The Ramsey Show - App - Should We Pull Money From Retirement? (Hour 2)

Episode Date: February 21, 2023

Dave Ramsey & Jade Warshaw answer your questions and discuss: "My job no longer aligns with my values", "Should I pull from retirement to pay off the house?" "How can I recapture depreciation on my rental property?" "I'm in Baby Step 3 and feel like we won't have enough for retirement", "Should I sell my annuity to pay off all my vehicles?" Calculating capital gains tax on investments. 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

Live from the headquarters of Ramsey Solutions, broadcasting from the pods of Moving and Storage Studios, it's The Ramsey Show, where we help people build wealth, do work they love, and create actual amazing relationships. Thank you for joining us. Open phones at 888-825-5225. That's 888-825-5225. Leo in Fresno, California starts us off.

Hi, Leo. How are you? Hi, Dave and Jade. How are you? Doing good. How can we help? Hey, so first and foremost, thank you so much for taking my call. Just to give you a little bit of background, I'm encountering a situation where I don't

know what to do or how to detach from it. I've been a sole provider for a very long time. I was a single mom for a very long time, and I've been in sole provider for a very long time. I was a single mom for a very long time. And I've been in the banking industry for more than 60 years. So it's basically all I know. I'm new to the Dave and Ramsey podcast. And so my question is, their values and morals no longer align with what I feel brings fulfillment to my life. So because this is all I know,

I don't know how to detach or let go or how to even navigate this new season of my life. So I was hoping I could get some orientation in a sense. So what's an example of, can you give me an example of how it doesn't line up? I think I know what you mean, but just for clarity sake. So Jade, you know, you're in a self like environment where you basically encourage and, you know, incentivize people to get in debt right okay okay and and i no longer find right that to be a part of who i want to be anymore so have you started

looking for other opportunities other job opportunities that are not requiring you to do debt sales? I have. However, I have not been very successful. I think I've had one or two interviews, you know, within wealth. Health Fargo is what I call it. And so I haven't had any luck. Well, I think you just got to keep going out there. I think you got to get clear about what what it is that you want to do from this point on, because like you said, that industry was all that you knew. So you're finding now that your values don't align with that. So now it's time to start painting the picture of what your values do align with and what it is that you want to do long term and start looking for those opportunities. And it probably is going to take you applying for more than just one or two jobs.

You're probably going to have to really put yourself out there, you know, and keep throwing your net out there. Leo, how old are you? I am 35. And what do you make? Around 80 a year. My husband makes around $140. Okay. Can you live on $140?

Yeah, we can. I mean, for six months. Yeah, that's what he actually suggests. I'm not saying you had to. I'm just saying if you accept that emotionally and swallow that, it gives you a lot of peace. Because now you're just staying in the bank until you find something and you don't feel as trapped.

You're not trapped. I feel trapped right now. You're not trapped. Your husband's right. You could quit today and take six months to wander around doing something. You'll find something to do. Okay. What do you do?

What do you actually do at the bank? What is your title? I'm a business relationship officer. Perfect. Okay. That's perfect. So that sets you up. Those are transferable skills to do business relationships in other businesses.

Other businesses that want to interact in what we call B2B, business-to-business transactions, would find your skill set of having formerly worked at the bank very valuable. But you're not any more trapped than you – the only reason you're trapped is you feel like you are. You've got very transferable skills. Your husband makes enough money for you all to live on until you make the move.

So you're not trapped. But I wouldn't quit i would just go on a very uh let's pretend that if you don't get a job in four months that you will get a terminal illness let's use that kind of motivation okay just go in other words what would you do if you said if i don't have a new job in four months i'm gonna die well then you would go get a new job you would you do if you said, if I don't have a new job in four months, I'm going to die. Well, then you would go get a new job. You wouldn't talk to three people. You'd talk to 300.

Right. Because how much time, up until this point, Leo, how much time have you put into your job search? Well, just talk to three people. None. Yeah. Yeah. You're just going to have to do more. You're playing with it, and you're rehearsing this as you drive to work,

mad at yourself, feeling stuck, and you're rehearsing it over and over and over in your head. I want you to rehearse it in front of human beings and get a new job. So I'm going to send you Ken Coleman's book, From Paycheck to Purpose. I'm going to send you his assessment, which is his career assessment. Take that. It takes 27 minutes to take it. I'm going to give it all to you for free, and I'm going to give you his other number

one bestseller, Proximity Principle, which will help you land the job. If I give you all of that, will you read those two books and go interview to 22 people in the next three days? I'm kidding. In the next 30 days. In the next 30 days, okay? Will you do it immediately with some urgency? I will.

