The Ramsey Show - App - 2023 Real Estate Trends: Should You Buy a House Right Now? (Hour 1)

Episode Date: March 10, 2023

George Kamel & Rachel Cruze answer your questions and discuss: "I was laid off right after buying a house", "Can I have fun and still save money?" High Interest rates and 2023 real estate trends, from the blog: 2023 Real Estate Trends: What You Need to Know, "What should I do with a cashed out pension?" Have a question for the show? Call 888-825-5225 Weekdays from 2-5pm ET Want a plan for your money? Take our FREE 3 minute assessment: https://bit.ly/3nInETX Listen to all The Ramsey Network podcasts: https://bit.ly/3GxiXm6 Learn more about your ad choices. https://www.megaphone.fm/adchoices Ramsey Solutions Privacy Policy

Девочка-пай Live from the headquarters of Ramsey Solutions, broadcasting from the Pods Moving and Storage Studio, it's The Ramsey Show, where we help people build wealth, do work they love, and create amazing relationships. I'm George Campbell, joined by my good friend and fellow Ramsey personality and fellow co-host of Smart Money Happy Hour, Rachel Cruz. And we are here for you, America, to help you take that right next step with your life and your money. The number to call is 888-825-5225. That's 888-825-5225. Are you ready, Rachel? Oh, yeah. It's pretty rare we get to host together.

I know. It doesn't happen very often. A momentous occasion. I'm usually with Jade and Christina. It's usually like the girl power show. I bring enough girl power to the mix. Let's be honest. There's enough there, George.

We're going to have a good time. All right. Let's start with Dane in Lancaster, Pennsylvania. Dane, welcome to the show. How are you doing? I'm doing the show. How are you doing? I'm doing all right. How are you guys doing? Great. How can we help today? I was just calling for some financial advice or kind of what you would do if you were in

my situation. So I bought a home about six months ago, no, seven months ago. And a month after I bought my home, I got laid off from my full-time job. So I kind of, I used all my savings to purchase a home, which I should have saved up more, but I didn't. I got a really good deal on the house at least, but back to my point, I lost the job and I didn't. I got a really good deal on the house at least, but back to my point, I lost the job and I didn't have any savings. So I got like behind on the mortgage a month after making my first mortgage payment. Luckily I got a new job that pays a lot more than my old job, but I literally, it's construction.

So we had work the first month, and then we were off for a month and a half, and we had a little bit more work. And now we have a full schedule for the rest of the year. So I wanted to know what you guys would do if you were in my situation because I'm three to four. I guess this is the fourth month I'm behind now. So you just haven't been making a mortgage payment for four months? Yeah, I haven't had any money to.

I just had a little bit of work here and there to pay utilities and all that. So all that's good. So you're keeping the lights on. Has the mortgage lender contacted you? No, not yet. I actually contacted them, and they said they don't really have any options because we're not, I'm not at a foreclosure yet. I guess it takes six months.

So you're, are you three or four months behind on the mortgage? This is the fourth month. This is the fourth month. Okay. And how much is the mortgage payment? This is the fourth month. Okay. And how much is the mortgage payment? Only $1,300. Okay. And how much are you bringing in a month or will you this month in March? So I am $1,099 and I make $1,350 a week straight check. Okay. So I do have to put aside taxes starting now. Yeah. Around $300 a week.

But April 1st, two good things. April 1st, I am getting a huge pay increase to $1,800 a week. And I also got a second job on the weekend that will be bringing roughly like $350 extra a week. So I have a really good income coming. I just need to play catch up. But I didn't know if there's a program or something for FHA guys, like who have FHAs on their home or what exactly I should do. I need to build a savings. I need to get caught back, caught back up on my mortgage. Yeah.

