The Ramsey Show - App - There Is No "Free"—You'll Pay for It Somehow (Hour 3)

Episode Date: May 30, 2019

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Music Live from the headquarters of Ramsey Solutions, broadcasting from the Dollar Car Rental Studios, it's the Dave 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. Thank you for joining us. Open phones at 888-825-5225. 888-825-5225. Liam, I can't say it for some reason, in Lexington is joining us. Hey, welcome to the Dave Ramsey Show, Liam. Hi, Mr. Ramsey. How are you? Better than I deserve. What's up?

So, pretty strange situation going on right now. I'm currently in my senior year of college here in August. Your phone is breaking up horribly. Is there anywhere you can get this a little clearer? Can you hear me now, sir? No, I'm going to put you on hold. We'll come back to you after Madison clears up your phone for you. All right, James is with us in Ocala, Florida. Hi, James.

Welcome to the Dave Ramsey Show. Hi, Dave. How are you today? Better than I deserve. What's up? That's great. I listened to your show yesterday for the first time and instantly became hooked. I think everybody needs solid advice.

Well, thank you. And I'm one of those people. So that's the purpose of my call. I'm a little terrified right now because I'm sitting in a position where I will turn 66 in one year. I'll be 65 on Monday, and then I turn 66 the following year. My plan is to retire at 66. My goal was to reach my full retirement age and try to, so I'm not going to be limited if I choose to work again and be penalized by Social Security. I have $645,000 social security right okay um i have 645 000 uh in 401k and ross and then um i currently have 20 put into my 401k the company has a nice company match, and then I have an extra $150 per check or $3,000.

Let me see. $3,900 a year that goes into a Roth that I have my broker take out. I moved to Florida last year, and it's really inexpensive to live here in a lot of ways uh income tax wise and there's not one um sales tax property tax but i don't like it here it's just way too hot for me my daughter and um grandchildren are living in uh the albany, New York area where I'm from. The purpose that my wife and I moved down here last year was our son had committed suicide and my wife was becoming agoraphobic. And I thought a change of scenery would help her out. Little did I know that it did not help her out. So I want to work until I'm 66 and retire and move back north, and I'm just scared if I'm going to be able to retire with the little amount of money that I have.

What do you make now? Currently, I make about $75,000. Okay, good. And is your home paid for? No, I have a $130,000 mortgage, and I have $10,000 in credit card debt. Okay. I get about $1,200 a month in mileage that the company gives me a full check for. I don't count that as income, although I guess I probably could or should.

Well, you pay the expenses. Well, what I did last month was I saved up three of my mileage checks and then I paid off three credit cards. I took the highest interest rates that I had and I paid off those three cards. Okay. and I paid off those three cards. Our process that we use to get people the closest path to wealth, and you've got some wealth, you've done a great job, you have well above average money, $600,000. I mean, that's a lot of money.

You did good. $645,000. I know. That's good. Very good. And you're going to have more by the time you retire and uh so what i would do is just do a little bit of cleanup around the bottom of this and that is let's knock these credit cards out and cut them up get you some debit cards and live on a cash

basis from this point forward make sure you have an emergency fund saved of three to six months of expenses and then i've got two goals for your retirement. One is for you to have a nest egg enough that you can live off of the income it creates without touching the principal. And the other one is to get a house paid off. Okay? So what kind of a price range of home do we buy in Albany when we move back? Well, the house that I had in Albany, I had actually purchased for $78,000.

I had sold it for $317,000. When you move back to Albany, what will you spend on a home? I'm looking to spend about $230,000. I want to have a smaller house. And you have how much equity in the Florida house? Yeah, I have about $120,000 equity. My plan is to put about $100,000 down on a new house. Right, okay.

And so you've got $100,000 debt on your home going into retirement. That's the only destabilizing factor in your whole plan. We've got to get that cleared up at some point, right? Now, obviously, you could just cash out enough of your 401K and pay it off, and you'd have a paid-for home with $545,000, plus what you put in for the next year and a half or two years or whatever you do here. And you're probably going to continue to work, you said. Yeah, I feel great.

