The retirement decisions that you make today will either haunt you or reward you for the next 20 years. Most of you are guessing. Today, we’re gonna give you the playbook, three moves that work together: Social Security, portfolio strategy, and taxes. And these separate a comfortable retirement from one that is scrambling.

Plus, we’re gonna tackle the AI bubble question. Is it real? What can you do to protect yourself? And of course, as per usual, we’re gonna answer your listener questions as well, and we’ve got quite a few of them. I’m Anthony Saccaro. Thank you for joining us. We are your retirement income source, and this is the place where retirees come for income.

And as amazing as it is, as unfathomable to think, most retirees go into retirement without a true plan. I’ve been a retirement advisor for 27 years, and I’ve just seen this over and over again. And quite frankly, it’s scary. Today, we’re gonna talk about three areas that are a good starting point for a plan.

For those of you that have not collected Social Security yet, we’re gonna spend some time talking about that. As a matter of fact, that’s where we’re gonna start. Then we’re gonna talk a little bit about portfolio strategy, and then we’re going to talk taxes. And if that’s not enough, we’re gonna answer the question, the AI bubble question, as to whether it’s real or not.

So we certainly have a lot in store. Let’s start off with our first question of the show. It comes from Marcus in Torrance. He wrote in, “I’m 62. I’m thinking about filing for Social Security next month because I wanna enjoy my money while I’m still young enough to travel. But my brother says I should wait until 70.

How much would I really be leaving on the table if I claim early?” Well, Marcus, that’s one of the most common questions we get when it comes to Social Security. Do I claim it at 62 and collect less for a lot longer, or do I wait until 70 years old, then collect more? The truthful answer is that it really depends on your situation.

From purely a mathematical standpoint, it all breaks even at around 80 years old anyway. So whether you take it at 62 or whether you take it at 70 years old, by the time you reach 80, you’ll have collected about the same amount. Once you get over the age of 80, then that’s where the divergence really starts to become very noticeable.

If you wait till 70 to start collecting Social Security and you live beyond 80, every year you live beyond 80, you’ll wind up collecting a lot more in terms of lifetime income than if you were to start taking it at 62 years old. We have software in our office that allows us to show someone mathematically how much they’d be leaving on the table if they take it early and live to early 90s.

It’s not uncommon to see that the difference between taking it early and waiting till 70 is a difference of a couple hundred thousand dollars of lifetime income. And if you take it early, then this is gonna be lost. If you wait till 70, then this is going to be put in your pocket. I just ran a Social Security seminar for a new client of ours who is 60 years old.

His wife is 53 years old. And mathematically, by waiting until 70, if he lives to 93 years old, the difference in the amount that he would collect is about $350,000 over their lifetime. And that’s their situation, that’s their age range, but $350,000. If they take it early, they’ll be losing that amount, whereas if they wait, then that amount will go in their pocket.

So it really is a very significant decision when you start to take Social Security. A wrong decision might cost you a quarter million dollars or more, and a good decision might put an extra quarter million dollars or more in your pocket. So how do you know? What for you is the best way to take Social Security?

Unfortunately, it’s gotten so complicated to figure out mathematically what makes the most sense for you and your family. I wanna help you with that, though. I’m gonna make an offer that I’m not sure if I’ve ever made here on the Providence Financial Retirement Show, but we have software in our office that will allow us to take your Social Security statement, throw it into our software, and press a button, and really come up with what’s the best strategy for you, and if you’re married, you and your spouse, to be able to take Social Security.

And I’m gonna offer you this absolutely free of charge as long as you ask for it. And to do that, you just need to go to providencefinancialradio.com/report. Again, it’s providencefinancialradio.com/report. Leave us your information and someone will touch base with you next week to get your statements and we’ll run this report for you.

But it will be a customized report that will show you mathematically the best way for you and your situation to take Social Security. To claim your complimentary Social Security report, just go to providencefinancialradio.com/report and someone will reach out to you early next week. But you’re gonna be glad you got it, and the amount that you see that you might leave on the table if you make a wrong decision, that might very well be a staggering amount for you.

providencefinancialradio.com/report I’m Anthony Saccaro. Thank you for tuning in to the Providence Financial Retirement Show. We’re having a great show. We’re talking about several different things. We’re in the middle of a Social Security conversation. We’ve got a couple of listener questions about that, so that’s where our focus is now.

