Most retirees worry that if they focus on dividend income, are they leaving growth on the table? Well, we’re gonna solve that dilemma right now, and that’s just the first of six questions that you need to hear. I’m Anthony Saccaro. Thank you for taking time out of your day to join us here for the Providence Financial Retirement Show.

We are your retirement income source, and this is the place where retirees come for income. Throughout the week and throughout the months, we often get listener questions, and we’re gonna spend our time answering your questions today. We’ve got a question about interest and dividend income. We’ve got a question about Social Security.

We’ve got a question about Roth conversions, and a few more even. If you have a question for the show that maybe you’d like us to discuss in a future episode, all you need to do is go to [providencefinancialradio.com](https://providencefinancialradio.com) and you can ask your question right there. But we’d love to have a chance to read it and see if it will help our listeners.

Our first question today comes from Marcus in Carlsbad, and he wrote in this: “I’m retiring in two years with about $1.2 million, mostly in growth stocks. My advisor keeps pushing portfolio income from dividends and interest, but I’m worried that focus will limit my growth. How do I know if a dividend strategy is right for me?

Or should I just sell stocks as I need the money?” We get that type of question all the time, Marcus, so I’m glad you’ve asked it. I’m really actually wondering if your advisor is someone that we might have helped train at some point in the past, because most advisors tell you the opposite. Most advisors tell you, “Just stake it out, stay with your growth stocks, just sell it as you need it, and you’ll be just fine.”

The fact that your advisor is telling you the opposite, focus on income in the form of interest and dividends so you don’t have to sell shares, to me, that’s our focus. And if you’re a regular listener of the Providence Financial Retirement Show, you know that that’s what we talk about all the time. So I already like your advisor ’cause I think he’s definitely going down the right track.

There’s two immediate concerns that I have as I read your question. The first concern is you’re playing the guessing game, and the second concern is you’re gonna have to be selling principal to get the income you need if you stay invested the way you are in growth stocks. Let’s talk about that first concern, the guessing game.

What is your $1.2 million gonna be worth, Marcus, in two years when you wanna retire? The answer is no one knows. You don’t know, I don’t know, no one knows what it’s gonna be worth. It could be worth a lot more, it could be worth a lot less. When you’re in the accumulation phase of life and you have 10 or 20 years or more until you get into retirement, who cares what it’s gonna be worth in two years?

It doesn’t matter because you’re playing the long game. Because you’re gonna retire in two years though, you care about what it’s gonna be worth in two years because it’s gonna be that bucket of money that is now going to be what has to last you the rest of your life. You’re not gonna be adding to it anymore, no more contributions, that’s it.

What you have is what you have. And if it gets cut between now and then because we have a significant market correction or worse, what’s that gonna do to your retirement? That’s a significant risk, and that’s why I say you’re playing the guessing game. What many of you don’t understand, but I think is absolutely vital, is this: the shorter your timeframe, the more gambling the stock market is.

Let me say that again. The shorter the timeframe, the more gambling being invested in the stock market is. If you have 30 or 40 years, we know from history that you’re gonna average eight to ten percent a year with a high degree of certainty. But if you need your one point two million dollars in two years like Marcus does, we have no idea what that’s gonna be worth.

There are many two-year time periods in history where the market is up by thirty, forty percent, and there are many two-year time periods in history where the market is down by as much as fifty or sixty percent. That’s the risk you’re taking by hanging on. Could you afford the worst case scenario? Fifty, sixty percent drop in your portfolio right when you need the money For most of you, that answer is no.

And I know that because I’ve been a retirement advisor for twenty-seven years. It’s never a good idea to wait until last minute. And Marcus, you’ve gotten away with it ’cause the market’s done well, but we don’t know what’s gonna happen between now and the time you retire. I think your advisor’s on the right track, and shifting to focusing on interest and dividends for the purpose of security, locking in what you have now probably makes a lot of sense.

We’re gonna answer your second question in just a minute, and that is, are you giving up growth? Before we do that, though, I wanna make an offer to you. We have an animated video that we’ve put together that talks about the case for fixed income. That’s what it’s called. And you’ll learn how investing for fixed income can help you lock in the portfolio that you have right now and still get you dividends and interest that you know you can count on in the future.

