The Ramsey Show - App - Should I Do a Backdoor Roth Conversion While I Still Can? (Hour 1)

Episode Date: January 20, 2022

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Live from the headquarters of Ramsey Solutions, it's the Ramsey Show, where debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. I'm Dave Ramsey, your host, George Campbell. Ramsey Personality, host of the Fine Print Podcast, is my co-host today. As we take your calls about your relationships, your money, your work, your career, your life, it all happens right here on the Ramsey Show. It's a free call, and some say the advice is worth exactly what you pay for it. The phone number is 888-825-5225. That's 888-825-5225. That's 888-825-5225.

Marcy is in Seattle, Washington. Hey, Marcy, welcome to the Ramsey Show. Hi, thank you for taking my call. Sure, what's up? I have a question about long-term care insurance. My husband and I purchased policies a few months ago to avoid a state-run program that we thought was going to be implemented as of January 1st. That has since been delayed until at least April of this year, but it's looking like it's going to be pushed out even further, like till July of 2023.

So we're wondering if we should keep the policies that we have. They are not the best long-term care insurance policy that we probably could have gotten. You just wanted something cheap to keep your communist government from taxing you. Exactly. Thank you. Yes. The state of Washington's lost its freaking mind yeah yeah it's it was a ridiculous um act and there's so many flaws in it that's why there's all these bills being proposed now to try and delay it and fix some of the the flaws i wish somebody put it in front of the Supreme Court and just stomp on it.

But in the meantime, we real people out here have to deal with this crap. So I wouldn't drop it if you're going to turn around and buy it again in April. But if you don't have to buy it until June of 23, then yes, I would drop it. So I guess I'm probably tapping the brakes and just watch, see what happens. If they kick it in in April, you've got to turn around and buy it again, right? Yes. Yeah, to avoid it. Yeah, and that's why it's a lot of trouble. So I'd probably just sit on it for a month or two here, and then if they do kick the can on down the road to June, I'd drop it.

How old are you two? Okay. I'm 49 and my husband's 54. But they're required by state law to carry it now. If they don't, they get a tax correct regardless of age what are you paying every month have you kind of shopped this around to at least make sure that you're yeah you're getting a good deal yeah we well initially we didn't because in the there was sort of a frenzy of people trying to get policies in place so we just grabbed whatever we could.

But we're paying for combined, my husband and I, about $200 a month for our policy. The state tax would be about half of that, but for its garbage coverage and um and then we i did actually um a couple of weeks ago speak to one of your elps for that specializes in long-term care uh insurance policies um and he said for for about the same prices that we're paying right now for a universal life policy with a long-term care writer he could get us a policy i'm sorry you said one of my elps told you that no no no no i didn't think so he could he could um offer us a better policy so one that fits within you know your guidelines and everything it's not a universal life policy but that would be a similar cost basically equivalent to what we're paying right now. Okay.

Well, if you would rather change anyway, then you could drop this, wait until April, figure it out, or wait until the following June and figure it out, and go to the one you're changing to. If you're going to change anyway, that changes the answer. So it sounds like you bought the universal life one, and you do need to drop that. So go ahead and drop it now. And then in April, if you have to rebuy to avoid the tax uh you can do that again how many states require one oh one okay she lucked out by living so far well i mean they're just complete

bonkers yeah i mean it's just you you pass a law that if you don't carry long-term care insurance, you have to pay a tax the equivalent of the cost of long-term care insurance because the state is going to have to pay part of Medicaid if you go into the nursing home. And it's just straight-up socialism. I mean, it's just classic. But this is the reason people are running out of some of these states is their taxation and their and their social policies are both just people are leaving by the literally by the truckloads so i'm leaving the coast yeah it's um they're coming to tennessee well yeah yeah the the latest one i saw was please don't be a missionary just be a refugee that's good meaning don't bring your stupid vote with you if you come so um i've tried to get the Tennessee state legislature to pass a law that if you move here from California, you can't vote for two years.