But in a few minutes we’re gonna spend some time talking about your portfolio strategy in retirement, what it should be, what you should be thinking. And then, not to be outdone, we’re gonna talk about taxes. That’s a critical part of retirement, and many of you wanna know how to save money in taxes, so we’re gonna tackle that as well.

Before we go there, though, we have a question from Jennifer in Santa Monica about Social Security. It’s a question we get a lot. She wrote in, “I’m 64, and I’m already collecting Social Security. I’m thinking about doing consulting work on the side, but I wanna know if I’m gonna get penalized.” If you could let me know that answer really quick, Anthony, I’d really appreciate it.

Jennifer, thank you for taking the time to write the question. I’m glad you asked, because you may very well get penalized just depending on your situation and how much you’re going to make while you’re doing the consulting. Social Security has an earnings limit, and that earnings limit for 2026 is $23,400.

If you make $23,400 of wage income or less than that amount and you’re collecting Social Security, then it will not affect your Social Security benefits at all. On the other hand, for every $2 you make over 23,400, then Social Security is going to want $1 back from the benefits that they’ve paid you.

It’s almost like a 2:1 ratio or a 50% cut if you wanna look at it that way. Let’s imagine for a second that you make $20,000 too much. Well, you take our 2:1 ratio, you divide that $20,000 by two, that’s $10,000. That’s the amount that you’re going to have to pay back from your Social Security because you made $20,000 too much.

And if you’re not aware of that, then when tax time comes around, it could be a lot harder than you were planning now that you have to write a $10,000 check back to Social Security. And it’s not optional, it’s in the law. And if we’re gonna be really forthright, it’s not a penalty per se, because Social Security will take that amount, and they’ll put it back in your formula.

So once you hit full retirement age or beyond, then you’ll get a higher amount because you wrote that check. Really, it’s not a penalty. But when you go to write the check, it will definitely feel like one Hopefully, Jennifer, that answers your question, and now you’re armed with information that you didn’t have before, so you can make a really good decision about when to file for Social Security based on how much you’re going to make.

That takes us back to what we were talking about just a few minutes ago, and that is when to file for Social Security. There’s more to filing than just the math. We just discussed the fact that if you file at the wrong time, you might actually be leaving several hundred thousand dollars on the table and not putting it in your pocket just by making a bad filing decision, bad timing.

There’s more to it than the math, though, and here are other things that you need to consider, not just the math. If you’re sixty-two years old and you’re single and you’re not in great health, you probably wanna claim early because you might not even make it to eighty years old. That certainly would be something to think about.

But if you’re working and you’re sixty-two years old, just like we talked about in answering Jennifer’s question, then it probably doesn’t make sense to file because you might have to give all of it back just depending on how much you’re earning. That’s certainly a consideration as well. What if you’re married, though?

There’s a spousal benefit and there’s a survivor’s benefit. The spousal benefit simply says that if you have a spouse, they will be able to file for their own benefit or fifty percent of your benefit, depending on whichever one is larger. And when you file is going to affect the amount that they get as well.

That’s also true with the survivor’s benefit. When one of you passes away, the survivor is going to be able to keep the larger of the two Social Securities that you’re currently collecting. And if you happen to be the breadwinner spouse and your Social Security is gonna be a lot larger, oftentimes it makes sense to wait until seventy to get that larger amount because your surviving widow or widower will be able to collect the larger amount.

So there really is a lot to it besides just the math. And that’s exactly why I’m offering a complimentary Social Security analysis. We have the software in our office that will allow us to take your statements, put ’em into our software, and press a button and come up with mathematically what’s the best way for you to start taking Social Security.

And then we’ll turn it into a report just for you. So it’ll be a customized Social Security report that you will get just for you based on your Social Security statements. That way, you don’t have to guess as to which way is the right way to take Social Security for you. If you wanna take me up on this offer, all you need to do is go to providencefinancialradio.com/report.