So before the savings even, the priority is this mortgage. Because if you continue just to get behind, which I know you're not now, you're going to be able to pay next month's mortgage payment. But four months behind. And so we always say catch up on your bills, your four walls, food, shelter, utilities, and transportation. And your housing, your shelter, in that sense, is behind. So before even getting a savings, I mean, this is catching up. This is go time. I mean, and I would even say, too, I don't know how late you work at night, but this is a little bit of a crisis-type situation, right? I know going forward, it's fixed with a great income, but you want this, you want this out of your record. Like you want to be able to be free from this. So, I mean, this is for me working Uber at nights. I mean, after your work, I mean,

this is doing everything possible. And then living on absolutely nothing because you'll be bringing in, I mean, right? I think, I mean, it's going to be close to eight grand with the new raise and then the extra money that you have. I'm guessing your tax withholdings will have to increase to about $500 a month or so? About $400. So April, first week of April will be $1,800 from the construction job. And my tax advisor said to put $400 aside in a bank account, like in a business account or something. So your true take-home will be about $1,400 a week?

Plus the $1,800 still, because of the part-time job. Awesome. Okay, well, that gives me a lot of hope. So really, the gap right now is we've got to cover the $5,000 we owe to the mortgage lender. So I would contact them and figure out what this repayment plan looks like when it's due, how we can do this so that you avoid a foreclosure and have that communication in writing from them. Well, I did give them a call and tried. So I have, I get paid today actually. So I'll actually have like 1800 today. And I tried calling to make a payment and they

won't even i don't know what's like with the mortgage company but they won't even accept a thousand dollar payment you know they all want it up front because it's so long past due so they want the entire amount up front so if it's's five grand, they want five grand at once. Yeah. With fees and everything, it's like 6,200. So that's our magic number. And like Rachel said, our goal is in the next 30 days, whatever that looks like, to come up with that six grand. Yeah. Which means we are not spending a dime elsewhere other than keeping the lights on, having some food on the table, and getting this mortgage back on track. Yep. There's no life hack.

I don't think there's any special plans that you can Google. They're all going to be traps. The only way to get out of this is to pay it off. Yeah, and making sure that you have that in writing and to know that it's not changing. Make this a locked-in rate, the $6,200, and then give them even a date because i mean i would want to be as proactive as possible as i'm like i don't want them to turn on

me and do something crazy where i'm like oh my gosh no no i thought we were fine and so making sure that everything is in writing that's going to be really really important man the thing the thing that stinks is the longer i wait the the more like behind I'm going to get. So I guess there's three, I forget, three or four weeks left of March. So next month, it's going to go up to $7,600. With the penalties? Huh? With the penalties or just because you have a mortgage payment on top of what you have?

Mortgage payment. Okay, so yeah. So stay current. So mine would be, I don't want you to get further behind saving up for behind payments. So I would be paying currently, making sure that that's paid, and then saving to get to the $6,200. Yeah. Sell whatever you have to sell.

Work however much you have to work. Do whatever it takes to get back on track and get that deadline from them and when that amount is due in full without incurring any more penalties. I'm so sorry, Dane. This is where we tell people, man, don't jump into a house before you're ready because it can cause a lot of issues. I'm sorry you're going through this, man, but hoping you can get back on track real soon. This is The Ramsey Show. I'm George Campbell joined by Rachel Cruz this hour. This is The Ramsey Show. Open phones at 888-825-5225.

You jump in, we'll talk about your life and your money. Gabe has chosen to do so in Burlington, Vermont. Gabe, welcome to the show. How are you doing? Hey, guys. How are you doing? We're doing great. How can we help? So I'm 21 years old. I'm still a college student. I've got about a year left.

I've paid off everything so far. I'm currently debt-free. Amazing. And I'm on track to be able to pay off this last year every semester as things go. Just cash flow. Exactly. Nice. I also am in a relationship and have been pretty intense on saving up, living pretty frugally for the last like year or two, almost maybe too much.

And I've realized, you know, I've just been listening to you guys, been talking, you know, and I've been all about the intensity of the first two steps. But it sounds like after that, things switch from intensity to intentionality. And I've, you know, recently just tried to pick up a third job to make a little bit extra cash to do things like take my girlfriend out for dinner and just do those type of extra things that I currently there or previously before that third job couldn't really put any money anywhere else. Um, and I guess I'm just wondering if, if, if even that is the best move with me being at baby step three, should I just be, you know, even with that third job, making the money that I'm making there and throwing it into a savings account to, to get myself through step three as fast as possible.

