauty of your Roth IRAs. When you take the money out, you do not pay any tax if you have met the requirements. Now, of course, there are complications and special rules, but in general, a Roth IRA, you've met the requirements if you are 59 and a half or older when you start taking the money out. And also, if your money has been in there for at least five years, we call that the five-year seasoning period. Now, the five-year rule is a little complicated. It depends on whether it was a rollover into a Roth IRA, whether it was a conversion or whether it was a direct contribution. So I won't go into the details on that because it's a little complicated. But if you started a Roth IRA many years ago, you're probably just fine. And one complication I will go into on the Roth five-year seasoning, if it's regular contributions where you're putting money directly into a Roth, you're not converting, you're putting 6,000 or so each year into a Roth IRA, then your five-year clock started with your first contribution. So if you opened a Roth IRA when you were 18 years old, your five-year clock started then, even though you've added a lot of money in the year, since don't even worry about that, your five years is done. So again, the basic rules are you need to be over 59 and a half, you need to have money in it for more than five years. If you did that, you pay no tax when you take your money out of Roth IRAs. That's why they're brilliant. You also pay no tax when you take money out of Roth 401ks. So they're quite wonderful. You may want to mix them in with the withdrawal strategy that you come up with for when you're retired. Your other investments. So here I'm talking about investments that are not part of a tax deferred or tax-free retirement plan. This is just stuff you might have in your brokerage account. Those, if you've held them for more than a year, you get to pay the long-term capital gains rate, which is much better, usually, than your ordinary rate. Long-term capital gains rates are either 0%, 15%, or 20%, depending on your income. And you have to be pretty high income to get into the 20%. I'll show you a chart of those later. But basically, capital gains rates are always better than ordinary income rates. And the key to that is you need to hold your investments more than a year. Note I said more than. Don't wait exactly a year and then take it out because you pay the short-term rates if it's a year or less. And the short-term capital gains rate at this point in our history is exactly the same as your ordinary income rate. So whenever possible, keep your investments at least a year and a day. Now note, again, that that does not apply to your tax deferred accounts. Even though you may have your IRA all invested in stock, it doesn't matter how long you hold it. You're going to pay ordinary rates when you take your money out of your IRA, no matter what. But your other investments, you might be able to get a better rate if you can keep them in more than a year. Your rental and royalty income, you pay ordinary income tax rates. If you are the recipient of term life insurance, somebody died and you were the beneficiary on their life insurance, there is no tax on that. If you are lucky enough, well, I don't know if I should say lucky when it comes to inheritances. I'm sorry your grandma died. But if you receive money from gifts and inheritances, there is no tax to you. Some people get confused because they've heard of the gift tax or the estate tax. If you are the recipient, none of that is your problem. It might possibly, in rare instances, be a problem for the person giving it to you or for the estate of the person who passed away. There is a very small chance they will have taxes, but you don't have any taxes on what you inherit. The money you get, tax free. Okay, that was kind of long. I'm going to stop for a second and ask Zoe if anybody wants clarification of this stuff. So far, just two questions. One is the 457 tax accounts. Where do they go? 457 accounts? Okay. All right, 457s, they behave mostly like tax deferred, they are tax deferred accounts. So they behave mostly like your IRAs. You get ordinary income rates on the full amount you take out. The only reason I didn't list them here is there are slightly different rules about when you can take that money out, but 457s are tax deferred, so they behave like 401Ks when you take it out. What else? A question I'm not sure if I understand. How can I avoid wash sale tax? Oh, everybody understands wash sale, Zoe, right? No. Okay, a wash sale means you were trying to harvest losses, okay?  So here's how that might work. Suppose I bought some, let's see, what's something that went down lately? Well, I'll use an example from a while ago. I did buy some Chipotle stock right before all those athletes got sick. So if I paid $6,000 for my Chipotle stock and then at the end, I'm getting near the end of the year, I want to recognize some losses to lower my taxes because when you sell an investment at a loss, you get to reduce your tax sometimes by the amount of that loss. So the $6,000 I paid for Chipotle, now maybe it's worth only $3,000. So if I sell that, I'm going to have a loss of $3,000, I get to put that on my tax return. Where the wash sale comes in is suppose a few days later I think, oh, I didn't really want to sell that, I'm going to buy it back. So then if I buy it back within a few days or within 31 days actually, if I buy it back, I don't get to use the benefit of that tax loss. So it's not really a big deal. Wash sales are not illegal and you get to take the loss much later when you eventually sell it again, but you might not be able to take advantage of your loss right now if you buy back the same stock or something what's called substantially identical, which is not defined by the way, within the next 31 days. So the way to avoid wash sale problems is don't buy the same stock that you sold at a loss within 31 days. So if you want to recognize some losses December 1st or December 15th, totally fine, just make yourself a note on your calendar to maybe around February 1st, consider whether you want to buy those back. Just don't buy it back the same thing too soon. Another thing a lot of people don't realize about wash sales is if you recognize the game, it doesn't matter. If you recognize the game when you sold something and then you want to buy more later, nobody cares, you're welcome to. No problem, it's not a wash sale. It's only when you're recognizing losses. All right, we'll go on to the next. I do have other questions. Go ahead. Can an IRA be converted to a Roth IRA? Yes, an IRA can be converted to a Roth, and that was one of the things I'm going to talk about for sure, but we can jump right into it now. So you can convert a traditional IRA to a Roth IRA anytime you want. There is no income limit on conversions and there's no age limit on conversions. You can do it anytime you want. It's great to have money in Roth IRAs. The only thing you should hesitate about is the year that you convert from a traditional to a Roth IRA, you pay full income tax on the amount that you convert. So if I have $1,000 in my traditional IRA that I've never paid tax on when I convert it to the Roth, I pay tax on that $1,000 that I'm converting. So that's the thing to think about. Doing Roth conversions is a wonderful strategy. Just make sure you do it in years when your income is relatively low, which it very well might be right around the time you're retiring. And so that's a key strategy. We'll come back to it some more as well. Anything else? If you open a second Roth account, does the five-year rule start again when you open the second account? Oddly enough, no. No. The government thinks or the IRS thinks of your Roth IRAs as if it's all one thing. So if you put money in one Roth IRA, a bank of America when you're 18, and then you forgot about it, and then 20 years later you start saving in a Roth account at TD Ameritrade, don't even worry, your five-year rule is met. They think of it all as one. Is capital gain from property sale considered earned income? No. It is not earned income, but that's good because earned income is always taxed higher. And so capital gains from a property sale will usually be taxed at your preferred capital gains rate. In fact, I'm going to jump down right now and show you. I have some slides with tax rates that may help clarify some of that. Okay, if you're single, these are ordinary tax rates in 2021. So if you are single and you make, say, $100,000 a year, you are in the marginal bracket for 24%. Marginal means that your next dollar is going to be taxed at 24%. And just for people who aren't familiar with that term marginal, I just want to point out that if you're making $100,000 and you're single, you