The Personal Finance Podcast - High Income Tax Strategies, Selling a House to Invest in the S&P 500, and Converting $100K to a Roth IRA (Money Q&A)

Starting point is 00:00:00 On this episode of the personal finance podcast, we're going to be answering your questions on Money Q&A. What's up, everybody, and welcome to the personal finance podcast. I'm your host, Andrew founder of Mastermoney.com. And today on the Personal Finance podcast, we're going to be diving into your questions on this episode of Money Q&A. If you guys have any questions, make sure you join the Master Money Newsletter by going to mastermoney.co slash newsletter. And don't forget to follow us on Apple Podcasts, Spotify, YouTube,

Starting point is 00:00:43 whatever podcast player, you love listening to this podcast on it. And if you want to help out the show, please consider leaving a five-star rating and review on Apple Podcasts, Spotify, or your favorite podcast player. Cannot thank you guys enough for leaving those five-star ratings and reviews. They truly mean the world to me and I read every single one of them. Now, today we're going to be diving into an episode of Money Q&A. And if you're watching, this episode on Spotify or YouTube, leave a comment down below if you have some questions on this and we can help answer some of those as we go through each and every single one of these questions. Now, today we're going to be diving into a ton of topics. I have so much to go through on this

Starting point is 00:01:20 episode for you all and I am really, really excited about it. We're going to talk through what are some tips for someone who is moving to the U.S. and how they can grow their wealth. We're going to talk about how to automate investing when your income is variable and how to think about variable income if you don't make the same amount every single month. Should you sell your house and invest the equity in the market? We're going to be talking through why tax planning is so critical for higher earners. We're going to talk through someone who wants to open an ice machine business and some of the considerations they should have on the personal finance side before they do that. In addition, we're going to be talking through a physician who is thinking through their entire financial

Starting point is 00:01:56 situation and someone who is trying to figure out the easiest and most simple way to convert $100,000 from a traditional IRA to a Roth IRA. Plus, we're going to be diving into a new scam where one in four Americans are actually being targeted by this scam. So I want to make sure that you know about this because it's a very important one. And as you know, it is very important to me

Starting point is 00:02:16 that my audience understands how to protect their finances online. So that is a big one there. Also, we're going to be talking through a situation where someone believes they are oversaving and how to think through that process. And Health Corner is going to be back. So we are going to go through Health Corner.

Starting point is 00:02:32 I have had so many of you email me about Health Corner and to bring that back. And so on this one specifically, I'm going to talk through some things that I am testing out to try to optimize my sleep. So each and every single one of us can benefit from this Health Corner for sure. So that'll be at the bottom of the show as we go through all of these questions. So we, as you can see, you have an action-packed episode on this money Q&A. So without further ado, let's get into it. All right, the first question comes in from Emanuel. all. He says, Dear Andrew, I am so happy to join the newsletter and I have been listening to

Starting point is 00:03:05 your podcast for a few months now and it has been the most informative. Thank you so much, Emmanuel. I'm so glad you're on the wealth builders journey here. I'm really, really excited to have you. I became a permanent legal immigrant in the U.S. in September and it has been a very challenging experience moving to a new country. I'm 58 years old, married with four children aged 24, 22, 17, and 15, and I worked 28 years in the oil and gas industry. I have been quite frugal and I've been lucky with my investments that amount to about $1.5 million of net worth, which real estate has 75% and 25% in stocks and mutual funds. My question is, now that I am a permanent U.S. resident, what tips would you give someone like me to protect and grow your

Starting point is 00:03:47 wealth in the U.S.? Well, Emmanuel, this is a fantastic question and congratulations on becoming a U.S. citizen. That is absolutely amazing. And it sounds like you have some experience in fatherhood as well. I could probably learn a lot from you just from fatherhood from having four kids that are now becoming adults and you have a teenager. So that is really, really fantastic. So some of the things that I would think through and some of the ways that I would approach this is to, A, build your U.S. foundation first. So the foundation is obviously one of the most important things that we talk about on this podcast is making sure that we are thinking through our foundation and the ways that we are going to invest our dollars. So if you don't have, you know, your family's social

Starting point is 00:04:24 security numbers yet or all that stuff set up, I would definitely get that set up. and then look at the major brokerages to get the ball rolling when it comes to building out that foundation. You can look at Vanguard. You can look at Fidelity. You can look at some of these other brokerages. But this is the first place I would kind of think through and say, okay, how am I going to invest my money moving forward? And where am I going to invest these dollars? And as you start to accumulate wealth and as you start to see your income coming in, I would take a portion of that income and start to put it towards some of your investment accounts. because this is going to help you unlock that foundation as we keep talking about. Now, since you are a U.S. citizen, you can now take advantage of some of the amazing things like the 401k, the Roth IRA, the HSA, which most likely is one of those things you probably won't have a high-deductible health plan at age 58.

Starting point is 00:05:12 And so all of these can be really, really great options for a lot of folks out there. So I would look into your situation and I would say, okay, well, how much time left do I have where I can start to contribute to some of these accounts to get some attacks efficiencies going. And you can kind of think through, okay, well, if I want to take advantage of some of these accounts, I can do it right now and or if I plan on retiring early, you could just continue on into something like a taxable brokerage account. But the third thing I would look into is rebalancing my portfolio. So the way your portfolio stands right now, as you said, you had 75% real estate and 25% stocks. Now, my assumption, and I could be wrong, but my assumption is that most of the real estate is in your personal residence, if your net worth is around,

Starting point is 00:05:53 $1.5 million. Maybe you have some rental properties, though. And if that is the case, that would be something that is wonderful. But you want to look at this portfolio and say to yourself, can I retire on this portfolio? Is there enough income available for me in this portfolio so that I can actually live the life that I want and enjoy my retirement in the U.S. here? So you can have some really, really cool stuff happening. So I would start to think through, okay, is my portfolio in a spot that makes sense? Do I have enough equities in place where I can start to draw down on that portfolio based on whatever percentage I think I should be drawing down on. Now, the number that we talk about a lot on this podcast is the 4% rule.

Starting point is 00:06:32 What that means is that you can draw down 4% every single year and have the ability to be able to preserve that portfolio over the course of 30 years. But things like guardrails can help you, you know, pull more from this portfolio or less from this portfolio, depending on if the market is up or the market is down. And so what I want you to do is figure out where your portfolio needs to be. If the majority of your net worth is in your personal residence, we most likely need to be able to save more in that portfolio in order to increase the amount so you could draw down and live off that portfolio.

Starting point is 00:07:06 If some of it is in rental properties, though, and you have those rental properties in place and they are cash flowing, then you could figure out, okay, well, if they are cash flowing, I can reduce the amount that I need in my portfolio by the amount of cash flow that I have on hand. So the portfolio is the biggest thing I see here. Looking into index funds and ETFs to build out your core and find ways for you to be able to build out that foundation is going to be very, very important. Now, the easiest way to think about this is if you, let's say you spend $40,000 per year. I'm just using a nice easy round number for the math.

Starting point is 00:07:36 Well, you need a million dollars for every $40,000 that you're going to spend in retirement. Now, that is pretty conservative. I think the 4% rule is now stated as a pretty conservative number where you can most likely pull a little bit more. but at the same time we just want to make sure that we are on target we are figuring out exactly where we need to be. The other thing to do is to plan for health care. See a lot of people when they fail, especially in the U.S., if they plan on retiring early or plan on retiring at a point in time where it is earlier than most is thinking through health care. Now, Medicare starts at age 65. So this is where you're going to get some supplemental

Starting point is 00:08:12 insurance available to you from the U.S. government. And so this is going to help you during that time frame, but between age 58 to 65, you got to figure out exactly what you're going to be doing during that time frame. If your company offers health care, that's great. If they don't, though, we just need to make sure that we have enough on hand in order to be able to plan for this health care. And so that is a really, really important thing as we start to think through this. So really, really cool stuff here, Emmanuel. I think the biggest overall thing you need to do is look at your portfolio, though, and spend some time going through that. Now, we have a free tool, actually, that helps you figure out what your retirement number is. If you go to mastermoney.com slash resources, it actually is going to

Starting point is 00:08:50 ask you a list of questions that helps you find what your retirement number is. It's one of my favorite tools we've done because it takes you through the exact sequence so that you can figure out where you need to be. And then what it's going to tell you is, okay, well, if you are short of that retirement number and where you need to be, it will tell you exactly how much more you need to save every single month in order to be on track. Secondly, though, it takes into account some of your other income. So if you plan on having pension, income or you plan on having, you know, retirement income somewhere else or maybe you have those rental properties, then those types of things are going to be factored in to reduce your overall amount