I want some swagger, girl. Yeah. I want you swagger. I want to see you strut up that sidewalk, not walk up with your head down going, I'm not worthy. Mm-hmm. Yeah. You make 80 grand a year. You're not dumb.

Dumb people don't make 80 grand. Well, maybe a few. I'm not sure. I sure i was gonna say dave maybe just a few oh my gosh but i'm serious i mean you have a lot you're giving yourself a credit of a two out of a hundred and i'm giving you a credit for 102 out of 100 yeah i think she was thinking she could just kind of like tap her toe in the water and maybe something magical would happen but you've got a yeah you can't wonder godmother's not coming you're the secret sauce kiddo get out there get after it yeah get after it that's how you do it hang on we're going to give you those two books and that career assessment and help you get started on this we want you to be able to win hey if you are a new listener and you want to dive deeper into the Ramsey baby steps,

go to ramseysolutions.com. Click on the get started button. We'll help you figure out the next best step for your financial journey. And we'll figure out where you are in the baby steps, tell you what to do next. We're going to walk you through. Oh, by the way, it's 100% free. Did I mention it's free? Can't beat the price when it's free. So go to ramseysolutions.com, click on get started, take a quick little assessment. We'll land you where you land It's free. Can't beat the price when it's free. So go to RamseySolutions.com. Click on Get Started. Take a quick little assessment. We'll land you where you land the baby steps. This is all new lingo to you.

You've got all these FPU. We've got debt snowballs. We've got baby step fours. We've got all this lingo that if you're brand new, you're trying to figure out. What are you talking about? What are you people talking about? So, yeah, click Get Started at ramseysolutions.com and we'll walk you through that free service to help you kind of get plugged into the family here.

You can jump rope with us. You just got to get in the cadence, right? We'll show you how to do it. You can do it. You can join us right here. I know it's fast, but it works and we'll help you. This is the ramsey show jade warshaw ramsey personality is my co-host today welcome back to the ramsey show i'm your host dave ramsey today's question of the day comes from michael in nebraska you have to turn on your mic. Thank you. He says this. Does it ever make sense to pull from retirement

to pay the house off? I'm curious if it would be acceptable to take out $50,000 out of our Roth TSP and pay off our mortgage. My wife and I are debt-free except our mortgage. We have $534,000 in our TSP, of which $150,000 is my Roth TSP. I'm 61 and work. My wife is 55 and doesn't work outside the home. With my military retirement, VA disability,

and federal salary, we bring and make around $140,000 gross a year. We plan on working another three years or so. Our mortgage balance is about $100,000. If we stay the course, we will pay it off in five years. If we take the money out of our Roth TSP, we could pay it off in two years. I wouldn't do it. I don't understand why they wouldn't just stay the course. Well, once you're in retirement, if your nest egg is big enough that you can make it without what i don't understand on this is why we're taking out why he's not just paying it off would you well maybe the tax implications no there's no tax because it's all roth it's all

roth and so i mean you got a hundred thousand 150 000 in the roth and if you want to pay off a hundred thousand on our mortgage why are we just cutting it in half why are we only putting 50 000 on it? It doesn't make sense. I mean, either do it or don't. Pay or get off the ladder, okay? So if you pay it off, you've got $450,000, and during the five years you would have paid it off, you can build up some more retirement in a Roth.

That's true. You build it back. That's true. And you've got $450,000 left, and you've got VA disability, federal salary, VA disability and military retirement. So would I take $100,000 out of $534,000 and pay it off at 61 years old? That's right on the bubble. And here's why it's right on the bubble okay uh i if it was 200 000 and you only had 100 000 left i'd say definitely no okay definitely if it was a

million and you had 900 000 i'd say yes definitely yes okay so see how i'm right on the bubble i'm like you know it's like yeah it leaves a good chunk but it it's not like, so if you did this, and I probably would, I'd probably just pay the whole thing off. I would not pay off $50,000 and then- You'd just take the whole $100,000. I'd probably do that. But the only way you do that is you pinky swear, spit shake, you and your wife look at each other and go, we ain't doing nothing until we put that $100,000 back.

