And good evening and welcome to More Than Money, you've got Gene Dickison, your host, and for the next half an hour, your personal financial adviser.

You can trust me to give you as much information as I possibly can in a very short period of time.

It is a crazy world out there.

And I'm often getting a question that is generally reflected to me from younger folks.

They go, this is crazy.

Has it ever been this crazy?

And I need to remind them that despite what they may or may not, sadly, have received in some of their civics classes, if they even have civics classes anymore, or history classes, but we have been through far worse.

Far worse, and if you have parents or grandparents perhaps who served in World War Two, they can explain that to you.

If you have parents or grandparents that served in Vietnam, they can explain that to you.

If you have parents or grandparents that lived through the 60s, where we lost John F. Kennedy to an assassin, when we lost his brother Bobby to an assassin, when we lost Martin Luther King Jr. to an assassin.

The question, have we ever seen anything as crazy as this is?

Oh, heck yes, and far worse.

So, we are Americans first and foremost.

And hopefully, whether we agree or disagree with each other, we keep that in close, close focus, that we are Americans first and foremost.

And as Americans, we generally offer great courage to the world.

Generally, we offer great leadership to the world.

And generally, we are the kind of folks who overcome.

So however you are interpreting all of the craziness of the world, do not lose heart.

Do not think it's never been this bad.

It's probably the end of times.

And wow, it absolutely may be because whoever knows when the end of times is coming, he's not telling.

It may be, but not likely.

We need to show courage, we need to show civility, we need to show creativity, we need to be Americans, each and every one of us.

More Than Money was invented so we can answer your questions, not just give, hey, in general, this is how retirement plans work, hey, in general, this is how a state plan works, hey, in general.

Hey, in general is not terribly useful.

And to be honest, I've been doing this a long time, it's not that interesting.

I've heard me talk in general.

I'm not that interesting.

What's really interesting is you.

If you have a question for us, send it to me, gene@askmtm.com.

We answer every single question, all of them answered directly back to you.

Some of them, with your permission, we use on air.

So you may see your question answered on air, but you will absolutely have your question answered directly to you.

And in some cases, goodness, we've already had quite a number of you visit us in our More Than Money world headquarters, and it's a great joy to be able to serve you at that level.

Let's show you how this works.

Let's go to the email bag, find out...

The email bag?

There's no bag.

But you know what I meant.

"My mom passed in December of last year."

My apologies.

Wow.

OK, a couple of things jump out at me.

We need to get clarity, we need to get clarity, and the clarity that we need to understand is did the IRA get paid into the estate?

Or did the IRA get paid by beneficiaries, you and your sisters were named as beneficiaries?

Because the tax treatment is going to be very different under those scenarios.

If it were paid, sadly, into the estate, translation, $300,000 was in the IRA.

The beneficiary read my estate.

And that went into an estate account, then it's in essence a fait accompli, it's a done deal.

The money is out and the taxes are being paid.

That's a shame, that's an absolute shame.

Now, if your sister's account is saying she should put it into an IRA, it gives me at least hope that it is not the case that it went to the estate.

The three of you were named as beneficiaries, in which case each of you has the opportunity to set up what is referred to as an inherited IRA.

An inherited IRA is quite different than a standard IRA, so you've got to make sure that you're dealing with either an accountant or an attorney or a financial adviser that knows the difference and knows what you must do in order to take advantage of the inherited IRA status.

An inherited IRA allows a beneficiary, in this case you from your mom's estate, to take the money, put it into a segregated IRA.

It cannot be your own.

And the rule says you have up to ten years to pull the money out.

So in your email, you said we don't really need the money right now.

We just don't want to pay a lot in taxes.

You can defer, you can push off all the income taxes on the IRA that you inherit if it's done correctly, and you can push it off for up to ten years.

And during that ten years, you can be as creative, flexible as you wish.

You could take some out each year for ten years.

You can take nothing out right away, take it all out at the end of ten years.

You could do anything in the middle.

You may find five years out, hey, something has come up and I need some extra capital.

You can draw that from that IRA.

Whatever comes out, comes out taxable and is taxed to your income tax bracket.

So each of you will have your own tax bracket.

Each of you will function independently.

This is what I pray is actually going on.

It's only been a little over a month, month and a half, maybe two since your mom passed.

And it may take just a little bit of time, but make sure that you stay well informed.