Starting point is 00:09:26 that you need inside of your portfolio. This is a tool that most people charge a lot of money for. I'm giving it to you all for free because I want you guys to be able to track that retirement number. So make sure you test that out if you have not done so already. It is a really, really cool tool that is going to help you figure out exactly what your retirement number is. And you can change the withdrawal rates and so many other things, just like. that. So, Emmanuel, I hope this was helpful. Congratulations on becoming a U.S. citizen. I'm so excited for you and I'm so excited that you have a $1.5 million net worth. That is absolutely incredible. Keep on pushing. And if you have any other questions, please reach out because I would love to help

Starting point is 00:10:00 in any way, shape, or form that I can. Workplace chaos. You know the feeling. Deadlines are stacking up, emails are flying, and then someone on your team gives notice. That's when you think this is a job for sponsor jobs. When you need the right hire fast, indeed sponsor jobs, your post stand out and reach quality candidates. Instead of hoping the right people see your listing, sponsored jobs boost it in search results so you can match with candidates who meets your specific criteria like skills, certifications, or locations, and you only pay for results. And here's something wild. In the minute I've been talking to you, companies like yours made 27 hires on Indeed, according to Indeed data worldwide. That is real momentum. Sponsored job posts directly on Indeed

Starting point is 00:10:44 are 95% more likely to report a hire than non-sponsored jobs. So when the pressure's on and you need someone who can actually move the needle, this isn't your job, it's the job of sponsored jobs. So spend less time searching and more time interviewing candidates who can check all your boxes. And listeners this show will get a $75 sponsor job credit to help get your job the premium status it deserves at indeed.com slash podcast. Just go to indeed.com slash podcast right now and support our show by saying you heard about Indeed on this podcast. Indeed.com slash podcast. Terms and conditions apply.

Starting point is 00:11:20 Need to hire? This is a job for Indeed sponsored jobs. For the longest time, our outdoor space just wasn't it. We had random chairs that didn't match a patio we barely used. And one of those setups that we kept saying, we'll fix this eventually. Then we finally did something about it with Wayfair. We upgraded a few key pieces, some outdoor seating, a rug, some lighting, and it completely changed the space. Now it actually feels like an extension of our home. It's somewhere we hang out, not somewhere we ignore. And that's what I love about Wayfair is how easy it is to find exactly what fits your style. You can filter everything down, read real reviews, and actually feel confident in what you're

Starting point is 00:11:59 buying. They've got over 20 million verified five-star reviews, so you're not just guessing. And with Wayfair verified, their team is actually vetting products so you know you're getting something with quality, no matter your budget. Everything showed up fast and set up was simple. So get prep for patio season for way less. Had to wayfair.com right now to shop all things homes. That's w-a-y-f-a-I-R dot com. Wayfair. Every style, every home. Wayfair, every style, every home. All right, so the next question is from Amanda. And Amanda has variable income. And I think this is a wonderful question that can help a lot of you out there who also have variable income. She says, hi, Andrew. Thank you for pushing your audience to automate their

Starting point is 00:12:44 investing to ensure our success. Absolutely. And that's one of the most important things that we talk about on this show. But I have to admit that I am scared to do this myself because I am a public servant who has had to live with furloughs and missed paychecks covered by my emergency fund. I know others in your audience may also do contract or commission work or otherwise have variable pay over the course of the year. How can we who live in this situation take advantage of automation? Thanks for any insights. Well, Amanda, congrats to you on thinking through this. This is one of those areas that I think is very important for most people to think through. And there is a way to do this. It is a little bit tougher than like the average person who just

Starting point is 00:13:24 gets a standard W2 salary. But I'm going to show you the steps on exactly how to do this and make it work for your situation. The first thing, though, above all else, and you probably know I'm going to say this is we need to have an emergency fund in place. So one of the things that we need to make sure that we are doing is having that six month emergency fund. Now, if you are worried that a furlough could go longer than six months, we need to potentially look at doing something like seven months, eight months, or nine months. We need to find what your swan number is. Your sleep well at night number. Now, for everybody out there who is building an emergency fund right now and they're saying to themselves, man, this is taking a long time. Yes, it takes a while to

Starting point is 00:14:05 build a fully funded emergency fund. This is not going to happen overnight. This may not happen over the course of the year. It may not happen over the course of two years, but we need to make sure that we are focusing on this emergency fund because this is what is going to protect us. The standard advice that someone gives you to have a three-month emergency fund is absolutely garbage, especially in 2026. We are getting furloughed left and right. People are losing their jobs to AI, and we need to make sure that we have more money in our emergency fund than just three months. You must, and I'm going to say this all day long. You must have six months in your emergency fund to fully protect your finances. Now, you're going to work your way up to that. You might be at three months right now and

Starting point is 00:14:46 you're putting a portion towards your emergency fund and a portion towards your investments. That's absolutely fantastic. But just continuing to chip away at that block over the course of the next 12, 18, 24 months is what is going to get you to that six month emergency fund. I know it's hard. I know it's a slog. I know it feels like you're just grinding away trying to get this thing fully funded. But once you get it to that point in time, this could protect your family, this can protect your kids, your spouse from anything that could happen in life. Your cash is your protection. It is your hedge against life. It is putting your finances in a bubble so that when people are firing things at you, your water heater breaks, your car breaks down, all these different things

Starting point is 00:15:27 happen. You've got the money just there. And as you know, there's power in having the money just there. Next, we want to figure out what the floor is. on your variable income. So if someone has variable income, they can probably figure out, okay, well, on my worst ever months, unless you're totally furloughed, but on my worst ever months, you know, I make $3,000. But on my best months, I usually make $7,000, $9, $10,000 in a given month. Well, if that's the case, let's look at your floor and let's say, okay, right now, as we get started, we can at least automate the floor. We can at least automate $3,000 worth of what we are spending here. And so we start to utilize and try to work with this $3,000 to automate towards

Starting point is 00:16:08 some of our bills. Maybe it's automating towards some of the investments that we have on hand, but we try to figure out, okay, how do I fit the puzzle of making sure I can automate the floor of this $3,000? Because really, and in reality, we know at least that that amount will hit your account. Then, when you have some good months, we want to automate some of those lump sums. So if you're trying to figure out, okay, well, how do I max out my Roth IRA in 2026? Well, if you have a good, good month and you are way above the amount that you need. Maybe you get a bonus. Maybe you're someone who is commission paid. Maybe you're a car salesperson or maybe you're a real estate agent. And so your income is variable. Maybe you're in sales, whatever type of sales that is,

Starting point is 00:16:46 well, if that's the case, then you want to take those good months and you want to automate some of those funds into a couple of different places. One, you want to send some of those dollars towards your investments so that you can hit those investment goals. Like if your number one investment goal of 2006 is to Mack out of Roth IRA, then if you have a really good month, why not try to that Roth IRA, so you don't have to worry about it for the rest of the year. Get that $7,500 into your Roth IRA, and then you don't have to worry about it for 2026 for the rest of the year, and you could focus on some of these other goals that we'll talk about here in a second, because that's a great way to kind of get ahead on some of this stuff. Secondly, though, is you can automate

Starting point is 00:17:21 some of that money into a buffer account. What is a buffer account? Well, for people who have variable income, I highly recommend that you look into a buffer account, because what this does, it allows you to have a buffer when those months are low. So if you look at some of those months where you're at your financial floor, those $3,000 months when on average you're supposed to make $7,000, but you have a couple of $3,000 months sprinkled throughout the year. Well, if that's the case, you want to look at some of those months and say to yourself, okay, I'm making less some of these months,

Starting point is 00:17:51 but I have this buffer account in place when my numbers were really high that allow me to get through some of those months. And this is a really great position to be in. Now, another thing that you could do is when you think about the buffer account, you could also think through something like getting one month ahead. This is something when I was living paycheck to paycheck that helped me tremendously. I would try to get one month ahead with my budget so that I am paying for this month's bills with last month's money. What this did was it reduced stress, it reduced anxiety, and allowed me to be able to actually get a buffer in place so that I'm not as worried about where the money's coming from. Sure, could you do this from your emergency fund? Absolutely. But if you get up one month ahead with your budget, this allows you to be much more flexible. Now, you may say to yourself, well, sometimes I have down months for two months or three months in a row. Great. Well, that will tell you, okay, let's try to get two months ahead or maybe even three months ahead. Cushions are very important when you have variable income because they help with the down years. Now, let me give you a great example of this, because this is even how business owners need to run their finances. If there is someone out there who is a business owner,

Starting point is 00:18:59 who has variable income, you know that your business also needs an emergency fund. You need to have six, nine, 12 months of cash on hand so that if your business has a couple of down months in a row, because your income is variable, you can't control everything when it comes to the amount of money that's coming into your business, then you want to make sure that you have this little buffer in place. You got six months of cash on hand or seven months of cash on hand that are going to help you be able to weather the storm when you don't have good months. The same thing goes for your finances. You are your financial CFO. And so when you have these months where maybe you have a lower income coming in, or you have a furlough, or you have something that pauses the amount of money that you can

Starting point is 00:19:40 make in that given month, you've got the emergency fund on hand, but you also got a buffer in place. You've got this buffer that allows you to be flexible. And then guess what? All of a sudden, once you have this buffer in place, it becomes so much easier and the stress melts away. So in Master Money Academy, we had a couple of students in there that, were furloughed. They were furloughed because they were government employees, but they said, man, we have an emergency fund in place, and this was so much better. I was really not stressed at all because I had the emergency fund, and I had some buffer in place that allowed me to not to have to worry. So that's one of those areas where I think you need to just have additional cash cushion.