But why wouldn't they? Okay, I'm playing devil's advocate. That's good. Why wouldn't they? Because I'm looking at it the opposite way. I'm like, you're making $100,000 back. But why wouldn't they? Okay, I'm playing devil's advocate. That's good. Why wouldn't they? Because I'm looking at it the opposite way. I'm like, you're making $140,000 a year. Why can't you live on, if you really care like that, why can't you live on nothing and get this thing paid off in two years?

I'm with you. So that was kind of my thought. But see, if you do that, you could put it back in two years too. That's true. So there's not a wrong answer here. The bottom line is both of those answers involve something he's not putting on here yeah that's right and both of them involve intensity at way cranked up from where old michael is right now because he's trying to trying to play with this 50 000 out of 100 why are you doing 50 that's just yeah you just kind of

come on come on get it whatever it is you're gonna do go all in and pay the whole thing off and then bust it and put it back or just bust it and pay it off now at 61 busting it wasn't in this equation at 61 another question does he need to bust it at all or can he just go we're just going to pay off our home keep going keep trucking along keep investing our 15 percent like can he do that, he could do that. Does he have to be intense at this point? But your point is. Either way. The thing we're both feeling in this that we're not,

it took a second to get to the surfaces. It's all lukewarm. Yeah. Okay. Get really, really hot or really, really cold here and get it. Whatever it is you're going to do. And so if I woke up in his shoes which one would i do i'm probably gonna pay it off and i'm gonna put turn on the heat and put a hundred thousand back in the bank in two years all right uh but you're

gonna pay it off in two years i'm gonna pay it off using and by the way neither one of these answers are in the dumb column that's right so. If it has that intensity that we were talking about. Now, if he pulls out that $100,000 and he's just, you know, meandering along. Yeah, that's not okay. Yeah, that's not going to work. Janice is in St. Louis. Hi, Janice. How are you?

Hi, I'm well. Thank you. Good. I am a new listener. I found you on TVN and I've really been enjoying your show. Well, thank you. Yes. So I've been renting out my mother's home since she went to heaven in early 2020 and the renter is going to be moving out

this spring and I'm trying to decide if I want to move in or if I want to sell the home. Um, I have been told that, um, if I, even if I decide I want to sell it, that I should probably move in for two years because that's a way to recapture the depreciation that's been claimed on my tax returns for the last three years. So I wanted to know, one, is that correct? Yes. And two, if it is, is that a good idea? That would be correct because what will happen is if you sell your personal residence, you can make a gain of up to $250,000 as a single person,

and your personal residence means you have to live there for two years. Okay? Okay. And that gain would include the recaptured depreciation because you're converting it from a rental property to a to a personal residence after it has not been a rental property for very long now if it had been a rental property for five years you would not have this option so if you're going to do this you've got to do it now okay okay now mathematically that is going to work and it's not a bad idea at all if you if you want to do that here's the thing okay what's the house worth

um i think the zillow has that it's something like it's a wide range but i think they put it at 315 what do you think it's worth i think it's probably worth more than that probably 400 okay and so what was your depreciation how much depreciation did you take in that one year oh gosh i don't know my my My tax preparer knows all that. I'm sure they do in a standard schedule. Yeah, it wasn't that much, okay? And so the taxes on this, if you sell it today, are not going to be much because here's what happens.

Your basis in inherited property that the tax is calculated on is what it was worth at the time she passed minus whatever depreciation you've taken that's all you're going to pay taxes on is anything over the that figure and it's not going to be substantial so if you hate i don't hate it's not the right word but if i really don't want to live there but i'm holding my nose just because my tax thing sounds right don't do it it's a nice house they, but if I really don't want to live there, but I'm holding my nose just because my tax thing sounds right, don't do it. Oh, no, it's a nice house. Don't do it.

But if it's like, oh, it might be kind of a cool adventure, and I'd probably save $10,000 or something, then that's okay. But it's not a $100,000 swing in this discussion. It's a $5,000 or a $10,000 swing in this discussion. Okay. Okay. Well, so if I don't live there and just sell it after it's been a rental, am I exposed to capital gains tax? Yes, yes. And the capital gains will be calculated this way.