It's kind of almost a relational advice that I'm asking. Has your girlfriend brought any of this up? As far as me taking the third job or not? Well, as far as going, hey, we never go on dates, and you never want to spend a dime, and we can't do anything. No, she wouldn't say anything like that. So she's cool with all this. She's nicer than me.

She's not struggling. Take me out to dinner. That's what I'm wondering. Is she reaping any of what you're selling here with all these jobs? Yeah, and Gabe, you guys are in school. Is she a senior as well? No, she's four years older than me, so she's graduated, I think, two, three years ago. Okay, that's great.

All right. And just so I have this clear, the two jobs you have, that is basically going for you to live off of and tuition, correct? Bills and saving up towards that tuition, yeah. Okay, okay. And then you're looking at Baby Step 3. How much do you have saved? Currently, this last bit of after this tuition, this next tuition is paid off about $1,000, $2,000. Okay, $2,000. Yep, that's great.

Well, I currently have $1,000 for my safety net, the baby step number one. But, you know, beyond that, I have one or two. Okay, okay. That's great. And how much would a three-month emergency fund be for you? Because, I mean, I feel like that's all you would need at this stage of life is more on that three to four months. So how much more of that $2,000?

$10,500 is what I need to get to. $10,500. Okay. That's a sizable emergency fund for you. What kind of expenses do you have? Say it again? What kind of expenses do you have right now while in school? Currently, I'm paying rent and I have gas,

you know, you need to pay a little bit of gas to get to work. I have a phone bill. I have an internet bill and car insurance. Okay. I mean, three grand a month. Yeah. Okay. So nine, ten grand will get you there. That feels right. So how much longer would it take while working these three jobs to get there if you were really focused? Well, if I get through tuition, that's kind of my biggest thing is all of that saving money has just been, I know that expense is coming every semester. I want to stay out of debt. So I've been using just everything that I make that goes in the savings. It's getting used to cash flow that tuition.

After that's all done, I could probably get that in a year. Okay. Especially if I held this third job. And so you're not out of the woods yet as far as intense to intentionality. Through Baby Step 3, we have to remain intense. And because what we don't want is... Sorry, I thought it was just one and two that were intensity. Yeah, you'd carry that through. Once you get to baby step four, we can pump the brakes a little bit. And are three jobs sustainable, Gabe, for you? Well, currently, I'm doing...

Like doing that and schools a lot. And dating. Yeah, I'm doing 32 hours at my job as a cook. Okay. I'm doing about 10 hours as a part-time work with my church. Okay. And then I'm trying to door dash. That's the third job I've picked up.

Okay, that's great. I've been doing that late evenings. Yep. And you know what, Gabe? I'm not feeling burnt out. I don't feel like I'm really fighting anything like that. That's great. I think that's awesome.

Because honestly, the time to sacrifice, like you're kind of at the perfect season. Like I know everyone's like, college, enjoy your life. Yeah, I'm not interested in that. Yeah, yeah I was gonna say like you're you're a senior you know what you want and you obviously have goals and this would be the time to be like oh yeah I'll sacrifice and like do that because once you once you graduate and you get a job and you're actually making an income a steady income obviously you're making great money now but uh there's just something about being able to be like oh yeah I'm like already ready to invest save up a down payment maybe for a house and like you get to move on to baby steps for and beyond uh so that so with the

dating thing though i was i mean i was joking with you earlier around like well she's nice i'd want to go to dinner but i mean like you guys yeah you can date cheap i mean it's not like you guys have to go out to nice places. And she obviously probably knows your goals and what's going on. And I mean, there's a lot of, I mean, and this would be true for married couples, right? Or I mean, anyone dating, regardless of if you're in college or not, it's just like, how do you live life while doing baby steps one through three? And you want to be able to enjoy life to a degree to sustain yourself. So, I mean, we always talk about, you know, there's always free stuff going on,

depending on, you know, your city. You can look that up. You guys, I mean, go on a hike. I mean, there's things that you guys can do together that doesn't have to be crazy expensive. And instead of going to the movie, there's plenty streaming at home for the thousand subscription services we have.

