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Published: Jan. 14, 2017, 6 p.m.

Paul Sullivan joins Joe Anderson, CFP\xae and Alan Clopine, CPA to discuss the biggest lessons from his book The Thin Green Line: The Money Secrets of the Super Wealthy on creating and maintaining wealth. Also in this hour: answers to financial questions. Original publish date January 14, 2017 (hour 2). Note that content may be outdated as rules and regulations have changed.

00:00 - Intro

02:38 \u201c[With] the 60-day rollover, you can only do one per year for all of your IRAs (individual retirement accounts) so all of your IRAs are considered to be one account.\u201d

04:18 \u201cI don\u2019t think this one is widely known, and when you have a 401(k) that has company stock and you roll it over into your IRA, you completely lose a strategy called net unrealized appreciation (NUA).\u201d

08:07 Start of Interview with Paul Sullivan

Joe: (08:30) \u201cTell us the genesis of the book. It\u2019s the secrets of the ultra-wealthy \u2013 what did you learn and what are some of the things that we can give to our listeners?\u201d

Paul: (08:58) \u201cThe gist of the book is this: how we think about money matters more than anything else\u2026\u201d

Joe: (10:15) \u201cHow did you come up with the title?\u201d

Paul: (10:20 \u201cIf you think about the S&P 500 or your favorite stock index over the past 50 years \u2013 it starts low, goes high but it\u2019s not in a straight line, it\u2019s a little bumpy along the way. That\u2019s the thin green line; the people who are on top of it \u2013 they\u2019re wealthy, whether they make a little money or a lot of money. Everybody else is rich and poor so you could be at the very tippy top making a ton of money each year but you\u2019re really rich. The difference is freedom. The people who are wealthy are able to make all the decisions and choices that they want to make with their money. They\u2019re in control, they control life.

10:57 \u201cThe people who are rich \u2013 you can think in the most simple context \u2013 is someone who is wildly over-leveraged. They may make $1 million a year but they have $5 million in debt obligations. Life is going to control them.\u201d

Joe: (11:51) \u201cSo wealthy is not necessarily a dollar figure in your bank account \u2013 it\u2019s basically the control that you have within the wealth you\u2019ve created.\u201d

Paul: (12:13) \u201cIt\u2019s all about having those choices and knowing that when you make them you\u2019re not endangering some of the essential things in your life.\u201d

Joe: (15:01) \u201cGive us some tidbits about your own personal journey.\u201d

Paul: (15:54) \u201cIt\u2019s been an interesting journey but it gives me perspective on [the fact that] it (wealth) can go away, how do you make sure it does go away and more importantly, how do I talk to my kids and my kids\u2019 friends so they understand that a lot of this is decisions and being aware of the decisions you make; and just as important is your behaviors.\u201d

17:27 \u201cYou can save money, you can spend money, you can give it away \u2013 but most importantly, you can think about it, and it\u2019s how those four work together that I hope will allow people to make better decisions in their own lives.\u201d

19:35 \u201cThe Ch\xe2teau Margaux is something I like, but if I\u2019m going to have it once a year, there are other decisions I\u2019m going to have to make to offset the splurge for that amazing bottle of French wine.\u201d

Joe: (20:02) \u201cWhere can people find more information about you?\u201d

Paul: (20:04) \u201cGo to my website: pauljsullivan.com or go to the New York Times website and type in my name.\u201d

20:23 End of Interview with Paul Sullivan

25:00 \u201cI have a beneficiary IRA that I doubled by investing in Apple Stock. I now have sold 90% of that stock because I felt it was too risky to have all my eggs in one basket. I would like to primarily live off of the interest and not touch the principal ($900K) of my IRA. How would you suggest I invest to accomplish that? How should I invest for the long term inside my IRA?\u201d

26:07 \u201cI would look at this as more of a total return; I would look at a globally diversified portfolio total return, not just income.\u201d

29:11 \u201cShould I diversify between different financial institutions? As a high net worth individual, should I diversify between financial institutions or should I just diversify within one organization such as Wells Fargo or Chase?\u201d

30:55 \u201cWell what if Chase or Wells Fargo goes out of business? You\u2019re investing in a security versus a bank.\u201d

33:56 \u201cWhat tax rate will my mother have to pay on a cashed out IRA? I have a terminally ill mother who is 69 years old. She has\xa0a traditional IRA worth around $500K\xa0that she converted to an annuity at 4%. Her medical care requires increased cash flow to pay day-to-day bills. The company has agreed to cash out the full value of the IRA with 0 surrender fees. The company will not transfer the IRA to any other investment vehicle. If she takes the cash value, what are the tax implications? Her income last year was ~$30K and her effective combined federal and state tax rate was ~3%. Will she pay 3% on the $500K or the full federal and state rate of 41% (FED ~35 NC ~6)?\u201d

34:55 \u201cIf you cash out an annuity, and the company is allowing you to do that without surrender, it can still stay out of an IRA.\u201d

35:37 \u201cWhen you have effective rates like 3%...when you add additional income, now you\u2019re on the marginal rate concept which means whatever tax bracket you\u2019re currently in\u2026that\u2019s actually the tax you\u2019re going to pay on the additional income.\u201d

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