- And good evening.

You've got More Than Money.

You've got Gene Dickison, your host, your personal financial adviser at your service.

For the next half an hour, I'm all yours, and hopefully one of the questions that we'll answer this evening is yours.

We rely on you.

We want to make our show the epitome of exactly what information you're needing at any given point in time in your life.

So send us the emails that have the questions that concern you most.

Some of the most fascinating material that we discuss has nothing to do with Gene, nothing to do with More Than Money, the TV show.

It has everything to do with you and the things that are really important to you and your family.

You are far more fascinating than, I promise you, I can ever be.

So gene@askmtm.com is your opportunity to send those questions directly to us.

They might be about investments or retirement.

They might be about income taxes.

Ugh!

That deadline.

My heart hurts already.

Bottom line is it could be about taxes or Roth IRAs or 401(k)s, could be about estate planning, wills and trusts, executors, executrixes, all that manner of topics.

Or it could be about any other issue, any other concern that you have in your financial life.

You send those directly to us.

When you do, we promise we'll answer every single question back to you.

Not every single question can appear on air.

As you might expect, we get far more questions than we have time.

So this week, we have the opportunity to pack as many of your questions into our show as humanly possible.

And to start that, we turn to our financial correspondent.

Megan, where do we start this evening?

- Hi, Gene.

Our first question says, "People have been very good to me "throughout my life financially, "and I have learned the value of saving over the long haul.

"I have nieces and nephews who are turning 21 in the next year "or two, and I would like to give them $1,000 "toward a Roth investment for their 21st birthday "and then give them $100 a month to put into that account, "even though they will still be in college.

"I would offer the monthly allotment "until their 25th birthday, "and then they are on their own, roots and wings.

"I have two questions for you.

"First, might this interfere with any scholarship money "that they are offered?

"Second, is the humble sum of $100 a month enough "to move forward with a Roth?

Thank you for your help, Gene."

- Well, goodness!

Thank you for your question.

It's a wonderfully generous thing that you are planning.

I want to guide you in a way that meets your needs, but caution you so that you're not inadvertently, unintentionally crossing a line that we really don't want to cross, and that line is called the IRS.

Roth IRAs, for young people, are literally one of the most exciting opportunities that they will ever face, the opportunity to have money invested, in this case, on their behalf.

Admittedly, not their own money, but someone that's kind enough, generous enough, as you are, to offer this opportunity to them, the opportunity to put money in at a very young age.

21, we'll use that as a good example, and just for fun, we'll run it out 45 years.

That'll take them to age 66.

By the time they reach that age, Social Security age might be 86.

We'll see, longevity being what it is, but bottom line is that all that money is going to grow tax sheltered and you're selecting a Roth IRA, which means in their retirement years, that money will come out tax free.

All of that is fantastic, but there is a requirement in the IRS code relative to any IRA that in order for an individual, in this case, one of your nieces or nephews, to qualify for an IRA, they must have earned income.

If they are in college and they're not working at all, they're not eligible for a Roth IRA.

So if you intend to carry out this plan, I think it's a great plan, if you intend to carry that out, you've got to confirm that they have earned income at least equal to the amount that you're putting in.

So let's use the first year as an example.

You're going to put in $1,100 a month.

That'll be $2,200 in total.

If in that first year they have earned income of at least $2,200, you're golden.

It works beautifully.

If their earned income is less than that, I'm not really sure what they're doing to earn less than $2,200, but if their earned income is less, you can put up to 100% of their earned income in.

So that may create some restriction.

And, of course, if they are full-time students and they are perhaps in a rigorous program that does not allow them to work at all, then, sadly, a Roth IRA is not an option for you.

You may have to explore a different type of an account.

Now your question is a reasonable one.

$1,000 up front, $100 a month for four years, $4,800 additional at age 25.

They're going to have approximately, in terms of contributions, approximately $6,000 in total.

It doesn't sound like very much.

Is it even worth the effort?

I would strongly suggest that it is.

I will use very, very rough numbers to give you some sense of how valuable I think that might be.

If we use a rule, it's called the rule of 72s.

If we want to know how often or how quickly money will double, we divide the rate of return it achieves into the number 72 and the result is the number of years it will take to double.

So if, for example, I'm looking at an average rate of return of 10%...

There's nowhere in the world you can get a guaranteed 10%, but well invested over decades of experience, you have the probability, the possibility, at least, of attaining an average rate of return of 10%.

That would have your money doubling about every seven years.

So for these young folks at 25, with about $6,000, roughly, in their minds, the equivalent of the down payment on a car, at age 32, that'll be $12,000.

Nicer but not dramatic.

At 39, it'll be $24,000.

Wow!

we're approaching maybe the down payment on a much nicer car.

