- Good evening.

You've got More Than Money.

You've got Gene Dickison, your host, your personal financial advisor, for the next half an hour.

I'm at your service and honored to be so.

You are the reason that we lay claim to being the most relevant financial show on television today.

We have the absolute opportunity of serving you where we meet you.

That's a great privilege indeed, because we don't set the agenda for our shows.

You do.

You send us your emails with your questions about your specific concerns, your specific objectives, your specific challenges.

And then we bring our 780 years of experience to bear on exactly those questions.

So unlike, gosh, all the other wannabe financial shows...

I say that very tongue-in-cheek, they're doing a fine job, I'm sure, but they're simply not the most relevant because we speak directly to you.

So if you have a question about investments or retirement, you have a question about maybe a Roth conversion, a Medicare premium impact, other tax issues, estate planning questions... What kind of documents need to be in that estate planning package?

Not just a will.

That's not...

This is not 100 years ago.

This is modern day.

We need lots of information to make sure your estate is handled properly.

And maybe it's a business, you've got a business concern about starting, running or perhaps liquidating a business.

We've had some amazing guests on our show that have counseled you about how they've run their businesses.

All of these things are fair game.

You send me your questions, Gene - G-E-N-E - @askMTM.com.

Gene, just the way you see it on your screen, @askMTM.com, and we promise you we answer every single question back to you.

Not every question makes it on air, but every single question gets answered back.

So since we lay claim to being the most relevant, let's start being relevant right away.

Let's turn to our financial correspondent, Megan.

What question leads off our show this evening?

- Hi, Gene.

Our first question tonight says, "I really like your show and I always "try to catch it to learn new things.

"My father in law passed away in February of 2017 "and left his estate to my wife, "who then passed away in March of 2017.

"Part of the estate is an IRA, which I then inherited.

"Am I supposed to use all the funds by 2027, "the ten-year rule?

I am 68 years old.

"Thank you so much for your help."

- Oh, you're very welcome.

And, goodness, 2017 sounds like a year you would very much like to forget.

That had to have been so very challenging, losing both family members so close to you in such a short period of time.

The answer to your question is one that I think you will find accommodating.

The answer is no, you do not have to abide by the ten-year rule.

That ten-year rule for inherited IRAs was established and applied to the IRAs that were held by folks who were deceased after January 1st of 2020.

So you have... Not even close.

you're not even in the ballpark of having that rule apply to you.

For those out there who have inherited IRAs just as you do, you are eligible to take out as little as just a few percent per year or 100% of the account.

That's completely up to you.

At 68, you don't indicate whether you're retired or not, you may be still working.

You may not want the additional income right now.

You might want to push that off until later in your retirement years.

That makes perfect sense.

Perhaps even your tax bracket will be a little lower then.

That makes perfect sense.

So having those options of not being forced to take all that money out within ten years, I think is a real advantage to you.

For those of you who have inherited IRAs after January 1st of 2020, after the decedent passed in January of 2020, the rules are pretty stringent.

You've got to take the money out within ten years.

You have lots of flexibility within the ten years, but you do not have flexibility beyond the ten years.

So if you inherited a $100,000 IRA, you could take all of it out immediately, all of it out at the end of ten years or some pattern thereafter.

It could be equal amounts or very erratic amounts...

Erratic's not the right word, my apologies.

Irregular amounts as you need them, as long as all the money is out before the end of ten years.

The exception to that rule, there are a number, but the most common exception to that rule are spousal beneficiaries.

So if a husband or wife leaves their spouse, their IRA, it is as if that spouse has added to their very own IRA.

There is no ten-year rule for that set of circumstances.

So again, 2017, very difficult year for you, but you have lots of options.

And of course if you're looking to explore those options, maybe sitting with a trusted, experienced financial advisor would be in your best interest.

But from a tax standpoint at least, you've got plenty of breathing room.

Goodness!

Excellent start.

Let's see what else is concerning our viewership.

Let's go back to Megan and ask what question number two might be.

- Our second question is about life insurance.

It says, "We'd like to start by thanking you for your show "and your excellent advice.

"My husband and I both turned 64 this year.

"I am already retired and receiving Social Security "and a small pension.

"My husband plans to retire at the end of August "and then begin to receive his Social Security in September.

"This is a plan that works for us.

"Our combined Social Security incomes will equal a little bit "more than his monthly paychecks, "and we do very well on those.

"We have a well structured budget "and have never lived beyond our means.

"Other than the usual utility expenses every month, "we have no outstanding debt.

"We have sufficient savings to cover "about three years of expenses, "and we each also have retirement IRAs.

"Our adult child has a good job "and lives independently nearby us.

"In 2003, when we bought our current home, "we got life insurance on each of us, "both working at the time, to pay off the mortgage, "in the event that one of us should pass away.