Starting point is 00:20:17 So if you have variable income, cash is going to be your friend. It's going to help you reduce your stress. It's going to help you reduce your anxiety. Now, when do you build up that cash? Again, it's those higher months. That's the time where you take that extra dollar. and you put it towards some of those reserves so that you have the ability to smooth all of this out. It helps smooth it out. Now, if you're trying to budget and you're saying, well, how do I budget with a variable income?

Starting point is 00:20:39 One of the things I like to do is budget over the course of two months instead of one month if you do have variable income. This allows you to stretch out when that money is coming in. And if you budget over the course of two months, you could say double up your mortgage payment, but it's just over two months, double up your electrical bill, what you think you'd budget there

Starting point is 00:20:56 and kind of just go down the list and think through, well, what is everything times two? And then I can budget it out there. That way, if you have a low month, but then a high month, it all kind of smooths out and evens out in the long run. So that's just another quick tip for anybody out there who's a business owner or if you're freelancer or a federal employee or anything else like that. It's going to help you go through this. So Amanda, a really great job thinking through this because it allows you to automate if you stretch or double up and extend that out of the course of two months. It may allow you to automate a little bit more by doing that. But having that cash cushion, once you have that cash in place or you get one or two

Starting point is 00:21:29 months ahead, that allows you to actually start automating your money and making sure you're going through that process. And by the way, if anybody wants to learn how to automate their money, if you go to mastermoney.com slash resources, we have a free checklist, the money automation checklist that shows you step by step how to automate your finances. We also have a full episode on this podcast showing you how to automate your finances that we will link up down below in the show note so that you can also check that out. Amanda, thank you so much for sending this in. And again, hopefully those furloughs are over. I know that's very stressful timing for a lot of folks out there. And the fact that we had a couple over the course of last year is really, really frustrating.

Starting point is 00:22:02 So I am so glad that you're asking this question. It is very important for people to note. All right. Question three is from Nick. Now, Nick has a question that I think is very interesting. And he has a question about thinking through, should I sell my home to invest the equity? So Nick said, I recently listened to your episode on buying a home versus invest. in the S&P 500. And I was curious if you had any thoughts on people selling their home and realizing the equity they have made over the last five to six years and investing that. I have been trying to weigh the pros and cons of selling and investing the equity in the market. And it seems to make the most sense and see the best return over the next 20 years. Do you have any thoughts on this?

Starting point is 00:22:41 Well, Nick, this is a wonderful question. And I want to kind of break this down step by step in a way where you can think through this logically, but also think through your lifestyle as well. because anything that has to do with a home or selling your home, sure, it needs to be an emotionless decision, but also needs to be somewhat of a lifestyle decision because the way that we have to think about our homes is what lifestyle do we want to live. Money is just a tool to be utilized to get the lifestyle that you actually want to live. And so as we go through this, I want you to think through the math and how complicated this can get if you go way too deep in the weeds. Now, I don't want to overcomplicate this at all. So my goal is to give you the steps on how to think through this.

Starting point is 00:23:20 First, we need to run the real numbers. So we need to understand what it's going to cost if we sell our home. So let's say, for example, you have some equity in that home currently. But in reality, you know, what is the true equity of that home? What has the total cost of ownership been over the course of the last couple of years? Now, we can look at this and say to ourselves, okay, well, sure, we have, you know, $400,000 or $500,000 worth of equity in the home, but also at the same time, how much have we put into the property to make this, you know, get to this point in time, and how much have we

Starting point is 00:23:50 invested there. And sure, the equity is great, but that is the opportunity cost of that equity, which is why I think you're thinking through it this way. So a home sale is going to roughly cost us right around 6 to 10% overall, depending on what we have to do. So if we sell a home and we put it on the market with an agent, we have those agent fees that are going to be in place. I'm not sure how much more agents are going to come down over the course the next couple of years, but I know they are much lower than they have been over the last decade. But here's the thing. Let's say you sell your house for $500,000. If you do, you're losing any way. from $30,000 to $60,000 right off the top before any equity kind of hits you at closing.

Starting point is 00:24:27 So that's one thing you just want to think through is some of that equity will come down based on just some of those closing costs. But the second one, and this is the really big one, is if you did do this, where would you live after? Where would you live after this? Would you decide to rent? Because that number, that rental number needs to come into play when it comes to thinking through selling a home.

Starting point is 00:24:45 So let's say, for example, that you sold a home and now you have to rent. And your home's mortgage was $2,000 per month, and your rent is going to be $3,500 per month. Well, that $1,500 delta needs to be considered when we are thinking about investment returns. Because if you start to invest these dollars and that $1,500 is eating into your overall cost, we just need to make sure that we're thinking about what we're going to do with that money. Now, if rent in your area is comparable to your mortgage, and this isn't a calculation you have to worry about, but you do need to worry about the lifestyle side of that, meaning if you are going to live somewhere else, is it somewhere you actually want to live?

Starting point is 00:25:23 Is this something that you feel as though, okay, well, if I rent somewhere else, I'm actually happier or it is going to improve my life significantly? Well, that would be a reason to do it. But if you feel as though like, I like being a homeowner, I just want this equity to be able to invest these dollars to retire faster, then that could be another reason to do it as well, but you just got to weigh these pros and cons as we think about this. What I don't want you to do is go out and sell a home and then make your lifestyle worse, meaning that you're going to go about and you are going to live on rice and bean,

Starting point is 00:25:50 because you're increasing the amount that you're paying in rent, and it's going to eat into the overall cost and the thought process there. Because if rent is going to take you above 30% of your income, then you definitely don't want to be doing that because that is going to put you into a house poor situation. So we just want to weigh out lifestyle. Make sure it's something you want to do. Make sure it's a place you want to live if you did do this, because that is a big, big deal for most people.

Starting point is 00:26:12 Now, third thing, though, is to consider the tax shelter, because if you do sell a home, there is a great tax shelter or if you've lived in the home over the course of the last couple of years, because married couples get a $500,000 capital gains exclusion on their primary residence. And if you're single, you get a $250,000 exclusion on your primary residence. And so these are really great options for a lot of folks out there. We're selling the home, you don't have to pay taxes on up to $500,000 if you're married and $250,000 if you are single.

Starting point is 00:26:43 Now, that gain is tax-free and it is a huge tax break out there. That's a huge one for the pro. side. So here is the last one is that your home is already leveraged. So if you're utilizing a mortgage or something like that, you are able to kind of build wealth with a little bit of leverage there. And so that is also a helpful thing. Now here is my answer overall in the way that I would think about this is I get it. If I was a single guy and I was in my 20s or 30s, this would be something I'd seriously consider if I did build up a lot of equity in a home. Why? Because the price of homes have increased over the course of the last 50, 60 years, right around 4% when you factor in total

Starting point is 00:27:17 cost of ownership. In some situations, it's two to three percent when you factor in total cost of ownership because maintenance costs are so high, because the cost to repair a home is much higher than it used to be. It is going down more and more and more. That said, homes are lifestyle decisions. They're not financial decisions. They are more so lifestyle decisions. If you're going to go buy a home, you need to make sure that you run total cost of ownership. If you go to MasterMody Debtco resources, we have a free calculator that shows you step by step how to do this and it'll take you through that process. But what you need to be doing is running total cost of ownership on your home. Now, if you get to the point in time, Nick, where you're saying to yourself, okay, well, I feel as though

Starting point is 00:27:55 this is really not bringing me value, it is really not bringing me joy. And I'd rather just go rent and invest the difference, that's a great reason to do it. If it's not bringing you value or joy to own a home and you hate doing yard work on the weekends and you feel as though it's just a money pit and it's something you really don't want to be doing anymore and it's in a location that you don't like as much as you used to, then great reason. But if this is something where you're just trying to optimize for finances and you feel as though if you started to rent, you would be miserable, then it may not be the most optimal thing for your lifestyle. Or if you have a family in place, or if you're married and your spouse really likes that location and really likes the home, then that may not be the optimal

Starting point is 00:28:30 choice to make. Really, it comes down to deciding, A, do you like where you live? If the answer's no, then nothing wrong with making that choice of selling and investing the equity. The other option is to say, okay, well, if you do like where you live, how do you weigh out the pros and cons? Well, if you invest the difference and you look at, you know, how much that would compound over the course of the next couple of years and you take in and factor in the new rental costs and if it's either comparable or if it's a little bit higher, you just figure out what that number is. Well, then maybe you want to consider making the move. But if not, you don't have to make this move just for financial reasons. Sometimes the best decisions we can make are not the most financially