are not paying 24% on the entire $100,000, not paying $24,000 in tax. What you're paying is 10% on the first $10,000 or so, 12% on the next batch, 22% on some and 24% on some. So some people don't understand that and they think, uh-oh, like I was making $86,000 last year. If I make a little bit more money, all of a sudden I'll be up in this higher tax bracket and I'll pay a lot more tax. No, you really won't. You can't lose by making more money because only the new money will be taxed at the high rate. Your $86,000 will still be taxed at relatively lower rates. And this is for single people. Here's the other most common bracket, which is married filing jointly. So here, if the two of you together are earning $100,000, you're going to be in the 22% marginal bracket. And the two of you together are earning less than about $20,000, you're in the 10% bracket. There are a few other brackets, but they're less common, married filing separately, head of household, and there's another one called qualifying widower, but that ends up being the same as married filing jointly. Okay. So let's go back to this single person who is earning $100,000 a year. She's in the 24% marginal bracket for ordinary income, but now here's her long-term capital gains rate. She's single. She's earning $100,000 a year. So she's in here. So her long-term capital gains are taxed at only 15%. Even though her ordinary income is taxed at 22%, so that can make a serious difference. And look here also, if she earns less than $40,400 in 2021, her capital, and that means less than $40,000 altogether, her capital gains rate is going to be 0%. So that's all of your income. It doesn't mean that you can suddenly sell investments and realize $100,000 in capital gains and pay, or let's say, yeah, you can't recognize $100,000 worth and pay 0%. But if you earn, let's say you earn 20,000 from your job, that would be a great year to sell some investments that you have gains on. Because if you're earning 20,000 from your job, you can sell investments with up to $20,000 worth of capital gains and pay 0% capital gains tax. So that would be a strategy that we call harvesting gains. When you're in a low tax bracket, sell things with gains, buy them right back because you get a 0% rate on your sale. So you're recognizing capital gains for free. Then you can buy the same stack stocks back, no wash sale problem because it wasn't a loss. It was a gain. Then you buy them back at a higher basis. So when you sell them again later, there's much less capital gains tax. So was there more on these topics? Everybody wants to know more about Roth IRAs again. Great. Okay. Everybody loves Roth IRAs, as do I. So all right, let's get to that sooner. Let's see. I think I have a slide near the end that's all about conversions. I think. A lot of slides as usual. Okay. Here's one. This is under a section in here that I called, but what do I do? So one thing you do is you do Roth conversions. You do that when you're in a low tax bracket. You convert some of your traditional IRA dollars to Roth IRAs. And by the way, you can also convert tax deferred 401Ks to Roth IRAs. You pay tax on the converted amount at your current marginal rate. Now, unlike direct contributions, you have to do this within the calendar year for it to count in that calendar year. What I mean is if I'm making a contribution to my Roth IRA with new money, I can do it, as you probably know, up to April 15 for the prior year. So for example, I recently made Roth contributions for both 2020 and 2021 because right before I filed my 2020 taxes. But for conversions, you have to do it by the end of 2020 if you want it to count in 2020. So with conversions, I might wait till near the end of the year because I want to know like what my taxable income is going to be for that year, whether I'm in a high bracket or not. Advantages are once the funds are in a Roth, they will never be subject to more taxes. All the growth will be tax free, not tax deferred. And there are no required minimum distributions from a Roth IRA in your lifetime. Just to clarify that a little more, there are RMDs from Roth 401ks oddly enough. So if you have a Roth 401k at your job, then when you leave the job, roll it into a Roth IRA. I have no idea why they're different, they just are. Another point is if you inherited a Roth IRA, you do have RMDs, required minimum distributions. Now you don't pay tax when you take money out of an inherited Roth IRA because your ancestor who left you that, they already took care of the taxes for you, which is great. So there's no tax on an inherited Roth IRA, but there are required minimum distributions. But if it's your own Roth IRA and you're still alive, no RMDs. Now let's see, more about that. So you want to give me any specific questions about Roth IRAs? One is, can investment income be put into a Roth IRA? Another is, do you recommend a backdoor Roth for salary that's too high? The second answer is yes. Okay, the first answer, can you put investment income into a Roth IRA? Not exactly.  I made a lot of slides. We're just going to jump around a little today to make sure we cover the right things. Okay, earned income. You have to have earned income in order to contribute to any type of retirement account. That includes a Roth IRA, a traditional IRA, a 401K, a SEP IRA. You must have earned income. So what is earned income? Wages and salaries, self-employment income, business income, and royalties. And that's about it. All these other types of income are really great and some of them are taxable, but they are not earned income. So if all of your income this year came from interest and dividends and capital gains, no, you cannot contribute directly to a Roth IRA or traditional IRA. What else? What's the income threshold for contributing to an IRA or a Roth and will high earners be prevented from contributing? Okay. I think I have that in my final slides here as a sort of appendix. So here it is for 2021. So that's our current year. For a Roth IRA, if you're single and you make more than $125,000, you cannot put in the full 6,000. If you make more than $140,000, you cannot put anything directly into a Roth under these rules. So as usual, this looks like a simple screen and yet I'm going to add a lot of different caveats. So first thing, traditional deductible IRAs, these income limits as you'll see are relatively low. They're lower than the ones for Roth. But these for the traditional IRA only apply if you have access to a workplace plan like a 401K. If you do not have access to a 401K and your spouse doesn't either, then just ignore this completely and contribute the full amount to a traditional IRA. Now for a Roth IRA, we don't care whether you have a workplace plan or not, these income limits apply. So for Roth IRAs, now someone told me recently I don't pay enough attention to low income people. And one of the reasons is a lot of my clients in Silicon Valley have very high incomes. And it is very common for people, particularly around here, to make too much money to contribute to a Roth IRA. And yet people who are making too much money are exactly the ones who want to start protecting as much as they can from taxes. So there's this very, I don't know if I could call it very simple or not, there's a very common workaround to people who want to contribute to a Roth IRA and are over these income limits. It's a little bit complicated to do it and to understand it, but it's very, very common. So everybody's doing it, let's say. And to the point where everybody's doing it, so I would hope within the next few years Congress will realize it's sort of dumb to keep having these limits because they're actually quite easy to get around. So why even bother? So we have talked about that in previous sessions, but I'll try to explain it briefly if I can. Let's say you're married filing jointly, you make together, you make 300,000 a year. So it looks like you just can't contribute to a Roth IRA. So what you do is you'll notice that this up here says traditional deductible IRA. There is another thing called a traditional non-deductible IRA, and there are no income limits for that. So the backdoor strategy is you put 6,000, or in this case there's two of you, so put $12,000 into a traditional non-deductible IRA, no income limits, it's totally fine, then convert that money to a Roth IRA soon afterwards. You convert the entire 12,000 because there's no income limits to contribute to a non-deductible traditional IRA, and there's no income limits to convert to a Roth IRA. So it's a workaround so high income people can get money into a Roth IRA. Now just one more warning about that. If you have money already in a traditional deductible IRA, the backdoor strategy is not good for you. The reason is when