Or until you've been through indoctrination on what actually running an economy looks like. But they haven't picked me up on that. They haven't responded to your email. Yeah, it's not answered me on that one. Can you imagine why? I think it went to spam. Yeah, it went to that. I'm in that other file.

The special folder for you. The special folder for Dave. That's it. Sharon is in Atlanta, Georgia. Hi, Sharon. Welcome to the Ramsey Show. Hi, how are y'all today? Great.

What's up? Nothing much. I just had a quick question for you um i've heard your name sprinkled out throughout my life um but about a month ago i really started listening and i just recently purchased your um baby step millionaire book i'm on chapter five i believe thank you but um i i was very blessed in the way that i was brought up and I don't really um I have my mortgage and that that's it good um but I also realized in doing my budget last night that I tend to micromanage my money and I don't have any money left over to have fun with and that tends to get me into trouble

then you'll go have fun and it wasn't budgeted. Right. Right. Yeah. And made a couple of stupid decisions in my life. And so anyway, so I technically should be in baby steps four, five, and six, but I haven't done like one, two, or three. You don't have to. You don't have to.

If you have no debt and you have your emergency fund in place, then you're in four, five, and six. You don't have to. You don't have to. If you have no debt and you have your emergency fund in place, then you're in four, five, and six. You don't have to start at one. Okay. Well, I was wondering if you can tell me, like, is there another book I should be reading? Should I be talking to, like, a financial person? I mean, I'd love to go ahead and send you a copy of the Total Money Makeover. That's going to be a detailed plan to walk you through all these baby steps, the ins and outs.

But right now in four through six, you're focused on paying off the house and make sure you're budgeting for some fun. You know, we say there's three things you can do with money. Give, save, spend. So give some, save some for those future goals that you have. Invest 15% of your income. And beyond that, you're saving for college, you're paying off the house, and enjoying life. So start budgeting for that that's exactly what i would do trying to think what to add to that

wow i nailed it first try drop mic drop it's a good day it's all downhill from here mic drop moon's full this is the ramsey show Ramsey Show. For a lot of you, last year was another year of just trying to survive. But you don't have to live like that. You can have confidence in your money and your future. So if you're tired of being stressed out all the time, you can decide to make a change. You can follow a plan that works. For almost 30 years, Financial Peace University has helped millions of people take control of their money. You'll learn our proven plan to save money, pay off debt, build wealth, and give generously. Watch FPU on demand or get plugged into a class for encouragement and support from other people.

You don't have to face another year of stress and worry. You can have confidence in your money. FPU is only available with a Ramsey Plus membership. Start for free by visiting RamseySolutions.com slash FPU. That's RamseySolutions.com slash FPU. Welcome to the Ramsey Show. George Campbell, Ramsey personality, is my co-host. We just got word this morning that the book Baby Steps Millionaires is the number one book in the nation. Thank you.

Thank you, guys. All of you. That's big. It hit a bunch of categories, didn't it? Number one overall, number one nonfiction, number one business. I mean. It's slayed. And the reason it's slayed is two things.

One is the number of people that listen to the show and that are interacting with us on different things nationally. Thank you guys for trusting us and for purchasing it. And the promise that I made with the book is true. And it will do that for you if you'll follow it. And I, I, I, uh, the promise that I made with the book is true and it will do that for you. If you'll follow it, how ordinary people built extraordinary wealth and how you can too. And our team, I mean, you don't do a number one,

anything in this world without an, uh, Herculean effort, uh, with a whole lot of, uh, very, very dedicated people.

Um, you know, I used to be so dumb i thought if you just wrote a really good book that mattered that all of a sudden it would just go and it would work no you have to actually go do the marketing you have to actually do the distribution you have to handle all the publicity i've done so many interviews in the past three weeks i'm exhausted it's wonderful i've had a good time being back with a lot of the shows that i hadn't been on in a long time and um because this is the first book i've done major trade book in eight years and so but um thank you guys on our team all the work you've done on this show and all the other shows and things we've we do around here the marketing team the publicity team the publishing team and, and all of you guys that bought it.