Starting point is 00:29:07 optimal decisions out there. And so I want you to just think through that as you go through this process. I know me when I was younger before I had a family, would I do? something like this, probably, because I think that there are a lot of instances where you can't really get equity like that back, where you're not going to be paying taxes on some of that equity, and so it could be a really great thing. But me now as being married and having kids and planting roots in a location, would I do this? Sure, I've dreamed about it a couple times with my personal residents already, but it's not something I would do because I have those roots planted. So I hope that helps because it's going to really come down to your specific lifestyle and what is

Starting point is 00:29:40 going on in the home currently. And congrats on even thinking through this and running these numbers. It is always good for everybody to actually think through this stuff. But again, I wouldn't just move for money. I would always think through the lifestyle decisions as well. All right, the next one is from Landon. Can you explain the tax scenarios for the 250,000 in an up example sometime? You make it sound like the amount of taxes are somehow more debilitating than previous tiers. I would have thought that even if you are spending more on taxes due to scale,

Starting point is 00:30:08 you are still netting more money total. So what makes it so much more critical outside of just passionately minimaxing? So really good question, and I think this is one of those things that that you are right, you still net more money. The issue is not just absolute dollars is what is we call the tax efficiency cliff. So this is one of those scenarios where there are a couple of things that stack up at $250,000 and beyond. Okay. So first, you're obviously paying more out of pocket than someone, but you're also netting more than someone specifically as we start to think through this. But one is that marginal rates can climb fast. So federal marginal rates

Starting point is 00:30:43 jump to 32%, 35%, and 37%, plus if you add in state income tax, places like California or New York or New Jersey, then your top marginal rate is closer to 50% in some of those states. So folks who are high earners who also live in a state that is not tax efficient are really getting nailed because of this. Because a lot of the high earners live in those states. And so there are a huge percentage of high earners when you look at some of the statistics and the metrics that show that high earners live in those extra states. So in some of those states, every extra dollar earned keeps less than 50 cents on that.

Starting point is 00:31:22 So if we think about this for a second, for someone making $250,000 per year, every dollar earned, they're keeping around $125,000. This is why it is difficult in some of those higher taxed states to be able to even make higher income sustainable and why some people live paycheck to paycheck in those states. So we want to make sure that we are tax efficient when we are thinking about some of those higher taxed states. Secondly, though, is tax shelters begin to disappear. So a lot of folks who make less than $100,000, make less than $150,000 per year, have some additional tax shelters available to them that maybe higher earners do not have. So things like just being able to contribute to a Roth IRA, for example.

Starting point is 00:32:03 Obviously, you've already been taxed on those dollars, but it can grow tax-free and you can pull the money out tax-free. that phases out at $168,000 per year at the time I'm recording this for single folks and $252,000 per year at that time I'm recording this for married folks. In addition, traditional IRA deductibility goes away and many deductions and credits phase out based on your income. So credits are obviously one of the best overall things for your tax situation. But if you make too much, some of those credits start to get phased out because credits are dollar for dollar tax savings that most people would or need to look for. And you lose that on just some of those tools that the middle class uses to lower your tax bill. And for some folks out there, depending on where you live,

Starting point is 00:32:47 $250,000 could still be middle class, depending on how you are taxed in your specific state. Number three is there are things like surtaxes that can activate. And this is something that a lot of people don't know about, but things like net investment income. So when you look at net investment income tax, this adds 3.8% on investment income above $200,000 if you're single and $250,000 if you're married. The additional Medicare tax adds 0.9% on wages above the same threshold. So for folks who are retirees who have higher incomes, this can also be something that are quiet taxes that really can come down and net on their pay stuff. And so here's the thing is that you are netting more, but every dollar of tax planning is now worth two to three times more. And,

Starting point is 00:33:33 what it was at lower income levels. So doing a backdoor Roth, a mega backdoor Roth, doing a cash balance plan, all of these can make a huge deal. And at $80,000, it barely moves the needle. But this is why min-maxing matters more as you begin to climb here. This is a really, really important note to make

Starting point is 00:33:52 and really important to understand because every dollar that you save is going to matter so much more for you specifically as time goes on. And so when we think about why taxes matter as your income goes up, this is why. And so in reality, you may be saying to yourself, well, what do I do about this? Finding a good CPA when you have a good income is great. And sure, CPAs are expensive. You know, expect to pay a couple thousand dollars per year to have a good one

Starting point is 00:34:15 when it comes to tax strategy and some of that stuff. They can give you some ideas on how you can maximize some of your tax efficiency so you can get to the right place and time. So that is something else that I just want you to think through is some of those different things there. And every dollar that you save is going to make a big, big difference. So, hope that helps and thank you so much for the question. I truly appreciate it. All right, the next question is from Thane. So Thane says, I want to start an ice machine business and I am almost out of debt, but I don't know whether to change my Thrift Savings Plan contributions to 15% to maximize compound interest or go to 10% and use that extra 5% towards the business

Starting point is 00:34:53 venture. Thanks so much for all you do. So there's a couple of things that I would think through Thane as we start to do this. For those of you out there who don't know what an ice machine business is, this is where you put up one of those side of the road ice machines where you can go and get ice, you know, in your cooler or you can fill up ice for, you know, whatever specific event you got going on. Well, those can be very profitable if you have in the right location. So Thane wants to start one of those and have the ability to be able to make some passive income or some cash flow that he can probably use in retirement and or have the ability to use that cash flow to fund his lifestyle. And so as we start to think through this, there's a couple of

Starting point is 00:35:28 non-negotiables thing that I would make sure that I consider first. One is, I want you to capture that full TSP match. So whatever your TSP match is, you want to make sure that you are getting that match. So a lot of matches are around 5%. Do not leave that on the table because that could be a 100% rate of return when it comes to the dollars that are going to be hitting your bank account.

Starting point is 00:35:49 But number two is finish the debt, making sure that you get rid of all of the debt. You said you're almost out of debt. I would make sure I get rid of all of the debt and make sure I have that fully funded emergency fund first because I think that is, is really, really important before you begin and start a business, especially if the ice machine has issues or there are things that you need to fix. You want to make sure you get out of debt,

Starting point is 00:36:10 especially if it's credit card debt or any consumer debt like that, so that you're not dipping back into the credit card or going back to some of these locations to fix the machine. A lot of times when you own a business that has machines, those machines are going to need repair, they're going to need maintenance, they're going to need a lot more going on. And sure, you hope that the ice machine is cash flowing enough. But up front, you want to make sure that you have enough cash on hand in your own personal finances. So nothing derails your progress when it comes to your personal finances. Now, a couple of things to think through is, are you going to consider buying a nice machine on an existing business? Or are you considering building one with one of the

Starting point is 00:36:44 suppliers that are out there? Because if you're going to buy an existing one, that is one where you can go out and get a loan and obviously you could do it alone with either of these instances. But you could go out and get a loan and figure out, okay, well, what are those numbers going to be? How much can this cash flow? and how much does it currently cash flows? So buying an existing one, I usually like that option because you know what the cash flow is going to be. If you're building one, you're trying to project how much cash flow is going to be coming in.

Starting point is 00:37:07 So it's much harder to figure out if those numbers actually work, specifically when it comes to this ice machine businesses because you could put it in a location and maybe if that location isn't what you thought it was, it would end up not cash flowing enough. So I like the existing ones. If you can find some for sale, there's a biz buy sell has some for sale.

Starting point is 00:37:25 Sometimes Facebook marketplace, I have seen them for sale. There's a bunch of other options out there of businesses that probably sell some of these ice machines. And you can go through the manufacturers because sometimes the manufacturers will have relationships with their owners who are looking to sell and they know they're looking to sell and they can help you kind of broker that deal. So that's one thing I would look into first and figure out if you want to go that route. But if you want to reduce your overall TSP contributions to start a business and you feel as though, no, this is going to cash flow. I know this is going to cash flow. I've done my research and I have run the numbers. then putting 5% towards that business, nothing wrong with that whatsoever if you want to go that

Starting point is 00:38:00 route. And if you have any other cash anywhere else that you can put towards it, that is also great so you don't dip into your retirement. I would dip into the retirement, you know, contributions last, meaning the 5% that you are contributing towards that. I would probably do that last if you could. But if it's the only extra dollars that you have, then, you know, moving them towards this business, there's nothing wrong with that whatsoever as a small percentage. As long as you have your financial foundation set up that we talk about in the portfolio pyramid, I think this is, a great starting point and something that you can look into. I think ice machines are very interesting businesses. I think they can cash flow. Some people make $80,000 per year on some of these. You got to

Starting point is 00:38:36 have them in the right locations and you got to have them in the right spot. But one of the things that I would also consider is, again, buying an existing location so you know what that cash flow is going to be. Really great question, Thane, and congrats on thinking about this and looking into this. Let me know what you end up doing would love to hear more about your business. If you've ever felt like your bank is working against you instead of for you, you're not alone. Between overdraft fees, monthly fees, and just trying to access your own money, it all adds up fast. That's why Chime is changing the way people think. Chime offers fee-free banking built for you, not the bank. That means no monthly fees, no overdraft fees with SpotMe and access to thousands of fee-free ATMs, so you're

Starting point is 00:39:18 not paying just to get your own money. And when you set up direct deposit, you unlock even more. You can get paid early, and even access up to $500 of your paycheck before payday with my pay. And it's just a smoother way to manage your money. They've also got real human supports available 24-7. And they're rated five stars by USA Today for customer service. Honestly, my younger self would have benefited from something just like this. Chime is not just smarter banking. It is the most rewarding way to bank.