Again, it’s providencefinancialradio.com/report. Leave us your information and we’ll contact you next week. We’ll make sure we get your Social Security statements, and then we’ll run your report for you. Absolutely complimentary, but potentially worth a couple hundred thousand dollars in your pocket. To claim your free Social Security report, one more time, go to providencefinancialradio.com/report.

Leave us your information and someone will reach out to you next week

Thank you for tuning in to today’s Providence Financial Retirement Show. My name is Anthony Saccaro. We’re talking about retirement, as we usually do. We just spent a few minutes talking about Social Security and the simple matter that a bad timing decision can actually cost you a couple hundred thousand dollars of income over your lifetime if you choose to take Social Security at the wrong time.

When it comes to timing, though, it’s not just Social Security that you have to worry about. You also have to consider the timing of your investments. When we’re in a situation like we are in now, where there’s a possible concern of a correction or maybe even a market crash, what do you do? Do you stay put?

Do you sell? Do you do some of each? Take some chips off the table? What do you do? The fact is that if you’re a few years away from retirement and the market crashes, it could wipe out your entire retirement, and here on the Providence Financial Retirement Show, that’s what we’re trying to protect against.

If you’re 30 or 40 years old, or maybe even 50, and you’ve got a decade or decade and a half until you get to retirement, you can afford to ride it out. But if you’re only three to five years away from retirement, and the market crashes and it takes your portfolio down with it, then unfortunately, your entire retirement might crash.

That’s what we wanna make sure doesn’t happen. The typical Wall Street mantra is buy and hold. That just means you buy it and you hold it, and you leave your positions forever and ever. There never is a mantra that says buy and sell. Well, what good is that? Are you just gonna buy and hold and hold and leave it for the next generation and not use it for retirement?

Well, some of you might be the goal, but for most of you, the object is to buy it and hold it so that when you get to retirement, you can spend it. And you can’t spend it without selling it, or you can’t spend it without somehow turning it into an income-generating machine that will allow you to get income from it so that you can actually live off of it.

The same advice seems to be true all the time for everybody, though. Wall Street’s advice of buy and hold. And if you have 20 years to go until you retire, that advice works fine. But not if you’re a few years away from retirement. Buying and holding right now could cost you your retirement. Horrible advice if the timing is bad.

As a matter of fact, if you’re gonna need your portfolio to retire on in the next few years and you just keep holding it right now, it might be reckless. I don’t want your retirement to be tied to the stock market. I don’t want you to only be able to retire if the stock market does well, if your portfolio does okay.

I want you to be able to retire on schedule no matter what. I lived through the 2001 crash. I helped clients through the 2008 crash, and I’ve seen people on both sides of the fence. We’ve had clients that were fully protected because they understood that the market doesn’t go up forever. And in 2005, ‘6, and ‘7, they prepared themselves for the next crash.

We kinda knew it was coming. They didn’t know when, they didn’t know how bad, but when it came, they were fine. On the other hand, I’ve seen people that in 2006 and ‘7 wanted to retire in 2008 and ‘9 and couldn’t because they had not prepared. And we kinda know that there’s gonna be some problems with the stock market ahead.

You can’t be $40 trillion in debt like our government is and have a 12 or 13-year run-up in the stock market like we’ve had and not expect that something bad is gonna happen. At some point in time, the market’s going to correct. We live in California. We know that there are gonna be earthquakes, and we know that there are going to be fires.

And there are codes that protect us from those. Fire codes, earthquake codes, things that we’ve done to be proactive to prepare for the next one. The question, though, is what is the likelihood that there’s going to be another financial earthquake? The answer is 100%. We know that it’s coming. We just don’t know when.

That’s not the question. The question is not whether we’re gonna have another financial earthquake or fire. The question is, are you gonna be prepared for it? Or is your retirement going to get burned? That’s the question. This is one of the reasons why here on the Providence Financial Retirement Show, we focus so much on investing for income.

The success of your retirement does not depend on how big your base is. The success of your retirement is all about the income. And you’ve heard me say it many times before that my definition of a successful retirement is as much income as you need until the day you die. That’s the definition of a successful retirement.

And a successful retirement plan allows you to get income from your portfolio no matter what the market does. Therefore, you’re detaching your retirement from the market, and you’ll know you have income you can count on. And that’s what I want for you, and I’m pretty sure that’s what you want for you as well too.