Thank you. We appreciate the trust. We're honored by that. We work real hard to be worthy of that trust. And coming out of the chute, actually, I've had a bunch of number ones, but this one kind of destroyed. It's at a different level. Still got it, Dave. That's good really hot well

i don't know if i've got it but a lot of you wanted to know this message and that's what matters so we're here to help you it's what we do and it's our opportunity to serve and we really really appreciate it 2022 is a fresh start this is your wake-up call all of our books are a lot of our best sellers rather are not all of them but most of them are on sale for $10 at ramseysolutions.com right now, including the cash envelope systems are there for $10. There's all kinds of specials going on, 50 to 70% off right now. It's New Year's, and a lot of people need the tools in their hands to move on and do that next thing, you know, and that next step. And that's what we're all about around here showing you a step-by-step plan to get a new job from paycheck to purpose with ken coleman to become

a millionaire following the baby steps to get out of debt following the debt snowball whatever it is we're helping you with we want to help you do all of that um you know you listen to georgia's podcast that we did here on the Ramsey Network called The Fine Print. It's all about showing you ways that you're getting tripped up so that you can not get tripped up and get to the life that you're supposed to have that God has for you. So, ramsesolutions.com backslash store. Check out the store right now. There's all kinds of things going on there, including the book Baby Steps Millionaires, of course, for sale there. And it is for sale most everywhere.

We've had reorders now from all the major bookstores and all that are carrying it, which means it is off of their shelves, and they've turned around and done the second order. And that's always a good sign from the marketing business perspective, but it also means that you guys are embracing this idea that you can win today. And that's what we do. We sell hope here. We want to make you believe that you can do it and show you how to do it and walk with you while you do it.

And that's what this is all about. So it's good times. Open phones at 888-825-5225. Rachel is with us in L.A. Hi, Rachel. Welcome to the Ramsey Show. Hi. Thank you.

How are you? Better than I deserve. What's up? Good. Okay, so long story short, I just moved in with my best friend. We are now roommates. And I know that she's struggled financially within the last couple years. You know, her habits aren't really that good.

She just came to me yesterday, and she was considering filing bankruptcy. She's just, you know, weighing over her head on payments and getting collection calls. And I really don't want her to go down that route. I bought her the total money makeover book several years ago. She never read it. And I don't want to be like i mean she knows that i've gotten out of debt um using your steps in the past i'm not fully out of debt but i'm still working on it and i know she knows that there's help out there but i just i don't know how to tell her you know i don't want her to go that route without overstepping boundaries you know like i she brought it up want her true but i why did she bring it up if she didn't want your input

well it's not the first time that she's mentioned it to me but this is the first time like with financial problems but this is the first like bankruptcy like option that she's stated and i just i don't really know where to go from here i mean i've bought her the book before but this is the first bankruptcy option that she's stated, and I just don't really know where to go from here. I mean, I've bought her the book before. Do you care about this more than she does? I think so, yeah. You can't help her then.

And bankruptcy is not going to help her either because she's going to get right back in the same stupid mess again. Yeah, her habits, they're going to stay the same. Exactly. So, I mean, when I've got a friend that's doing stuff like that i just ask them do you want help if you want help i can show you how that you don't have to file and show you what to do and i'm not going to shame you i'm not going to beat you up i'll walk with you but i'm also going to kick your little butt while we're doing this stuff right because you're my friend and i love you and i'm not gonna i'm not gonna participate in your crazy and call that friendship that's enabling uh-huh I mean this is the conversation you have if you're my friend