"We paid off our house in 2019 "and the 20-year life insurance term "will be ending in 2023.

"Here's the question.

Do we really need to purchase "any more life insurance?"

"We have no one dependent on us at this time "and could certainly do without the expense.

"Just wondering if there are reasons to do it "that we are not aware of at this time "and hoping you can assist with that information.

"Thank you.

And keep up the good work."

- So very kind.

So very kind.

Goodness!

From my interpretation of what you've written, you might better be standing right here giving advice to thousands and thousands of folks watching so that they can follow your lead.

You and your husband have done so many things correctly, so many things properly and effectively, that you could teach a class.

You've done very, very well.

The fact that you paid your home off early, outstanding.

The fact that you had life insurance on it, "in the event that...", "just in case...", fantastic idea.

The fact that you live frugally, you live modestly or, to be honest, live appropriately so that your income from your Social Security covers all your needs is great, in addition to which you have a tremendous emergency fund.

Three years?

Outstanding!

And IRAs to fund the extras, the fun stuff in retirement.

All of these things are fantastic.

Your home is paid off.

You have no debt.

Goodness, this is... You are the poster children for doing things correctly.

Now you've got a question about doing one more thing correctly.

Should you have life insurance in your retirement, under these circumstances?

And the answer is, do you need life insurance?

No.

Might you wish life insurance?

It depends.

It depends.

Needing life insurance generally falls into one of three categories.

One, you're leaving behind someone who is financially dependent on you, and they will be hurt financially if you don't give them a pretty substantial chunk of money as a support.

That does not apply here.

Number two, you will be leaving behind significant debts that will be a burden to somebody that you care about.

Again, that does not apply to you.

The third item is inheritance taxes, taxation of any kind.

There are, in very rare cases, situations where today someone would pass and have a large estate tax.

It would be rare for this reason.

A husband and wife can pass in their estates a total of $24 million.

So before they would hit federal estate tax, they would have to have a tremendous estate.

And most folks, of course, don't fall into that category.

If you do, then life insurance can be tremendous, a very, very powerful tool.

If you have a $50 million estate, your estate taxes are going to be somewhere in the $14 million range.

And, yes, life insurance would make a great deal of sense, but not in this case.

Now, some would argue that there is still inheritance taxes for you.

We don't know the size of your estate if it goes directly to your adult child.

It is four and a half cents on the dollar in the state of Pennsylvania, a relatively small number.

But you need to evaluate that in your own mind as to whether or not you would like to have life insurance cover that amount.

If your estate is, using a nice round number, $1,000,000, the inheritance tax would be about $45,000, probably a little less with some deductions.

So bottom line is, if that's troublesome to you, I wouldn't think it would be, but if that is, that might be a reason you would consider having life insurance or continuing life insurance.

There is one area where you might wish to have life insurance, and that's the issue of legacy.

That's the issue of making an impact when you have passed.

It is not uncommon that folks who have made so many wise decisions as you have are also very generous.

They care about their churches.

They care about organizations that they're deeply committed to, nonprofits that do great work.

And they understand that at their passing, their support, their financial support, could disappear.

And they may wish...

They may wish to have life insurance that would name as many of those organizations as they chose.

Pick a number, they have a $250,000 life insurance policy.

It can be a policy set up that pays out the benefit upon the second of your death, the second passing of husband and wife.

That would make the premiums much less expensive.

And you could split that five ways, 50,000, some to your church, some to Folds Of Honor, some to the Children's Home of Easton, some to various organizations that you believe in.

That may be something that you wish.

If you're in good health and that is attractive to you, then please sit with a trusted, experienced life insurance advisor, not a salesman, an advisor, one that has the insight from dozens of life insurance companies so that they can give you lots of different options, lots of different companies and how they approach things, because everybody... Every company is a little different, every insured is a little different, everyone's objective is a little different, so make sure you explore that with somebody who is impartial.

But oh, again, congratulations, what a great result.

And, gosh, I pray that you have... ..both of you have tremendously good health at 64, maybe 40 years of retirement ahead of you.

Wouldn't that be wonderful, particularly maybe 40 years of healthy retirement ahead of you?

That's what I pray for you.

Megan, outstanding.

That was a really, really wonderful question to have explored on air.

What's next for us?

- This next one is a little bit of a switch from the last one.

It says, "Please listen to the link that I sent you.

"I want to invest in crypto and want you to help me.

"Very good information."

What are your thoughts on that, Gene?

- No!

I'm not going to help.

Goodness!

Crypto, cryptocurrency, currently in my mind and in the mind of many, many well respected advisors, not appropriate for the average investor.

For folks who are touting crypto, most of them have their own agendas.

They're turning a profit on your willingness to invest in crypto.