you do the conversion, the IRS will assume that you're converting a prorata amount of all your traditional IRAs. So you have this new $12,000 you just put in a non-deductible, that's not going to cause you any tax trouble because you didn't take a tax deduction in the first place, so no big deal. You convert it, no problem. But if you could put in that new 12,000, but you also happen to have 100,000 in traditional or rollover IRA money from the past, and then you say, I want to convert $12,000, the IRS is going to take a prorata amount, so they'll take a little bit of that new 12,000 that's not taxable, and they'll take most of it out of that 100,000 tax deferred, and they're going to convert that and you're going to have a tax bill. So bottom line is if you have balances in traditional deductible IRAs, don't do the backdoor Roth. If your income is less than these amounts, you don't have to worry about the backdoor. It's much simpler, just contribute directly. But if neither of those is true, the backdoor Roth is a great strategy, and I know it sounds a little confusing, but if you have a tax person, they're very familiar with this, they can help you with it, or if you have a bank or a brokerage, which you probably do, they also know that codeword backdoor Roth and they can help you get it done. What else? Is there an age limit when you can convert to a Roth? No, no age limits for converting. You've probably already covered this, but who qualifies for a Roth? Anybody can contribute to a Roth IRA who has earned income and who is below these income amounts. Okay. When rollover 401 Roth, when retiree is it subject to RMDs? Okay. I think I get it. If you leave your money in your company's plan, which by the way, some people don't even realize you can do, but when you leave your company, you don't have to roll over your 401Ks. You can leave them where they are. So, if you leave the money in your Roth 401K, then, yes, there are RMDs. So, if you leave the money in your Roth 401K, then, yes, there are RMDs. Remember, you won't pay tax on it, but there are RMDs. But if you roll that money out of your company plan into a Roth IRA, then there are no RMDs. And by the way, the IRS has a special publication. It's just a chart comparing Roth IRAs to Roth 401Ks because they behave the same in the fact that it's after-tax money and tax-free growth. Those two things are the same. So, if you tax-free growth, those two things are the same. But there's a lot of weird little differences between the Roth IRA and the Roth 401K. So, if you're concerned about that and wondering, should I roll it into a Roth IRA? You might just Google that. It's like IRS Roth 401K chart or something, and you'll find the comparison. What else? How is the pro rata calculated? I don't like to do math on screen because I might mess up. But it means they take a portion of each based on the amount that you have in each. So, let's see if I can think of a simple example.  So, whatever you convert, 90% of it is going to be taxable. Well, is it better to roll over to a 401K or an IRA? Every situation is different. I don't know if this person is retiring or what, but in general, I suggest when people leave their job, don't be in a hurry to roll out of your 401K into a traditional IRA specifically for the reason we're talking about. There is a chance, maybe you want to do a Roth conversion later. Maybe you want to do a backdoor Roth later. And so, if you can keep your tax deferred money out of IRAs, makes that a lot easier. So, in general, I am not in a hurry to roll over money out of 401Ks into IRAs. You can leave it where it is, unless you really think the company's about to fall apart or something, but even then, you're pretty protected. So, usually just leave it where it is when you leave your job. More of these are about Roth still. Are you still in the Roth area or do we need to move on to actually cover the topics you're going to cover? People love Roth IRAs, so go for it. What else we got? Okay. Do you pay tax on the earned income before putting it into a Roth IRA? Yes. The contribution you make to a Roth is after tax.  And so, but then again, the brilliance of it is once the money is in there, it's never taxed again, no matter how much it grows. But it's not, you don't get a tax deduction the year you contribute the money. So, if you're in a very high income bracket right now, maybe contribute to traditional stuff, like max out your 401K at work, or try to get money into a traditional IRA if you don't have a 401K, because it's sort of a question of do I need the tax deduction more now or later? Is it taxable if you convert from a 401K to a Roth IRA? Yes. Anytime you're going from something that tax deferred to something that's after tax, you pay tax when you do the conversion. If you have a 401K deferred work plan, can you also do a backdoor with a company like Fidelity? Yes. That's it? Just yes. Yep. That's it. I mean, again, this backdoor Roth is a great loophole. It's a way for a high income person to get money into a Roth and it's not affected by your company plan. Okay. We've got somebody who's just as hourly work as needed. So, is there a minimum requirement for earned income for a Roth IRA? The only minimum is the amount that you're going to contribute. So, if you're 50 or under, no, if you're under 50, you can put in $6,000 this year to an IRA. If you're 50 or over, you can put in $7,000. So, if you earn exactly $6,000 and you can afford, you can spare the cash, you can contribute the whole $6,000. And if you earn $2,000 from earned income, but you have money to live on from somewhere else, then go ahead and put the whole 2000 into an IRA of some kind. Any recommendation on NUA when converting from a 401K to an IRA? All right. That's a professional, right? That's too hard. Sorry. No, I am not prepared to talk about, that's called net unrealized appreciation. And it's a tricky thing that happens with some jobs, but I'm not prepared to talk about it. Sorry. Okay. Someone's, what's the difference between a traditional deductible IRA and a traditional non-deductible IRA? I don't know what deductible means here. Okay. Deductible means I get a tax deduction in the year I make the contribution. So, if I make the contribution to my traditional deductible IRA right now, then let's say my taxable income was $5,000. No, let's make it a little higher. Maybe I had taxable income of $30,000. I contribute $6,000 to my IRA. Now all of a sudden, I only have to report taxable income of $24,000. So, I get to deduct it right now in the current year. If I make a contribution to a non-deductible traditional IRA, I don't get to deduct it. So, a non-deductible traditional IRA is not super valuable on its own. They were almost never used before the whole backdoor strategy came in. The only advantage to the non-deductible traditional, if you're not doing a backdoor Roth, the only advantage is that the growth on it is tax deferred. So, I put my $6,000 in, I get no tax deduction, no benefit now, but the interest and dividends that are in over the years, I don't pay tax on until I take the money out. But I do pay full tax when I take it out. So, a non-deductible traditional is not a great deal unless you're doing the backdoor Roth, because it doesn't save you money now. The deductible traditional saves you money right now. Is it possible to roll a deductible IRA into a 401K? Sometimes, that depends on the 401K. So, ask your company or go to your company's website and look up the 401K and find what's called the Summary Plan document or SPD. That will tell you whether you can roll your traditional IRAs into your 401K. Your company doesn't have to allow it, but if they do allow it, it helps with this backdoor Roth thing. Because maybe you have a lot of money in traditional IRAs and you want to do a backdoor Roth, you're not a good candidate for it because it's going to really mess with your taxes. But if you can roll those traditional IRAs into your company plan, then they're out of the way and then you don't have to worry about that pro-rata rule. So, check with your company. Okay, some of the other ones are getting kind of detailed. So, okay, let's go ahead then and we'll talk about some of the things I had in mind. And then maybe it'll trigger more of those questions. Let's see. I'm going to jump back up to the top almost. Oh, yeah, let's talk more about social security because that's an important part of many people's retirement income. Excuse me. So, we already talked a little bit about how it's taxed. But another important thing is actually I want to find this chart of ages that I have. Uh-huh. I called this talk your golden years for tax planning around retirement. And those golden years I'm thinking of are essentially the years