And you can always cook a great steak dinner at home instead of paying 10 times that at the restaurant. And so there's a lot of occasions. Yeah, I'm a cook. That's my job. Oh, that's so true. Which means you're tired of cooking when you get home. Or he's the best, and he can cook at home, and it's restaurant quality. That's true. Oh, yeah, Gabe. I would definitely. That's great.

I see why. Part of the reason she's dating you now. This is a big win. This is it. Right, yeah. Yeah, and you know, Gabe, too, I'll say this. Like, this isn't forever, because I know this can seem daunting and exhausting, and you're like, oh, man, this is just, it's a lot. But this isn't your life forever, right? It's just for a season to get an emergency fund.

And honestly, well done for you, not only doing it at your age, but that season of life, like, it will just propel you when you graduate. And whether you continue to date her, I don't know if it will just propel you when you graduate and whether you continue to date her and I don't know if it moves on to marriage or you go and find a career, like just setting yourself up well now, it is, it's great. So never regret that. You're never going to go like, man, I wish I partied more in college. That would have been so great for me.

You're doing the right things. And so I want to encourage you that you're being weird in the best ways possible. And everyone listening should be encouraged by that. What are you studying? Right now I'm trying to get a teaching license. I'd like to teach English at a high school level education. Awesome. That's great.

So great. And what's awesome too, Gabe, is like, you know, we were talking about teachers pay maybe a few episodes ago on my show, and I'm like, and that's what's even amazing is I'm like, you can choose to go into a career field that you know, you're not going to go make half a million dollars, right? But you're able to make those choices and those decisions because you don't have payments that you're going to have to repay. So like, that's another reason doing the work on the front end is so great, because you get to go do what you love and not be like, oh man, it's going to take me, you know, eight years to get out of the student loan debt on a teacher's salary. You get to take that teacher's salary and be blessed by it. And

it's great and wonderful. And you've just set yourself up really well. So that's, I mean, you're doing a great job and you can still have a life and still have a great, healthy relationship with your girlfriend and be on baby step three this is incredible and rachel the data shows that students who work 15 to 20 hours a week have a higher gpa than those who don't yep that makes sense to me you're going well how is that possible well junior has to be real disciplined with his calendar with his time or gabe to do i mean gabe's working 40 hours a week that's insane gabe. And so, and he's still crushing it. He's going to finish completely debt free.

Yep. And so it's parents who are going, well, my son and daughter, they shouldn't work. They're focused on their studies. Oh, really? Are you following them around campus all day? They're in class for a few hours a day. There's 24 hours in that day. There's a lot of other stuff happening in those other hours.

That's right. They're at the library. Sure, sure. They wouldn't darken the doors of that library, I'll tell you that much. But hey, Gabe, we are rooting for you, man. Way to go. Love seeing young people just crush it and sacrifice now so they can live their best life later. Awesome. More of your calls coming up. 888-825-5225. This is The Ramsey Show. This is The Ramsey Show. I'm George Campbell, joined by Rachel Cruz this hour. 888-825-5225 is the number to call. Today's question of the day is brought to you by Neighborly, your hub for home services. When something in your home breaks, Neighborly is the name to remember. And with the Neighborly done right promise,

you'll know you'll get great service from their network of local home service providers. So go to Neighborly.com today and check them out. And today's question comes from Julie and the Baby Steps Millionaires Group. I'm saving 20% down to buy a house in 2023, but this mortgage rates keep me worried. Are we really going to buy at 6% to 7% rate next year? People's incomes are not growing as much. What are your thoughts? It will take longer to save money for a down payment. Yeah, and it is hard. I mean, if you're seeing increases of interest rates and, you know, the price of housing has kind of, I feel like- It's definitely cooled off. Deadied, yes.