You’ll learn a lot by watching this video for sure, and I wanna send it to you free of charge. You just have to ask for it, and you can do that by going to [providencefinancialradio.com/video](https://providencefinancialradio.com/video). Again, it’s [providencefinancialradio.com/video](https://providencefinancialradio.com/video). Leave us your information and we’ll email it to you, and you’ll be able to watch this video just very shortly.

To claim your free video called The Case for Fixed Income, just go to [providencefinancialradio.com/video](https://providencefinancialradio.com/video) and we’ll get it right out. I’m Anthony Saccaro. You’re locked into the Providence Financial Retirement Show. Really glad that you’ve joined us. Thank you for taking time out of your day to be with us.

We’re answering your listener questions. There are actually six specific questions that we are answering today because they’ve built up over time, and we just haven’t been able to get to them. The first question we’re answering now is from Marcus, and Marcus’ question generally had to do with the fact that he’s retiring in two years with about one point two million dollars.

That’s mostly in growth stocks. And he wants to know, should he be staying invested for growth or should he be focusing more on a dividend portfolio? The first concern that I had is right now, because he’s only two years away from retirement, he’s playing the guessing game. We have no idea what his one point two million dollar portfolio is gonna be worth in two years.

And if it gets slashed because the market gets slashed, now all of a sudden he’s not gonna be in good shape. So he’s playing the guessing game. The second concern that I have though, Marcus, is that if you don’t make any changes, you’re gonna wind up having to sell principal in order to get the income that you need to be able to retire Selling principal in retirement is never a good thing, but it’s exactly what most advisors recommend that you do.

“Oh, don’t worry, just sell your principal, and whatever’s left is gonna grow enough to offset the principal you had to sell.” Well, how do we know that? There’s been many decades where that hasn’t happened. You realize that the last major crash we had, the financial crisis, which really ended in 2009, early part of 2009, that happened 17 years ago.

It ended 17 years ago. That means that an advisor who has been in the business today for 17 years or less has never experienced a significant crash like I did and like you did in 2008. To them, it’s all the stock market. They’ve only seen the stock market go up. So their advice, “Oh, don’t worry about it.

It’s always just gonna continue to go up. You never have to worry about running out of money.” Hogwash. That is not true if we have another negative period like we’ve had multiple times in the past couple of centuries. And forget the past couple of centuries, just go back the last 25 years. The market crashed 50% from 2000 to 2002, and then it crashed 60% from 2007 to 2009 with the financial crisis that we just talked about.

If you were to draw out a chart from 2000 to 2013, it looks like a big W. There’s two crashes, two recoveries, but over that 13-year time period, there is no growth. Any financial advisor who’s been in business for 17 years or less has never experienced that. I’ve been in business since 1999. I’m coming up on 30 years.

I helped clients successfully through the 2001 crash and through the 2008 crash. I’ve lived through them. I know what could happen, and it also smells like it could happen again. If it does happen again and you retire at the beginning of it, and we have another 10 or 15-year time period where the market has no growth, like it’s happened many times throughout the course of market history, if that happens again, you could be selling shares in a flat market and have to worry about running out of money before you run out of life.

It’s not a great way to live retirement, and I know from experience, not theory. You can probably tell I’m a little passionate about this. I’ve seen it. I’ve seen people not be able to retire for a few years. I’ve seen people lose their life savings. It’s been a long time, but I’ve seen it, and I don’t want that to happen to you, and you can smell that there might be another problem around the corner.

This word AI bubble seems to be creeping up, and I don’t want you to get caught in it if you’re on the brink of retirement. Marcus, thank you for taking the time to write in your question. I really hope I’ve given you something to think about. In my book, More Life Than Money, I wrote an entire chapter, chapter five, all about market history.

The market really is predictable and repeatable over the long run. And I talk about what those trends are in chapter five. And if you’re on the brink of retirement or you’re gonna retire soon, or you even are just fairly newly retired, you gotta know what’s in chapter five about what history tells us about where the market could go from here.

I wanna send you More Life Than Money free of charge. All you have to do is go to [providencefinancialradio.com/book](https://providencefinancialradio.com/book). Again, it’s [providencefinancialradio.com/book](https://providencefinancialradio.com/book). Leave us your information and a brand-new hardcover copy of More Life Than Money will show up on your doorstep. To claim your free copy, go to [providencefinancialradio.com/book](https://providencefinancialradio.com/book) and we will get it right out

Thank you for joining us for today’s Providence Financial Retirement show. I’m Anthony Saccaro, really glad that you’re here. We’re taking our entire show today, and we’re answering six different listener questions that we’ve gotten over the past few weeks that I think you’re all gonna benefit from. The first question we got was from someone who’s about to retire in two years and wanted to know if he should stay invested for growth in his growth stocks or whether or not he should start focusing on interest and dividends We’re gonna move on to our next listener question, though.