I mean, I've got job offers for me in New York, even at my age, but I have kind of a specialized field, and I've got people offers for me in New York, even at my age, but I have kind of a specialized field. I've got people calling me saying, hey, when you come back, we want you. And I plan on working. I mean, I feel good. So you don't need the money today. You don't need to, quote, retire and live off of the money. You're going to continue to add to this nest egg.

Okay, so I'm moving back to New York whenever you want. I don't care. You can go now whenever you want. I don't care. You can go now if you want. Take the new job, you know? Well, I want to stay. My goal, listen, the reason I came down here to Florida, for obvious reasons, but the company was good enough to transfer me down here. We opened up a new operation in Tampa.

So I want to give them a couple years to take and build the territory for them. Okay. You want to honor that obligation. That's fine. It doesn't matter to me. I'm good. So the point is, though, mathematically, your income is going to continue after you move back. You're going to use that to continue to add to the nest egg, not start subtracting from it, and you're going to use that to clean up the $100,000 mortgage,

and you're not moving to New York with any other debt because you're going to clean that up now. Yeah. Okay. So that's going to put you in great shape. Here's your formula, real rough and dirty, okay? The stock market has averaged, if you're invested in good mutual funds that are averaging what the stock market has averaged, has averaged between 11% and 12%, okay? If you pull off 7% or 8% off your nest egg, you're safe.

I'm good with that. Oh, really? That much? Yeah. If you're earning 11% or 12% and you're pulling off 8. You're leaving 3 or 4 in there. Okay. See what I'm doing? So if you can live off of 8% of your nest egg, you're good. And I think by the time you quit, you're probably going to have a million dollars in this nest egg,

so you're going to be living off of 80 grand or 70 grand or 60 grand, whatever you want to pull off of it. That's where you're going to be. Good job. or $70,000, or $60,000, whatever you want to pull off of it. That's where you're going to be. Good job. No matter what time of year it is, focusing on your family's financial plan is always a smart move. I get questions all the time about where to start and what to do first. One of the most crucial and affordable first steps to take

is to protect your family and get term life insurance. I know it's not glamorous, but all the other steps mean a lot less if something happens to you and your family has no financial protection. Getting term life insurance needs to be a top priority. I recommend 10 to 12 times your income and lock in rates for 15 to 20 years. This gives you plenty of time to get out of debt and build wealth, and I've been recommending Zander Insurance for over 20 years. They understand and live this strategy,

and they will take the time to help you find the most affordable term life rates. Go to Zander.com or call 800-356-4282. It's not that expensive, it's not complicated, and you need to do it right now. That's 800-356-4282. Our famous $10 sale ends tomorrow. Our lowest prices of the year. Go to the online store at DaveRamsey.com or call our concierge, Ramsey Concierge, a 888-22-PIECE. Over 50 of our most popular books, audio books, e-books, envelope systems, $10 each.

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Always use your promo code Ramsey when you're at Blinds.com. This is a great company. Today's question comes from Jose in Texas. Should I cash in my whole life insurance and get term insurance? No, you should get term insurance and then cash in your whole life insurance. We have approximately $30,000 in cash value. I'm sorry. We're both 64 years of age.

The agent is suggesting a paid-up policy. What is your suggestion? Well, the agent is a whole life agent. And so, you know, you don't let the fox in the hen house and give you advice on this. So here's the thing. You have a savings element to a cash value policy called cash value, $30,000. You have an insurance element, which is the life insurance that's paid if you die. The great ripoff of cash value life insurance is that you will never get both,

and you have paid for both. You paid extra for savings, and you have life insurance. If you die, they're going to pay the life insurance, and they keep your savings. If you cash out the savings, they're going to cancel your life insurance. Now, what is paid-up insurance? Prepaid and overpaid. That's what paid-up insurance is. You can pay up term life insurance if you want to send them 10 years of premiums in advance. They won't send you another bill for 10 years.

It's magical. That's all this is. It's what paid up life insurance is. Because as long as there's a probability you're going to die, which if you're breathing, there's that probability, then there's a statistical cost to covering your life. And if the cost is not, the cost is never, it never goes away until you die. And so the insurance company is going to get their freaking pound of flesh. Count on it. So paid up and overpaid and prepaid is what paid up life insurance is.