Hasn't been increasing at the same rate. No, no. But the interest rate is having people worried. And so, Julie, I mean, just looking at the math, we always talk about a down payment of 10 to 20 percent so even if you wanted to get into the housing market faster you could just do save up 10 percent 20 is obviously a wonderful goal but the 10 percent would work but just making sure that your your mortgage payment is no more than 25 percent of your take-home pay that's the big part of this equation and again a lot of people fight us on that because it's very conservative uh but here's the deal. If half of your income is going to a mortgage payment, you're not going to have a lot of money to go and enjoy and to invest and

to save for your kid's college and to put extra on the house to pay it down. I mean, it just limits your ability. So we don't want your house, your mortgage payment to eat up so much of your income. So that's the conservative approach that we take. But honestly, it works. It works. And we just took a call earlier from a guy who could be looking at foreclosure because they got in a house a little too soon, the payment's a little too much. And so walking to this really peacefully with some wisdom, even though it hurts because you're looking at these interest rates and you're going, well, even if the prices stay the same, a few interest rates points higher could mean hundreds of dollars more. And so, like Rachel said, I would focus on that 25% parameter of your after-tax take-home pay going

towards the PITI, principal interest taxes insurance. And that gives you more peace. It's not necessarily about a perfect down payment number. And we're not mad at you if you put down less than 20%. It's more about not having too much of your world tied up in a mortgage payment. So I crunched some numbers using our Ramsey Mortgage Calculator just to show you what this looks like, because the numbers, it's real. And so let's say the home price is $500,000, you want to put 20% down. That's $100,000 down on a 15-year fixed. Well, if the interest rate was 5%, your payment would be $38.47. When the interest rate goes to 6%, well, now it jumps another $212 to $40.59. If it jumps to 7%, it jumps another $220

to $42.79. And let's say it jumped to 8%, it's another $227 at $45.06 every month. So you can see from that 5% to 8%, it went from $38.47 up to $45.06. Yeah, it's a lot. From 5% to 8%. So that is a real concern, but here's the good news. You can always refinance later. And so if that interest rate, your payment is within that 25% parameter, go for it. You are ready to buy a house regardless of the interest rate. And when the interest rates go down, which they inevitably will based on history, then you can refinance at that lower rate. And a lot of people did that. People now have two or three percent interest rates because they refinanced over the last few years, which lowers

their payment. So do not fear. But I think it's worth talking about the real estate trends that we are seeing in 2023. And this is based on our blog called 2023 Real Estate Trends, What You Need to Know. We'll put the link in the show notes and in the YouTube description for all of you if you want to go check that out. But there's been lots of drama around buying and selling a home in the last year, Rachel. Here's some market predictions. And these just give you an idea of what to expect. Again, they are predictions. No one has a crystal ball. So never let these control your housing decisions. Only your personal situation and your finances should do that. So for 2023, the data is pointing toward a slightly more stable housing market, not a crash. We've been saying this for, I feel like a year now

since our real estate live stream. Because for a while it was the housing prices were going crazy and there was like 42 offers on any house that was for sale in a moment. And people thought, oh my gosh, this is turning into a bubble. And now it's the interest rates that have people panicking. That's right. And this is all because home prices are only driven by the law of supply and demand. So when demand is greater than supply, home prices don't tumble. So today, here's the stats. There's still a shortage of homes for sale and lots of buyer demand. That is why home prices are still going up, but they're just going up at a slower rate. So leading into 2023, the median home price reached over $366,000.

