Hi.

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 am at your service and very pleased to be so.

It is a fresh start for many of us as we look into the new year and great excitement.

Maybe some changes in your life.

Maybe you're going to make some adjustments, go a different direction.

That's pretty exciting stuff.

Maybe you've got some great momentum coming out of 2024 and you wish to see that accelerated.

Well, we can help in many, many ways.

The title of the show is More Than Money.

After all, it's not just an investment idea.

It could be a educational idea.

It could be a business idea.

Tax planning, perhaps family planning, legacy planning, estates, investments, insurance, oh goodness, the list goes on and on.

If we talked about financial topics on More Than money, we could go on and on and on.

As most financial shows do, droning on and on about stuff that they want you to hear about.

What we do is the exact opposite.

We allow you to tell us what we should be talking about.

You have made us over now six seasons, the most relevant financial show on television today, bar none.

No matter what station you may be watching, no matter what system you may be on, we are the most relevant.

Not because of me, but because of you.

You send us your emails, you allow us to see a glimpse of your life and allow us with a certain, goodness, discretion, of course, to address the things that are most important to you, most relevant to you.

And of course, if you're just joining us for the very first time, we welcome you.

I think you'll find the more Than money community to be a very welcoming one.

And if you have questions, particularly after you've watched a few that we answer on air, if you've got questions that that you'd like to have addressed, send those to me.

Gene at ask mtm dot com GENE at ask mtm dot com.

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

But definitely you'll have your question answered.

And for those of you who over the holidays keep sending me emails going, hey, you never answered my question.

Keep in mind that with technology, I know that we did.

So check your spam filters.

That's that's really good advice.

So, goodness, let's give you a demonstration of exactly why we're the most relevant financial show on television today.

Let's turn to our financial correspondent.

And Megan, where do we start?

Hi, Gene.

Our first question tonight says I love your show.

And being 75 years old, I am watching more so for my two daughters who will get some kind of inheritance from me.

I listened to the case of the three individuals that inherited $270,000 each.

The strategy that you outlined involved supplementing a 30 K personal annual IRA contribution made up of ten K, in addition to 20 K from the inherited IRA proceeds.

Does this mean they completely avoid taxation on that withdrawal if in fact they would have to pay taxes on that withdrawal and then contribute that money into their own IRA?

Wouldn't that mean that they will eventually pay taxes again when eventually withdrawing that money?

If so, I would say that is in effect double taxation.

Thanks.

Once again for your show and your answer.

Well, you're very kind and, we appreciate it very much.

You are the father of, two daughters.

I am the father of three daughters and, now a granddaughter.

So I am swimming in a sea of estrogen.

And many of you gentlemen out there gone.

I got it, I understand completely.

So bottom line for this, gentlemen, is it's really important when you listen to the answers that you hear on More Than money, that you keep in mind the details of the question.

So, for example, in this particular case, the question that we examined on a prior show was a set of, young ladies who were, inheriting dollars that came out of their parents IRAs.

That's a very important distinction.

This is not simply an inheritance.

This is coming from a retirement account.

So the question became, as each of them received their share, their one third, in this case 270,000, what might they do with it?

Well, let's start with the fact that if they decide I don't really care, I don't really worry.

I don't really plan ahead.

I don't think ahead.

I'm just going to take the money and cash it in.

They will pay tax on $270,000 in an instant.

It hurts to say.

It even hurts to utter that.

Not probably in their best interest.

There are exceptions, of course, but not probably in their best interest.

Now, having said all of that, are there ways that we can soften, the taxation that they will feel as the money must, must come out of this inherited IRA?

It must come out by the end of ten years.

It must be empty, and taxes must have been paid.

Well.

You can simply take it out year by year.

That will keep the taxes relatively lower, but it will not eliminate them by any stretch.

If, on the other hand, and this was the suggestion we made to this original, question, if these young ladies happened to be, employed with a 401 K plan, and let's assume for the moment, for demonstration purposes, that they're eligible to put roughly $30,000 a year away and they're currently putting away ten.

Could they accept a $20,000 distribution from the inherited IRA and then adjust their cash flow to allow them to put $20,000 more into their 401 K?

The answer is sure.

Can be done mechanically.

Not difficult, particularly not early in the year.

Kind of fits particularly not early in the year, because that gives you plenty of time to get that extra money out of your, earnings and into your 401 K so your, your paycheck, so to speak, will drop $20,000 this year.

Your cash flow will go up $20,000 from the inherited IRA.

The inherited IRA 20,000 is taxable.

The money going into the fall and K is tax deductible, if not completely.

They will very much eliminate.