It comes from Patricia in San Clemente, and she wrote in this, “My husband passed away last year and I inherited his IRA. I’m 62 and I’m still working. I’ve heard about stretch IRAs, but the rules have changed. What are my options and what mistakes do I need to avoid?” It’s a great question, and the rules have changed a lot with SECURE Acts 1.0 and 2.0.

I’m glad that you’re asking the question because there are definitely things you need to know. There is one thing, though, that did not change, and that is the spousal rollover rules. You’re a spouse. You actually have some options that a non-spouse beneficiary does not have. You have the option of using the IRA or treating it like an inherited IRA, like a non-spouse beneficiary, or because you’re the spouse, you have the option of doing a spousal rollover.

Simply stated, that means that you can roll your husband’s IRA into your name and pretend like it was yours all along. That’s huge because you’re not then subject to the 10-year distribution rules that a non-spouse beneficiary is gonna be subject to. Because you’re only 62 years old, you have until you’re 75 years old to take your first RMD.

If you took it as an inherited IRA, you would have to take your full distributions over the next decade, which probably wouldn’t be as tax advantageous. And I don’t know your situation for sure. There’s certainly some details that might change that answer. My general thought, though, is that rolling it into your name and doing a spousal rollover probably is what’s gonna make the most sense.

In your scenario, it doesn’t inhibit you at all, but it does give you more flexibility. If you do a spousal rollover and you still wanna make withdrawals, you can. You’re just not forced to as if you did not do a spousal rollover. Patricia, then, in your situation, I think that’s what makes the most sense.

Do the spousal rollover. And I hope that helps answer your question. Let me take a few minutes, though, and expand on non-spousal beneficiaries. What if you inherited an IRA but you’re not a spouse? What are your options? Generally speaking, other than a few exceptions, you’re gonna have to take the IRA over a 10-year period of time.

If the IRA owner passed away before their required beginning date, which is April 1st, after the year that they were required to start taking their RMDs, their required minimum distributions, if they passed away before that date, as a beneficiary, you can actually wait for the entire 10 years and then liquidate the entire IRA in year number 10 if you want to It’s an option for you.

It’s probably not the best option because that means that you’re gonna have to pay tax on the full IRA amount in that one year. That’s usually not the best option, but it’s an option for you as long as the IRA owner died before the required beginning date. If the IRA owner died after the required beginning date, you then have to take a minimum amount every year and at the same time make sure that the entire IRA balance is liquidated by the end of year 10.

And if you miss any of those distributions, then it’s gonna be subject to a 25% penalty, 25% of the amount you should have taken but did not. If you wanna learn more about IRAs and specifically inherited IRAs, we put together and created an animated video that’s fun to watch that talks just about IRAs and what you need to know when it comes to required minimum distributions and inheritance I wanna email you this video absolutely free of charge.

It’s fun to watch because it’s animated, but you’ll learn what you need to know in just seven or eight minutes because we’ve really wordsmithed it and put it together very nicely to give you a lot of information in a really short period of time. If you’d like to watch it because you inherited an IRA recently, or maybe you’re about to, just go to [providencefinancialradio.com/video](https://providencefinancialradio.com/video).

Again, that’s [providencefinancialradio.com/video](https://providencefinancialradio.com/video). Leave us your information, and it’ll show up in your inbox shortly. To get your free video about inherited IRAs and IRAs in general, go to [providencefinancialradio.com/video](https://providencefinancialradio.com/video), and you’ll have it in your inbox shortly. But I know you’re gonna enjoy watching it.

My name is Anthony Saccaro. Thank you for taking time to spend some of your day with us here. You’re listening to the Providence Financial Retirement Show, where it truly is all about the income. If you’ve been with us, then you know that we’re answering six listener questions that we get all the time and are gonna benefit you as our listeners.

And if you haven’t been with us, then welcome, and now you know that we’re answering six listener questions. We’ve already answered a question about investing for interest and dividends, and we just answered a question about inherited IRAs. And our next question comes from listener Jennifer in San Marcos.