The value at the time of your mother's death is your basis. That's as if you paid that number for it, okay? Okay. Minus any depreciation you take. And so let's say it's $400,000 value at the time she passed. Then you take $30,000 worth of depreciation. Now your adjusted basis is $370,000. You follow me?

You sell it later for $570,000 many years from now, okay? Okay. That's a $200,000 gain over that $370,000. You see how I did that? Okay. That's a $200,000 gain over that $370,000. You see how I did that? Okay, I got it. But your gain is not the whole $570,000 when you sell it. It's over whatever your original value was minus whatever depreciation you take. Okay.

And each time your basis is lowered each year by the depreciation you take on your taxes. That's called your adjusted basis because you're adjusting the cost downward by the amount you're writing off. Okay. Is that logical? It sounded pretty soupy to me when I said it. No, no, I think it makes sense. So I guess the question is capital gains tax, is it more than personal? Oh, no, it's a lot less.

15%. 15%. 15%. And your personal is probably more than that. Probably more than that, yeah. So that's what I'm saying. Even if you sold it today, what little gyration you've done with this depreciation and the recapture and all that over what it was worth when she passed, it's not going to be much money. $5,000, $10,000 max.

And so you haven't had time to mess it up too much in terms of the calculation for taxes. Very interesting call. Thank you, Janice. Thanks for being a new viewer on TBN. For those of you who don't know, it's one of the places you can now watch the show every afternoon. This is The Ramsey Show. Jade Warshaw, Ramsey personality, is my co-host today in the lobby of Ramsey Solutions on the debt-free stage. Nicholas and Samantha are with us. Hey guys, how are you? Fantastic. Welcome. Where do y'all live? Upstate New York, Albany, just west of Albany, called Schoharie. Bit of a haul to Nashville.

Welcome. Good to have you. How much debt have you paid off? $235,000. Woo! How long did that take? 46 months. Good for you.

And your range of income during that five, eight, four years, I'm sorry. We started out around 65, and we ended up about 150 last year. Wow. Good for you. What do y'all do for a living? I'm a physical therapist that works with children. Very good. I work in maintenance at a power plant. Excellent. Excellent. So what kind of debt was your $235,000? $14,000 was a car and the rest was student loans.

Sally Mae set up shop. Yeah, absolutely. Wow. Wow. a physical therapy degree right there's a lot of it i was gonna ask that was about 180 of it was the physical therapy degree yeah wow wow so what happened 46 months ago that made you guys go all right that's like what was that i've had at moment because everybody's got one that made you just throw your hands up and say we got to do this i think when you're young and you first get married, you don't really think about the future like that. And then I started listening to the podcast shortly after we got married. How did you find out about the podcast in Albany?

I was honestly just looking for a podcast, and you guys come up as recommended for a personal growth business, stuff like that. So I had heard of Dave Ramsey before, but the podcast and when I started listening was really when I got started. Um, and I will say, uh, I, I definitely presented it to my wife the wrong way. So for all of you husbands and spouses out there listening, she was at a conference in Rhode Island. So she was away for a couple of days and I called her and said that I was going to change everything. Your exact words were, I'm going to rock your world,

in which tears ensued immediately. Not in a good way. So that was the wrong way to do it and then when you uh regain consciousness what happened after you regained consciousness we had many many talks um most of them starting with tears and then as i really started to understand the debt and how it was going to impact our lives long term i i was like okay i you know i'll give it a shot let's let's do financial peace and um now really both got us on the same page was going through financial peace university together okay you presented it much better than i did

for sure for sure well if you say i'm gonna rock your world through the television and it's not your husband you can get away with a lot. So, so good. So what was the hardest part along this journey? You do FPU, you start learning the principles. What was kind of the first, what was the first thing that you guys kind of rallied around and said, all right, we need to do this. As the free spirit, the budget, um, him, he wrote it all out. And then he's like, you need to be involved. to be involved and i was like uh uh you just do it so getting on the same page with all of that for sure forcing each other to sit down and talk about what we're going to spend so he went from i'm going to rock your world to your vote counts so much you have to do this yes that's a good move we both threw a lot okay it's a good move good

move and then you finally did sit down and say okay okay, I'm going to make my vote count. I'm going to hold my nose and eat my broccoli and look at this. Yes. Which we needed because I'm definitely the spender. So I needed her. And I'm the saver. So I didn't want to spend anything once I realized, hey, we need to pay this off. I don't want to spend a thing.