One will wash out the other and as a result we will over many years be able to pull the vast majority of this money out of the inherited IRA without paying taxes.

So this gentleman is concerned that they will end up paying taxes twice.

Is, what's the most diplomatic way I could say it's not accurate.

It is a misinterpretation.

They will not pay taxes as it goes from the inherited IRA into the fall, and they will pay taxes when they retire, hopefully having earned a very handsome rate of return over many, many years that was tax deferred.

And then make some choices when they are in retirement.

So very interesting question.

I really appreciate it.

It gives me a chance to clarify that there is not double taxation in this case, and that from a tax planning strategy, it could be a super duper winner.

Super duper winner, of course, is a technical term.

We mean thumbs up.

Meg's outstanding.

Plus all the nice words.

We we like that.

As soon as you start saying nice words, you're probably going to get on air.

Always, always exciting.

Where do we go next?

Our next question says, my wife and I have been contemplating rolling her standard IRA into a Roth.

She is 65 years old.

There's approximately 20 $200,000 in the account.

We could roll over $40,000 each year for the next five years before RMDs are required and stay in the 12% tax bracket.

This tax bill will easily fit in our budget.

We have no short term need for these funds, so we like the idea of them growing tax free until such time that they are needed, maybe for long term care down the road.

If we keep the standard IRA, the taxes on future RMDs would be in the 22% tax bracket due to our higher income.

When we are both collecting Social Security plus the funds we withdraw, it won't immediately, won't be immediately needed.

So we'll need to invest them and generate more taxable income.

I can't see a reason not to roll into a Roth IRA, but it's been suggested to us that we may want to leave the funds in the standard IRA and use life insurance to cover the tax bill at my wife's death.

Am I missing something?

Thank you.

I don't think you're missing anything.

I'm very impressed.

This is a very interesting question on two levels.

Number one, pretty typical, pretty common that we have, concerns about should with this, block of money that we know is a kind of a ticking time bomb for taxation.

Can we address it in some way, including doing a Roth conversion?

So pretty common question.

Pretty typical.

Pretty appropriate question.

What's what's different here is that this gentleman has explored this, from the standpoint of, of practicality, mentions his budget.

I'll circle back to that.

He has explored it from the standpoint of long term impact.

And then he's also suggested that there might be an alternative that could be explored as well.

Well, first of all, this gentleman has done something that most folks don't.

And as a result, he's got a very clear question.

Most folks don't have a handle on their budget.

And I absolutely understand budget for lots of us, the the hair in the back of your neck stands up.

It's a little unnerving.

It's it's not comfortable to talk about.

So let me reframe that and maybe make it a bit more comfortable.

The question I always ask is not what is your budget?

That's pretty accusatory, actually, and a little confrontational.

Not comfortable.

How about how much money do you need to have coming through the door on a monthly basis so that you're happy, you're healthy, and your bills are paid?

Most folks, when presented with that question, have at least a pretty reasonable, estimate.

I don't need to know that your electric bill is $4 higher this month and last.

Don't need to know that.

Well, I do need to know is, do you need 4000 a month?

So you're happy, healthy, and your bills are paid?

Or do you need 7000 a month?

And to be happy, healthy, your bills are paid and most folks are very clear about that difference.

The reason that's so important here is that this gentleman is voluntarily raising his hand to say to the IRS, I want to pay more income taxes than I am required.

That's what you're doing when you're doing a Roth conversion.

You are saying to the IRS, I am 65 years old.

I am not required to take anything out of this account for at least eight more years.

But I'm going to anyway, and I'm going to take a block of money out, in this case $40,000.

I'm going to pay the tax on it.

In this case, roughly 12%, 4800 bucks eight years before you require me to do so.

A pretty interesting approach.

And the reason the question would be is, does that make sense?

Well, number one, is it even possible?

Does your budget allow for it?

Does the amount of money you have coming through the door?

Happy, healthy and all your bills are paid?

Also have enough room for an extra 400 bucks a month in taxes.

And in this case he's saying, yeah, does because he understands and knows his cash flow.

And before you could make this choice, you would have to know that as well.

The second thing he knows is his tax bracket.

Fantastic.

He knows that if he's taking money out now, it's being taxed at 12%, 4800 bucks.

If he waits and takes it out later, the same amount of money is going to be taxed at 22%.

It's an extra 4000 bucks.

Not not once.

It's an extra 4000 bucks a year, maybe as long as they live.

And hopefully triple H club where it's I'm not 35 more years.

Ouch.