She wrote in this: “My mother is 68 years old and still hasn’t claimed Social Security. She says she’s waiting for a bigger benefit, but I’m worried she’s already left too much money on the table. At her age, should she start now or keep waiting until 70?” Jennifer, that’s a very, very good and a very common question.

And unfortunately, you might not like my answer because the answer is going to be it depends. It depends on a lot of factors. It depends on the situation that your mother is in, and it’s not just as simple as everyone should wait till 70 or everyone should take it at 62 years old. I do wanna give you some things to think about, though, and you can put these into your mom’s situation and hopefully be able to come up with an informed decision about whether or not she should wait or start taking it right away.

One of the most common misunderstood things about Social Security, though, is the fact that if you wait until too long, you’ve missed out on eight years of benefits. And that’s true, but the math simply says that by the time you turn around 80 years old, you’re gonna have gotten the same amount anyway. So if you started taking Social Security at 62, or if you wait till 70, by the time you turn 80, you will have gotten just about the same amount.

80’s about the break-even age. That is the time that you wanna live beyond if, in fact, you’re looking to break even and max out Social Security. The race is not to 90 or to 100. The race is to 80 I can confidently tell you though that if you do wait until you’re 70 to start claiming Social Security and you live beyond 80, you’re gonna be really glad that you did that.

The math shows a significant difference every year you live beyond 80 if you started claiming at 70 years old as opposed to filing at 62 years old. How does this tie back to your mom’s situation? Well, it depends on her health. If she’s healthy as an ox and could live another 20 or 30 years, maybe push the centenarian age, then waiting for another couple years like she wants to do probably makes a lot of sense.

On the other hand, if she’s not doing so well and there’s a question as to whether or not she’ll even make it to 80, then taking it now probably makes more sense. Health is definitely a factor to consider. Another thing that I do want you to consider though, Jennifer, is this: Social Security should not be considered in isolation of everything else.

You have to look at your family dynamics. Is your mom married? What are the other resources? Should she draw down her IRAs until she turns on Social Security, or should she turn on Social Security and reduce some of the withdrawals that she’s making from her IRAs? And of course, I’m even making an assumption that she has IRAs.

A mistake that I often see, though, is that families tend to look at Social Security in isolation from everything else. I’ve even sat down with husbands and wives where the husband will say, “I’m gonna take mine at 62,” and the wife will say, “Well, I’m gonna wait till my full retirement age,” or, “I’m gonna wait till 70,” because they have different feelings about Social Security.

That’s not the right approach. It’s a family decision, it’s a family matter, and it’s going to affect the entire family. It needs to be looked at and coordinated with the rest of the family structure. And in your mom’s situation, Jennifer, unfortunately, I just can’t give you more than that ’cause I don’t have the additional information.

I hope I’ve given you some things to think about, though. And I can also point you to my book, because in my book, More Life Than Money, I wrote an entire chapter about Social Security. I talk about a lot of the different benefits in there that many of you might not even be aware of. I talk about the break-even age.

I discuss the fact that if you wait from 62 to 70 years old, you’re gonna get 24% more income every year for the rest of your life. And there’s many other things that I talk about as well too in that chapter. If you’re on the brink of taking Social Security and you wanna make sure that you make the best decision possible for you, you’ve gotta read this chapter.

I wanna send you this chapter free of charge. All you have to do is go to [providencefinancialradio.com/book](https://providencefinancialradio.com/book). Again, it’s [providencefinancialradio.com/book](https://providencefinancialradio.com/book),

and we will get it right out. You’ll have it within just a few days. A brand-new hardcover copy will show up on your doorstep of More Life Than Money. To claim your copy, just go to [providencefinancialradio.com/book](https://providencefinancialradio.com/book) and we’ll get it right out.

Thank you for staying with us here for the Providence Financial Retirement Show. I’m Anthony Saccaro. We are your retirement income source, and this is the place where retirees come for income. We’re taking this entire show and we’re answering your questions. We’ve already answered a question about dividend income.

We’ve answered a question about inherited IRAs, and we’ve answered a question about Social Security And I’m really glad that you guys take the time to write in these questions, ’cause it gives us something to talk about on these shows. If you have a question for The Providence Financial Retirement Show, really easy to ask.

You just need to make your way over to [providencefinancialradio.com](https://providencefinancialradio.com) and you can ask your question right there. Hopefully, we’ll get a chance to discuss it in a future episode. Would love nothing more than to do that. It turns out that our next question comes from David in Oxnard. It’s, uh, pretty short and sweet.