At 46, we are at, what, $48,000?

At 53, we're at $96,000.

At 60, we're at nearly $200,000.

And by the time we are projecting they retire at 66, 67, nearly $400,000, because their aunt, when they were very young, she was caring enough and compassion enough and giving enough to set them on the right path.

So assuming all of these things happen as we are planning, you could very well be creating a financial foundation for their future that will not only be nearly half a million dollars in value, but generating income tax free for the rest of their lives.

What a wonderful thing you're doing.

What a wonderful demonstration, not just of financial responsibility, but of caring and compassion.

Of course, if you bump into some wrinkles along the way, shoot us another email.

We'll be happy to assist you.

This is a worthy effort.

We want to support you in any way we can.

Fantastic.

Megan, that was a great way to start our show.

What's our next concern of a More Than Money viewer?

- This next email has a couple of questions in it.

It says, "I love your TV show.

"I am almost 74 and a retired architect.

"I have a trust from my parents that sends me $9,000 a month.

"I have repairs that need doing on my house.

"I have two daughters in their late 30s whom I want "to leave something to."

"Should I have a life insurance policy to leave them?

"What about helping them buy their houses?

"Is that possible?

"My mortgage just went up to $2,000 a month.

"Taxes were raised 2,000 over the last two years for me.

"I'm finishing up a book and want to write more.

"I am a first-time author.

"I need a financial adviser.

"I'm wondering, what is the approximate cost "for financial advisors and how are they paid?

"I have opened an account with Fidelity, but they are not "a comprehensive adviser.

Thank you for your help."

- Hmm!

Lots of interesting pieces to this question.

First of all, congratulations on a long and healthy life, and you are in a position to ask some very appropriate questions about what happens next.

You have a strong income.

What we don't know and what will hinder me just a little bit in giving you very specific advice...

I can give you really close, very appropriate.

But whether it's specifically correct for you, we don't know yet what your monthly budget might be.

So let me give you two examples that would change how I would advise you.

You ask about life insurance, so that you can leave your children, your daughters, a legacy.

If your health is good and you have the available cash flow to pay the premiums, I think it's a wonderful idea.

It would guarantee that they would receive a legacy as long as the premiums are paid, and you could set it up so that they could be paid over a limited number of years.

We'll pick 20 as an example.

And when you hit 94, it's done and you know that they will receive a nice sum of money, a sum that you have chosen, whether you have assets in your accounts, in your portfolio or not.

So it can be a wonderful opportunity.

But if, as it turns out, your $9,000 income and your Social Security and any other income you might have is not yet sufficient to pay your monthly expenses, then the answer is you should not do that.

You should not do that.

You should, as a gift to your daughters and your family in general, be financially independent to your very last day.

So at 74...

When I was growing up, 74 was at the very, very far edge of life expectancy, and now, for a woman, 74, there is a very realistic possibility that you've got 25 or 30 more years with us.

So making sure that you stay financially independent the entirety of your life is your number one priority, your greatest gift to your family.

If you said to me, on the contrary, "No, my expenses are running about half of my income.

"I have 4,000 or 5,000 a month "that I have available for my use," then I think life insurance really does fit.

Whether helping them with the purchase of a home fits or not is a very different question with much more complexity to it.

So your interest in having a comprehensive, a full spectrum financial advisor, a fiduciary, is very well grounded.

It makes perfect sense.

And many investment firms, Fidelity and Vanguard, etc, etc, offer investment accounts, investment, particularly online accounts.

But you're quite right.

The types of questions you're asking are more global, more holistic, if you will.

And so having an advisor might very well fit your needs.

Advisors come in lots of flavors.

I've mentioned the word fiduciary.

I think that's the only type of advisor I would be comfortable with you working with.

Fiduciary advisors are required both by law and by code of ethics to act in your best interest, so their interests must be lower in priority than your own.

They've got to give you recommendations that fill your needs first rather than, unfortunately, there's a fair number of financial advisors who are really salesmen.

They sell different products and they have no such responsibility.

They must still respect you, they must still do business in a honorable way, but they have no responsibility of acting in your best interest.

If you like their product and you decide to buy it, whether it's appropriate for you or not, that's on you.

Let the buyer beware.

So fiduciary, I think, makes the most sense.

How they get paid, it varies, and each registered investment advisor particularly sets up their own business model.

Some are paid as a small percentage of your investments.

Some are paid on a retainer basis, a certain amount of dollars per month or per year.

And some are paid on an hourly basis.

When you meet with prospective advisors, that will be one of the first questions, or first couple of questions, you will ask, "Are you a fiduciary?"

And number two, "How are you compensated?"

And if the word commission jumps in there, might be something that would cause you to hesitate.