between 59 and a half and 72. Because when you're 72, your required minimum distributions begin. So, at that point, if you have a lot of money in tax-deferred accounts, you're going to be forced to start taking that money out and to pay taxes at a pretty high level at your ordinary income rate. When you're 72, you won't have control over that. Once you're 59 and a half, you can take money out of those tax-deferred accounts anytime you want with no penalties. You pay taxes, but you don't pay penalties. So, the years between 59 and a half and 72, it's entirely up to you how much money you take out of those accounts. And if you're still working, if you're earning a lot of money until you're 72, then fine, leave it alone, don't take it out. But let's say you retire at age 60 and maybe suddenly at age 60, you're not earning very much money or maybe none. So, between age 60 and age 72, you're going to be in a very low tax bracket. Let's say if you have savings, so you have savings, you can live off and you have maybe some IRAs. So, when you're 72, you'll start taking that money out. But between age 60 when you stopped working and age 72, when you're forced to take money from your IRAs and pay income tax on it, maybe you have almost no taxable income. What I would do is start gradually taking money out of your IRAs and 401Ks then because you're in a low tax bracket, you'll be paying a low amount on it.  So, one of the reasons, back to Social Security, one of the reasons that 72, it used to be 70 and a half until about a year ago, that people can be hit with a big tax bill then is that most of us financial advisors advise you to wait, if you can, until age 70 to start taking Social Security. You have a choice. You can take Social Security as early as age 62 and as late as age 70, talking about your basic Social Security retirement funds. Here's a fun fact. The option to take your money out at 62 to start getting Social Security checks at age 62 was offered in 1956 and at first it was only available for women. This was a direct part of the overall government effort after World War II to get women to go home. They wanted women to retire. They wanted women out of the workforce. They wanted the jobs available again for men coming back from the war. So the government took a lot of steps to try to discourage women from working. But now everything in the Social Security system is gender neutral. So also when Social Security was invented, everybody's full retirement age, NRA is the same thing as FRA. That means normal retirement age or full retirement age. Everybody's full retirement age was originally 65. You hit 65, you got a Social Security check. That's no longer the case. The ages have started creeping upward. So for a lot of us now, even people like me who are relatively old, our full retirement age is 67. If you were born in 1960 or later, your full retirement age is 67. If you were born in one of these other years, you'll see what it is. Like if you were born in 1940, 65 and six months. Okay. Now I just said you could start getting your Social Security benefits anytime between age 62 and age 70. So why not take it as early as possible? And the reason is that you get less if you take it earlier. Here it is. And you get more if you take it later. So my full retirement age is 67. If I take it at age 62, that's five years early. So my monthly benefit check forever for the rest of my life is going to be about 6.67 less per year than if I started at age 67. If I wait three years until I am 70, between 67 and 70, I have three years. My monthly check for the rest of my life will be 24% higher plus cost of living increases, which everyone gets each year. Now when the system was designed to encourage people to wait, it was supposed to be actuarially equivalent. In other words, they tried to do some math and figure out, okay, we're going to guess how long Heather's going to live. And if she starts taking it at 67, obviously she gets three more years worth of benefits. But she gets less per month than if she waits till 70. Based on what they think, how long they thought I was going to live when this was designed in 1983, that was supposed to come out about the same. But it doesn't come out about the same. In fact, for most of us who are relatively healthy and fine, we're going to live long enough that we're really going to make much more money if we wait longer. So if you can, if you can afford to wait until you're 70, you probably should and start getting your benefits at age 70.  Like I said, my full retirement age is 67. So I have the potential for three years worth of 8% increases. If my full retirement were 65, I would have the potential for five years. In other words, if my full retirement age is 65, and I say I'm going to wait till 70, that's five times eight, I'll get 40% more plus cost of living increases. There's no investment you can find that's going to guarantee to pay you an extra 40% return each year, or even an extra 8% return each year. So if you can wait till 70, you should. And a recent study said the system is not balanced and it definitely favors people who delay benefits. Okay, so that was a little pitch about waiting. This is a chart about it and a few other interesting things. Okay, I ran this through my financial planning software. I invented a person named Bathsheba. Her full retirement age is 67. But I did this analysis in the software that said if she wanted to take her money at 67, and then she decided to wait until 70 over her lifetime, she would get nearly $250,000 more. Now there are a few variables. I said Bathsheba is 60, she stops working at 61. Her primary insurance amount, that's the basic number at the top of your social security statement, is $3,000 and she's going to live to be 95. So if all those things were true, she'd get $250,000 more. Now if she suddenly died at age 62, she loses. Or if she dies at 65 and she was saving her money till 67, she loses that bet. But you know what, that's okay. If she dies at 65, the money for the rest of her life is not her biggest problem. So one way to think of this, another argument for waiting till your 70 is it's kind of like longevity insurance. Because if you are, let's say you're 87 years old and you realize, oh, I'd like to have more money, it's kind of hard to get a new job, right? And if you live to 110, you want the highest possible amount of money because you can't sort of fix it at that point. So it's like an insurance against living too long. Now the reason I just went into that in so much detail, when this is not really a social security talk, is I'm trying to convince you that you should wait until your 70 to take social security. But one byproduct of that is all of a sudden, your 70, you start getting your social security checks. So maybe your annual income increases by $30,000 to $40,000 because you're getting social security. Then all of a sudden, you're 70 and a half or you're 72 and you're getting RMDs on top of it. So all of a sudden, your income jumps way up. And I'm going to show you a picture of how that works for one of my imaginary clients. Here we go. Okay, another person I invented her name is Cecile. She worked until she was 65. She was earning $67,000. Now Cecile has a lot of money saved in traditional IRAs, which is great. So she'll be able to live on that when she needs to. She also has money in taxable investments and money in the bank. So she doesn't need to take any money out yet. She's going to wait until she's 70 to start taking social security. But here's what happened. She retired at 66, I think. So all of a sudden, this is her taxes, this whale, this picture of a whale, this is her taxes. The blue part of the whale is her federal tax rate. The green is her California. And the orange is her FICA or social security. So that stops suddenly when she stops working at 66, no more FICA. But also, she has basically no income here between, except for maybe some dividends and interest on her taxable account, almost no income between age 66 and age 70. And not so much here either, not till it suddenly jumps up when she's 72 and her RMDs start. So this little trough here, that's the golden years I'm talking about. Because things are going to spike around 70 and 72. So I'm going to advise you to make the most of these years. Now, what can she do with that? One thing is, I would harvest some gains in my taxable accounts. If I have some investments that have increased in value, a great deal. Her capital gains rate right here, you can't see all the details. But I happen to know from the software that at this moment, her capital gains rate is 0%. Because she's earning, she's single, she's earning less than $40,400 overall. So I probably harvest some gains and go ahead and sell things at