Oh, wow. Okay. Okay. So I'm definitely the nerd spender. She's more of the free spirit, but the saver. So we needed her input. Very good. Very, very cool. Good for you guys.

So proud of y'all. Well done. Well done. You had a good FPU class that cheered you on, I hope. Yes. At first, I would say there was not a lot of support. It was kind of a lot of, that's good for you. I'm happy for you guys from our families.

And then, I mean, this journey was almost four years long so we had a lot of cheerleaders that grew into just the best cheerleaders yeah our parents were actually both uh scared of what we were doing they both thought we were ending ending all the fun that would ever happen in our lives but now they're both both families are so proud and jumping on that train well isn't it funny how that happens you start and everybody's got all the questions but then when you finish they want to know how you did it right exactly oh man new questions yeah exactly yeah good job you guys very very well done well we're so proud of you excellent excellent work these are really

good numbers you guys did lean into it it's obvious on the numbers this was not an easy task for you was it absolutely not we i mean even in new york we probably lived on about 30 000 a year for those four years thankfully we had affordable rent and we had um a family that was willing to help us out how old are you now 27 And you got the rest of your life to live free. Yes. How does it feel to be free? Oh, so good. We can actually, we can go on trips, come see you guys. We're going to go to Florida in a couple months and then start saving a down payment for a house. That's exciting.

You ever going back in debt? Absolutely not. No. Love it. Love it. Love it. Hey, we got the live and give bundle for you. That's the number one bestseller, the Total Money Makeover,

and the number one bestseller, the Baby Steps Millionaire's Books. Read them, give them away, whatever you want to do. Same thing with you've been through Financial Peace University, we're going to give you another one-year membership to gift to somebody. Might even be one of those family members that you converted and help them get on their way. That would be great. So however you want to bless someone with it,

it's for the Live, You Live, and so very very good stuff nicholas and samantha albany new york 235 000 paid off in 46 months making 65 to 150 count it down let's hear a debt-free scream three three two one we're dead free! Yeah! Way to go, you guys. That's fabulous. Andrea is with us in New York City. Hey, Andrea, what's up? Hi, Dave.

Hi, Jade. What's going on? I'm so happy to be on. Oh, I'm so excited. Well, we're happy to have you here. How can we help? Thank you. Let me get to the point.

Okay, so my husband and I, we're currently on baby step number three, forecasted to complete it by May. Our take-home is $5,000 a month. My husband brings home $36,000. I bring home $14,000. I am 42 years old. My husband's 46. We have a 12 year old and a 10 year old. We currently have 15k in retirement from an old 401k that we rolled over to a Roth IRA. So the question is, do we immediately start baby step four? Or do we start baby step three B once

we're completed with baby step three for a down payment on the house we currently rent rent my parents um have a two-family house we live on the second floor but of course our dream is to own our own our own home but the ramsey way because we do want peace in our in our lives but i just see it so far from our future and that kind of this motivates me well you know i think take it one baby step at a time you're going to finish baby step three in May you said and then from then from then on start saving 3b if you want to own a house the only way to get there is to start so if you get so overwhelmed that you kind of have that we call it paralysis analysis and you're thinking about all the numbers and you're

wondering how it's going to be possible you'll never make it so you've just got to actually start putting aside the money and as you're putting aside the money, start looking in the area. We have a really cool calculator online that says, how much home can I afford? And start plugging your numbers in there and finding out how much it's going to take for the homes in your area, what that down payment needs to look like, and start working towards it. And here's the thing. You guys worked to pay off the debt. You worked to build up your three to six months. If you want to know what you can do, you can work to build up your down payment. And you've done it before, so you can do it again. And yes, it's going to take a little bit of time,

but like you said, you want to work through the steps because it's worth it for you to have that piece, right? Yeah. Andrea, how much debt have y'all paid off uh we paid 55 wow um we started we so let me let me tell you when you started the 55 it seemed insurmountable yes to jade's point then you you plowed through it you did it so if you can pay off 55 i'll bet you can save 55 okay now there's a little... No, wait a minute. You drove right past that. It's the same stinking math.