I'm gonna ask permission to bust you right and if you give me that permission game on if you don't I'm gonna back up and watch the car wreck right because I can't doing good I can't help you then yeah if you push back unsolicited it's going to backfire and it's going to hurt the relationship she's got to want the help and i mean it sounds like she's she's kind of backed against the wall here and so you can encourage her you can give her some resources but you can't you know you can bring the horse to water but you can't make them drink and so so i it would sound something like this with me okay look i've been there because you have i've been scared confused and beat up and beat down and yet it's kind of the way you look to me right now and i'm i'm hurting for you um and i want to help

if you want me to help if you want me to show you some things if you want me to walk with you in this i can help you or if you want me to stand back and just watch you drive the car in the ditch, I can do that too. I'll be whatever kind of friend, whatever level of friend you want me to be. But if you, if I understand you're scared and if you want some help, I can walk, I can show you some things. I think that I did that I learned when I was just like you. And so, you know, you're using your, your weakness as a thing and talking about yourself rather than wagging your finger in her face because you don't want to get up there and go you know you're stupid you're an idiot don't do this that's not that's not helpful but the bottom line is you do need

to ask in a very firm way that you have permission to speak into this and then it's not talking about all her old habits it's just talking about where we are right now. We can't fix the old things. All we can figure out is that. So, number one, if you file bankruptcy, student loans aren't bankruptable. IRS is not bankruptable. Anything that has a lien against it, if you want to keep it, is not bankruptable. Her car, if she has debt on it, you don't get to keep it in bankruptcy unless you re-sign for the debt. In which case, filing for bankruptcy on a car note would be stupid if you turn around and keep it.

Right? Right. And so a lot of people, by the time they take all the things off the table that bankruptcy doesn't cover, really aren't filing bankruptcy on very much. They're just filing bankruptcy because they're scared, confused, and caught in the middle of a tornado. And another resource, Rachel, I have for you. On the fine print, we did a whole episode on, is bankruptcy a quick fix for struggling Americans? I interviewed Dave on there about his bankruptcy story. I talked to a bankruptcy attorney. We talked to people who are on the verge of bankruptcy. And so that might be an easy 30-minute listen you can do with her or let her listen on her own that can give her some hope.

That was the goal with that episode, to help people understand what bankruptcy is, what it isn't, and give them hope that there's a way out. And so check that out. That's the best answer on here. It's completely free, and it only takes 30 minutes. Just go download that right now. Find print, podcast, pull up the bankruptcy lesson, hand her the phone, tell her to listen to it. And then say, if you need some help, hand her the phone, tell her to listen to it, and then say, if you need some help, I'll walk with you.

And if you want to get her in touch with one of the coaches that we've trained, a Ramsey trained coach, a Ramsey preferred coach, we can walk through it. She's probably not bankrupt. She's probably just so scared and confused and doesn't see a way out. And you can walk your way out of anything almost in these situations. We've done it with tens of thousands of people. So try to get her to understand what's going on here and just love her well, gently, kindly, no shaming, but telling the truth. This is The Ramsey Show. Thank you. In the lobby of Ramsey Solutions on the debt-free stage, Mike and Lindsay are with us.

Hey, guys, welcome. Hey, Dave. Hi. Where do you guys live? Hudson, Illinois. All right, and here to do a debt-free scream. Yes, sir. How much have you paid off?

$95,264. Cool. How long did that take? About 48 months. Good, and your range of income during that time? We started at $97,000, and we ended at $124,000. Cool. What do you guys do for a living? I'm in human resources. And I drive a truck for an environmental waste company. Very cool. Good, okay. Great t-shirt. Sally Mae has been evicted. The other one, rich people really are scared of leaves. I like it. Yes, sir.

So that's a side gig or is that just a joke? No, that's a side gig I picked up mowing yards and raking leaves. And that's kind of when our story got started was we were taking financial peace and I went to the store and- It was like a week before, right? Yeah and I went to the store. It was like a week before, right? Yeah. A week before the class. Yep.