So here's the thing. If you take $30,000 and you put it into a mutual fund, it made 10%, that'd be $3,000 a year. $3,000 a year would buy you a term life insurance policy greater than the one you have today if you're healthy and could get the insurance and they are paying you not three thousand dollars on your thirty thousand dollars they are paying you three hundred dollars on your thirty thousand dollars about one percent not ten percent so that's their gift to you, is they're giving you 1% of money you should be making 10 or 12 on, and in return they give you a free policy. It's kind of like when I was in Sweden and they told me they had free health care.

And I asked them what their tax rate was, and she said, oh, I pay 65% income tax. And I said, tell me where the free starts. If somebody takes money out of one of your pockets and then runs around behind your back and drops it over your forehead, does that mean it's free? This is stupid, okay? This is how we think, though, okay? So it it's not free and it's not paid up at all you're making a reduced rate of return and they're using the difference to provide you a toaster to go with your new account you just opened if you're old enough to remember that at the bank okay so no it's not free there is you know i got interest, no interest on my new car, which went down 62% in value when I drove it across the curb. You know, it ain't free, dummy.

Okay, you have to think through this stuff. There is no free. Sorry. There's not. I mean, you can get free on the short term, but somewhere, somehow, it's being picked up. So, Jose, you get your term insurance if you need term insurance at 64 years old. You may not need term insurance. Maybe you made a bunch of other financial decisions that were good ones.

And maybe you have some money. You might have, I don't know what you have. You may have $750,000 and no payments and the kids are all grown and gone. And if you die, she'd be okay. You may not need life insurance at all. You may be self-insured because you've done a good job with your money and you're out of debt and have built some assets. That would be the goal with life insurance, by the way,

is to get out of the need from it. You get away from the need of it. You don't have any need for it because everybody that's left behind is okay because you have money. And until you have that, you buy life insurance. I do believe in term insurance. So if you need some insurance, you get term insurance in place, then you drop the whole life. Never drop insurance until you have the new policy in place.

And, you know, when you're looking at a whole life agent and they say sweet things to you, you say, my, but grandmother, what big teeth you have. And you think about this a little bit, little red riding hood. All right, Elizabeth is with us in Syracuse, New York. Hi, Elizabeth, how are you? I'm fine, fine. How are you, Dave? Better than I deserve. How can I help? Yes.

So my husband and I moved to Syracuse with my son in January because of my job. We have an old Honda 2004 Accord, and the transmission went out about two days later. So we've been without a car. He's been trying to get a part-time job. He's in school right now um so the issue is what do you make we have the i make a year about 50 000 okay and you move there for your job and he's not gotten a job in how long um in a few months since january he actually has gotten two job offers but because of our son um we couldn't afford like the daycare and the

timing and the scheduling so it's an issue but right now you know we're having a struggle with that so he he wasn't going to make enough to justify the daycare um it's not that we i mean he could but is this so much more like 300 somethingsomething a week for daycare. Yeah, but what was he going to be paid? He would actually do, like, security part-time because of his schedule at school. Oh, so he wasn't going to make enough to pay the daycare even, so it doesn't make sense. Right. Okay, that's what I'm saying. All right, so what's the problem?

So you've got a car that's down. Have you got one car that's working? That was the car. We only had one car, and so now we want to get something else. How long have you been getting car that's working that was the car we only had one car and so now we want to get something else how have you been getting around since this car broke um just like the bus and uber um so right now we're trying to find something we found something for about two thousand dollars good and um the issues were just afraid you know, just a couple months down the road. We didn't even have the Honda for eight months, and it ended up going out. Well, get the car checked out. You don't get a lot for $2,000, but you can usually get something semi-reliable.

And you don't have any money, so this is your only choice right now. Right. Okay. The point is, long term, you drive like no one else, so later you can drive like no one else. But right now, you're broke, and you're going to drive broke people cars. That's what I did when I was broke. You drive broke people cars. You don't go on vacation.

You work extra. You go crazy. And you find some stuff to do for hubby. He needs to make some money. This is the Dave Ramsey Solutions, David is with us. Hi, David. How are you? Good.