And that's only up 2.3% compared to a year ago. Yeah, and that growth, it can have people panicking, and it is. But listen, again, the housing panicking, and it is. But listen, again, the housing market is not going to crash. So calm down. And it still marks 130 consecutive months. That's over a decade of year-over-year increases, which is the longest running streak on record. They should win a Guinness World Record for that. That's incredible. That's it. I know. So again, it's not going to crash. And Freddie Mac actually predicts overall home price growth in 2023 will drop by 0.2%. 0.2%. Yes. Just barely. A drop that is small, nothing to worry about. And again, it's not a sign that the market is going to crash. So again, calmer prices is directly related to supply and demand and again historically speaking there are

more homes for sale than people wanting to buy and so that is that's the great thing or i'm sorry more uh more buyers out there it's been trailing behind them that's right that's right yep so we're we're seeing a slight uptick in supply and at the of 2023, housing inventory was up 10.2% year over year. And while that's still lower than it was before the pandemic, buyers should have more options than they did the past few years. So again, looking at buyer demand last year, the average mortgage rate increased several months in a row, which lowered demand a bit. Again, people weren't going out and rushing to buy homes as the interest rates kind of ticked up, which made it affordable for other people because you could actually go and negotiate the price, which is great. But in January, mortgage rates dropped to the lowest that they've been since September of 2022.

And Freddie Mac forecasts rates to stay pretty steady over the rest of this year. So some buyers who held off their plans because of rising rates last year are likely to return to the market in 2023. So in other words, what we're seeing here is supply is starting to meet in the middle with demand, but we still got a ways to go. So the bottom line, we won't see home prices plummet or spike in 2023 and the market should feel steadier. I think that's good news. So never sit and wait for home prices or mortgage rates to drop. That's like timing the stock market. We would never tell you to do that. It's impossible to time the market. So if you're in good shape financially, don't wait to pull the trigger. Don't wait on the interest rates to be

the perfect interest rate. It's not going to do that. You can always refinance if the rates go down. And so here's how you know if you're in a good place. You're debt free, no consumer debt whatsoever. You have a fully funded emergency fund of three to six months of expenses. And then you have that down payment to where the mortgage payment won't eat up more than 25% of your monthly take home pay on a 15 year fixed rate mortgage. And that is some of our most controversial advice. I mean, every time we say 15 year, they're like, these guys are 25. These guys are crazy. And I'm some of our most controversial advice. I mean, every time we say 15 year, they're like, these guys are 25. These guys are crazy. And I'm like, you know what's crazy? Foreclosing on a home at 26 because you felt pressured to jump into it.

To go and buy. Well, and the biggest thing too, I think is yes, you don't want a massive mortgage payment eating up your income because you want to be able to do other things. It's like fund retirement, enjoy your life, give, like do other things with your money than just pay a mortgage payment. But also it is being debt-free and having an emergency fund in place. Please have savings in the bank when you go to buy a home. I mean, home ownership, it's expensive. Things break, things happen. And when you don't have money money it turns everything into a crisis i mean it you live on the edge and it it does something to your i mean really your anxiety level your stress level when you don't have money saved in the bank for any day and that's regardless of whether you're a

homeowner or not but especially if you're looking to buy make sure you have an emergency fund in place before you do that yes we can't say you're complaining about an interest rate going up a percent, which is 200 bucks, instead of going, oh, it's my car payment that's killing me. It's my credit card debt that's killing me. A $900 car payment. Clean up the debt. That'll give you some margin. So if you guys want help with this stuff, we've got tons of resources for you. We've created a hub at ramseysolutions.com slash homebuying, and we can even connect you with expert pros to help you guide those decisions, give you confidence as you step into the largest purchase of your life. Tread with caution, go slow, follow the Ramsey plan. It works every time you work it. This is The Ramsey Show. Welcome back to The Ramsey Show. I'm George Camel, joined by my co-host, Rachel Cruz.

She's also the co-host of Smart Money Happy Hour, a new episode released yesterday about all of the different money traditions around the world. And I learned so much. It was very fascinating. I loved it. We kind of stick to like North America, America on this show. Yes, which we covered.