If you wanna learn more about that concept, we’ve put together an animated video that’s short, but it’s fun to watch because it is animated. You’re gonna have the opportunity to get it free of charge because we’re going to email it to you. If you want it, you just have to let us know. You can do that by going to providencefinancialradio.com/video.

Again, it’s providencefinancialradio.com/video, and we will send it right out. The video is called The Case for Fixed Income, and you’ll learn how you can turn your portfolio into an income-generating machine so that you can retire on schedule. And once again, to claim your free video, just go to providencefinancialradio.com/video and you’ll have it in your inbox shortly.

I’m Anthony Saccaro. Thank you for staying with us. We are your retirement income source, and this is the place where retirees come for income. Really glad that you’re here today. We’ve talked about timing when it comes to Social Security. Now we’re talking about timing when it comes to the stock market, and we kind of have established that the market’s not gonna go up forever.

It looks like there’s gonna be some problems ahead. And if you’re close to retirement, that could affect your retirement, and staying heavily invested in the market is risky. The question, though, that you’re probably asking is, “Okay, so how do I actually get out? How do I de-risk myself? What’s that process?”

Well, the hardest part of de-risking is not the math, it’s the emotion. You’ve been holding onto your investment, some of you, for forty or fifty years. Now to think that you actually have to start de-risking and maybe shoring up your portfolio, sometimes that feels like you might be giving up or it feels like you might be admitting defeat, but that’s not true at all.

You’re just entering a different phase of life where it’s no longer about growth, it’s about protection And what I would suggest is that you don’t think about doing it all at once. Generally speaking, people who do it all at once often as a result of panic. I saw that in 2008 and ’09 when the market was crashing, that people sold everything.

I was speaking with someone recently that said that she sold at the bottom of the market in 2008. She panicked, and now here we are, what? Almost 20 years later, and she still has not gotten back what she sold. She panicked. She made a bad decision, and unfortunately, it’s gonna cost her big for the rest of her life.

So don’t feel like you necessarily need to sell everything. Now, there’s even exceptions to that. If you sold everything now and you could have the rosy dreaming retirement that you want, then maybe that makes sense. But oftentimes it makes sense to kind of move in a direction. And how fast you move, it’s gonna depend on your situation.

Sometimes moving slowly, sometimes a little quicker for some of you. But every month that you’re delaying making a change, that’s every month that you’re still at risk. And I don’t know what’s going to happen. I don’t know when that financial earthquake’s gonna happen. We just know that it’s coming at some point.

And when it comes, you have to be prepared. And I’ve spoken with many of you, and I know that most of you agree with me. I also know that a lot of you haven’t de-risked your portfolio yet. The reason ties back to emotion. A lot of times that’s the case. It just feels uncomfortable. Another reason, though, could be taxes.

If you’ve done really well in a non-retirement account, then there’s capital gains taxes that you’re gonna have to pay, and sometimes that might keep you from wanting to sell also But paying 15 or 20% of capital gains tax as opposed to losing 30 or 40% of your portfolio during the next market crash, a lot of people look at that as insurance.

You could very well consider that paying the tax is your insurance to making sure that you actually keep the gains and don’t give the gains back. If the market crashes and your portfolio crashes with it, you’re gonna look back and wish you’d have paid the tax. So you don’t wanna let the tax keep you from doing what you probably should do.

Don’t let the tax keep you from protecting your retirement. And we’re gonna talk a little more about taxes later, but for now, if you’re at the stage of life where you wanna protect your retirement, maybe not sure how to do it, maybe a little uncomfortable, and you just wanna get more information, that’s the reason I wrote my book, More Life Than Money.

It’s an Amazon number one bestseller in multiple categories. I’m gonna send it to you free of charge. A brand-new hardcover copy of my book, More Life Than Money, absolutely yours free for the asking. To ask for it, go to providencefinancialradio.com/book. Again, it’s providencefinancialradio.com/book.

Leave us your information, and a hardcover copy of More Life Than Money will show right up on your doorstep. You’ll get the information you need to be more educated as to how you can start making this transition and make sure that your retirement is not tied to the stock market. I want you to be able to retire on schedule no matter what the stock market does, whether we have a crash or not, and More Life Than Money will show you how to do that.