It is, sadly, sometimes the case that the attorneys settling estates don't communicate very well.

They may be in daily communication with the executor or executrix, but not necessarily with the beneficiaries.

And some attorneys, even though they're named as the attorney of record, so to speak, for settling the estate may not be particularly familiar.

They may not be particularly conversant in the rules of inherited IRAs.

So do not wait.

If this is messed up, to use a very sophisticated term that's very professional in every way, if this is messed up, it's very difficult to un-mess it.

If it's done correctly, it's lovely and can benefit each of you in whatever way best fits you.

I pray that you get good guidance, and of course, if you find that information that leads you to more questions, circle back to us, gene@askmtm.com.

Back to the email bin.

Interesting!

Well, that last question's a little loaded, don't you think?

It's like saying, I'm not crazy because of that.

Well, no, not because of that.

Doesn't mean you're not crazy.

Is your sister missing something, is too broad a question.

I can't possibly answer that.

I'm kidding.

It is very possible that all this is unfolding exactly as it should.

It is actually far more likely that it isn't unfolding exactly as it should, because you've given me a hint when you said that you and your sister have already received your inheritances.

The fact that your father's estate was quite large doesn't really affect whether things go smoothly and quickly or take a long time with a lot of hassle.

What determines that is how your dad set up his accounts.

I'll give you a simple example.

If he had a life insurance policy and he named you and your sister as the beneficiaries, that policy will settle almost instantaneously.

Not exactly, but very close, because all that your sister will need to settle the estate, in this case, the life insurance is a claim form and a death certificate.

Once she gets the claim form, she sends that off with the death certificate.

It's a matter of days or a week or two, and all of a sudden that is taken care of and you and your sister will receive your checks.

Very simply done because it did not go through probate, it did not need to go through a will, it went as a beneficiary designation.

Now, let's think about all the other accounts that might go through beneficiary designation, the most important, the biggest, the one that most folks have, IRAs.

If one of the major assets in your dad's estate was an IRA and he named you and your sister as beneficiaries, again, that money will come to you.

A claim form, a death certificate and checks are drawn.

Hopefully, if that's the case, you've set up inherited IRAs and hopefully you were listening to all that stuff.

We're being very stern about this, because that's the best benefit that you can get.

If your dad had bank accounts and he set it up on what's known as a TOD, transfer on death, and named you and your sister as the designees, that same scenario, your sister will send to the bank the death certificate and those funds are split and they become yours.

All of these actions operate outside probate.

Probate doesn't have to take a long time, but it usually does.

Estate planning attorneys that are taking an estate through probate often are measured in months, sometimes measured in years.

I think our current record, we have a wonderful client and a dear friend, she had an uncle who passed away and I think his estate is still open 14 or 15 years later.

That's an abomination.

Bottom line for you, it sounds like you're on the right track.

Sounds like your sister's doing everything correctly.

I would caution her that if all these moneys are flowing kind of directly to the two of you, there still may be...

I don't know what state your dad lived in.

In the state of Pennsylvania, there would be inheritance taxes, and those need to be paid.

And, of course, you need to file a final tax return for your dad.

There may be some income taxes to do as well.

So even though you and your sister have received your inheritances, I wouldn't spend it all quickly, because you might have to come up with some dollars to cover some of those liabilities if everything indeed went directly to the two of you.

But to me, it sounds like your sister is doing a great job and I think you're on the right track.

If you want to be on the right track and you have questions, send me your questions, gene@askmtm.com.

And they can be questions of many different flavors.

Lots of folks have investment questions, as you've heard already today.

Lots of folks have estate planning questions.

Lots of folks have retirement questions.

And those go on and on and on, because once you dig into retirement, now you have to worry about in retirement cash flow.

You used to have a paycheck.

Now where do you get money?

How do you invest your savings appropriately?

How does Social Security do its thing for us?

And when do we take it?

And how do we apply now that Covid has basically shut down those offices?

You might have questions about estate planning, of course, businesses, starting a business, running a business, liquidating a business.

It's all fair game.

And of course, you might have questions about things I've not even thought about, because remember, the title of the show is More Than Money.

So we talk about all kinds of things.

You set the agenda.

Let's find out what agenda is being set for us now.

Well, first of all, congratulations.

27, you're already in your 401(k) plan for four years, that already puts you light years ahead of your compatriots, the guys that you're out playing softball with, having a couple of brewskis et cetera.