Like 401Ks and all that. The biggest North American tradition when it comes to money is debt. That's right, we did cover that, yes. There's one. But so, yeah, so much that goes on in the world with money. It was fun. Go check that out, Smart Money Happy Hour,

wherever you listen to podcasts. And now on YouTube, if you want to see Rachel's reactions, she has some emotional breakdowns and it's just good, good content. It's like a half therapy session for me on the podcast. And Sharon Ramsey said it's just good it's like half there it's like a half therapy session for me on the podcast and sharon ramsey said it's her favorite podcast i know which is my mom loves love smart money happy hour so make sure to check that out number one fan all right george well i am so excited uh because we are we have launched our money and marriage getaway

that's going to be held here in n, October 19th through the 21st. So Dr. John Deloney and I are hosting this event for you and your spouse, and it is an entire weekend. We've never done this before. Usually Money and Marriage is an evening event, but we're doing an entire weekend here in Nashville. So if you're married, you know that staying aligned is a really important thing, but it's not always easy to do. And so, again, we've picked an entire weekend to have encouragement and some inspiration to help you grow in all areas of your marriage, including your money, a.k.a. money and marriage. Brilliant name. I know. So you get to meet Dr. John Deloney and myself, and you'll have time set aside to reflect on everything that you've learned and how you can apply it to your marriage right now.

So again, this is focused time with your spouse to work on you and your marriage. No work, no kids, no errands, just time for you two to connect. And here's the thing, there are limited tickets for this event. And again, it's an entire weekend. So remember that.

So tickets start at $699 per couple, which includes so much. It's a whole package of stuff that we're going to give you in that. So talk to your spouse and see if you can join us in Nashville again, October 19th through the 21st. So go to ramseysolutions.com

slash events to learn more. And our VIP, we've had different tiers of this and they have all sold out. Like, I mean, it is crazy. Response has been awesome. It has been awesome. So a weekend in Nashville with your spouse.

You had me at no work, no kids, no errands. That's the best pitch of all time for anyone. It's basically like vacation, except you get to learn some stuff. And you guys make it so fun. This is not your normal marriage retreat where it's like just real heavy and just like. Yeah, no, it's going to be really fun. And we're going to pull in other speakers and experts too in it. So it's going to be a really fun weekend.

And lots of Nashville flavor too that we're planning. So get ready. Hometown show. Love it. All right. Let's get to the phones. Katie joins us in Cedar Rapids, Iowa. Katie, welcome to the Ramsey Show. Hi, thanks for taking my question. Absolutely. A little backstory. I've been at my company for 31 years, I guess, facility. And my first seven, maybe eight years, they had pension. And then they started 401k probably about 25 years ago. So I started that then, but they kept our pension and keep telling us how much a month we would get from that still. We just received a letter that we need to do something with the pension. They're closing that out and we will get a lump sum.

So I'm trying to decide. I have to do something with it before January of 24. I'm trying to decide what I want to do with that or what would be the best route to take that sum and put it in something. I really don't want to roll it into my work form on Kay and Ross, but I also don't want to get killed on taxes or anything either. So this lump sum is going to be taxable if you don't roll it over? Well, I don't know. They haven't told us a total right now. My little letter I get says at retirement, I would receive $350 a month because obviously it was only my

first seven years of employment. So you don't know the lump sum yet? I don't. And I'm sure there's some formula they will use. A friend of mine talked to one of our 401k people at work and they said, she's got less tenure than I do. And she said, they said maybe 20,000, but I have no idea what even to expect. Okay. So let's just ballpark it for now at $25,000, $30,000. Yes, probably. Okay. So tell us about your financial situation. Where are you at in the baby steps? Do you have any debt? Do you have a mortgage? We have one car left, and that should hopefully be done by the end of this year. And then just our mortgage, which isn't a lot really compared to some people, I guess, but just got last child through school. So that part's

done. So that's about it. And then my husband and I are both 53. Okay. What do you guys have in your nest egg currently combined for retirement? You need total like 401ks? Yes. All retirement accounts combined? Yep. Probably a little over $600,000. All right. And how much money do you guys have in the bank, just kind of liquid cash? $10,000. Okay. What's left on the car loan? I think $18,000. All right. And lastly, what is your household income? Well, last year it was definitely higher. I'm a nurse and they threw a lot of money at us the last year. So average, our household income is probably about 170. Awesome. Cool. Yeah, that's great. That's great, Katie. Yeah. Well, I would figure out obviously the lump sum and then talk to them. Yeah. About, about the tax situation, because, the lump sum and then talk to them, yeah, about the tax situation.