It's the same math. But this is good math. If you can pay off $55,000, and now you don't have any payments, except your house, except your rent, and if you can pay off $55,000, you can save $55,000. And you'll do it even faster. It's doable. Yeah. It should go faster. Yeah, it will

go faster. Because now you're getting good at it. This is The Ramsey Show. Jade Warshaw, Ramsey Personality, is my co-host today. Thank you for joining us, America. Guys, how many of you are thinking about buying a house it's really not a bad time to buy at all things have slowed down out there have you

noticed and that means there's not 73 people putting in an offer every 26 minutes and in other words you're not not like buying a house two years ago it's like being in an auction oh my gosh it's like being and you're not you don't have to go to an auction anymore. Now you just, like, walk up, and then you kind of make an offer, and then they maybe make a counteroffer, and then maybe you counter that. And, by the way, if you're selling a house, it's a great time to sell a house because there's actually still a shortage of housing. There are still more buyers looking than there are houses for sale. Yeah, interest rates are up, and house prices are up, but there's still more buyers looking than there are houses for sale. Yeah, interest rates are up and house prices are up,

but there's still more buyers looking than there are houses for sale. So if you're selling a house, don't expect 73 offers in 26 minutes. Instead, you're going to have a normal. Yeah, I've been selling real estate since 1978. I have my license. Okay, that long I haven't been selling it. I've been around buying and been in the real estate business my whole life. And I've never seen a time except that one little period of time there

where you didn't put a house on the market. Put a house on the market, getting full price 100% was unheard of up until that short period of time. Getting multiple offers was unheard of except during that short period of time. Getting multiple offers was unheard of, except during that short period of time. And a house typically took 30 to 120 days to sell, except during that short period of time. But we went through a period of time where the world was turned upside down. The world was so crazy that used cars went up in value. This is like, I mean, the world's upside down.

Like you're living in Australia. It's upside down. I mean, it's just crazy. I mean, wow. Crikey. But you're living in Australia. It's upside down. I mean, it's just crazy. I mean, wow. Quirky. But all of that's kind of smoothed out now. Now, listen, if you need to borrow, your best bet's actually a 15-year fixed rate. You get on track.

You pay the house off immediately. You don't have to be intimidated. You don't want the payment to be more than a fourth of your take-home pay on that. We have a free mortgage calculator on our website. Give you an idea what your payment would look like. And we're not trying to sell you a mortgage because we're not in the mortgage business. Go figure. RamseySolutions.com.

Click free tools. There's a ton of tools there. One of them is the free mortgage calculator. Free tools. All kinds of calculation stuff you want to do. You want to learn about your money. You want to get control of it. You want to tell it what to do instead of wonder where it went.

All that kind of stuff. RamseySsey solutions.com and click on free tools it will get you there that's what we used jade warshaw ramsey personalities my co-host today freddie is in new york city hi freddie how are you hey dave what's going on walking our way through it brother what's up all right what's up? All right. What's up? I have an annuity that I've owned for 10 years, really, in my idea, a very bad investment. I don't see it going anywhere. I feel like I could do better somewhere else. You're right.

I have $58,000 in car payments. The annuity's worth $60,800. Should I just lick my wounds and pay off my cause? But then I'm debt-free. I'm baby step seven debt-free. What's the rest of your net worth? I'm worth, I have $628,000 in retirement funds and about a million dollars in real estate. And you're 65.

How old are you? No, I'm 57. Oh, okay. Close enough. I knew you were right in there somewhere. All right. Yeah, I can kind of smell it on you. By the way, it's a good smell, like a cologne.

Okay, it's not. Yeah, you're doing good. I like it. In other words, because some people call up with $58,000 worth car debt and i and i might give them a talking to about it but i think you can afford it so yeah cash the annuity out pay off your cars you're right on track freddie you got a couple million dollar net worth you're not doing dumb stuff way to go i'm proud of you right pay it off be done be debt free and then start investing in my road to erase more just dump it all into my roots yeah you got it baby you have paid paid for homes keep it rock yeah you said baby step seven