He wrote in this: “Is now a good time to lock in a bond ladder, or should I wait for interest rates to come down?” And that’s interesting that you ask the question like that, David, that somehow you think waiting for interest rates to come down actually might help with your bond ladder. The truth is this, the higher interest rates are, the better off locking in a bond ladder might be.

If rates come down, it’s not nearly as beneficial as locking in a bond ladder as when rates are high. So I’m just wondering where you got that information from and why you’re thinking it might actually be better to wait for rates to come down before locking in a bond ladder. Let’s take a minute and step back, though, because many of you might not even know what the heck I’m talking about and what is a bond ladder to begin with.

You should also understand what a bond is before we talk about bond ladders, too. What do you think? Yeah, I think that makes sense. Here’s the definition of a bond. A bond is simply a contract between you and whoever issues the bond that you own. You own the contract, and because you own the contract, you get the guarantees of the contract, and there are two guarantees that bonds give you.

Number one is a guaranteed interest rate. Number two is a guaranteed maturity date. And as long as whoever issued the bond is solvent, then you’re gonna get your principal back when the bond matures. Guaranteed interest, number one. Guaranteed return of principal, number two, when that bond matures. In short, that’s what a bond is.

If you have a 10-year bond for a million dollars that’s paying you 5%, that’s gonna give you $50,000 a year every single year for 10 years, and at the end of 10 years, you’re going to get your million dollars back. And over that 10 years, you will have collected $50,000 a year of interest, which is then a grand total of $500,000, and those are guaranteed as long as, again, whoever issued the bond is solvent.

That’s the basic info of what a bond is and how it works. What’s a bond ladder? A bond ladder, then, is buying a bunch of different bonds with different maturity dates. You might start the bond ladder by buying a five-year bond, a 10-year bond, a 15-year bond, and then a 20-year bond. The idea is that the five-year bond’s not gonna pay you as much as the 20-year bond, but it matures in five years, so that money will be liquid in five years.

The 20-year bond, though, generally speaking, is gonna pay you more than the five-year bond. When that five year rolls around, every bond that you have will have five years less on it. That means that your 10-year bond will only have five years left, your 15-year bond will only have 10 years left, and your 20-year bond will only have 15 years left.

When your first bond matures in five years, now you can buy another 20-year bond, which is gonna pay more, but you still only have five years until the next bond liquidates. So you wind up having longer term bonds in your portfolio, but without giving up the liquidity, and that’s essentially what a bond ladder is.

When interest rates are higher, you get to lock in longer rates all across the board for different time frames than when interest rates are lower. That’s why, David, I was a little confused by your question because you seem to think that as interest rates go down, it would be better to start a bond ladder at that time, but that’s not true.

You wanna start a bond ladder when interest rates are high, not low. Hopefully, that now makes sense. Bond ladders certainly could have a place in your portfolio, but just like everything else, they shouldn’t dominate your portfolio. They should just have a place. If you’re in retirement, though, and you need to focus on income, you need to get income out of your portfolio, and you wanna make sure that you never have to worry about running out of money before you run out of life, fixed income should probably dominate your portfolio, but not just bonds.

And bonds are not the only source of fixed income. As a matter of fact, there’s eight or 10 other asset classes that work like bonds that will provide you dividends and interest that you can count on, but that are not bonds. If you’d like to learn what some of these other income producing investments are, we’ve put together a short animated video for you that’s called The Case for Fixed Income.

It’s only seven or eight minutes. It’s short, but it’s fun because it is animated, but you’ll learn a lot in seven or eight minutes, and you’ll learn why focusing your investments to give you interest and dividends in retirement just makes a lot of sense. I’ll send this video to you absolutely free of charge.

You just have to let us know you want it, and you can do that simply by going to [providencefinancialradio.com/video](https://providencefinancialradio.com/video). Again, it’s [providencefinancialradio.com/video](https://providencefinancialradio.com/video). Leave us your information, and within a short time, that video will show up right in your inbox. All you got to do is press play. You’ll be able to watch this video.

To get your video about fixed income, go to [providencefinancialradio.com/video](https://providencefinancialradio.com/video) and we’ll get it right out. I’m Anthony Saccaro, really happy that you’ve decided to join us today for the Providence Financial Retirement Show. We’re answering your listener questions. We’ve got six questions that we’ve been answering.