There are so many, so very many high-quality fiduciary financial advisors in the country that wherever you watch, wherever you happen to be as you watch our More Than Money show, coast to coast and border to border, undoubtedly, there are some wonderfully qualified, exceptionally good fiduciary advisors that would be appropriate for you.

So I don't think the word commission needs to fall into there anywhere.

Hopefully, that helped a little bit.

If you need a little more clarification, of course, follow up with another email.

We're happy to help in any way we can.

And as you're listening this evening, going, "I've got some questions of my own," don't hesitate at any point sending us those emails, gene@askmtm.com We're happy to answer those back to you.

Let's give you another demonstration of how it looks when one of those questions shows up right here.

Megan, what's next?

- This viewer is hoping you can help them determine the best course of action to take.

They say, "I participate in my company's 401(k).

"My company offers a 6% match, "and currently I am contributing 9%.

"I'm 47 and planning to retire around 65 or so.

"I also have a Roth IRA that I use "as an alternative retirement planning "and/or college savings fund.

"I'm wondering if I should contribute the excess amount "of the 401(k) contribution that is over the matched amount "to my Roth IRA instead.

"I know that future taxing may change, "and I'm trying to figure out how I would be able "to calculate what is the better tax strategy.

"Should I take advantage of the 401(k) pretax now?

"Or should I add more to the Roth "and get a tax benefit later?

"Thank you for your help.

I really love your show."

- Well, thank you very much, very kind words, and we love that you took the opportunity to send us your question.

I think it's one that faces a lot of people, whether they're looking at a 401(k) and a Roth IRA or whether they're looking at a 401(k) that includes in the 401(k) a Roth option.

The questions are the same.

At what point is a Roth IRA or a Roth 401(k) appropriate?

And at what point is it not?

There were initially, when the Roth IRA and then the Roth 401(k) came on the scene, some guidances, some academic guidances that seemed to suggest that there was an age cutoff at which point doing the Roth made no sense and prior to which doing the Roth made perfect sense.

It has since largely been debunked that it's an age issue.

In our opinion, it's not an age issue.

It is, in many cases, a cash flow issue, and in all cases, it's a personal preference issue.

If you are planning on retiring, as this gentleman is, in 18 years or more, a very long time, having the Roth option, in my opinion, is one that you have to look at very, very carefully.

Make it your highest priority and put as much money on the Roth side of your life as you possibly can, because 18 years is going to go in a blink.

All of that money will then come to you, be available to you, income tax free.

If we look objectively at today's financial world, in the year 2022, in case you're looking back in 18 years, that would be fascinating.

As we see the economic scenarios unfolding, the likelihood of ever increasing government spending, ever increasing taxation is a very high priority.

The likelihood that tax rates will go down in the future seems remarkably remote.

The opportunity, the likelihood that tax rates will go up substantially over years to come seems very likely.

So the more money that you can put away, even though you're paying a little extra income tax this year, the more money you can put away now that will produce tax free income later, in my opinion, you look back on that and smile from ear to ear.

Even to the extent... You mention that your 401(k) matches 6%, you're putting in 9%, in a 401(k) plan, all of the company contribution goes into the standard 401(k).

It does not go into the Roth.

So if you're looking at a balancing act here between standard and Roth, you could legitimately push the entire amount you're currently contributing into the Roth option instantly.

And if you have additional dollars, you don't need to add that to the Roth IRA.

You could add that in all likelihood to your Roth option at your employer.

You are permitted at age 47 to put approximately $20,000 a year as your contribution.

So if you're putting away 9%, that means you are making...

If you're at the max, you're making about $200,000.

If you're saying, "Jeez, I'm not making that much," then you might very well want to increase your percentages.

Let's say you're making 80 and you want to put $20,000 away.

If you can cash flow afford it, you put 25% of your money in.

We understand they're only matching six.

That's not the issue.

The issue is your long-term goals and putting as many dollars to work in a tax free environment as you possibly can.

So in my opinion, I think you look very carefully at your 401(k).

You evaluate very carefully the options they are giving you.

Likely, you have a Roth option in addition to the standard 401(k) and maybe pump up the volume there, makes your life a little easier.

It is direct deposit, it's autopilot, it's dollar cost averaging, it's tax sheltered until you retire, and done properly, It's tax free when you retire.

I think that's the right track for you.

And, of course, if you want more details, follow up with an additional email.

We're happy to analyze that for you.

Fascinating.

Very, very well done.

You're doing a great job.

We're just going to make it a little bit better.

Speaking of doing a great job, Megan, you're sharing questions with us at a very great level.

What's next?

- Thank you very much, Gene.

You're doing a great job answering them.