How are you? Better than I deserve. Where do you live, sir? Dallas, Texas now. All right. Welcome. Good to have you. And all the way to Nashville to do a debt-free scream. Yes, sir. Very cool. How much have you paid off? I've paid off $74,228.43. Love it. How long did this take? It took me three years, four months, and 15 days. Okay. And what was your range of income during that time? I started at dollars an hour jumped up to forty thousand dollars an hour got laid off forty thousand dollars an hour i'm sorry forty forty thousand dollars a year okay good okay and i got

laid off back down to 14 jumped up to fifty thousand dollars a year and laid off again and then uh jumped up to $5950. Okay. Yeah. So that's what you make now. It's $5950? I got a raise. So I'm at $61,000. Good.

What do you do? Licensed architect. Okay, cool. So from $14,000 all the way to $60,000. Yes, sir. Very good. Good for you. How long have you been out of school?

Well, I graduated in 2015, so four years. Yeah. Yeah. Okay. Good. Good. And $74, good, good. And $74,000 in debt was what? 100% student loans.

Ah, so you kicked old Sally Mae out. Got rid of her. Give that old woman her eviction notice. Yes, sir. Put her to the curb. I like it. Very good. So $74,000 to become a licensed architect, and now you're there.

Now I'm there. Love it. Good for you. Where'd you graduate from? I went to Kent State University and then to the University of Texas, San Antonio. Very good. Good. Okay.

And so when you got out of schools, when you started this? A little bit after, about a year later, it looks like. I actually started first. I paid off one of my loans before going back to grad school. Oh, okay. It was only about $3,000. Okay. But, yeah, I did that and then transitioned right into grad school and then right out of school. Just started powering through it.

So what made you – so you're what? You're 28? 27? 31. 31. Okay. Just turned 31. Okay.

And so what made you decide that you needed to get out of debt like this fast? Because you leaned on it. Well, it was kind of raised that way uh my parents have always been like that and uh my brother was debt free way way before i was so um it just was kind of always in the family and um felt like that was something i needed to do and just put my nose through the grindstone so it's like thanksgiving dinner they're like okay we're all out of debt. It's time for you to get after it. About right, yeah. A little positive family peer pressure. I like this family.

All right. Good stuff. Well done. Cool. Way to go, dude. Thank you. How's it feel? Feels great.

Feels great. About at the end of this month, or I'm sorry, the next month I'll have my emergency fund saved up, too. So there's just powerAway and my savings. Yeah, way to go, man. Very good. So who were your biggest cheerleaders, family and who else? 100%, my parents and my brothers.

I had a couple buddies that were really into it as well. And they were my number one supporters. And I had one kind of funny story about a detractor. I know you might get a kick out of this, but about two months after I got debt-free, I was seeing a girl and I told her that I didn't have a credit card. And next week she came back and she was kind of all distraught. She said, I don't think we can do this anymore.

She thought I was a little crazy with the finances and not too smart with the way I was running everything, so she dealt me over that one. But, I mean, hey, it happens, right? Well, all the old people are going, you got rid of that. She did you a favor, man. Exactly, exactly. This chick was going to be a long life for you. It was a bummer, but, you know, oh well.

Yeah, well, you know, it's a good time to find out that she's not smart with her finances. Oh, my gosh. Yeah, I don't think I can date you if you don't have a credit card. Yeah, exactly. You belong to that Dave Ramsey cult. Oh, that's funny. I love it. So your mom and your brother came with you to cheer you on for the day. They, that's funny. I love it. So your mom and your brother came with you to cheer you on for the debt freeze right here?

Very cool. That's good. Good stuff. Well, excellent work, man. What do you tell people the key to getting out of debt is? You just got to power through it. Notice the grindstone. Set a goal and achieve it.

And just the little incremental things towards that goal, kind of the same way you say it. Put your mind to it, and you can do it. Okay. So when I asked you about your income, you told me like four different stories of things going on. It sounds like it came and went, came and went, came and went. So sticking with it with all of that gyration and variation is tough, isn't it? I've got to tell you, it was really tough. After the first layoff, it was like it wasn't too bad.

I was able to fall back on the family business, uh, moving in storage and, um, you know, it's kind of raised in that, uh, we work till the job's done kind of mentality. Yeah. And, um, I was able to power through that. Got another job building houses and, uh, three months that was, that was terrible, terrible, terrible gig. terrible terrible gig so i was out of that back to the moving storage and um then i was just really called to get back into architecture so decided that there was no um not too much of a market in pittsburgh for that so i just decided up move down to dallas and just power through everything else okay so your family's in pitt yes sir okay all right cool wow so this has worked out good for you man well the sticking move down to Dallas and just power through everything else. Okay. So your family's in Pitt? Yes, sir. Okay.