Because if you're able just to roll it into a Roth and a 401k and kind of keep it in that rhythm, I'm not mad at that, honestly. I mean, I think that that could be a great option, especially if there's tax implications that are going to happen. If not, and you can just cash out the 30 grand, there's a lot that you could do with that right now, Katie. I mean, you could be paying off this car with that um you guys could be having a larger emergency funds that you can use that so um yeah depending on the tax situation if you are penalized

by taking that lump sum at your age i would roll it over to yeah to avoid taxes my guess is it's like a traditional not raw so you'd probably want is it's like a traditional, not Roth. So you'd probably want to move it to a traditional IRA, direct rollover. So privately, because I have, I moved, my 401k is Roth and 401k, depending, I split it up so I could get the match and everything for the 401k. But I didn't know if I needed to do that privately, like a private IRA. Well, you wouldn't do it through your employer. An IRA is outside of your employer, individual retirement account. Is your 401k a Roth 401k and you have a Roth IRA? Is that correct?

No, it is a, you can divert, you can put your money in straight 401k or Roth or both. So you have a mix of traditional and Roth in there? I do. Okay. Okay. Because the employer match by default is going to go into the traditional side currently. It is. It is.

Correct. Yeah. Okay. So I would get to do some homework, find out what that lump sum is going to be, find out what the tax implications are. Your best bet is going to be to roll it over into a retirement account without any penalties. And at this point, I think you guys need that for it to grow for the next 10 years to add to your nest egg. Right. And if there are no tax implications, you want to wipe out your

debt and add to the emergency fund, that's a great goal too. But you still need to think about how can we get to a million dollar nest egg in the next 10 years? Yeah. And that's what my thing was, was the whole taxes. That's what I don't know anything about it. And they just got this letter this week. So I'm trying to like start looking at it. So. Yeah. Well, I would meet with a smart investor pro. And even if you have, you know, someone that helps you with your taxes, if you have a CPA, you know, sitting down, cause you have, you have what, six months, nine months to figure it out by Januaryuary so i would go ahead and start that because regardless of what the amount is you're going to want to know exactly what it

entails from a penalties and tax perspective and that's going to help you make your decision yes i did um go online and type in my address for the smart buster pro and i'm not kidding it was 20 seconds after i hit submit I got a phone call from somebody good we have trained them well we tell them hey we want you to get in touch us because when you want that help we want you to get the help as soon as possible not wait three days to hear from someone that was like I was like what in the heck and it was somebody calling me already so that's awesome we love to hear that they've all contacted me through phone and email since so good yeah well sit down and meet with them I mean honestly Katie and they're going to be able to help you too

with your whole picture of just, you know. Tax strategy and estate planning. Yeah, going forward. And especially with your age and stuff, sitting down with someone I think is really, really key. It gives you confidence instead of hoping and wishing for the next 10 years, you go, oh, we know exactly where we're headed. Yeah, exactly. Well, thank you so much for the call. Thanks, Katie. Thanks. Great conversation. Well, I love hearing that about SmartVestor Pros because they really are. It's incredible.

Winston and I sat down with ours in January and I'm sitting with him. And granted, we do this every day. We talk about it every day. But I mean, he's just like throwing data at me and all of this. And it wasn't intimidating, but I'm like, you breathe this in and out

all day, every day, and you love it. So these people want to help you guys. So make sure to check it out. Love it. Hey, that puts this hour of The Ramsey Show in the books. My thanks to my co-host, Rachel Cruz, all the folks in the booth keeping the show afloat, and you, America. We appreciate you listening.

We're going to be back real soon. Hey, it's Rachel Cruz. If you love the show and want a deeper dive on your money journey, we have a weekly newsletter that gives you trending and helpful articles and tips on following the Ramsey way. Just go to ramsesolutions.com today to sign up for our newsletter. Again, that's ramsesolutions.com to sign up for our weekly newsletter.