This one says, "I took an RMD distribution "from a beneficiary IRA and directly transferred it "to a donor advisory fund.

"Am I still taxed on the distribution "even though I am donating the full amount into a DAR?"

Oh, goodness!

And my angst is I hate giving bad news.

I...

This individual is trying to do the right thing.

A qualified charitable distribution is available to anyone who has attained the age of 70 and a half and has an RMD requirement coming out of an IRA or a 401(k).

They can choose to send some or all of it to a qualified charity.

It goes directly from the IRA custodian to the qualified charity account.

There's no income tax.

There's there's no effect on your...

..I'm sorry, your Medicare premiums.

It's a lovely, lovely process.

There are exceptions, and the donor advised fund is an exception.

You are not permitted to do a qualified charitable distribution directly to a donor advised fund.

So, yes, you will be taxed, so to speak.

Let's use 10,000 as an example.

10,000 comes out.

You will pay tax.

Use a simple number.

You're in the 20% bracket, you'll pay $2,000.

You will have, then, a net of $8,000 that you can put in your donor advised fund.

You'll get a deduction for that in the same tax bracket.

It will save you about $6,900, so your net cost is about $400.

Still, not bad.

Not a bad process.

But if it went directly to a qualified charity, your net cost would be zero.

So it is certainly something that you're going to have to take a very close look at.

I understand donor advised funds very, very well.

They come in several types of flavors, so there are little wrinkles you might look at in terms of whether you want to continue with the donor advised fund contribution, whether you want to adjust your charitable contributions in some way to take advantage of the qualified charitable distribution.

But in this particular case, my apologies for the disappointment.

A donor advised fund is not an appropriate target for your qualified charitable distribution.

Megan, I didn't like that answer, so can I get a question I can give a better answer to, please?

- I'm hoping so.

This one asks, "Is there a way I can give my nieces and nephews $10,000 each "while I am alive as a non-taxable gift, "but not have them receive it until after my death?

"I want to get the money out of my taxable estate and to avoid "any feelings of obligation.

"I do not have their Social Security numbers."

"Thank you for your help."

- Well, goodness!

Yeah, that didn't help at all.

Thanks, Megs.

This is a real challenge.

It is not an insurmountable challenge, but it's a real challenge.

The IRS is very, what's the word, on the alert for gifts that are not really gifts.

They are very aware that people are unhappy with the idea that they must pay inheritance taxes or someone pays inheritance taxes when they die.

The vast majority of Americans will never pay federal estate tax under the current laws, because the exemptions are so very high - for an individual, over $11 million, for a married couple, over $23 million of estate value before you pay, before your heirs will pay an inheritance tax.

The states are very different.

State of Pennsylvania, it's basically from dollar one.

So helping to avoid that tax, 4.5%, in this case, actually, nieces and nephews, 12%...

So, 12...

If you're giving away 10,000, you're saving $1,200 per individual.

It's a lot of money.

It's serious capital.

If you can do it, it's a great idea.

The IRS says that in order for a gift, to be a gift, it must be a completed gift.

It must remove all vestiges of ownership from the donor and instill them in the donee.

Translation: You can't have control over it once it's gone.

Wow, that's disappointing!

There is an exception.

It's a very, in the advisory world, well known exception.

But in the average world, normal people, not very well known, a 529 plan, which has tremendous flexibility in assisting people for education, is one of the few, if not the only, assets that I'm familiar with where you can give the money away, it is removed from your estate, and yet you still have control over it right up to the point where you can take it back and use it yourself.

So, yes, if you are successful at obtaining their Social Security numbers, dates of birth, current addresses, you can set up individual 529 plans with this money going in.

Now, we understand these individuals may or may not need this money for education.

They may have family members that, eventually, they want to turn it over to.

That's not the issue at hand.

The issue at hand is, is there a way to give away money, hang on to control and still have it out of your estate?

The answer is likely yes.

It's called a 529 plan.

But more importantly, before you take any actions, sit with a trusted estate planning attorney, an experienced, trusted estate planning attorney.

Go through your entire picture first before you take any actions, so that you make sure that whatever you're doing is squeaky clean, does exactly what you want it to do and doesn't cause more problems than it solves.

We can't thank you enough.

Great questions.

Fascinating questions.

You folks have fascinating lives.

We are so honored that you share those with us.

Each and every week, we try to answer a selection, a variety of your questions, and if you have ones about any topic that's important to you, send those directly to us, gene@askmtm.com.

Gene, just as you see it on the screen, @askmtm.com, And we will answer every single question back to you.

And perhaps, just perhaps, you'll see your question on a future show.

Folks, it's been an honor to be with you.

It's been an honor to serve you.

It would be an honor to do that exact same thing next week, right here on More Than Money.

Good night.