Already answered a question about interest and dividends and social security and inherited IRA. We’re now in the middle of answering a question about bond ladders. David asked the question whether or not it’s a good time to start building a bond ladder, and with interest rates as high as they are today, it probably makes sense for some part of your portfolio.

I wanna expand on that a little bit though and talk a little more about bonds and fixed income investments and what affects fixed income investments more than anything else. A lot of times people that are invested in fixed income compare the results of their investments to the stock market. Fixed income, though, is not the stock market.

That’s almost like trying to compare the zero to 60 mile per hour time on a Porsche to a semi-truck. They’re built for two different things. When you’re invested in stocks, you’re taking a lot of risk. You might gain 50%, you might lose 50%, and there’s just a lot of risk, and stocks are generally good as a long-term play.

When you’re focused on fixed income, though, you’re not gonna gain 50%, and you’re not gonna lose 50%, so you can’t compare that to the stock market. But I find that a lot of people are doing that. The stock market is not what tends to affect fixed income very much. What does tend to affect fixed income, though, is interest rates.

That’s what you wanna pay attention to. For those of you that might be familiar with how fixed income works, you already know that fixed income investments react opposite of interest rates. So if interest rates go up, the value of your portfolio is gonna go down. If interest rates go down, the value of your portfolio is going to go up The reason is simple.

When you buy a bond, for example, we mentioned that you lock in a fixed interest rate at the time. Well, if interest rates go up and someone else can buy a different bond that’s gonna pay more than yours, then that means that the value of your bond is going to go down. That’s why fixed income investments fluctuate opposite of interest rates.

It’s then really important to know where you are, where we are in the interest rate environment when you’re investing in fixed income. And right now rates are really high compared to where they were just four or five years ago. This means that you can lock in higher interest rates for a longer period of time because interest rates are high, and that’s good news for you.

The next question then is: where are interest rates likely to go from here? And in the short run, they might go up just a little bit, but the Fed funds rate was at a quarter of a percent five years ago and is now at three and a half percent, which is a dramatic jump. And we’re not gonna go from three and a half to seven percent, at least no one sees that scenario as even being possible.

So if we do go up, it might be another quarter percent, maybe half a percent, because inflation has been sticky and the Feds are having a hard time getting rid of that. But I wouldn’t expect it to go up much more than that. But most economists and professionals believe that over the years to come, interest rates are gonna go down.

And if they go down, that means the value of your fixed income portfolios are actually gonna go up. And I do a lot of live TV interviews, and over the course of the last one or two years, I’ve actually said that this is the first time in like four decades where you can actually buy a fixed income investment to lock in a higher interest rate and for potential capital appreciation as well.

That just doesn’t happen a lot. If you’ve been thinking about adding some fixed income to your portfolio, it’s really not a bad time at all. As a matter of fact, it’s potentially a very good time because you can lock in higher rates for longer and because as interest rates go down, the value of your portfolio might even go up.

If that concept is intriguing to you and you wanna learn more, I wrote all about that in my book, More Life Than Money: How to Get Income From Your Portfolio and Lock in Yields That Are Higher with Potential Capital Appreciation. I’ll send you More Life Than Money absolutely free of charge. You just have to let us know you want it.

You can do that by going to [providencefinancialradio.com/book](https://providencefinancialradio.com/book). Again, it’s [providencefinancialradio.com/book](https://providencefinancialradio.com/book). Leave us your information and we’ll get a brand-new hardcover copy of More Life Than Money right out to you. You’re gonna really enjoy reading it. And while you’re at it, you might as well read some of the other chapters because it’s all about the most common mistakes that I’ve seen retirees make over my career and how to avoid them.

To claim your free copy of More Life Than Money, go to [providencefinancialradio.com/book](https://providencefinancialradio.com/book) and you’ll have it on your doorstep shortly.

Thank you for spending some part of your day with us. You’re listening to the Providence Financial Retirement Show. My name is Anthony Saccaro, and I’ve decided to take this entire show and just answer some of the questions that we’ve accumulated over the last few weeks. So there’s six listener questions that we’ve answered.

I think we’ve already answered four of them, questions about dividends, questions about Social Security, inherited IRA, and we just answered a question about bond ladders and had some good conversation about interest rates. Our next question, though, comes from Michelle in Victorville, and she wrote in this, “My CPA says that I should do Roth conversions, but I’m scared of the tax hit.