gains, pay 0% tax on them and then buy them back if you want to. But the other big thing to do during this time is do Roth conversions. So we're back now to that topic that you all like anyway, do Roth conversions. Because when you do, when you convert money from your traditional IRA or your 401K into a Roth, you are reducing the balance in those traditional IRAs. So that means when it's time for requirement on distributions, the balance that it's calculated on is lower. Also, what she's doing, because you can see, she's going to be at a pretty high tax bracket at some point in her life, largely because she has so much in savings in her IRA. She's going to end up in a high tax bracket. But if she takes this time when her income is low, and she converts some of that money to Roth IRAs, she will pay tax when she converts, but her tax rate is relatively low. Her federal rate here looks like it's 12% or 10% or something. So if she converts there, then that money she has converted will never be taxed again, which means this amount that the taxes are based on in the future, that's going to be lower. So here's what I did with Cecile. For between 66 and 70, okay, her long-term capital gains rate was zero, her ordinary income tax rate was 10%. But as soon as she hits 70, her ordinary income tax rate is going to jump up to 33%.  But I did an analysis and said, what if during those years from her age 67 to age 71, I think, what if she converted enough of her traditional IRAs to Roth IRAs just to fill up the 12% tax bracket? Because her ordinary rate was about 10% there. If she does some conversions, she's going to pay a little tax, but let's just fill up the 12% bracket. We can all afford to pay taxes at 12%, right? Better than paying it at 33% later. So if she did that for those six or seven years in that middle period, she would end her life based on a whole lot of assumptions, no guarantee, but about $1.7 million richer at the end of her life when she's 95, just because of the tax savings from doing those conversions during those low-income years. And then here's her new whale, her whale after those conversions. You can see her tax rate is still lower in these years from 66 to 71, but it doesn't fall down to just about nothing. And then her tax rate at the high end is not quite as high as it was before. Okay, I bet it's time to stop for questions. There are some questions here. What if you are invested in stocks, SEP IRA, how do you pull out if you want to keep stock investments? Okay, so that person has a SEP IRA, is that right? Okay, that behaves mostly, at the time of taking it out, it mostly behaves like an IRA. For those of you who aren't familiar with SEP IRA, it's for a person who owns their own business. And you can put more into it than you can in a traditional IRA, but when it comes out, it's like it's an IRA. So you're taking that money out, you're paying ordinary income tax on it when you take it out. And I think the question is like, I kind of like the investments I have in my SEP IRA, so now what? But that shouldn't be a big deal. You should be able to take that money out and pay tax on it and then reinvest it. And you can choose the same investments again in your new account. Like when it's time to take the money from the SEP IRA, call your bank or your fidelity or whoever it is, and say, I need to take some money out of my SEP IRA, let's move it to my brokerage account and then reinvest it in the stocks or the stock funds that I like. Now once it's, and again, you always pay ordinary income tax when you take it out, but then once it's in that new brokerage account and you've reinvested that money in stocks or stock funds, then leave those in for more than a year. And now that it's in a taxable account, you're going to have access to long-term capital gains rates on the future growth. What software did you use for Bathsheba? Oh, this is my financial planning software. It's called Write Capital, but, and you probably aren't going to buy it yourself. It's something advisors use, and many advisors use other programs. There are several other great ones. One is called E-Money. One is called Money Guide Pro. I think those are the two most popular. They can all do really cool stuff like this, but again, you probably won't have it yourself, but maybe your advisor has it. What are the ways to provide income insurance should someone outlive their retirement? Outlive your retirement. Okay, that is essentially what Social Security is. Social Security is kind of longevity insurance, because if I'm getting $3,000 a month when I'm, say, 67, I'm going to still get that money no matter how long I live. It's going to go up each year with cost of living increases, so maybe when I'm 150 years old, I'm going to be getting $6,000 a month or something, but that money, it's guaranteed as a tricky word. It's planned that I get that for the rest of my life no matter how long I live. So that's what Social Security is. Now, Social Security is never a huge amount of money, though. If you have a lifestyle where you're spending a lot of money every year, Social Security might not end up being a lot, because the most anybody gets is about $45,000 a year. And again, in Silicon Valley and California in general, that's not really enough to live on. So Social Security is usually not going to be your whole income, no matter what. And by the way, $45,000 a year is at the upper end. A lot of people get considerably less. Maybe you're only getting $15,000 or $20,000 in Social Security. So you may want some other guaranteed income streams that can last for the rest of your life. The one you can purchase that works like that is an annuity. An annuity is a product sold by insurance people, and it works kind of like Social Security.  So if I put $100,000 that would be called an immediate annuity, there's various ways to fund it. You can pay a lump sum now, you can pay a little every year over time or something like that, but you're buying a product that is an income guarantee. So if I choose an immediate annuity, I put in a lump sum now maybe $100,000, and then my contract will say, okay, we're going to start paying out when you're whatever age, I think there's flexibility on that too. Maybe I say, please start paying me when I'm 65 years old and pay me $6,000 a month for the rest of my life. Now, if I die at age 66, I lost that bet, but fine, I'm dead, it's not my problem. And everybody else in that pool gets more money because I'm no longer a problem. But if I live to $150,000 or even to $95,000, I win that bet because I have guaranteed income. So that's how annuities work. Annuities are complicated, there's lots of different versions, some of them are overpriced, but and there's all different kinds, it's all different riders, but having a portion of your income that's guaranteed is a good idea for many people. Now, what's her name back here? Cecile, she doesn't need an annuity, I don't think, because with $3.5 million in a traditional IRA, she's probably going to be fine, even if she made a few bad investments and even if we have inflation, et cetera. But for someone with less in savings, making sure that you have at least enough guaranteed income to cover your basic rent and food, it's probably a good idea. Now, I'm just going to mention one other type of annuity because I think it's related to what you said. There's this thing that's, I think a little bit on the newer side, so not everybody's heard of it, it's specifically called a longevity annuity. And the way they work is they're not terribly expensive because you don't get a payout unless you live a long time. So many of them don't start paying until age 85. So if I say now, okay, I'm 40 years old, but I'm getting nervous, I'm not 40, but if I were, this is my imaginary persona, I'm 40 years old, but maybe I'm getting nervous, I'm hearing from medical science that people are living longer and longer, and I think, you know, I'm saving enough money, but I'm basically saving enough money to know I'll be okay until about age 80. What if I live to 120? I'm scared.  