So if there's 200,000 in there and if she has eight years before she has to take money out, and if they can afford to take 40,000 out a year and pay the tax, even though the investments hopefully in the IRA are going to continue to grow, that the IRS should be empty by the time she is required by the IRS to take money out, all of it is being converted to a Roth IRA.

It is still an IRA.

It is still tax deferred.

As a matter of fact, it will come out tax free if, they decide that they need that additional cash flow.

It's a very, very good idea.

Excellent.

Indeed.

The life insurance idea I'm going to suspect has come to you from someone who sells life insurance.

I and I, and I say that knowing that that might ruffle some feathers.

But yes.

Is it possible to solve the tax problem, by taking some money out and pay the tax and then and then fund a life insurance contract?

It is possible you have to go through underwriting, has to be medically cleared, etc., etc., etc.

in my opinion, the first approach makes the most sense.

The second approach would only be, plan B, unlikely that we will need to turn to plan B, how about plan C?

This will actually be our third question.

So plan C will be going back to Meg's.

That's one of the worst Segways in the history of TV.

My apologies still made me laugh.

Thank you so.

And several people at home are laughing, but more out of pity.

Yeah.

What's next?

Our next question.

Maybe you can fill in a little bit of it.

This one says I was with my accountant yesterday going over taxes.

When we talk next, maybe we can do a verbal cost benefit analysis on CDs.

Since they are taxed as ordinary income versus capital gains, our ordinary rate has been at least 22%.

Thank you.

Yes, you are quite right.

There needs to be a little more context in order for this email to make sense.

So, backstory.

Individual and his wife, have a block of money, substantial block of money.

We're talking hundreds of thousands, that they want to invest.

Invest may not be the right word.

Guild.

Decide.

After I describe to you the situation, they want the money to earn them a return.

A return?

Not necessarily a high return, but better than zero.

But they want to have the money safe.

Is can be and particularly liquid.

So that if.

Well, in their particular case, an opportunity came along a business opportunity that they could take that cash and take advantage of the opportunity.

Pretty straightforward very straightforward.

They meet where their account, the accounts as well.

What are you doing?

Oh my gosh, you got all this, the CD's and, other stuff.

That's super safe.

You're making four and a half, five, 5.5% interest on your CDs.

It's going to be taxable.

This is.

Whoa.

It's going to just jack you right through the roof.

The accountant, I'm sure.

Well, meaning, I'm not familiar with the original concept.

The original investment instructions suggest that they should have been in stocks.

It would have been taxed that capital gains.

Interesting idea.

There's at least three things wrong with that.

Excuse me.

Number one there in the 22% bracket, their capital gains rate would be in the at least 20% bracket.

The differential is so small it's a rounding error.

So to try to, posture, his advice, her advice as, oh, you should have thought about that.

You should call me on the tax guy.

I really know, puts him or her in a very bad light because the differential is too small.

Number two, really important, investing in the stock market.

No matter how, skilled you think you are, no matter how skilled you think your financial advisor is, it involves risk.

Can the stock market go down?

I assure you it can.

780 years of dealing with the stock market, it goes down a fair amount.

And, gosh, it also goes up a fair amount.

So if you had three, 4 or 5 years as a time frame, I would likely be agreeing with the accountant.

But in this case they were talking about time frames measured in 3 or 4 months, months, and any time frame that brief, in my opinion, any time frames short of three years is likely inappropriate to be investing in the stock market.

Because while your taxes tax capital gains rate might be slightly lower 22 to 20, what if it goes down?

What if it the stock market drops 10%?

Then you haven't saved 2%.

It's cost you 10% 10% of hundreds of thousands of dollars.

And you say, what is it likely?

Couldn't we project when the stock market would go down?

The word project is such a polite word.

So professional, so academic.

Can't we look at the overall indicators?

Oh, there's another very polite, academic, very professional work and give us a, a direction that we expect the markets to be in.

And the answer is people do it all day long.

But but in my world, my experience, I don't refer to that as projection.

I refer to that as predicting predicting.

And we we need to find somebody who's really good at predicting the stock market.

And, and we're still looking because as the, the great American philosopher Yogi Berra, once said, predicting really hard, especially about the future.

Bottom line is there isn't anyone that can tell me what the stock market will do tomorrow or this afternoon.

It simply isn't possible.

Gosh, the ability to, to to predict the future, is is envious.

It's exciting.

It's the holy grail of investing, perhaps, but it's not possible.

So in all, for all these reasons, absolutely inappropriate.

When we had our discussion, after the election, that was another piece of the puzzle, when we had our discussion after the election, it became very, very clear that this was a non-issue.

Now, here's something that you should take away.

A good life lesson.