To get your free copy, go to providencefinancialradio.com/book and we will get it right out.

Thank you for continuing to stay with us here for the Providence Financial Retirement Show. I’m your host. My name is Anthony Saccaro. We’re in the middle of a really good discussion. We’ve talked a lot about timing when it comes to your retirement. We touched on Social Security timing, things to think about, and we really uncovered the fact that if you take Social Security at the wrong time, it may cost you a quarter million dollars of lost revenue, lost income from Social Security over your lifetime.

Timing’s really important. Now, we’ve just spent a few minutes talking about the timing of the market. Do you wanna stay in forever, or do you need to get out at some point, and how do you time that? That was the topic of our last discussion just a few minutes ago. We’re gonna continue our discussion, though, with the focus on a question that a lot of you and a lot of professionals are asking, and that is: Are we in an AI bubble?

And my professional answer is yes, absolutely, we are. Now, does that mean that this bubble is gonna pop? Well, that we don’t know. We can be in a bubble and come out of it okay, or we could be in a bubble that does pop. But how do we know that we’re in a bubble? It really comes down to income and outgo.

Right now, according to the sources that I’ve been looking at, big tech is gonna spend somewhere between $650 and $700 billion this year on AI. OpenAI is reportedly gonna lose $14 billion this year in 2026, and according to another source, the AI industry has an $800 billion revenue shortfall.

Translation: companies are burning cash way faster than they’re generating income. That’s the definition of a bubble. The formula is this: massive investment plus minimal revenue equals unsustainable. It works until it doesn’t, and when it stops, it stops fast. And you go back to the year 2000, right? The dotcom parallel.

Everyone was investing in internet companies. It was the craze. That’s what everybody wanted, and most of them at that time had zero revenue. There was massive burn rates, and it was really unsustainable, but everyone said, “It’s different this time.” And I read recently that those four words, “It’s different this time,” are the most dangerous words in the English language.

It’s different this time. And it wasn’t different then. Tech crashed 78%, and it took 15-plus years to recover, and it’s not going to be any different this time. Either the revenue has to catch up very quickly, and that’s possible, or there’s going to be a crash. And I don’t want you to be in the car when that car crashes.

I don’t want your retirement to be affected. But we are in a bubble. That’s not the question. The question is, is the bubble gonna pop, or are we gonna find a way out of it? Is the revenue gonna grow enough to keep that bubble from popping? And that’s an answer I don’t have. But my gut feel says there’s gonna be some problems ahead.

If you’re sitting there realizing that I’m right, realizing that you’re taking a lot of risks that maybe you can’t afford to take, but never have really done anything about it, wondering whether or not your retirement would be affected if this AI bubble pops, and you wanna do something about it, I’m gonna recommend that you get this video that I’m offering in this show.

It’s called The Case for Fixed Income. It’s gonna show you how you can get income from your portfolio, whether that bubble pops or not. Simply stated, this means that you’ll be able to retire on schedule or stay retired because you’ll know you have income you can count on, income that’s not tied to the market.

And to learn how that’s possible, I’ll send you this video absolutely free of charge. It’s fun to watch because it’s animated, and it’s short. It’s only seven or eight minutes, but it’s pretty powerful ’cause we put a lot of information into that short period of time. To get your free video about how to get income from your portfolio regardless of what the market’s doing, just go to our website, give us your information.

The website is providencefinancialradio.com/video. Again, it’s providencefinancialradio.com/video. Leave us your information. We’ll email it to you shortly, and you’ll learn everything you need to know very quickly about how to generate income from your portfolio regardless of the stock market conditions.

To claim your free video, go to providencefinancialradio.com/video and we will get it right out. I’m Anthony Saccaro. You’re listening to the Providence Financial Retirement Show. Thank you for joining us, really glad that you’re here for the ride. We’re in the middle of a good conversation. Right now, we’re answering the question whether or not we’re in an AI bubble.

I believe strongly that we are. We just don’t know how that bubble is gonna end. Are the companies gonna get profitable enough to keep that bubble from bursting, or is that bubble going to burst like it did back in two thousand and one and again back in two thousand and eight? There’s something else that I also want to address and something that maybe you might be not considering.