We had been to our first class, and we were going to go to the second one. And I called her, and I said, I just bought a leaf blower. And she said, what? We're on a budget. I said, well, I'm going to blow leaves, and I'm going to make some extra money. Help us speed this thing up. All right. We went to class a couple days later.

Yeah. And you said, buy yourself a leaf blower. Rich people are scared of leaves. And sure enough, they are. We looked at each other in the class and our jaws dropped. I'm like. That's amazing. Yeah. That is so fun.

I love it. I love it. Hey, way to go, you guys. Okay, so what prompted you to get started on all this ramsey stuff so we've been married for just over 10 years now and on our on our wedding someone gave us the book we chucked it to the side and you know use it as a coaster it's a great coaster yeah and uh get your two drinks on there exactly so never really did anything with it you know in and out.

Like, listened to the show here and there. And then one day we were on vacation, and we were broke. We didn't have any money to buy food to get home, you know, gas to get home, or food. Just kind of broke vacation. Yeah. I've been on those. We got back and just dug it back out, and we said, it's time. You can't be Dave-ish.

I mean, it's all or nothing. Yeah. We tried using the credit card to book the hotel and they said you reached your max and so we were like vigorously trying to call and say can you bump our limit we need you know we're in a different town we're trying to stay the night and you know at that point they're like yeah you know we'll give you more money and then we were able to stay but that was our point we were like we're done we can't do it yeah when you're begging someone else to not be homeless yeah it was a bad thing yeah yeah that's awful yeah so what kind of debt was the 95 000 you name it yeah student loans um i had nine store credit cards in addition to

like two or three different chase cards um cars personal loans um we had a funeral uh payment mower um we put a personal loan, I think, on the mower. Yeah. You did. You had everything. Y'all were so normal. It was unbelievable. We were so normal.

So did you just think, I'm really good at managing these 12 credit cards? Yes. That's crushing this. I knew exactly when Victoria's Secret was going to have their sale and they're 30% off to use the card and all that. Yeah. I was one of those people at the store. You had mastered being broke.

Yeah. Wow. I knew she was serious when she cut those all that. Yeah, I was one of those people at the store. You had mastered being broke. Yeah. Wow. I knew she was serious when she cut those all up. Yeah. Uh-oh, that's gay. Which one was the hardest? I'm just curious. Which one was, like, sentimental?

Oh, man. There's always one. Shoot, I'm trying to think. There was nine of them. A lot of stores you like to shop at. Yeah, yeah. Probably Victoria's Secret. I think they throw in the, not the discount.

They do like $10 off for $20. And obviously with money, it seems like, oh, I can get more money, you know, a discount off more money. You felt like you were making money off the scheme. Yeah, yeah. And you realize, nope, we're actually broke. Yeah, I was walking out of the store like, oh, I took their money. I got all the sales.

Wow. So then you decide after coming home and reading the book to go to Financial Peace University. Yep. Best thing we did. And you just had it at your church or just a local area? Yeah, local church. We did twice. Yep.

Okay. Went through it twice. About halfway through, we need a little more motivation. And once you get that motivation, you start seeing the light at the end of the tunnel. I mean, it's real. Snowball just gets bigger and bigger, and here we go. So you stuck with this four years. 48 months, that's a stripe, man.

I mean, you went after it. That's a lot of leaves. Yeah, it was. A lot. I already quit those jobs, too, by the way. I bet. I don't blame you. So what do you tell people the key to getting out of debt is?

What's yours? Mine would be a why. You've got to have a why to really see you. My family never really had money. They were going to the bank every, you know, it seemed like every other day, getting more money for this, more money for that. I don't want that for my kids. Not at all. Change your family tree.

Exactly. And I don't want them having college debt like we took us forever to pay off. I don't want that for them. Change everything for them. Yeah. I would say definitely mine's the budget and goals. Physical. I would definitely encourage people to use physical goals.