How do I know if a Roth conversion actually saves me money?” Well, Michelle, you just hit on the number one tension as to why many listeners haven’t done Roth conversions, and that is because you have to pay the tax. I’m actually really proud of your CPA because I find that most CPAs are shorter-term thinkers, meaning that they’re trying to save you money on taxes this year.

That’s their focus, and that’s what their training is, right? You don’t hire a CPA to help you pay more taxes this year. And when you think about Roth conversions, that’s exactly what’s gonna happen, is you’re gonna pay more tax in the year that you do a Roth conversion with the idea that in a longer tax standpoint, you’ll wind up saving taxes.

So Roth conversions is definitely gonna have some tax pain up front, with the entire idea being that it’s a longer-term tax saving strategy, not a short-term tax saving strategy. And not only do most people tend to focus on the instant gratification, the short term, but most CPAs tend to focus on that too.

For those of you who might not be familiar with what Roth conversions are, it’s really simple. It’s just transferring money from your traditional IRA to a Roth IRA. You pay the tax every time you make the transfer, but whatever winds up going into your Roth IRA is gonna be there tax-free, and all the future growth is gonna be tax-free, and there are no required minimum distributions.

So you pay the tax now at today’s known tax rate, knowing that you’ll never, ever have to pay tax on any of the earnings that are in the Roth IRA going forward. There’s one time that I can think of where it usually does not make sense to do Roth conversions, and that is where you need the income from your retirement accounts.

If you’re withdrawing from your retirement accounts and you’re having to pay tax on that and you need that money to live, oftentimes doing Roth conversions doesn’t make sense because of some of the negative ramifications that it could have, and you already need the income. That’s point number one. But there’s also a time when it usually makes sense, and that is when you don’t necessarily need the income, and most of your IRA is probably gonna be passed on to your kids or your beneficiaries anyway.

Then it could very well make sense to do Roth conversions now at your bracket, so that when your kids inherit the money, it’s gonna be tax-free And they don’t have to start taking required minimum distributions. Of course, everyone’s situation is different, but I find that most of the times people that are retired are in lower tax brackets than their kids.

And if you pass away and leave your kids an IRA that has to be drawn down over 10 years because of the updated RMD rules, if your IRA is significant, that’s a significant amount of income that your kids are gonna have to add to their tax return every year and they’re gonna have to pay tax on. And if they’re professionals and they’re already making a lot of money, that’s very disadvantageous for them.

If you were to pay the tax for the Roth conversions now though at your lower rate and then leave them the Roth IRA later, not only do they not have to take required minimum distributions, but they can actually let that money sit there for 10 years and grow for 10 years tax-free before cashing it in.

That is a major advantage. Let me recap then. If you’re in a situation where you need all the income you can from your portfolio to live retirement and make ends meet, Roth conversions probably don’t make sense. But if you’re in a situation where you probably don’t need that income, maybe you’re just forced to take it through RMDs and the bulk of your retirement portfolio is probably gonna go to your kids, then Roth conversions oftentimes do make sense.

There’s a lot more to it though, as you can imagine, and because of that, I’ve written a commission report that I wanna make available to you all about Roth conversions. It’s six or seven pages. It’s very detailed. It talks about when you should be thinking about Roth conversions. It uncovers some of the myths of Roth conversions, and I know that you’re gonna learn a lot by reading it.

If Roth conversions have been on your mind and you’re just not sure what to do, kinda like Michelle who asked this question, you’re gonna wanna read this commission report. To get it, all you need to do is go to [providencefinancialradio.com/report](https://providencefinancialradio.com/report). Again, it’s [providencefinancialradio.com/report](https://providencefinancialradio.com/report). Leave us your information.

We’ll email it right on over. You’ll have it soon, and you’ll know what you need to know to decide whether Roth conversions make sense. But at least you’ll quit wondering, and you’ll have the information so you can make a decision. To get your free report about Roth conversions, just go to [providencefinancialradio.com/report](https://providencefinancialradio.com/report) and we’ll get it out shortly.

Thank you, Michelle, for taking the time to write in that question. I’m Anthony Saccaro. You’re tuned in to the Providence Financial Retirement Show. We’re spending our entire show today answering your questions. Week in and week out, we get questions, and sometimes they build up, and we had a lot of good questions, so we wanted to spend our time talking about those and answering them.