I just had a conversation with a gentleman recently who said that he doesn’t have any AI stocks at all. He’s invested in the S&P five hundred, invested in index funds, and he feels like if the AI bubble pops, which he thinks it’s going to, that he’s gonna be okay. Well, I disagree, and I disagree very hard, and here’s why.

When you think of the S&P five hundred, you think of the biggest companies in the world. That’s what five hundred stands for, right? S&P five hundred, Standard and Poor’s five hundred, it’s the five hundred biggest companies in the world. But are you aware of the fact that it’s a market cap index? What that means is that the biggest companies control the most market cap, and right now, the seven biggest companies in the world are controlling thirty-five percent of the S&P five hundred.

What are these seven companies? Apple, Microsoft, Nvidia Google, Amazon, Tesla, and Meta. Of the 500 companies, these seven companies control 35% of the entire S&P 500. That means that if they crash, the entire S&P 500’s going down with it, and I’m gonna guess that that’s something that many of you aren’t aware of.

You may think that you’re not invested in AI, but you are absolutely invested in AI whether you like it or not. It’s also interesting to know that these tech companies, they all tend to outperform when the market is doing well, and they all tend to underperform when the market is not doing well. What that means is that when the market’s going crazy like it is now, the tech companies lead the way up.

And in this situation, that makes sense because we’ve got this AI craze. People are calling us all the time wanting to know how to get in. It’s that FOMO effect. They don’t wanna miss out. So it’s these seven companies that are essentially leading the way up, and of course, they take the rest of the companies with it.

But when that bubble pops, it’s also gonna be these companies that lead the way down. And whenever the market drops, the tech sector generally drops much faster and much farther than the broad market in general. And if you’re invested in these seven stocks, The Magnificent Seven as they’re often referred to, you could be even in more danger than if you were invested more in the broad market.

But even if you’re invested in the broad market and you think you’re safe from this AI craze, you’re not, and when that bubble bursts, you’re gonna get bursted with it. We have a listener question that’s very on point here, and it comes from Damone in Santa Monica, at least I hope I’m saying your name right.

But he wrote in this, “I’m 62 years old. I’m heavily concentrated in tech, mostly The Magnificent Seven, and everyone keeps making money. I’m a little concerned, but if I sell now and it keeps going up, I’m gonna be mad, but if I don’t sell and it crashes, then I’m gonna be ruined. What would you do?” It’s a very good question.

That’s the question that many people are pondering with. Everything’s going up, so you don’t wanna sell, but if it goes down, in your situation, you’re gonna be ruined. My question is this: Are you okay with that outcome? Are you okay taking that risk? I don’t know your situation, Damone. I don’t know what being ruined means.

There are a lot of you that if the market crashes, you’re gonna be okay. It won’t affect your retirement. But that’s not the majority of you. The majority of you, if the market crashes, it’s going to affect your retirement. You might not be able to retire, or you might not be able to stay retired, or you might not be able to live the retirement you want.

That’s the risk. So the question, Damone, for you is, are you comfortable taking that risk? Because the risk is on you. But my gut feel says that if it’s true that you’ll be ruined if these seven stocks go down I personally would think you probably wanna do what you can to start getting your way out of them.

Just my thoughts, but hopefully that helps. If you’re in a similar situation and you’ve got a stock portfolio that’s grown, but you’re worried, like I am, about the market and the future, and you’re thinking about maybe taking some of those chips off the table, just not sure how to do it, you’re gonna wanna read my book, More Life Than Money.

It’s an Amazon number one bestseller in multiple categories, and you’ll learn what the alternatives are. If not stocks, then what? Well, there’s a lot of good alternatives that will give you income regardless of what the market does, which means that you’ll be able to retire or stay retired, and your retirement won’t be coupled to the stock market.

I’ll send you More Life Than Money free of charge, but you do have to ask for it. That’s easy. You can do that by going to providencefinancialradio.com/book. Again, it’s providencefinancialradio.com/book. Leave us your information and we will get a copy of More Life Than Money right out to you. One more time, to get your free copy of More Life Than Money, go to providencefinancialradio.com/book and you will have it shortly

Thank you for staying with us. Really glad that you’re here for our Providence Financial Retirement show today. I’m Anthony Saccaro. We are your retirement income source, and this is the place where retirees come for income. We’re talking about timing, timing of when to take Social Security, timing of when to get out of the stock market, and we talked about timing of the AI bubble.