We did a chain link for the kids. And it was butt ugly in our house. But my husband's like, well, let's stay in there until we cut every single one off. So that was my motivation to show each one what we cut off. We let them cut them off when we, you know, had the amounts and we took a video when we did our debt-free, you know, in our house and cut the... Absolutely. Absolutely.

And how old are they? Let's get them up into the shot here. Yeah. What are their names and ages? Luke is seven. Uh-huh. And Emmy is three. fine wow so they were participating chopping up the links then he's got his t-shirt on my family tree's been changed yep and hers is uh what cold so much sold sold so much i thought i was next

that's a good one you got all the isms on there. I like it. Well done, guys. It's fun. Very fun. You guys are amazing. You've done an amazing thing here. Thank you. How does it feel to be free? It feels good.

Yeah. It feels real good. Yeah. I'm so proud of you. Well done. Well done. We've got a copy of Baby Steps Millionaires for you. Number one bestseller as of today.

And we'll give you a copy because that's the next chapter in your story. You're going to go on and do that now. Finish up, finish out, do change your family tree, become wealthy. Yep. That's the thing to do here, and be outrageously generous along the way. Very cool. We've got a copy of Total Money Makeover. You can give it to someone in case they need a coaster.

Yes. Because it makes a really good one, and then it appears to show up when it needs to. At the right time. At the right time. It's a smart bomb. It just lays there ticking until it's time, right? It's waiting for you to be ready. the right time. It's a smart bomb. It just lays there ticking until it's time. It's waiting for you to be ready. That's it.

That's the whole thing. All right. Mike and Lindsey, Luke and Emmy, Hudson, Illinois, $95,000 paid off in 48 months, making $97,000 to $124,000. Count it down. Let's hear a debt-free scream. Three, two, one. We a debt-free scream three two one they did not hold back well i mean she's three and a half and she she wins she wins the internet

she's got pipes man she she She busted it. Way to go. Way to go, Emmy. You're a star. That's amazing. Luke ain't bad either. I mean, he yelled as big as his hat there. If you're listening on radio, go watch it on YouTube because the cowboy hat. You've got to see. That was amazing.

Wow. This is what it looks like when you change your family tree. Yeah. They're never going to forget this day. That's dialed into their memory. You can't get rid of it now. Yeah. That time that my dad got a leaf blower.

Yep. And my mom, and they worked extra. And I cut the chains with scissors. We had the butt ugly thing in our house. And I remember being a little bitty kid cutting that up. And they can tell their grandkids that. Yeah. That's what a family tree being changed is.

It's not just the money. It's not just the math. You get out of debt, you've got the math to change your life. You have to become a millionaire you got all that working but but more importantly you completely dial in a whole new financial dna imprint on the kiddos they you know mom and dad don't borrow money oh wait a minute we're ramses we don't borrow money it's like a foreign thing no of course oh no there's a lot of things rams's don't do, and that's one of them. We don't borrow money. I mean, can you imagine Rachel Cruises? I can totally see that.

And she said more is cost than taught, you know, from Smart Money, Smart Kids. It's an imprint. This is what's happening. They saw this whole experience. They got to be a part of it. And now they get to live a very different life because of it. And they will. Because now they're going to live out the rest of their childhood watching these principals cause their parents to become wealthy.

Yeah. And then that finishes off the job of the parenting part of the equation. That legacy, it's such an incredible why to have when you can go, man, what would it be like to be able to pay for my grandkids' college? What would it be like to be the last Ramsey in this branch of the tree? The last one that had that. Wow. The last one that had to call and beg some stupid butt idiot on the other end of the phone on a credit card company to raise my limit so I have a place to stay. I'm the last one, by God.

Never again. You've got to have that moment, man. You've got to have it. This is The Ramsey Show. We'll see you next time. George Campbell Ramsey personality is my co-host today. Open phones at 888-825-5225. Tanya's in Denver. Hey, Tanya, what's up? Hi, Dave.