If you have a question for the show, really easy to ask. You just need to go to [providencefinancialradio.com](https://providencefinancialradio.com). You can type in your question there, and maybe we’ll get a chance to discuss it in a future episode. Our last question of the day comes from Robert in Newport Beach, and he wrote in this: “What’s the 4% rule, and does it still work in today’s market?”

Both of them really good questions. What is the 4% rule? Well, in 1994, financial advisor William Bengen, he published a research report on safe withdrawal rates. He analyzed historical market data, and he found that 4% was a reliable starting point. A few years later, there were several professors at Trinity University who validated this with another comprehensive study, and together through this study, they established the 4% rule as kind of the gold standard for retirement planning.

In short, the 4% rule says that if you’re invested in some portion of stocks and bonds, you should be able to comfortably withdraw 4% a year from your portfolio and be able to adjust for inflation and really never have to worry about running out of money. That’s what the rule says More specifically, the rule assumes a couple of things, three things to be particular.

Number one is you have a 30-year retirement time horizon. Number two, your portfolio is 60/40, meaning 60% stocks and 40% bonds, which probably would be considered a moderate allocation. And number three is you don’t panic sell during downturns, and that’s a big issue because a lot of you do panic sell. If you change any one of these three as- assumptions, then that entire 4% rule goes out the window.

And there are times when the 4% rule works beautifully, and then there are times when it breaks down. It tends to work really well when markets go up over a long stretch. Think about from 2009 until here we are 2026 and what the market’s done, 16% plus a year. The 4% rule works really well in a very long period of time where the market just goes straight up.

It also works well when you’re really calm and you’re disciplined and you don’t panic. Some of you had a panic attack back in 2020 when COVID happened and the market went down 40% in 40 days and it was short-lived, but I’ve talked to some of you who panicked during that time. You sold and you never got back in the market.

And if you did that, you’re regretting that decision. So if you’re even keel, if you’re disciplined about your approach, if you don’t panic, then the 4% rule tends to work really well. It also works well when you have other income sources like your Social Security or your pensions or rental income as well.

And it also works well when your portfolio is large enough that you don’t feel poor. So those are times when it tends to work good. There are some times though that it breaks down. It tends to break down if you retire right before a major bear market. So if you retire and then the market crashes by 20 or 40 or 60%, Then you throw the 4% rule out the window.

Doesn’t help at all. It’s also not gonna help you if you panic sell, as we just talked about as well. The question then is, is it still valid? And that rule’s been challenged over the years, and there are some studies that say that no, the rule’s not valid anymore. There’s one study that showed, I think it was 10 or 12 years ago, that the rule of 4% should actually be the rule of 2.7%.

And then that study showed later that it should be like 3.1% and then 3.3%. And the fact is that no one really even knows what the rule is. I actually had the opportunity of being interviewed for a US News and World Report article where not only was I interviewed and quoted in the article, but so was William Bengen, and even he said that the rule of 4% is outdated.

And if you’re on the brink of retirement and you’re about to retire and you’re following the rule of 4% and we enter another long period of time where the market is just flat, I think it could really have a devastating impact on your retirement, and you just need to be really, really careful. Hopefully, Robert, that gives you some things to think about.

If you’d like to learn more about the rule of 4% and about the trends of the stock market, well, in chapter five of my book, More Life Than Money, I wrote all about that. And when you read it, it’s gonna open your eyes as to how the market really works. And we get calls and comments from our listeners all the time that they had no idea what they learned in chapter five.

I wanna send you More Life Than Money free of charge, absolutely complimentary. Just I wanna make sure you have the information so that you can have a secure retirement. You do have to ask for it, though, and you can do that by going to [providencefinancialradio.com/book](https://providencefinancialradio.com/book). Again, it’s [providencefinancialradio.com/book](https://providencefinancialradio.com/book).

Leave us your information. We’ll send you a brand-new hardcover copy of More Life Than Money. Read it, enjoy it, get the information you need so that you can have the peace of mind and stress-free retirement that you deserve. One more time, to get your free copy of More Life Than Money, just go to [providencefinancialradio.com/book](https://providencefinancialradio.com/book) and we’ll get it right out.

I’m Anthony Saccaro. Thank you for taking time out of your day to join us. I’m really glad that you’ve been with us. We’ve answered a lot of listener questions today, and I know that listening to these answers has been very valuable for you. Feel free to write in your questions that you have by going to [providencefinancialradio.com](https://providencefinancialradio.com), and maybe we’ll get a chance to answer them in a future episode.

Have a great week, everyone. God bless