All right. Cool. Wow. So this has worked out. Good for you, man. Well, the sticking with it thing's a big deal. And especially through things going thick and thin, thick and thin, it wasn't like a steady line for you. You had this circuitous route that you used to get there, but you stuck with it.

Way to go. Very much so, yeah. Very proud of you. Congratulations. I'm sure your family's proud of you. They definitely are, yes. Very proud of you. Congratulations. I'm sure your family's proud of you. They definitely are, yes. Yeah, very cool. We've got a copy of Chris Hogan's book for you, Everyday Millionaires.

That is where you're headed, how ordinary people built extraordinary wealth and how you can too. It's the story of all these tens of thousands of millionaires we've studied. And that's the next chapter in your story. I hope so, yeah. Yeah, the $14 days are gone. Well well do that on part-time still too so you never really get out of that you keep working till the job gets done yes sir i like it good stuff all right david from dallas 74 000 paid off in three years making 14 an, up to now a little over $60. Count it down.

Let's hear a debt-free scream. Three, two, one. I'm debt-free! Yeah! Woo-hoo! This is how it's done right here. Well done, sir. Very well done.

Love it. Jill is with us in Birmingham, Alabama. Hi, Jill. How are you? Hey, Dave. I'm good. How are you? Better than I deserve.

What's up? I have a question. I've been listening to your podcast for a few months now, and my husband and I are debt-free other than our house, and I had a question because I haven't really heard too much on what your advice is for couples that have a bit of an age difference. And we have probably more on the long lines of just planning for our retirement. We have term life insurance. I'm just wondering on what your thoughts are if we should. We have a 20-year policy.

My husband, he's 50 and I'm 36, and we're about five years into a 20-year term. And just whether or not we should get another policy at any point. We have insurance on myself as well, or if we should just continue to when he's 65 what when he's 65 on the current trend that you're on what will be your financial condition will the house be paid off yes um yes okay will you be debt free other than the house yes yes okay and uh what what's your household income? Between the two of us, $110,000. Okay. And so if you're saving $15,000 or $20,000 a year for the next 15 or 20 years,

that means you're probably going to have $600,000, $700,000 in mutual funds. Do you have children? We have one child. He's six right now. Okay. And so in 15 years, he would be 21. Okay. So he's grown right now okay and so in uh 15 years he would be uh 21 okay so he's grown and gone and by the way you would have saved for college by then so if you've got eight hundred thousand dollars of paid for house and no kids at home and he dies at 15 years from today you'd be okay right so you're probably okay on life insurance. Okay. If you want to buy another policy in a few years and start it over just to have a little bit of pad on the other side, you can, but it's kind of a luxury.

Yeah, that was my question. You know, obviously, you know, I know we wouldn't need, you know, to do another, you know, it would be expensive, obviously, to do another million dollars or anything like that. Yeah, but you could pick up another half million or something. As long as he's not overweight and doesn't smoke and his health is in good shape, it's not prohibitive. I mean, it's really not. It's not that bad. So you can add some to it if you want to later,

but on a shorter term, like a 10-year policy or something, then you'd be right where you want to be. This is The Dave Ramsey Show. our scripture of the day joshua 1 9 have i not commanded you be strong and courageous do not be afraid do not be discouraged for the lord your god will be with you wherever you go bethany hamilton says courage doesn't mean you don't get afraid courage means you don't let fear stop you there it is like that one jeff is with us in seattle hi jeff welcome to the dave ramsey show thanks dave thanks for having me and uh thank you for taking me out of my 30-year financial coma. Well, that's my job.

How can I help? Well, we're in baby step two, and I see that interest rates have gotten a little bit better here lately. We've got a 30-year that's now a 20 with $150,000 on that 20 years. And I did some stupid stuff. Long story short, there's a $37,000 deferred balance on that as well. I was wondering if it's in my best interest to refinance that all into one or to go about that some other way. What's the interest rate? Four and an eighth.