But some of us aren't. So they charge everybody who wants this product a relatively small amount. If I die before age 85, money's gone. If I live from 85 to 120, I get paid. So a longevity annuity is specifically to hedge against that fear of what if I just live too long and outlive my money? What else? Well, we're talking about Cecile. How does Medicare stealth tax impact the Roth conversion? Great point. All right, let's go to Medicare. Okay. Actually, as a lead into Medicare, I'm going to show you one of my other tables of types of income back here in the beginning. You know, when I was organizing this yesterday and the day before, I didn't quite know what order to put everything in. So I think the answer is there was no perfect order. We'll just find what we need. Okay, so adjusted gross income. Let's talk for a minute about what that is because that's what affects your Medicare payments. And for those who aren't too familiar with Medicare, what I think that person means by stealth tax is Medicare Part A, which is hospitalization, that's what you've been paying for your whole life through that 1.45% of your paychecks. So Part A, you don't pay more when you start taking Medicare. Part B of Medicare is for doctors, though. And that part, you pay a premium. It's partially subsidized by taxes, but you also pay a premium. For many, many years, everybody paid $104.90 a month for Medicare Part B. Then they said, hey, wait a minute, this program is very expensive to run. Some people have a lot of money. Why are they paying the same amount as those of us without much money? So the medicare.gov, Medicare agency, put in additional tiers for Part B, which is doctors, and Part D, which is prescription duct drugs. Note that Medicare Part D is one of the few things that makes any sense in its name. D is for drugs. So Parts B and D, you pay a premium each month, and it increases based on your income. Now, it increases based on your adjusted gross income, or even more technically, you're modified adjusted gross income or magi. But for Medicare, let's look at what your adjusted gross income is because your Medicare payments, I want them to be as low as possible, and they are controlled by what your AGI is. So AGI used to be fairly simple to see. This is a 2017 tax form. I realize it's 2021. The reason I'm showing you 2017 is this is the last year the tax forms made any sense at all. The tax laws all changed at the end of 2017.  And I'll tell you off screen who to blame for that. His name is Ted Cruz. Okay, I gave it away. All right. So anyway, long story about why the tax forms are all messed up. But now you can't really look at your tax forms and make sense out of it. Because now you have a very high stack of short forms, and each one has one or two numbers on it. Back in 2017, you could see back in 2017, whoops, the bottom line on this page, which I'm sorry, you're supposed to be able to see it, you can't. But the very bottom line says this is your adjusted gross income. This next page I have here does show that. Notice it says this is your adjusted gross income. This was the front page of your 1040.  And the stuff that goes into it is not there on the front page. But that's a really important number. It's not your taxable income. A few things happen after that. But your adjusted gross income affects a lot of things. So we want it to be as low as possible. Here are some of the things your adjusted gross income affects.  The increase in premiums for Medicare Part B and D, which you just asked about, that depends on your adjusted gross income. The limits, the contribution limits we've been talking about for traditional IRAs and Roth IRAs, those income limits we're looking at, that's based on your AGI. There's this other thing called a net investment income tax. It's an extra 3.8% tax you might pay. If you make more than 200,000 for single or more than 250,000 if you're married filing jointly, that's based on your adjusted gross income. So let's look back again at what's involved in that.  And then we subtract these things. We get to subtract our contributions to our traditional IRAs, our health savings account, our student loan interest, our $300 charitable contributions under the CARES Act, capital losses up to $3,000, all this stuff reduces your AGI. Now what you don't see on this list is your itemized deductions. Your itemized deductions on Schedule A or your standard deduction, those come after AGI. But all this stuff lowers your AGI. So the more we can get this down, the more we can get our Medicare premiums down and qualify for a lot of other things. So this is just a picture of some of the things that help reduce your AGI, your health savings account deductions, your contributions to your SEP IRA, your self-employed health insurance, your IRAs, tuition and fees deduction, that's up to $4,000 for tuition. But there are income limit phaseouts for several of these things like the tuition and fees and the student loan interest deduction. You can deduct up to $2,500 worth of student loan interest, but only if your AGI is low enough. Now this is circular. You can only deduct the $2,500 for student loan interest if your AGI is below, I think it's $85,000. But the $2,500 lowers your AGI. So some of these things are circular, but still you want to reduce your AGI as much as you can. Here's how you do it. Okay, we already went through some of that. Now let's jump back to my Medicare slides, see if I can make some of that more visual for you. Okay, Medicare. So the higher your income, your AGI in a given year, the higher your Medicare costs will be two years later. Here's the chart for 2021. This is Medicare Part B, which is the most expensive part for most people. And it's for doctors. And if you are single or head of household and you make $88,000 or less in AGI in 2019. See, it says if your yearly income in 2019 was $88,000 or less, what you pay in 2021 will be $148.50 per month. If you're married filing jointly, and let's say you have a very high income, you're married filing jointly between the two of you, your AGI is $750,000 or above, you're going to pay about $505 for Medicare. So you want to lower your AGI. Now some people say, well, why does two years ago matter? The answer is two years ago is the last time they had any solid information on you.  So that's the last time they had solid information. When you say it's for doctors, you mean it pays for the doctors? Is it not a doctor plan? Right, right. It's for, yeah, it's for like the medical part that's not hospitals, it's to pay for doctors. Yes. This is Medicare Part D, similar sort of thing. There are, there are many different Medicare Part D plans. And so we can't, the Medicare.gov, which is where I got this information, they can't tell you what your exact plan premium is, because it depends, well, did you choose plan number K or plan B or whatever?  If you have more questions about Medicare, this book is pretty good. It's by Philip Mohler. It's called Get What's Yours for Medicare. It has many, many, many details. There's another good book, although I don't have a picture of it. I found that Medicare for Dummies by Patricia Berry is also quite good and very clear if you have specific questions. What else, Zoe? So someone is 62, husband passed away. Do I collect his social security or not? Okay. Yes. Yes. You're 62, your husband passed away. If he was already collecting social security retirement benefits and you are the survivor, now there are a lot of rules. And so if you go to a professional for advice and they say, oh, that's not right, probably because they asked you one more question that I didn't ask, but it sounds to me like probably you have a right to a survivor benefit. And the survivor benefit will be 100% of what your husband, your deceased husband was receiving or would have received at full retirement age. Now, one thing about that, if that husband started taking his social security at full retirement age, he might have gotten say $3,000 a month, if he waited until he was 70, he might have gotten $3,700 a month. If you are the survivor and he waited until 70, you will get that higher amount. Okay. If he hadn't started taking it, they'll assume they'll give you what he would have given at full retirement age, but it's one more reason to wait longer if you can. It might help take care of your surviving spouse because they will get more. Now, this is a really good book. For anybody who has questions specifically about social security, you'll notice one of the authors here, Phillip Moller is the one who wrote the Get What's Yours for Medicare book, but I have to say this one is a lot more fun, the Social Security book. It's got three authors, Lawrence Kotlkoff, you may even have heard of, he comments on television all the time, and this book has every possible scenario for social security questions like that one, and it's actually funny and it's easy to read. Anybody who is about to start getting social security or trying to think about strategies, I highly recommend this. Just make sure it says updated and revised because the first edition came out in 2015, and then suddenly they changed all the rules in November 2015. They did revise the book, but don't get the old version even if it's cheaper. Don't save a few bucks on that. Okay. What else? If you have other income like rentals, can the Fed reduce your social security amount and based on this, how do you determine what to collect? When to collect