Starting point is 00:39:48 Join the millions who are already banking fee-free today. head to chime.com slash pfp. That's chime.com slash pfp. It only takes a few minutes to sign up. Chime is a fintech, not a bank. Banking services for MyPay and ChimeCard provided by Chime Bank partners.

Starting point is 00:40:03 Optional products and services may have fees or charges. Checking account ranking based on a JD Power Survey published October 20th, 20205. For more information on APY rates, MyPay, Spot Me, and Travel Parks, go to chime.com slash disclosures. There's something about this time of year that makes you slow down a little.

Starting point is 00:40:17 More time outside, more time with family, and maybe a trip or two planned. And in those moments, you start to think, this is what it's all about. But it also makes you think about protecting it, making sure the life you're building, your family, your future is actually secure. And that's where PolicyGenius comes in.

Starting point is 00:40:33 PolicyGenius isn't an insurance company. They're an online marketplace that helps you compare life insurance quotes from some of America's top insurers, side by side for free. Their licensed team works with you, not the insurance companies, and they help you figure out the right coverage,

Starting point is 00:40:48 answer your questions, and handle paperwork so you can get it done quickly and move on with your life. Honestly, it's one of those things that feels like a big task until you actually do it, then it feels like a win. With PolicyGenius, you can see if you could find 20-year life insurance policies, starting at just $276 per year for $1 million in coverage. Head this PolicyGenius.com to compare life insurance quotes from top companies

Starting point is 00:41:12 and see how much you could save. That's policygenius.com. Summer's almost here, and I want to spend time planning trips and making memory. with my family, not stressing about whether I can actually afford anything. That's why I try to get organized ahead of time so the money's already handled before summer really starts. Monarch is the personal finance app that tracks everything, accounts, investments, savings goals, and spending. And you can get your first year of Monarch Corp for half off, just $50 with promo code PFP. One thing I use all the time is my five-minute drill.

Starting point is 00:41:45 It's a quick daily financial check-in, and Monarch makes that really easy because everything, is in one place. I can see spending trends, investment balances, savings progress, and cash flow in just a few minutes. And the weekly AI recap is honestly one of my favorite features. It catches spending spikes and little changes before they become bigger problems, which helps us stay proactive instead of reactive. So use code pfp at monarch.com to get your first year of Monarch Core half off at just $50. That's 50% off your first year at monarch.com with code PFP. You ever do that thing where you're about to buy something online? And then you hit checkout and realize you don't have your wallet. Don't remember your password. And suddenly it feels like way too

Starting point is 00:42:30 much work. And then you see it. The purple button, you tap it. And the whole process is done in seconds. That's shop pay. And it's one of the small things that just makes a big difference. That's powered by Shopify. Shopify is the commerce platform behind millions of businesses and handles about 10% of all e-commerce in the U.S. Whether you're just starting something on the side or building a full business, Shopify gives you everything in one place. You can build your store with ready-to-use templates, use AI tools to create product descriptions and improve listings, and run email and social campaigns to actually

Starting point is 00:43:02 reach your customers. See less cards go abandoned and more sales go ka-ching with Shopify and their shop pay button. Sign up for your $1 per month trial today at Shopify.com slash pfp. Go to Shopify.com slash pfp. at shopify.com slash pfp. The next question is from Chintov. So hi, Andrew, thank you for this amazing podcast. You provide so much valuable information.

Starting point is 00:43:29 Well, thank you so much for the kind words. I truly, truly appreciate it. I discovered your podcast about five months ago and have backtracked and listened to most of the episodes till 2020. That's incredible. I am a 35-year-old physician, maxing my 401K,

Starting point is 00:43:43 doing backdoor Roth, and using Fidelity Go Robo Advisor at 0.35% for my taxable brokerage. I also have a profit share, plan with 70,000 to 90,000 in passive income. Should I keep paying the 0.35% Robo-Advisor fee? And what tax advantages do you recommend for someone in a very high tax bracket? Really great question. And these are some things that you definitely should be thinking through. So I'm glad you are thinking about this stuff. When it comes to the Robo Advisor fee,

Starting point is 00:44:10 one of the things it comes down to is if you feel as though you're getting a value out of a robo advisor, I have no problem with them at 0.35%. Sure, you need to run the math to understand what the impact of this would be. But if they do feel as though they are helping you, I think it could be, you know, very, very helpful. So overall, if you think about this on a $500,000 portfolio, that is about $1,750 every year that you are paying, growing with the balance. So this is something just to consider if you are okay with that number and you're saying to yourself, okay, well, let's say I have a million dollar portfolio. I'm paying roughly a little under $4,000 for that million dollar portfolio. And every million dollars going forward, that is what I am paying.

Starting point is 00:44:49 It is a lower cost as long as it's automatically rebalancing. And if you feel as though, a lot of robo advisors claim this, that they are going to do things like tax loss harvesting for you and do it automatically. Well, that could save you more than the $17.50 per half a million dollars, if that is the case. Now, we want to make sure that it is saving us enough. And so we want to run the numbers to make sure that it gets us close enough, at least, to saving us a little bit of money.

Starting point is 00:45:12 And so that is one of the reasons why you could do that. Now, another thing you consider is looking into something like a DIY three fund portfolio, if you're not getting enough value out of the Robo Advisor, that is something where you can do something like a, something like a VTI, a VXUS, and a BND. That is something to consider or do some research on and see if that is the route that you want to go because your cost would drop to roughly 0.05%

Starting point is 00:45:35 and you save something like 0.30% over that time frame. Now, another thing you could consider is something like direct indexing. Now, there are companies out there like Wellfront or Freck or Fidelity that offer things like direct indexing, but the one big deal that I want you to consider is that it over, it does really make your portfolio complicated. And it does really offer something that could just make it a little more difficult to kind of go through this. But there's more tax loss harvesting, especially if you have a really large portfolio, you could have some great tax loss harvesting benefits that could help you when

Starting point is 00:46:07 you're thinking through this. And so if you're thinking through well, is the 0.35% too high? I don't think it is something where you have to just rush to get out of that as fast as you possibly can. If somebody was charging a two and a half percent, sure, that would be a big, huge deal. But anything below, you know, 1% isn't as big of a deal as something would be above, you know, 1.5, 2%, because that's really going to make a huge dent in your portfolio. Now, 1%'s a lot. And I'm not saying it's not a lot. But it is one of those areas where we just want to make sure that we kind of think through that. So if you feel as though you're getting good benefit out of this, you feel as though they're giving you a good service and they're building a portfolio that

Starting point is 00:46:42 you're happy with, you're happy with those returns, those are reasons to stay. But if you feel as though, you're not really getting any service whatsoever, and they're not building a portfolio that makes a ton of sense for you? Well, that would be an instance where I would consider, you know, other options that are out there. Okay. So that's what I would look at when it comes to thinking through some of your robo advisors. Now, what are some of the higher tax bracket priorities in order? So for me specifically, I'm going to give you my order or the list that I think through when you get to these higher tax brackets because it actually shifts. It changes from just doing the standard, hey, let's do a Roth IRA and an HSA and go in that order. No, it's going to change dramatically for

Starting point is 00:47:19 for someone who is higher income, especially if you have a really high income, like if you're a physician or a really successful attorney, or you're someone out there who just makes a lot of money, you're a business owner, or someone who makes a lot of money in their corporate job, you're an executive, those types of things. You want to make sure that you have an order that makes a ton of sense for you. So let me give you a couple of things to think through. One is the 401K. 401K is going to move ahead of a lot of things when you start to make a lot more money. Why? because it gives you a tax deduction in this given year. And for those of you who are eye earners,

Starting point is 00:47:47 you most likely need to make sure that you are reducing your taxable income in this given year because you're probably getting slammed with taxes. So maxing out the 401k, $24,500 pre-tax is what you can do at the time of recording this. So that is one to look into. The backdoor Roth IRA is the second thing. So getting dollars into a traditional IRA and then converting it to a Roth IRA. That's how you get money into a Roth and something I would consider if you want to get more dollars into a Roth.