Congratulations on your book reaching number one thank you i did pick up a copy well it's all your fault then we appreciate you yeah i have a question for you about investment strategy i typically do a backdoor roth me too um however i heard you say that um potentially that loophole is looking to be closed. And so for this, is there concern about doing that backdoor conversion for this tax year? And are you recommending people hold off on doing that or not? I did mine yesterday. Okay.

It was part of the Build Back America bill that failed. Right. But my comment, I i think in addition that you may have heard was that um that i do think someday it's going to be addressed that the loophole it is literally a loophole i mean it's not illegal it's not immoral but it is um it's a loophole and so um i think one of these days somebody in a piece of legislation is going to tack that on the end of it. But if they want to stay with the rich people must be punished narrative, that generally comes out of the income tax system. So what would be your recommendation if and when that does close as another alternative?

Well, I mean, that's closed, so you just got to do other investing, obviously. I mean, I buy. Yeah. I's only it's only eight thousand dollars i mean there's only so much you can do anyway but and me and sharon so uh uh the uh in addition to that i do low turnover mutual funds and i buy real estate that i pay cash for okay you know what a low turnover mutual fund is yeah it's the ones that they don't change what's inside of it very often. Right, so there's no taxation on it until you sell it to amount to anything. Yep. Because it's basically capital gains growth, like buying a single stock that goes up, you don't pay taxes on the increase until you sell it.

Same thing. And so it gives you tax-deferred growth, in a sense. And it's capital gains growth at that, which is wonderful, meaning you get tax capital gains rate rather than ordinary income rate. It's a good question. For these high-income earners where they go, all right, I can do my 401K. I'm not eligible for the Roth IRA. I can do a backdoor Roth.

Let's explain the Roth, the backdoor Roth. Yeah. So for a high-income earner. Make over $200,000 a backdoor Roth. Let's explain the Roth, the backdoor Roth. Yeah. So for a high-income earner. Make over $200,000 a year household income. There is a loophole to where you can turn it into a Roth by contributing on the traditional side after tax. Exactly. So you're not allowed to do a Roth IRA if you make over $200,000 a year household income. So what you can do, and it's called a backdoor Roth, and this is the loophole that we're talking about,

is you can open and you can always roll, regardless of your income, things into a Roth. You can always roll to a Roth. It's on the traditional side. You can pay the conversion. If you've got anything in there, if you're willing to pay the conversion, then you're going to have that. So anything that you, no matter what your income is, you can roll stuff to a Roth.

You can roll an old 401K, an old IRA into a roth and then if it was traditional then the amount of gain or amount that's in it would be taxable at that point now if you open an after tax meaning there was not taxes held out it was it's after the tax already been held out of the money. A traditional IRA, and instantaneously roll it to a Roth, there's no taxes. And that's called a backdoor Roth IRA. And I do one every year for me and one every year for my wife. It's not a lot of money, but it's that much more that I can get into tax-free growth. The other thing, and that's what you only do that kind of stuff at baby step seven and beyond and if you're a high income earner the other thing that people do a lot and i do this as well is the match at your company is not allowed to be roth it has to be traditional and so once

a year i roll all of my match from my company into the Roth and pay the taxes on that. That does create taxes. But I roll it all to Roth and pay the taxes on it and roll it all to Roth and pay taxes on it. So years ago, I've converted everything into Roth. So all of the money that is in the retirement, former SEPs, former IRAs, former 401 former 401ks everything anything you've got like that outstanding when i reached baby step seven i had extra money then i would roll stuff to roth pay the taxes because that tax in a sense becomes an additional investment into it because it grows tax-free from then on yeah and that's the goal is to have all this money uh without uncle sam's