These are some timing issues that we’ve already covered. We need to talk about the timing of required minimum distributions, though, because that is something that if you’re not aware of and you miss the timing that the government has set for you, it could cost you a pretty big penalty. And what is that penalty?

Well, we’ll answer that in just a minute. Let’s talk RMDs, though. RMD stands for required minimum distributions, and most of you are familiar with that term. You might not know exactly what it means, but some of you might not even be familiar with it at all. A required minimum distribution is a forced distribution from your retirement account that’s required by the government at a certain age.

Depending on when you were born, your required minimum distribution age is either gonna be seventy-three or seventy-five years old. But at that age, you then have to start making required withdrawals, minimum distributions, that is, from your retirement account. You then have to claim that distribution as income, and you have to pay tax on that distribution.

It’s the way for the government to get their tax dollars because you’ve been saving taxes all these years and decades that you’ve been putting money into your retirement account. And if you miss the timing, there’s gonna be a significant penalty. What is that penalty? It’s twenty-five percent.

Twenty-five percent just for not taking the minimum distribution on the government’s timetable. In all fairness, if you make a mistake and you correct that mistake pretty quickly, they might knock the penalty down to ten percent. So maybe it’s not twenty-five, maybe it’s only ten. But think about it, giving ten percent to the government of your retirement dollars just because you made a mistake?

I mean, call me crazy, but that’s crazy. That’s just not something that I think you would wanna do. Matter of fact, I think you’d wanna do everything you can to avoid that penalty How much do you have to take? Well, it depends on your age and it depends on the balance of your account. But, you know, generally age seventy-three, seventy-four, seventy-five, it’s gonna be around three point six, three point seven percent.

By the time you get to eighty, it jumps to about five point one percent. By the time you get to ninety, it’s over eight percent. Every year you get older, it’s going to escalate. You’re going to have to take a larger amount. At seventy-three years old, for example, if you have a one million dollar portfolio, three point six percent, that’s roughly thirty-six thousand dollars.

You’re gonna have to claim that as income, and you’re gonna have to pay tax on that amount. But there’s more to it than that. I often refer to this tax as a tax time bomb because it could be just one domino that pushes over other dominoes. This thirty-six thousand dollar withdrawal, because it counts as income, it might push you into a higher tax bracket.

It might trigger Medicare Part B premiums. It might even trigger capital gains taxes on investments that you wanted to hold. And one year of big RMDs can actually derail your entire tax plan Generally speaking, when it comes to RMDs, there’s two mistakes that I often see retirees make. One mistake is waiting until the last minute to do something about it, to actually take your RMDs.

They just wait until they get to seventy-three years old, and they just do then what the government tells them. It’s almost like they just get in the raft in the river and float downstream, and whatever the government tells them to do, then that’s what they’re gonna do. And if you do that, you’re not being proactive, you’re being reactive.

And if you follow the government’s plan, chances are it’s gonna work out better for the government than it is for you. They’re pretty strategic about why they set up RMDs, and that’s one mistake that we see is following their plan, not being proactive. In a minute, we’re gonna talk about a strategy that you can do that will actually put the benefits in your favor and not theirs.

But for now, just know that a common mistake is just waiting till the last minute to deal with RMDs. Another mistake, though, when it does come to that age that you have to start taking required minimum distributions, is many of you have investments that require you to sell principal to satisfy your RMDs.

Now, not only are you taking money out of your IRAs that you have to pay taxes on, but you’re cannibalizing your portfolio at the same time. That’s a double whammy. It’s usually not what I would recommend. The right way to do it would be to generate enough interest and dividends from your portfolio to satisfy your RMDs so you can keep your principal intact.

The government doesn’t care how they get their money, whether you have to sell principal to give them their tax dollars or whether you give it to them out of income, they don’t care, but you should. Quite frankly, that’s another reason why investing for income is so powerful when you get to retirement.