Starting point is 00:48:13 that's a quick, easy thing for someone who is a really high earner, $7,500 per year. It's not something you have to really work as hard towards. You could just kind of do a backdoor Roth IRA, do it in January every single year, and make it work. Three is the mega backdoor Roth. So this is something that we have done an episode on, but we're going to probably do a deep dive episode coming up, or we're going to be talking through the mega backdoor Roth. And if your plan offers or allows you to have after tax contributions, you got to ask and see if your plan allows you to do this. But if they do and they allow you to do it.

Starting point is 00:48:43 in-service contributions, then you can get another $47,000 into a Roth IRA by doing a mega backdoor Roth. Well, this is a huge, huge benefit for high earners when they have this extra money available because they can get more stuffed into a Roth where they don't ever have to pay taxes again, except for in this given year. Now, next is if you have a high deductible health plan, doing an HSA is fantastic, it's $4,400 per year if you're single, and then it is going to be $87.50 for a family. And you can treat this as your stealth retirement account. It is your account where it is going to go in tax free, grow tax free, and you can pull it out tax free as long as you have that qualified medical expense. But make sure you invest your dollars in an HSA if you're going to use it as

Starting point is 00:49:22 a stealth retirement account. Now there's a secret weapon for physicians that I want you to look into. And this is called the cash balance pension plan. Okay. So the cash balance plan is a secret weapon, especially for physicians, because you can shelter $100,000 to $300,000 per year on top of all of your $4.0.1K and pre-teach. tax stuff. And so you want to look into a cash balance pension plan, see if that's going to fit your situation, because you can shelter a lot more in taxes and save a lot more in taxes based on that. Then we have the 529 plan. So this is going to be something that is going to help you save for kids. If you do have kids in place or you plan on having kids one day, you can shelter some money

Starting point is 00:49:58 from taxes there. And then your asset allocation is really going to matter, which is why having your robo advisor is very helpful. But having bonds or reits in tax deferred accounts are going to be very important because broad index funds could be more so in your taxable. And then also thinking through things like donor advised funds. So if you are someone out there who is charitably inclined and you already give the charity, using something like a DAF or a donor advised fund can really, really help you for charitable giving because you can front load a bunch of gifts for three to five years. And then you can start to give it over the course in the next couple of years if you want

Starting point is 00:50:28 to, but you force extra dollars into these accounts so that you can save money on your really high income years. Maybe you made a lot of money in one specific. a given year. If that ever happens, then you could use a donor advised fund to really, really do it. So a cash balance plan is something that could save you anywhere from $40,000 to $100,000 in a given year. So that is something that I think could be really, really important. And I would talk to a CPA who specializes in physicians if you can because they're going to help you step by step through this process. Now, as you start to think about this, those are some of the things that I just listed

Starting point is 00:50:59 that could save you over six figures in taxes alone. And so if you look at each and every single one of those things, you just literally could make yourself six figures if it works for. for your financial situation. So really, really important stuff. Congrats on, you know, becoming a physician and congrats on some of the stuff that you were doing. We appreciate the work that you are doing for sure and want to thank you for sending this question because that is absolutely fantastic. And one of the things that I think can be very, very powerful for a lot of folks out there. The next question is from Michelle. So what is the easiest and simplest way to convert about $100,000 from a traditional IRA to a Roth IRA? So Michelle, this is a really,

Starting point is 00:51:37 really great question and something that the mechanics are actually pretty simple to do this. And so once you start to think through this, what you'll realize is that the timing is what matters most. And so step one is if you're going to convert the whole amount, is picking the right year is going to be one of the biggest things that you can do. A Roth conversion adds about $100,000 to your taxable income. So the year you do this matters more than how you do it. When we think about Roth conversions and we think about converting larger amounts to a Roth IRA, we want to do this in lower income years. We want to make sure that the year that we do this is a year that makes sense for our finances. So let's say you have a sabbatical year, you have a gap year and you decide,

Starting point is 00:52:18 okay, well, during this given year, I am going to take a half a year off or a year off and I'm not going to make as much money. Well, that is a great time to do it. Or maybe you do a career transition and your income drops over that time frame. Well, that's another great way to do it. Maybe you're a business owner and you have a specific year where you're taking a loss in that given year because you just didn't have a great year in the business or you just had to invest a bunch of money into the business and you are doing a bunch of infrastructure stuff and it makes sense for you to do it that year. If there's a market downturn year and you really didn't make much or you are doing some tax loss harvesting or things like that, it may make sense to go out and do it in that given year.

Starting point is 00:52:53 But you're going to have to look at your specific situation and look for a lower income year in order to do this. Or if you're just okay with adding $100,000 of taxable income, you know, overall, then you can actually, you can look at that too. that's the easiest route obviously, but at the same time, we just want to make sure we do this in the right year. I would hate for you to pay tens of thousands of dollars in taxes when you don't have to. So just making sure that's step one. Two is making sure you open a Roth IRA at the same brokerage. So if you have your money at Vanguard, open it at Vanguard and be able to just convert that money over because it's a very simple thing. If you have it at Schwab, do it at Schwab. If you have it at Fidelity, do it at Fidelity.

Starting point is 00:53:27 But make this easy because those three places that I just mentioned right there allow you to do this in like five minutes online. They allow you to make this super simple. They allow you to do this in a way that that really works overall. Now, step three is when you are converting to a Roth IRA, a lot of these different brokerages now have a tool basically that just says, hey, convert it to a Roth IRA. So like at Vanguard, if you were looking at your account, you could see, okay, if I have a traditional IRA, they actually have a button on top that says convert to a Roth IRA because so many people do this. And so when we think about this, we just want to make sure that we are, you know, finding that button so you could just kind of do this simply. if they don't have that button, you can call them up, and they will be able to help you through the process to find it if it's not there in a specific location. So when you do Roth conversions, it's going to be anywhere from 22 to 30% that you have to pay in a tax bill.

Starting point is 00:54:13 So the next step is going to pay the tax bill in cash outside of the conversion. So one of the things that I like to do is if you do do a big conversion like this and you know what the tax bill is going to be, you can have your CPA calculated it. But you can go through and make sure that you understand what that number is going to be. And then you just park it in a high yield savings account when you do this conversion. so that next year you're ready come tax time and you have the cash available for it. So that's another big one to do. And then another thing you could do is you can convert it in chunks. So if you don't want to do the entire thing, you can start to convert money over in chunks like

Starting point is 00:54:42 20,000 at a time or 25,000 out of time. If you don't want to get this big tax bill hit, that is another consideration is to do it over the course of the next couple of years. So it doesn't take you into a different tax bracket or make you have to pay a lot more in taxes. That's going to be a bigger deal than most people realize. So those are just some of the simple things that I would consider when converting money over, that could be helpful for you as you start to think through

Starting point is 00:55:06 this process, because I think for most people, it is going to make sure that you do it at the right time. Timing matters always when we are talking about Roth conversions. And so this is one of those things that definitely want to make sure you look deeper into. Thank you so much for the question, and I truly appreciate you sending it in. If you have any additional questions on that, please let me know. All right. So now we're going to dive into one of the biggest scams that are going on right now for most people out there because there has been an AI voice scan that has been going around that has now targeted over one and four Americans. And if you haven't heard about this yet, it is one of the wildest thing that is happening right now. And for your grandparents or

Starting point is 00:55:43 even your parents, you need to have the conversation that this is happening more and more out there because this is one of those things that the FTC has actually put out reports saying that more people need to get informed about this because it is one of those areas that I think a lot of people can get tricked pretty easily. So the way that it works is that some of these scammers out there, they will put out or they will try to call you with a voice of someone you know. And so all they need is about three seconds of someone's voice, whether it's on, you know, social media, whether it's on a real, whether it's on Instagram, where they can find your voice and they can use your voice against you, meaning that you can find a voice of someone's child, for example. And they can record

Starting point is 00:56:23 that voice and have your child literally call you. And it sounds just like them. and they're going to say they're in trouble, they need money, something along those lines. And so I wanted to look at how easy this actually was. So I used a tool called 11 laps, and I went in and gave it some audio of my voice and went through the process of kind of seeing, okay, well, how accurate is this? Does it actually sound like a real person? Or this is something that, you know, you could kind of tell us AI and you just need to listen to a couple of things.