social security? If you have other income from rentals, oh, okay, I know what you're talking about. Let's see. No, because rentals are unearned income. I know that sounds a little weird because for those of us who own even a little rental property, it's a lot of work, but it is technically considered passive income. I'm not talking about real estate professionals like Zoe. They're in a different category. Most of us are not real estate professionals. If we have just some rental properties, it's considered unearned income. Just going back to my list here so you can see the list. Okay. See rental income, unearned income. Now, why does that matter for this question? Zoe was asking just now. The reason it matters is if you take your social security retirement benefits before you hit your full retirement age and you are still earning money, your social security retirement benefits will be reduced a little bit, but rental income is not considered earning money. So don't worry about it. Number two, for those of you who are still working who think, well, I kind of need my social security, but I also have to keep my part-time job. This doesn't seem fair. Try to just at least wait until you hit your full retirement age. Okay. Because once you're 66 or 67 or whatever that age for you is, they no longer penalize you for working. It's only those years between 62 and your full retirement age that your social security will be reduced a little bit if you're still working. What else? There's still a whole bunch of stuff about Ross. Well, first of all, can you convert in kind, keep the stocks without liquidating? That, ask your banker. Okay. Check with wherever your account is. If it's at Fidelity or Bank of America or Schwab or whatever, ask them. On your whale, when you came up with a new whale chart, how many percent was her or her taxes reduced when she has to take out her RMD? Let's see. In my particular whale example. The second whale, the new whale. Yeah. Okay. What I did is I said, let's convert enough each year to fill up the 12% tax bracket. So we filled the 12% bracket and before that, she had been in the 10% bracket for those few years. So we got 2% more taxes in those years, but then we lowered her highest rate from 33 to, do I have that answer? I think at some point she would still get to 33 at some point, but later. And she saved 1.7 million over the course of her life. But I'm not sure that's an exact answer to the question. Can you read the question again? Sorry, I was reading other questions. In the new whale, where is it? Here we go. How many percent were her taxes reduced when she has to take out her RMD? Oh, when she has to take it out, how many percent? I don't know exactly. I don't think I can answer that question exactly. And if I did, it wouldn't be that useful because everybody's situation is a little bit different. Cecile had some very specific issues here. So yours would be different if you had 500,000 instead of 3.5 million. So I don't have an exact answer for that. Okay. What's next? This might be very specific, but please advise if the Kai Zen plan is a good plan for retirement. KAI hyphen Zen. Sounds like a Kaiser plan. And I'm sorry, I don't know, because plans do vary a great deal. So I better not repine on that. Okay. For those of you who are not looking at the comments, the library staff did post the book information. Oh, good. So, and this might be too much of a political question, but is social security going away in the future will be depleted if you're young before taking social security? What happens to your benefits? Does it get forfeited or going to go to your beneficiaries? Okay. It's a little bit political, but it's super important. And I assumed it would come up. So I do have some notes for you on that. Okay. Social security future. First of all, that person is right. It is a political question. That's important because it is not a financial question.  Can I curse on here? Okay.  Social security is not running out of money. The government cannot run out of money because guess who prints money? The government. So there's no such thing as social security running out of money. There is such a thing as congressmen running out of political will. Okay. So social security will go away if you let it go away. Not for any other reason. It is a political question. So this is one of my favorite quotations. It's from a wonderful book about the history of social security called The Woman Behind the New Deal. I have a picture of that book later. But it was Frances Perkins who invented social security for Franklin Roosevelt. And she said FDR said it had been constructed in a way that no future politician would be able to tinker with it because it would be funded by workers' own contributions. So the point is when social security was invented, they could have designed it a lot of different ways. They designed it to withhold 7.5% of every darn dollar you earn so that you would feel invested. It didn't have to be set up that way. But Frances Perkins and FDR wanted you to say, hey, wait a minute, you can't take that money away. That's my money. That's not welfare. That's my money. They set it up on purpose so we would be invested. So she says, one thing I know, social security is so firmly invested, this is 1962. In the American psychology today that no politician, no political party, no political group could possibly destroy this act and still maintain our democratic system. It is safe forever and for the everlasting benefit of the people of the United States. Who would guess in 1962 that she couldn't foresee how politics looks now? I also like these quotations, Dwight Eisenhower, staunch Republican. He said, should any political party attempt to mess with your social security, you would not hear of that party again.  So I think it's interesting that people seem so concerned now that social security will go away. And I'm concerned too, you know, there are people who are trying to get rid of it. But historically, people are pretty sure they can't get rid of it because it's ours and we have a right to it. And it is up to us to fight for it. So if you demand it, it will be there. Now, if there are very young people here, I do understand that you think maybe it won't be there when you retire. When I worked with very young clients for financial planning, sometimes we do do their plans without social security just to make sure it works if they don't get it. For older people, I'm pretty sure it won't go away. I mean, partly the people who have the power, they're pretty old. So if they want to get rid of it, they'll make it so it hurts people later, not so it hurts old people now. Okay. Oh, and speaking of social security. So this is the practical book. This is the one where if you have questions about what happens if my father died, but yada yada, or my husband died, or I took social security early and now I want to remarry and my ex husband married three other people. This book will answer all those questions. These books, if you're just interested in social security as I am, these are great books. This biography of Frances Perkins is also a great history of the new deal and unemployment insurance and the shirt waste factory fire. She's an amazing woman. She's the first female cabinet member in US history. It's a wonderful book. This is a good history of social security, and this is Alan Greenspan's memoir, but he was in charge of the task forces in 1983 and 1993 that made a lot of major changes in social security. So it's only part of this book, but it's very interesting. Okay, what other questions? Well, there are a ton more questions, but you only have 10 minutes left. Okay. Stuff that you plan to cover that you want to get. Let's see, we talked about Medicare, we talked about social security, RMDs, we talked a lot about last week and some this time. No one should go ahead and tell me what people want to know. Okay. Here's one on a slightly different topic just for a little bit. I'm budgeting for retirement as a lifetime renter. Most retirements there is assumed home ownership. In your opinion, is renting in retirement improvement strategy? I wonder where that person lives, because personally I live in San Francisco and I rent because I have rent control. So there's no way I could buy even a tiny home for anywhere near what I pay. And so buying is just not an option for me. So I totally understand, you have to do what you have to do. Well, it would be a very nice thing to own a home, but it doesn't always make sense to own a home. San Francisco is the location of this question. Okay, not surprised. Yeah. And prices in San Francisco have only gotten higher and higher and higher. Every time they tell us they're going to come down, they don't. In San Francisco, if