If you have advisors that are critical in terms of your decision making in your financial picture, make sure they're talking to each other.

If you're talking in the MTM, the more than money world, we talk to each other because we're all under one roof.

We have our tax experts, we have our investment experts, social security, estate planning, legal insurance all under one roof.

So easy.

Easy to integrate, the tax side with the investment side.

The advice side, the strategy side.

If your advisors are separate, make sure that they have regular conversations to avoid this kind of anxiety.

Stress inducing, speaking of stress inducing, if you got one back there, maybe that will cause me to flutter.

Oh, I don't know.

Well, it definitely ends nicely with with our favorite way to end something.

You'll see what I mean.

This one says my wife, 70, works part time, and I, 65, work full time.

Self-employed, are in the planning stages of a retirement house being built in another state.

Wondering, is it better to take out a home equity loan on our existing home for $50,000, which we'll pay back when we sell the house and move to the newly constructed house?

Or redeem $50,000 from an IRA funds to add to some cash savings that we are required to put down for the construction loan, I'd expect the redeemed IRA funds will be taxed, so we would have to plan for the additional tax amount.

If we go that way.

Wondering what would the tax be on that redemption of $50,000 IRA funds ending with we have enjoyed your show for many years.

God bless you, your family and all the MTM group.

Well, that's incredibly kind.

Thank you.

And same back to you.

God bless you and your family, our MTM crew, our extended More Than Money crew, our PBS crew, they're all fantastic.

Our MTM group in the office, in the home office, in the Holy Lands.

Unbelievable.

We are blessed.

And we accept that that, Well, wishes.

Gratefully.

Thank you so very much.

Now, a couple things here.

This gentleman obviously married way over his head.

His wife is 70, still working.

That's our kind of guy and our kind of girl.

Maybe she's working just to get out of the house.

You know what I'm saying?

Get a little break.

But bottom line is, they're in a very strong financial position.

And what I really enjoy, particularly as the founding member of the triple H club, I didn't name it, but I did found it.

Bottom line is, if they're going to be with us until 100, they're just now planning their retirement house at 65 and 70.

Fantastic.

Good for you.

What's the hurry?

You're going to have plenty of years in your new home.

This is exciting stuff.

Good for you.

Question is pretty straightforward.

We got 50 grand easily in the IRA.

We can take that out.

We're gonna have to pay some tax.

I'm not so sure I'm happy about that.

We also have plenty of equity in our house.

Could we take that out and pay some tax on that or pay some interest on that?

And, which would be better, $50,000 coming out of an IRA?

I suspect it's not in the email, but I suspect we'll put them in roughly the 20% tax bracket, 20%, in order to get, 50,000 net, we need to take out about 65,000 bucks.

20% of that's 13, 14 grants and state tax.

You're going to net about 50, and you're going to pay that instantaneously.

Gone, not likely to be retrieved and particularly not likely.

Some of you out there already said wait, wait, wait.

If he puts it back in within 60 days, there's no there's no tax.

That is true.

Based on this email, it is very unlikely it will go back in 60 days.

I'm going to use a year as an example.

I think that's probably, pretty reasonable.

So we're going to pay, 20% right upfront.

In essence, if you're looking at that as a loan, it's not.

But if you're looking at as loan, it's not following me.

You're paying 20% upfront in interest, instantaneous interest, and you can't put the money back in.

If, on the other hand, you borrow the money from your equity in your home and it's 12 months, and the current equity line is a lines of credit, roughly 5%, by the way, maybe tax deductible.

So you might actually save some money, but 5% maybe because you may be able to sell your home more quickly.

It may only be six months, seven months, eight months.

But let's say it's the full year.

You end up paying 2500 bucks as opposed to 13,000 in in capital gains tax or I'm sorry, in tax on the IRA distribution.

Very, very simple, very straightforward.

Use the equity in your home and enjoy the whole process.

Chill and circle back.

Let us know how the, the new retirement home is unfolding.

Folks, you're very, very kind.

You spend part of your evening with us.

Half an hour goes very, very quickly for us.

I think it probably does for you as well.

If you have questions that you would like to explore, you'd like to have a more than money advisor do that for you.

There's no there's no obligation.

It simply means that you have to engage us.

You simply send us that email.

Gene at ask mtm dot com.

We have an entire team of financial advisors answering questions back to our audience members and happy to do so.

We start some wonderful relationships, exchange lots of great Intel, and help an awful lot of people.

And maybe one of those might be you.

So send it that email Gene at Ask MTM dot com.

Thanks so very much.

Hopefully you learned enough that you'll want to be back here next week when we come back for another edition of More Than Money.

Goodnight.