Starting point is 00:56:48 No, I went through the process and kind of listened back to my own personal voice. And it was unbelievable how accurate it sounded. It was one of those things that I was like, shocked. My mouth was wide open when I listened to how accurate it was. Now, was it perfect? No, it wasn't 100% perfect, but it was like 90 to 95% there where I could probably get tricked pretty easily if somebody utilized something like that. And so when you start to think through this, there are a number of different scams that are out there when it comes to some of this voice cloning that I want you to understand is happening. Okay. One is the grandparents bail call. So if your

Starting point is 00:57:22 grandparents are getting this call from their grandchild saying they need money for bail and they need it sent to this address. This is the one that is happening a ton right now. And it's anywhere from $2,000 to $15,000. And the FTC has warned that so many people are falling for this, it is absolutely incredible. So what a lot of these scammers do is they go on Facebook and they look at grandparents, for example, and they figure out, okay, what is their information? Then they go look up their personal information, find that information on some of these data broker sites. And then they go out and they start calling them based on who their family tree is on Facebook. So they use Facebook as a place where they can start to fish out some of the information that they need.

Starting point is 00:58:00 But then they go to data broker sites to find their information like their phone numbers and things like that. The second one is the virtual kidnapping one. Now, this is probably one of the most cruel ones, but they use someone's voice to basically say, hey, I've been kidnapped. And I need you to send money to the folks who have kidnapped me because I am held hostage. There's another one called a spouse emergency one, or it's a clone voice that sounds exactly like your spouse. This is the one that could get me. And it basically sounds like they're.

Starting point is 00:58:25 in trouble in some way, shape, or form. You need to send them money. You need to send them, you know, a Venmo request, something like that. And they have a way to make this work. Another one is a CEO or boss wire request. So I just had a friend who said this happened within their company. Someone came and it sounded like exactly like their CEO or their boss who called the specific individual up and asked them for, you know, money to be sent to this specific location, just sounded like a normal business transaction. And one of the employees at this company actually fell for it and sent a significant sum of money to, you know, to, you know, one of these fraudsters. There's also like the bank fraud ones, which I think a lot of people

Starting point is 00:58:59 have seen in the past, or medical emergency ones. Those are another one that I think, you know, we've seen happen over and over again. Now, if you come across these, I want to give you a couple red flags on what you need to make sure you're looking for. Urgency is always the big one when it comes to financial scams or any scams just like this, because urgency is what they try to make you do. They try to make you pay right now. Otherwise, it's not going to happen. You want to make sure that you are looking out for that. The payment method is number two. Are they asking a for a global wire transfer, something like that, you want to make sure that you have your red flags up. And a second person takes the call to help or verify you.

Starting point is 00:59:33 That is going to be one where your red flags also need to go up. Or you're told to keep it secret from family members. That's a big one that I think most people don't realize is a huge red flag. If someone's calling, that's why the bail one works so well on grandparents. They say, hey, can you keep this a secret from mom and dad? I just need to make sure that I get bailed out of jail. You know, it wasn't my fault, those types of things. and so it's really, really important.

Starting point is 00:59:56 And then hesitation or vagueness when you ask for family details, always try to ask for family details or details about the specific person. Ask them questions that nobody else would know besides that person and see what they respond with, see how they answer, and think through that. Now, this is something that is happening more and more. If you haven't seen it or heard it in the past,

Starting point is 01:00:14 I think it is one of those things that is scary. Even if you get this phone call, it's creepy. It's creepy to hear someone else's voice when it's supposed to sound like that individual. and I think it hasn't happened to me yet, but also I don't answer random phone call numbers. And I use things like delete me that help me through this. But I think it's one of those things that I think is really, really important. Now, if you want to get your personal information removed,

Starting point is 01:00:35 or you want to get your grandparents' personal information removed from the internet, or you want to make sure that these data brokers are not available in just giving out your personal information, I think it is really important to make sure you remove it from the internet. This is one of the most important things that you could do when it comes to scams because that's how they find your information. Sure, you should also have private social media accounts. to make sure that that is covered when you're doing this. You should be asking questions and have a list of questions in your head

Starting point is 01:00:59 if this phone call situation were to ever happen to you that you could ask that specific person with information they could give you back that only they would know. But in addition, removing your personal information online is very, very important. Now, the way that I do this is with a service called Delete Me and Delete Me will go and remove your personal information

Starting point is 01:01:17 from these data brokers. It is very difficult to get your information off of these websites unless you know what you're doing. me knows what they're doing. And so they go and remove your personal information. If you go Google your name or your phone number or your address and quotations, you're going to see your name and information pop up on all these random websites. And you're like, what the heck is this? Those are data brokers. And they're selling that information to anyone who is willing to pay for it. And so Delete Me helps remove that information so that it is not easily accessible for people because if they get part of your

Starting point is 01:01:46 information, they can go and find the rest. And so if you go to join DeleteMe.com slash PFP20, that is going to be a place where you're going to get 20% off of Delete Me. And again, it is one of the best services that I use. I make sure I'm on it. My family's on it. I tell all my friends to join it because it is just one of those services that is a no-brainer for me. If you want to protect your finances online, which is very important. And for those of you who don't know who are newer to the podcast, I have my identity stolen. This is why this stuff is so important to me. Then check out Delete Me because it is one of those things that I think is one of the best services out there to get your personal information removed. Again, that's going to be the scammer this week. Make sure you are looking.

Starting point is 01:02:23 can out for that kind of stuff. Make sure you're telling your family and friends about this. When we do these scams, I want you to tell or spread this information, which is why we do this, so that none of you get scammed at any specific dollar amount whatsoever. And I think that's why we want to make sure that we are doing this, especially on Q&A episodes, to kind of help you through that process. So if you have any questions on that or if you want to know any other ways to kind of help with privacy protection, feel free to shoot me an email and ask me questions on that. I would love to help you out in any way, shape, shape, or form. I can.

Starting point is 01:02:51 All right, the next one is from Chris. Chris says, good morning. My wife and I are 40 years old with four older children. I receive 100% VA disability payments monthly and my wife works for the Department of War and is vested in their pension. We have accumulated about $560,000 in retirement accounts, approximately 250,000 in Roth, and the rest traditional. We fear that we are over-saving. How do we plan for future strategies like Roth conversions when we know our current burn rate is significantly higher than what we will spend in retirement. And compound interest is likely to grow our portfolio higher than necessary even with modest returns. So here's the situation, Chris, and I think this is something that you can feel okay with. I'm going to try to make you feel okay about the situation because overall,

Starting point is 01:03:37 if you have VA disability, that is going to be 100% tax free for life. And if your wife's pension is guaranteed and it is a guaranteed income stream, between those two, the likelihood of you having your forecover is most likely there. So I want you to shift your strategy. And I want to, I want you to shift your mindset here. If you feel as though you are way ahead in retirement, one is you can look at this situation and say to yourself, okay, well, if I am way ahead in retirement because I've been disciplined in saving and investing my early years, I have these great benefits out there for me that currently are going to help me in retirement, then if that's the case, you want to make sure that you're not over-saving. Because the last thing I want you to do

Starting point is 01:04:13 is oversave and feel as though you really missed out on life. I know you have older children there. So one of the things that you consider is what do you want to do or how do you want to spend more time with them? Well, if you reduce the amount that you're saving for retirement, because I don't think you're really going to need it long term. So I want you to think through how you can spend more time with them if you want to as I go through some of these steps because we want to shift the goal from aggressively funding retirement to making sure we optimize for lifestyle, but also making sure we just kind of land the plane and ensure that we have enough cash on hand. So the first thing you could think through is funding your Roth now, meaning I would prioritize the Roth. because you could put money in there. And if you're not going to need the money up front or you're not going to need it as much up front, then you're not going to have things like required minimum distributions down the line and you can allow that money to grow tax free. The second thing I would do is kind of front load. If you have a Roth 401k or something equivalent to that, I would front load that Roth 401k if you can, not traditional going forward.

Starting point is 01:05:07 And you could start to get kind of dollars into there. So you could you can do your Roth conversions now if you want to. If you feel as though, hey, I want to just get money into a Roth right right now. I want to get those conversions going. and if you feel as though that's something you want to do, you could front load that right now. Just talk to a CPA to see what the tax implications for your specific situation will be. But you can do something like Roth conversions early in now. Then frontloading that Roth 401K can be really good. If you could do mega backdoor Roth conversions,

Starting point is 01:05:31 that's also something you could consider because that is a great way to just keep money in a Roth and have it grow tax free over the course of the next couple of years. And then if you want flexibility, if you plan on retiring early and you and your wife just don't want to work until you're, you know, $6, 59.5, then getting some money in a tax, Maxable is also a great place to look at this because that is going to be the bridge account that that gets you across the finish line. That's something I would definitely consider. And then increase your standard of living and giving now. So like if you're charitably inclined, you can give more or

Starting point is 01:05:59 increase your standard of living in some of the things that you're currently doing and enjoy some of your money. Because right now is a time where you're not going to get back being able to be 40 years old again. And so spending more time doing some of the things that you love right now is absolutely okay, especially if you're way ahead of the target, you've got a pension in place and you've got some of these other things going on right now. Do some of the things that you love. Take some of those great vacations you've always wanted to do. Do some of the bucket list items you want to do. Now is the time to do it because you don't want to wait until your 60, 70, 70, 80, 90. What are we even building wealth for anyway? Do some of it now. Increase some of your standard of living now. I want to give you