hands on it ever again when you withdraw that exactly Exactly. And it's growing tax-free. So all the growth I get between now and death is completely tax-free. And, you know, an inherited IRA on a Roth, there's no taxes. Because it's a Roth. And so it cleans up your estate plan in that regard, too. And beyond that, beyond all of the tax advantage, tax deferred, retirement accounts, things like that, then we move into taxable investments where you're just going to pay your capital gains rate and all that. But that can be a great option for those high-income earners. And a lot of people do this to retire early. You kind of have that bridge account where you go, I'm going to live off this taxable investment until I can pull out from my retirement. Exactly. A low turnover and a lot of ways to, an easy way to get to a low turnover,

easy way to find something with a 5% or less turnover ratio is the S&P 500 index fund. No commission. I dump money in those, additional spillover money, so to speak, in those all the time. And, you know, if I leave it there a year before I take it out, whatever growth is going to be taxed at capital gains rate, which in my case is more than 15%, but it's still less than my full complete over taxation.

I'm just about to puke when I look at what we're going to pay this year. Chris is in New York City. Hey, Chris, welcome to the Ramsey Show. Hey, guys. Thanks for taking my call. I had a quick question for you. So my wife and I are currently renting our home from family and have just considered buying a home in Florida. I wanted to make it our primary residence, split our time between where we're currently at because all of our family is here, but get away from the winters. Also wanted to start building some equity in this property,

homestead the property for income tax purposes because I'm self-employed. While we don't have a mortgage, my only debt is a school loan, which will be paid off in November. Otherwise, you know, that's kind of where we're at. So I wanted to get some insight, find out. So you're 50-50 between New York and Florida? That would be the goal yes yep okay what's your household income uh between 275 and 300 um a year so it really depends on the year but um i mean you're really right on the line 50 50 you're not talking about 90 10 yeah yeah because we're young and our whole family is where we currently live. Well, it kind of defeats the purpose of being near family if you're not half the year. Yeah, right.

But, you know, we're looking to get into the sunshine a little bit and maybe away from the winter, you know, for six months and a day, if that makes sense. Well, yeah, it makes a lot of sense to get out of New York taxes. Yeah. in a day if that makes sense well yeah it makes a lot of sense to get out of new york taxes yeah but uh i guess my dilemma is you know i'm in a unique situation where i do get a little bit of help on the school loan on a monthly basis um what do you mean by that i'm like four grand a month at that uh i have um you know a family member um giving me a little bit of money you know as part of my deal towards school loan. Oh, I'm sorry. I didn't know you still had debt. I apologize. I didn't get that part. A little bit. How much do you owe the student loan?

It'll be paid off in November. Okay. I would pay that off. Don't buy a second house until you pay your student loan off. You have $40,000 in debt? $40,000 in school loan at $2.99. I don't care what the interest rate is. And you make $300,000. Yeah. Why is this not paid off in two months on this relative this past year was the first year i earned that prior to that okay it was far less than that you need to clean that up

and you need to have a strong emergency fund before we start talking about buying a second house when you're renting right now yeah yeah would you continue to rent this too i do have go ahead go ahead george would you continue to rent new york and then you'd purchase a home in florida correct okay yeah i would get out of debt then this is your home purchase is what it amounts to with your new income and your new plan and so i'll be out of debt have an emergency fund and have a good strong down payment for the florida home purchase before you do it so it sounds like it's going to be a year before you get around to that. Use this income.

Do not let this income float away. I know this is new income, and you may be tempted to spend it all. Do not. You could get crazy, and you could pay cash with this kind of income. So use it wisely. You could put a big chunk down on this house a year and be debt-free and have an emergency fund and then get it paid off within a couple of years in Florida. And that does change the whole equation within a couple of years in Florida.

And that does change the whole equation. Take advantage of that big shovel. Good stuff. Cool. Hey, thanks for the call, Chris. That puts this hour of The Ramsey advice in their life? Let them know about the Ramsey Call of the Day podcast. It's a quick hit of advice about life and money in under 10 minutes. Check out the Ramsey Call of the Day podcast

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