If you wanna learn more about how you can satisfy your RMDs from interest and dividends without cannibalizing your portfolio, well, we’ve created a video just for you that we’re offering on this show. It’s called The Case for Fixed Income. It’s a seven to eight-minute video. It’s short, it’s animated, it’s fun, but you’ll learn how you can satisfy your required minimum distributions from interest and dividends and leave your principal alone.

To get your free video, just go to providencefinancialradio.com/video. Again, it’s providencefinancialradio.com/video. Leave us your information. We will email it to you shortly, and you’ll be able to learn how you can satisfy your RMDs from the income from your portfolio and not by cannibalizing your principal.

One more time, to get your free video, go to providencefinancialradio.com/video. We’ll get it right out. I’m Anthony Saccaro. Thank you for staying with us. You’re listening to the Providence Financial Retirement Show. We’re in the middle of talking about required minimum distributions, which is the age that the government forces you to start taking money out of your retirement accounts, whether you like it or not.

In our last few minutes, we’ve discussed the fact that if you just follow the river downstream and kind of float the way the government wants you to float, and next thing you know, you’re 73 years old, and now you’re forced to take RMDs, that’s reactionary. And if you’ve heard me on the Providence Financial Retirement Show at all for any length of time, you know that I would rather you be proactive than reactive.

That’s especially true when it comes to required minimum distributions, because once you get to RMD age, you miss out on a window of opportunity to do some things that you cannot do anymore, or at least you can’t do them as efficiently as you could before you got to RMD age. Another mistake that I see retirees make all the time is when they’re 60 years old or they’re 62 years old, they think, “Well, I’ve got, you know, 10 or 12 years until I get to RMD age.

I’ve got plenty of time.” Yes, you have plenty of time to mess up, and you have plenty of time to go through that window of opportunity if you’re not proactive. And when you get to 73 years old, your RMD age, you might be very much wishing that you had done something different. I just spoke with a guy the other day that was 70 years old, and he came to me almost frantic saying, “It hit me.

I turned 70. I’m only three years away from RMD age. Where did the time go? Is it too late to do anything?” Well, the answer is no, it’s not too late to do anything, but there’s also a ton of years that you could have been putting yourself in a much better position. So that window of opportunity has narrowed.

What can you do with that window of opportunity? Well, one of the things that you can do, a primary thing you can do, is Roth conversions. That just means that you move money from a traditional IRA, which is a pre-tax account, to a Roth IRA, which is after-tax. You’re gonna pay the tax on the conversion this year, but that money, that’s gonna grow tax-free forever.

Not only will you never have to pay tax on it, but you never have to take a required minimum distribution. So if you’re 60 years old and you have 13 to 15 years until your required minimum distribution age, you’d be nuts not to think about Roth conversions strategically for some portion of your retirement account.

It allows you to be in control of when to pay the taxes instead of letting the government be in control. And we’ve spent a lot of time today on The Providence Financial Retirement Show talking about timing, the timing of Social Security, the timing of getting out of the market, the AI bubble. These are topics that we’ve already talked about, and timing also matters when it comes to Roth conversions.

There are times and years that it makes sense, and there are times and years that it doesn’t make sense. They tend to make sense more when you are in a low-income year. You might be able to do a conversion and not pay a lot of tax at all. And then there are years when your income might be a lot higher that it doesn’t make sense.

Earlier in the show, we talked about Social Security and when to take it. One thing to consider is if you’re gonna do Roth conversions, maybe it doesn’t make sense to take Social Security while you’re doing Roth conversions because now you’re gonna have to pay tax on Social Security. That’s a concept that you’ve probably not thought of.

Even Roth conversions tie into Social Security. And yet, when I talk to people about when they’re gonna take Social Security, Roth conversions usually aren’t a part of that equation, but they should be. If you’re in your early or mid-sixties, you have a window of opportunity until you hit RMD age to think about conversions, and it’s a mistake not to do that, and in the end, could really wind up costing you hundreds of thousands of dollars in taxes, and depending on the size of your portfolio, maybe millions.

I’m Anthony Saccaro. Really glad that you’ve joined us today for The Providence Financial Retirement Show. I certainly hope you’ve learned something that you didn’t know before and something that will help you have the peace of mind and confidence and clarity that you deserve in retirement. Thank you for joining us.

Have a great week, everyone. God bless.