you are pretty low income, there's a very small renter's credit, which I think is good, because federally, there's a huge subsidy for people who own their homes federally. They get to duck their mortgage interest insurance and their property taxes. So unfortunately, that's one of those regressive parts of the tax code that rewards people who can already afford to buy a house. They get to pay less taxes, we renter subsidize them. So the answer is, if you can afford to buy a house, you should, but don't assume that it's always the right thing to do. The New York Times has a pretty good calculator that just it's called rent versus buy, or rent or buy. And if you just Google it, New York Times and rent or buy, I really enjoy that. You can plug in different numbers and say, well, what if I could get this interest rate, or what if I could get a house at this price, and here's my rental price? And it may very well tell you, no, keep renting, you're lucky you have what you have. So that's the answer. It's nice to own, but it's not always the best idea. Yeah, you guys do have a weird situation out there. Do the feds have a rule how many years you must be married? For example, if seniors are getting married, what if you get married and he kicks it? How long do you have to be married before you can get into Social Security? Before you can get into Social Security. The basket didn't put it like that. But okay, yeah, I think the answer is at least, it's either at least one year or at least two years. But if the person dies of an accidental death, it's fine. So I didn't refresh those details. I have a slide deck with it somewhere, but I won't waste your time while I search for it. So look at the book, the Social Security Get What's Yours, but I think it's only one or two years. Unlike if it's a divorce situation and you want spousal benefits, you need it to be officially married for at least 10 years. And by the way, so now I'm shifting away from the question. The question was about death. I'm talking about divorce just for a second. In a divorce, the IRS and the Social Security Administration, they do not care if you were getting along. They don't care if you were living together. They don't care if you'd already moved in with that other flusy. All they want to know is legally how long you were married. So if you're in a lousy marriage, but your spouse makes a lot of money, don't make the divorce final until 10 years are up. Because if 10 years are up, then you will qualify for divorce spouse benefits under Social Security. But for death, the length of time is much less. So check it for sure. It's a year or two. And again, if it's an accidental death, it's a shorter period of time. And I remember a cartoon in this book based on there was a court case where someone died during a sexual act. And that was determined an accident. And his wife got his Social Security survivor benefits. So I think it's a pretty broad definition of what's an accident. Okay, next question. If I retire at 62, and so I stop contributing to Social Security, but I wait to take it until I'm 67, will I still be eligible for the full amount? Yeah, your Social Security, the amount that you get is based on an average of your 35 highest earning years. Okay, so if you stop working at 62, but you started at age 18, you've got 35 good years in there somewhere, they're going to average your 35 highest years. Now, if you continue working until you're 80, and you start taking Social Security at 70, they're going to keep recalculating every year, like maybe your income keeps going up, your amount is going to go up, because your top 35 years are going to go up, and they're going to keep recalculating it. But it's your best 35 years. So do try to work at least 35 years, because otherwise they're going to average in some zeros. But if you stop at 62 and start taking it at 67, that's just fine. Okay, there's so many questions about Roth still, here's a quick one. Can you remind me of withdrawals from Roth IRA count against AGI? No problem. No, you can take money out as long as you've met the two requirements, which are be at least 59 and a half, and have your money in at least five years, then you get the wonderful benefits of the Roth IRA. When you take it out, there's no tax on it, and it does not count as income in any way. So it's not going to affect your AGI. Will the government ever readjust the 915 SSA earning taxed formula? Yeah, the government surprises us sometimes. For a number of years, I said, oh, don't worry about Social Security changing, Congress can never get anything done. But then in 2015, November of 2015, they snuck something into a budget bill and got it done overnight. So yeah, they rethink those things all the time, the calculations. I wouldn't expect facts changed, but it could happen. Let's see. Got that. So many Roth questions. That's okay. Okay, well, here's one. When at age 72 and taking RMD, can I convert traditional IRA to Roth IRA? You can convert anytime. The only drawback to converting is you pay tax in the year that you convert. But there's no time limits on it, and there's no income limits on it. Just do it when you want to do it when you're willing to pay the tax. Somebody else says, if gold is reducing RMDs at age 72, will converting a 403B to a Roth 403B accomplish this? Yeah, because Roth IRAs don't have RMDs. But yeah, even if you convert from a traditional to a Roth workplace plan, it won't mess with your RMDs because it's not tax deferred. So yeah, that's a good idea. Convert to Roth when you can. So this goes back to a workplace plan. What's the best strategy to reduce taxes in the future if you have a large 401K balance but are no longer with that company? Okay, if you're no longer with that company and you want to reduce RMDs in the future, actually, anytime you want to reduce RMDs in the future, the thing to do is get the money out now. There's basically two ways to get the money out now, which will reduce your balances that are going to be used to calculate your RMDs. One is just take the money out, pay taxes on it and spend it. The other is, if you don't want the money to spend, take the money out, convert it. So either way, you pay taxes. But if you need the money, take it out, pay the taxes and use it. If you don't need the money, pay the taxes and convert it. Either way, you're reducing that balance that your RMDs are calculated on. All right, you have two minutes left. So here's one more question. Do we have to wait to age 59 and a half before converting from a traditional IRA to a Roth IRA? You can convert any age, any time. I was expecting questions like that, so I might even have that summarized here about Roth's. Why does everybody convert everything? Converting is good. Well, I'm pushing converting.  Yeah, I probably have a note on that, but no age limits and no income limits convert any time you're willing to pay the tax. And the calculation for the RMD? Oh, okay. I have slides on that. One minute left. So chop, chop. Okay, we can do it. How RMDs are calculated? Okay, you look at the balance, the total in your tax deferred accounts at December 31st in the year you turn 70 and a half or 72. For most of us, it's 72. Unless you were 70 and a half before 2020. So if you're not 70 and a half yet, then look at your balance at 1231, the year you turn 72, you divide that by your life expectancy as determined by the IRS. So just go to the IRS tables, look at your life expectancy. It'll say, you know, 28 years or 30 years or something, and you'll divide your balance by that. Then the next year, do not look up your life expectancy again. You don't change that because you're older, but you look at your balance 1231 the next year, and then you divide that by your original life expectancy minus one. So every year your RMD is recalculated, but it's based on how much was in your tax deferred accounts at the end of the prior year. It's 330. Okay, 330. Well, thank you so much for coming, everybody. It was nice to see you all. Jonathan Massey, who just waved, is giving a presentation soon. Zoe's giving one on May 3rd. Jonathan, I think I'm going to unmute him. Is it April 26th? When is it? April 26th. I'll put it in the chat. Good. April 26th. Great series, Heather. Very helpful. Thank you. Thank you. And that one's on options. And I want to thank Leah Hillman, the fourth floor manager at the library, and all of her wonderful staff. It's been a pleasure. I hope I'll see you all again. Thank you. Thank you. Thank you. Thank you. Thank you. Thanks, Heather. Thank you, Zoe. Thank you so much. Incredible. Thank you. Thank you very much. Yeah, another incredible program from the Listed Ladies. Thank you. And thanks to all of you for attending, and we'll see you at the next program. Bye-bye.