So you're doing a great job.

Secondly, congratulations, you've started an investment account.

And despite the fact the world is crazy, despite the fact that there's so much going on that makes you scratch your head.

You mention the word funds and that's an interesting reference.

Mutual funds is what I assume you're referencing.

And we're going to circle back to why that's an interesting reference here in a moment.

And you're starting with $5,000.

That's a serious sum of money.

And again, we're going to have to figure out exactly where to from here.

But let's go back to your 401(k) plan.

You are invested in a target date fund.

For many folks viewing us tonight, they go, sure, we've bumped into those before.

For many folks, I'll bet more than half, they're going, no idea.

I have never heard that term before.

I have no idea what it means.

Well, let me give you just the flavor.

The flavor is the 401(k) plan is a retirement plan.

The default fund is where they put the money for this young man if he does not choose any of the other options.

Many 401(k) plans... All 401(k) plans have a menu of investment options.

And if he chooses, he can pick any combination of those that he wishes.

But if he hasn't made that choice, they drop him into a plan, into a fund that is managed by whatever company is underwriting their 401(k) plan.

That might be T. Rowe Price, that might be Vanguard, it might be Fidelity, could be any number of companies that offer up the investment platforms, and they are managing a 2060 fund as if the individual putting the money in was going to retire in the year 2060.

The young man is 27, he's got roughly 40 years.

He'll be 67.

It makes perfect sense.

So if they're currently managing for someone retiring in 40 years, it's going to absolutely guarantee to be nearly, if not 100% in the stock market, because at 27 you can afford the ups and downs of the market because you have 40 years to go.

For those of us who are a little further along, maybe a lot further along, if we thought back to the ups and downs of the market since we were this young man's age, we've forgotten most of them.

Some of the most upsetting at the moment ups and downs of the stock market we don't even remember now because it's been so long.

And that's how that works.

It works out beautifully.

And as he progresses in that same fund, they will automatically make it a little more conservative, a little more conservative as he gets closer and closer to retirement.

So in the year 2058, he won't have 100% in the stock market.

He might have 50 or 45, and they will have made those adjustments automatically.

Now he's making a very different move.

He's taking charge, personal charge of his own investment account.

And instead of having someone, hopefully somebody pretty skilled, making those decisions for him, by golly he wants to make his own decisions.

One of the most important things he must do first is decide what is this money invested for?

Is it similar to his 401(k) that it's going to be retirement money 40 years from now, or on the other end of the spectrum, is it possible that at 27 he's investing this money for the down payment on a house that may come two or three or four years down the road and he may end up needing 40, 50, $60,000?

Well, depending on those objectives or any other that he comes up with, that will drive how we invest this money.

Let me give you the two ends of the spectrum as an example.

Again, if we're looking at 40 years from now, it's retirement money, aggressive.

He should invest in a mutual fund or an exchange traded fund that is broadly diversified but 100% in the stock market, and to the extent that he can resist the heartburn and agita aggressively in the stock market.

On the other end of the spectrum, if he's saving for a home, he must do the exact opposite.

He must avoid the stock market, he must avoid risk.

He must swallow hard and accept that he's going to make a very small rate of return.

But his money will be safe because the tragedy of not making a great deal of money over the next two or three or four years as he saves for the down payment on his home would only be exceeded by the tragedy of he saves $40,000 in the stock market, he intends to use it as a down payment on his home, and just as he signs the contract on that new home, the stock market goes down 20% and he loses 8,000 bucks overnight and he doesn't have enough money for his down payment.

That's a tragedy.

So using those as bookends, you can see where determining your investment goal is the single most important thing you can do to determine how to invest.

Those are bookends.

There's lots of flexing between some in the stock market, some out, some aggressive, some protected.

And all of those are very, very useful for different kinds of goals.

For this young man, once he understands what his goal is, I think he's going to have a better sense of how to invest.

And until he does, even a grizzled old veteran would not be able to help, because a grizzled old veteran needs a target to aim at before he decides exactly how to align.

So hopefully that helps.

And for the young man, if you figure all that out, shoot me another e-mail.

That works beautifully.

We often have gives and takes, so we have conversations back and forth.

Sometimes the conversations bleed out onto a phone call.

Sometimes they morph into a face to face.

However we can serve you, it works.