Starting point is 01:06:33 permission up front first to be the first person to tell you to do this because there's nothing wrong with spending some of your money. And I think for most people, especially when they're great savers like you all are and they have some of these great benefits, you know, these are some of those things. You know, these are some of those things that are hard to get over that hump. But once you do it, it is absolutely amazing. So you have permission. You know, if you feel as though you're way ahead on target or you, your money's going to compound and you're going to coast right into retirement and having enough money no matter what, then you can go ahead and spend a little bit more if you're comfortable with it. If it's something that you feel as though, you can absolutely do. And sometimes,

Starting point is 01:07:05 if it's hard for you to do that, just increasing the dial a little bit every single year is going to help you get to that point in time. Maybe it's an extra $5,000 on a vacation this year. maybe then next year it's an extra six, then an extra seven. And you start to increase the dial a little bit more if that's something that you actually value. So I hope that's helpful and really great question. I think that's really, really powerful. And thank you so much for your service and absolutely incredible what you and your wife are doing. All right. So last segment is Health Corner. So I'm going to be talking through some of the things that I am doing for my health specifically. And so many of you have emailed me about this that I'm actually bringing it back. And we'll try to make it a little more regular

Starting point is 01:07:44 on this show, especially on these Q&A episodes so that we can go through some of the things that I'm doing, because I'm doing a lot of things for health, and I try to optimize for health a lot. So one of the things that I have been struggling as of late is with sleep. So I'm going to tell you some of the things that I am shifting and some of the things that I am doing for sleep that I think is going to be really big. So one of the best books out there, if you've never read it, is a book called Why We Sleep. And I've read that book a couple of different times, and it is one that really shows the massive benefits of sleep. If you want to live longer, If you want to have the best cognitive ability, then you need to be sleeping more.

Starting point is 01:08:17 If you want to have the best mood, you need to be sleeping more. If you want to have the best performance, whether that's physical or mental, you need to be sleeping more. It is the number one thing that you need to focus on for longevity. And when it comes to this, it is one of those areas that I have struggled with over the course of the last couple of months. Now, the reason why is that nine months, I was running about 30 miles every single week. and I was trying to increase my cardiovascular fitness by running a lot more. And when I was running a lot more, I was sleeping very well because I was really, you know, exerting myself and I was doing a lot of stuff that was helping me sleep much better because

Starting point is 01:08:53 I was doing a lot more cardio. I was doing a lot more volume of aerobic activity. And so when I was doing that, I was sleeping really well. Well, I have tendinitis in both of my knees right now. And so I'm not able to run and do as much as I would like to. And so because of that, my sleep has been disrupted where I can fall asleep okay, But the problem is pretty much three to four times a week, I have been waking up between the hours of 1 and 4 p.m. and cannot fall back asleep. I'm not really actually. I'm not overly stressed. It's not like a crazy cortisol spike. I am just in a situation where when I wake up, I cannot fall back asleep. Now what happens here? Well, then all of a sudden, there's a domino effect. Because when I cannot sleep, all of a sudden, I can't think as clearly. I have brain fog. I don't feel good. I'm not as good of a husband.

Starting point is 01:09:42 I'm not as good of a father. I'm not as good to you, my audience, to make sure that you guys are getting the most out of me. And I want to serve you. I want to be able to give you as much value as I possibly can. And so when this happens, it is very difficult for me. So I have been working on some things, on how to improve my sleep over time.

Starting point is 01:10:01 Now, I have been doing all this stuff for a long time, and there's things that are not working, and there's things that I think will help me a lot more. So a lot of times when I lift or I work out, I work at night. So one of the things that I'm doing is I'm shifting that to the morning and giving my body a bunch more stress in the morning or that then it can kind of lower cortisol throughout the rest of the day. I mean, obviously, cortisol will spike it when you're working and when you're doing things and running business calls and those types of things. But at the same time, I want to make sure

Starting point is 01:10:28 that I am doing the right things in that department. So I'm shifting my workouts from the evening to the morning. So that's one thing I'm doing. The second thing is I am going to, and I feel as though this hasn't worked for me in the past, but I am increasing the amount of glycine that I'm taking supplementally. But in addition, I'm also increasing the magnesium that I'm taking. So, like, I have these magnesium pills that I typically take. And, you know, in the past, I feel as though magnesium wasn't helping me that much. But looking back, you really need about 21 days of magnesium supplementation before you can kind of see the implementation or the effects of it.

Starting point is 01:11:03 And so I am going to increase that supplementation and do it before bedtime between those two things. and see if that helps me as well. Third thing, though, this is the big one, is a lot of times I am doing research or I am watching things like, you know, YouTube videos or things right before bed. I'm looking at my screen right before bed, or I'm reading emails, doing that kind of stuff.

Starting point is 01:11:22 And so when I do that, I've gotten so used to it that I can still fall asleep after doing it pretty quickly. But I think a lot of times, just that screen exposure, that blue light exposure, those types of things, I am going to instead spend that time reading more throughout that time from. So I'm going to read about an hour right before bed, and I'm going to do it with physical paperbacks.

Starting point is 01:11:41 I've been using my Kindle for years. I talk about my Kindle all the time. I love my Kindle. I'm going to see if that helps improve that situation because I think overall it could be a big difference. Number four is I am not going to work past 9 p.m. So a lot of times I will work all day, spend time with the family and the kids from, you know, in the evening. And then once my kids go to bed, I'll start working again because I am someone who works a lot. I run out a lot of businesses and do a lot of different things.

Starting point is 01:12:07 And so I am going to actually stop work and not do those evening sessions if I can and see how I feel about that. Now, if it increases my stress or my cortisol, I may have to go back to at least a portion of it. But hopefully that is something that I can shift. In addition, one of my goals is to go bed at the same time and wake up at the same time every day. So I'm going to bed. Same time, right now I have identified 930 as the time I'm going to bed, which is about 30 minutes to an hour earlier than when I normally get to bed. And I'm going to try to wake up at the same exact time every single day to see how that works as well. Well, that's going to be a big one. Again, I've also heard that getting the first 15 to 30 minutes

Starting point is 01:12:42 of your day in sunlight, so the sunlight can get in your eyes actually signals to the body and signals to the brain that it's time to wake up and the day has started. And that has helped a lot of people significantly. Dr. Andrew Huberman talks about this a lot. Dr. Rhonda Rousey talks about this a lot. And talking through, you know, getting sunlight into your eyes, the first 15 to 30 minutes can be important. So when I do my workouts in the morning, when I shift them to the morning, that's going to be the first thing I do is try to get outside and begin the workout outside and get some sunlight there as well. So I'm waking up earlier to get those workouts in because I want to get to my office at a certain point in time. But these are just some of the things

Starting point is 01:13:16 that I am doing. Now, my goal with this is to try to get to the point in time where I can ensure that I am, you know, sleeping soundly and getting higher sleep scores over this time frame. So I'm going to be tracking this. I have a Garmin 970. And I'm going to be tracking this on my Garmin 970. I have also ordered, I mean, you get like a credit for an aura ring. I have also ordered an aura ring where I'm to try to test the different sleep scores between the two. When I was running, I was getting sleep scores in the 90s consistently. And ever since then, I've been in the 80s, 70s, 60s, 50s, and I've even had a couple in the 40s because of my sleep is so disrupted and so poor over the course of the last couple of months. So I'm doing these things to try to get in a point in time where I can wind

Starting point is 01:13:55 down properly. And so avoiding screens, making sure I go to bed at the same exact time every single day and wake up at the same time every single day, getting sunlight in my eyes, moving my workouts the mornings or all things I'm going to be doing in addition to supplementing. Now the other stuff, you know, if you talk to people who tell you all these other tips, I've done them all. I've done everything. I'm cooling down my room. It's very cold in my room. There's all these different things that I have done. And so I've tried pretty much everything. So these are the last things that I'm going to do before. If it gets worse or it does not improve, I'm going to go get a sleep study done and make sure that I can figure out exactly what's going on there. So that's the next thing is just

Starting point is 01:14:31 thinking through some of this stuff and making sure I am sleeping properly. So if that helps any of you, please let me know. Would love for you to comment down below any of your sleep tips. You can leave a comment on Spotify or YouTube would love to hear more about how you feel as though you have mastered sleep because this is something that I think we all need to make sure that we are doing to be the best possible person that we can be. Thank you guys so much for listening to this episode of Money Q&A. If you guys have any questions, you can either shoot us an email or join the mastermoney newsletter by going to mastermody.com slash newsletter. Thank you so much for being here on this episode and we will see you on the next episode.

The Personal Finance Podcast - High Income Tax Strategies, Selling a House to Invest in the S&P 500, and Converting $100K to a Roth IRA (Money Q&A)

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.