And when I say cryptocurrency, some of you are going, "I've kind of heard the phrase..." You may have heard Bitcoin more often than you've heard cryptocurrency.

Bitcoin is one of the larger of the offerings under the heading of cryptocurrency, but it's by no means the only.

It is an amazingly packed group of companies out there.

More than 10,000 organizations now sponsoring some form of cryptocurrency, Bitcoin, Ethereum, "Doggy-coin".

Dogecoin, some say.

I call it "Doggy-coin".

Started as a joke among a bunch of guys at a tech company, now theoretically valued at $17 billion.

It is, in many people's opinion, smoke and mirrors.

Now, the fact that you want to invest in cryptocurrency, that's up to you.

Your money, you're free to make as many mistakes with your money as you wish.

The fact that you want to enlist me to help you is the real issue.

One of the most important regulations that governs how financial advisors interact with their clients, and to be fair, we are regulated, again, in many people's opinion, overly regulated by too many authorities, but doesn't change the fact that some regulations are pretty powerfully important to protect the investor, to protect the consumer, the client.

And one of those regulations says that no advisor should allow a client to invest in an asset that's inappropriate for that client.

And I must say that the only clients that I would consider cryptocurrency to be appropriate for are those that can afford to lose money.

If you're hearing that and saying, "Well, I don't think I can afford to lose money," excellent.

You are probably in a category that's 85% of America.

They would not necessarily starve if they lost some of their investments, but it would be very detrimental to their long term goals.

It's not adding anything.

So if you can't afford to lose money, this is not an area that you wish to go in.

By the way, it's only one of many areas that you should not wish to go in if you cannot afford to lose the money.

If you can't afford just to simply write it off and go, "I lost it, I don't care," this is not for you.

Number two, and a very important regulation, one that, sadly, many financial advisors, not the majority, a small percentage but a significant percentage, violate on regular basis.

A financial advisor is not permitted to allow an investment in an asset they cannot explain themselves.

And I am here to tell you the vast majority of financial advisors, very smart advisors, very experienced advisors, very trusted advisors I have met, cannot explain cryptocurrency in ways that even they believe.

So be very cautious.

If you decide to do that on your own, don't inflict that on your financial advisor.

Do it on your own.

So whatever mistakes might occur, they're all yours.

And, by the way, if you happen... And all of these things are possible.

If you happen to be one of those that, similar to the Powerball lottery, you hit the lottery with crypto, good for you.

You get to take full credit as well.

Goodness!

That was a little different.

Let's see what category we find our next question in.

Megan, what's up?

- Our next question says, "I am single and have lived in my home "for about 40 years.

"The value has increased from $200,000 to about $600,000.

"Most of that increase, about $300,000, "is from capital improvement I have made to the home, "a large addition, upgrades in the kitchen and bathroom, etc.

"I'm trying to document all of the capital improvements "I have made over the years "by currently inputting receipts in file folders "for each year.

"Should I be organizing the receipts instead "based on the type of improvement, "for example, landscaping, kitchen, bathroom, "basement, etc?

"My second question.

"I hope I will not have to pay any capital gains tax.

"When I sell the home and have to prove that I have made "all of these improvements, I'm wondering who checks "the 40 years of receipts that I have, "the realtor, my accountant, the IRS?

"Do I have to submit all of these hundreds of receipts "with my tax return that year?

"Or do I just indicate $300,000 in capital improvements?

"Will this trigger an audit?

"That's the last thing I want.

"But these extra 80,000 IRS agents "have to keep themselves busy doing something.

"Thank you for your guidance.

I'm a loyal viewer."

- Well, thank you for your loyalty and your humor.

You're right.

They're hiring 87,000 more agents.

They've got to keep them busy somehow.

One phrase stuck out at me as I heard your question, the question about audit and your comment is, "That's the last thing I want."

That's not true.

That's not true at all.

The last thing you want is to pay capital gains tax on $300,000, potentially $60,000 in tax that you do not owe.

That's the last thing you want.

An audit, an IRS audit, almost always starts with a letter.

Almost always, 98% of the time, 99% of the time, you will get a letter from the IRS saying, "Hey, you said this on your return," in this case, "Hey, I had $300,000 of capital improvements."

"We're not necessarily buying that.

"We would like you to provide documentation."

And that's the point where you need to make the copies.

That's the point where you need to send them a packet.

Is it possible that they skip the letter 1% of the time?

Is it possible they skip the letter and they ask you to come in with your documents?

Sure.

And, again, you will take copies.

The IRS, sadly, has had a past history of taking originals and losing them... ..losing them and then assessing you the tax and saying, "Show us that we were wrong."

You can't make this stuff up.

So bottom line for you is good for you.

You're very organized.

Who needs to see those receipts?