Just let me know, gene@askmtm.com.

Another question.

Well, interesting phrasing, but I'll take it.

Is it actually a thing?

Yeah, it's actually a thing.

There are investment platforms that allow you to invest, generate a guaranteed income for as long as you live and, in some of these platforms, as long as a husband and wife might live.

If spouses are joint on the account, they can get an income for as long as either of them should live.

And yet at their passing, their beneficiaries receive the entire original investment or more if the investments have done very, very well.

So let me give you some numbers as an example.

I have a retirement plan, it has $500,000 in it.

I roll it into my IRA at retirement, I invest in one of these platforms that can give me a guaranteed income.

I want it for me and my wife.

I'm going to pick a number and say it's going to pay 5% a year for as long as either of us lives.

Translation, I'm going to get 25,000 or my wife is going to get 25,000 as long as either of us lives, and since we are quite young, as you can readily see, that could be 30 or 40 years.

And the only requirement for my beneficiaries, my three daughters, to get the entire 500,000 is that when the second of us is gone, there's at least a dollar in the account.

Well, how do we make sure of that?

Well, two ways.

Number one, we invest wisely.

We are in control of the investments under the platform.

So we, or we with a financial adviser, can invest in such a way that if we're spending 5%, we're being guaranteed that, that we can target to earn that much or more.

So even if we only averaged 5.25% over 30 or 40 years, that 500,000 will actually grow.

Maybe not a lot, a quarter of a % is not very much.

But it's going to grow so that we have all this guaranteed income.

We're using 40 years and we're taking $25,000 out, it's $1 million out.

And at our passing, our children are still guaranteed.

$500,000.

Pretty impressive.

Now, is it perfect?

No, nothing's perfect.

There's not an investment out there that's perfect.

Is it perfect for a certain scenario?

The answer's yes.

That's a very different question.

If it fits what you need, then it's perfect for you.

And if it doesn't fit what you need, then it's not.

Investigation, education, becoming informed and working with somebody that can explain these things to you, preferably in English, that really does help.

And when I say English, I don't mean English versus Spanish.

I mean English versus legal terms that nobody understands.

Get all that good education and see if it fits you.

And if it does, ain't life grand?

Gene@askmtm.com.

I'm going right to another one.

The answer is no, not directly.

But yes, if he uses a little bit of strategy, and here's how it works.

If he's working part-time, let's say he's making $5,000 a year, he can put up to $5,000 into his own IRA.

How does it get there, though?

Because he inherited this IRA, so his uncle left him the IRA.

He took it over and it's still an inherited IRA.

That means by IRS code he has to take all the money out by the end of ten years.

We've got plenty of time.

As it turns out, if he's working part-time right this second, he can take the money from the IRA that he inherited, $5,000 in 2021, and put it into an IRA.

If he's smart, he does, he puts it into a Roth IRA so that when he retires many years from now, it's income tax free.

If he does that over the next four years, in total, he will have moved approximately, if not all of the $20,000 into a Roth IRA where it will sit and cook and grow tax free for 40 years.

And then when he decides he wants to take an income from it, he can take the money out income tax free because it's in a Roth IRA.

So your son's in a very enviable position.

He has the opportunity to make a huge impact on his financial future.

20,000 today in 40 years could easily be a half a million dollars if it's well invested.

He also, sadly, is 19, which means he also has the opportunity to mess this up royally.

So make sure if you're not the person to give him the advice, that you find somebody, maybe an older guy, maybe a little gray hair, that can absolutely guide him in the right way so that he's not regretting many, many years from now the opportunity he had that his uncle literally gave to him on his deathbed of funding a wonderful retirement, a wonderful tax free retirement for his future.

So hopefully, hopefully, hopefully, Folks, we just have a minute or so left in this edition of More Than Money.

There's so much to cover every single show.

But as always, you are our number one priority.

You set the agenda.

You've heard so many emails that are giving you insights into what your friends, neighbors, family, what things they're faced with.

That doesn't mean that you're faced with the same things.

I'm guessing that your concerns are very specific to you as well.

Don't hesitate.

We invented More Than Money for exactly the purpose of serving you and giving you as much great information as we possibly can.

So send me that question by email, gene@askmtm.com, and we'll answer it directly to you and maybe you'll see it on a future show.

Thanks for spending part of your evening with us.

We'll see you next time on More Than Money.