there you go yeah i own all my homes i own three probably they own you know i just want to get done i just want to be done i love that and and and don't don't play math games next time you get ready to buy a car just buy it with money cold hard cash yeah you you played math games that's how you did that because you're trying to figure out some way to beat the system and with a stupid car you lose every time i always find that to be weird dave you always lose on a car you got six hundred twenty eight thousand dollars in real estate and retirement millions millions of dollars but you're still getting a car note i don't understand that went in there and negotiated and i gotta tell you that the car dealers they look at you like you got one eye in the center of your head when you write them a check

they do not know what to do with that they babble and walk around in circles they'll try to tell you they can't take the check yeah when we try when we try to buy our first car in cash i remember we had the check right there and they gave us such a run around dave i mean they they made up excuses why this wasn't going to work i got a weird one happened the other day that was the opposite of course i've been dealing with this dealership for quite a while i just bought the brand new raptor right the the big one and um the big one the way it's 700 horsepower it's so freaking sweet but the uh um i wrote him a check a literal check it's we usually wire money what is this we wire money we have cars and i had no they asked me to i said i'll wire you the money

and they said well just just send a check over oh of course they know me i've been doing business for a while so they know the check's probably okay but but uh just send us a check they'd rather have that than a wire i had not run into that because i almost always wire money yeah we're buying a car these days well checks are from like you would say when dinosaurs roam the earth i know we had to we had to print one off and and card it up there you know it was fine i didn't mind it it was just felt different i didn't know what because the wire should be faster it should be but i whatever maybe they just maybe they wanted to hold a check from davesey in their hand. I don't think so. I think it's something I didn't understand.

Oh, well, it's all good. Lee is with us. Lee is in Lexington, Kentucky. Hi, Lee. How are you? Hello, Mr. Ramsey. I'm doing well. Good.

How can we help? I have a stock that I'm considering selling to pay off my mortgage. Good. I'm just not sure how much to set aside for the capital gains taxes. Do you know what you paid for it? I'd say it was $1,000 and my husband says it was $2,500.

Okay. What's it worth today? $28,000. $28,000. Okay. So somewhere around $26,000 is the gain. Does that make sense? The difference in what you sell it for versus what you paid for it. That much is taxable at 15%.

Okay. So your taxes are going to be somewhere between $4,000 and $5,000. Okay. You see how i did that yes yes i did yeah and so if you're off by a thousand dollars it's not good you're gonna be okay but you need to set aside out of this money four or five to set five thousand aside and then when you do your taxes you find out exactly what the gain was but um you need to go back to um or go to either your current broker or whoever you were when you purchased it and see if they can give you the actual purchase price because you do have to

verify that to create the calculation you want the exact number but it's somewhere between a thousand twenty five hundred it's worth somewhere around twenty six thousand um and um or twenty eight thousand and we're going to take two thousand off of that so that's going to be your gain that's how it works and it's only fifteen percent so that's fifteen hundred per ten thousand of gains so if you got a thirty thousand dollar gain that'd be forty five hundred so we know it's forty five hundred or less in this case it's probably probably set four thousand dollars aside and you'll be just fine yeah that's going to be real close again i'm doing big numbers here i'm not doing nitsy to the penny calculations but i'm not going to be i'm going to be within three or four hundred dollars of where you end up on this

assuming the numbers you gave me are correct that is so that that's how it works so the good news about capital gains is you don't pay taxes on it until you sell it and when you do sell it it's at that reduced rate very good so good good stuff and you know that works with um anything that you hold and goes up in value real estate uh hold you pay no taxes on the increase in value until you sell it uh it's called a realized gain but not a recognized gain. You realize it when it went up in value. You recognize it for tax purposes when you sell it. And so you have to kind of admit that it happened, so to speak. And the same thing is true if you buy a low turnover mutual fund. Like if you're a baby step seven, you're completely debt-free,

and you're doing other investing. They don't sell the stocks inside the mutual fund very often. It grows in gains primarily, and there's very little to no taxes on it until you sell a low turnover mutual fund. So look for a turnover ratio that's like down around 5% or something like that. So that's how it's done, ladies and gentlemen. Good stuff. Good question, Lee. Well done, good question lee well done well done well

done get that mortgage paid off i love your plan this is the ramsey shot Dave here. You can find all of our shows with the Ramsey Network app on your smartphone. It's the only place to listen to the entire back catalog of episodes. Download the Ramsey Network app in your favorite app store today.