It's... You do not send them in with your tax return.

Most trusted, experienced tax professionals will take your word for what you have spent.

But if you've got the receipts, they will smile from ear to ear.

They'll do that magic where they can add up on a calculator without actually looking at the buttons.

How do they do that?

Amazing!

And they will absolutely get you to the point where your original cost was 200, you've added 300,000 in capital improvements, your actual net profit is only 100 and you're allowed up to 250,000 of net profit on your residence without paying any tax.

So, all of those receipts will be unnecessary if you still own the home when you pass away because your beneficiaries, your heirs, will end up with a stepped up basis to the full $600,000 of current market value.

But if you are truly getting yourself in line to sell your home and you want to make sure that you're limiting your tax exposure, what you're doing is fantastic.

Now, in terms of organizing your receipts, the IRS doesn't care.

They don't care if it's by category.

They don't care if it's by year.

They just care that you've got them.

And you do.

Congratulations.

Most folks don't.

Most folks end up, "I think the kitchen cost us 20 grand."

They don't have the receipts.

Good for you.

You've done well.

You won't pay any tax.

Go forth and enjoy.

Ah, fantastic!

Megan, one more, perhaps.

- Yes.

Our last question says, "We basically only have annuities "and need them assessed.

"Our broker just died unexpectedly "and we have no one to talk to.

Thank you for your help."

Yeah, that may or may not be our last one, because that's pretty brief.

I hope you've got one back there just in case.

Ah, advisor passing away.

Very, very uncomfortable.

Obviously a sad situation.

All the professional issues aside, likely somebody that you've spent some time with, likely someone you respected and trusted, likely someone that even, in many cases, you considered a friend.

So losing your advisor is doubly difficult because now, yes, you're left in some cases, or in some phrases, to your own devices, as those accounts will likely be assigned back to the company, the annuity company themselves.

And they may or may not be in position to give you the kind of specific and personal advice that you need.

Having a professional, trusted annuity advisor, they are available.

Most will do an analysis, give you a summary at no charge, and that will give you a very good handle on what you've got.

If you have questions going forward, again, if you're working with a financial advisor you trust, that's got good experience, they may very well have an additional partner involved that can give you that kind of annuity analysis, and hopefully you get everything that you need prior to making any decisions that are permanent for your annuity.

So reach out to either a trusted, experienced annuity advisor, if you know one, or a trusted, experienced financial advisor that you hope will be able to introduce you to that annuity specialist.

Megs, do you have another one back there or shall I continue?

- I do have another one, but we're actually going to skip to the last question that I have.

It says, "My husband and I are both 59 and work full time.

"We each contribute 20% to our 401(k).

"We hope to retire at 62 and work part-time.

"We currently have about $15,000 in a savings account.

"I am looking for a place to earn more money.

"Any suggestions you have would be appreciated.

"We would probably add more to it in the future "but would like access if an emergency should arise.

"Thank you."

- Excellent question.

Lots of folks are in a similar circumstance.

My answer to you might be very different than folks who have different numbers, so let's talk about this in general terms.

The banks, currently, their rates have not risen significantly.

A lot of folks are confused by that.

The answer is very simple.

It's supply and demand.

They are sitting on tons of money.

They don't have to pay additional interest rates.

They can pay you modest rates and invest that money themselves at much higher rates.

For folks who have checked around, there are some significant advantages to going perhaps through a brokerage that has...

Some call them money markets on steroids, currently paying 2% or 3% short term, two-year treasuries paying 4 or 4.25%, three-year annuities paying five, almost 5%, 4.7%.

Lots of options.

In your case, though, $15,000, I don't think you move it.

It's an emergency fund.

You're doing great elsewhere.

It's an emergency fund.

Emergency fund should be kept close at hand, absolutely guaranteed, FDIC insured.

Don't try to stretch for an extra 1% that might give you $50, $60, $70 a year extra income.

Make sure you stay safe and secure.

If, on the other hand, you're listening out there going, "Wait a second, we have 50, 60, 70..." I've had clients come to us, "We have 100, 150 in the bank."

If you move 100,000 from 0.3 to 2.3, you just made 2,000 bucks.

You've got to explore the options, make sure you're working with a financial advisor you trust that can give you those options and still give you the safety that you require.

Lots of great questions.

Fantastic.

Thanks to Jacob, thanks to Megan for being light on their feet, quick on the fly as we handled the end of our show.

And thanks to all of you for spending half an hour with us.

Hopefully you picked up some ideas that might be beneficial to you.

And of course, if you'd like to be maybe part of a future show, send us your questions.

Gene@askMTM.com We'll be happy to help.

It is always a pleasure to stand at this desk and answer your questions.

Hopefully you'll return as I come right back here next week on another edition of More Than Money.