Okay. Well, you're not going to better your interest rate by refinancing. The $37,000 is part of that loan? Correct. Yeah, the payments are at $150,000 right now. Yeah. It was originally $200,000. It was a 30-year, and now it's $20,000.

Yeah, okay. No, I would not refinance that. I'd just finish your Baby Step 2. When you get to the point up to Baby Steps 4, 5, 6, if you want to, when you start putting some money on 6, you're going to accelerate those payments anyway. The only benefit to refinancing is to get a lower interest rate. You do not need to refinance a 20 or a 30 that's got 20 left on it in order to get it to a 15. You just need to pay it as if it were a 15 or more, and it will pay off sooner. I mean, if you pay it like it's a 7, it'll pay off in 7, you know?

So all you got to do is just add extra principal, the equivalent to what the extra payment would have been, and it knocks it right out. It's the exact same math. There is a zero mathematical benefit to refinancing unless you're lowering your interest rate, and you would not be. So I wouldn't do it. Richard is with us in Kansas City. Hi, Richard. Welcome to the Dave Ramsey Show. Hi, Dave. My name is Richard Medellin, and I've got myself in a pickle. I've got two credit cards maxed out, and they're suing me now. I'm wondering what happens when they put a judgment on me.

Well, in most states, they can garnish you your wages. Okay, I'm on Social Security disability, so I'm worried about what they're going to do to the house. I only owe about $10,000 on it. It's only worth about $30,000 or $40,000. It would be very unusual, like almost would never happen, that they would mess with your house. I would not worry about that. The one thing I have seen them do in situations like yours is if your Social Security disability

is direct deposited into a checking account, they might put a lien on that checking account. They cannot scarf your Social Security disability. They can't touch it, but they can clean out checking accounts. And so if it's direct deposited and they happen to have a lien on that account, boom, they're going to take that money. So how much is owed on these credit cards? About $9,000 between both of them. Okay.

And how long has it been since you paid on them? Last year. Okay. Why were you able to pay then and you're not able to pay now? Well, I was paying $250 a month on them, and it was just killing me. And I tried to file bankruptcy, but the lawyer ripped me off, and she told me she would do a Chapter 7, but then she changed her mind and said I had to do a Chapter 13.

Yeah, well, there's a lot of those. I don't think that's – $300 or $400 a month. I don't think that was the lawyer ripping you off. I mean, she may have made a mistake, but the law dictates that in certain situations you have to do a 13 versus a seven and the lawyer doesn't have a choice in that uh so it wasn't it wasn't her changing that on you so um you're single yes and so your social security disability is how much about 1500 a month and

that's what you live on yes you. You don't have any other money? No. Coming in. How old are you? 54. What's the nature of your disability? I have cerebral palsy, and I worked for 30 years for Duffin Ball, jumping in and out of a big truck, and now I can no longer do that. So I've been on disability since about 2008.

Okay. All right, cool. You know, basically you are in a position that what we call judgment proof, meaning that there's not much they can get from you. You do need to manage the checking account, as I mentioned, and not let them get a shot at the money that goes into that checking account. And I'm guessing you have direct deposit on that, and it goes straight into a checking account that you used to live on.

And so if Social Security still has this available, if they actually do take a judgment lien, and if they start messing around, I wouldn't fool with it unless they did, but if they start messing around i wouldn't fool with it unless they did but if they start messing around with your checking account you may want to go to a paper process where you actually receive a check in the mail and go to the bank and cash it and that way there'd be no way they could get that money the good news is if you could scrape together some money at some point from a side job or something else you can probably get them to settle this whole thing for fifteen hundred or two thousand dollars um you probably get it settled for you know we're talking 10 20 cents on the dollar here and um i think i think that's very doable but that's going to be

tough to scratch together in your situation so um but if you scratch that together, you can probably call them and explain your situation. I'm on disability due to cerebral palsy. This is my 54. I'm not able to work. I have $1,500 a month income that you do not have access to. So I'm offering to settle this with you for this, you know, $1,400 I've scraped together or whatever it is. And get that in writing from them before you send them money. And if you get it in writing, then you send them money.

You have proof that you sent them money. Then at that point, you know, you would have cleared the thing and settled it in full. That's your best-case scenario. Your worst-case scenario is you're looking over your shoulder for a while and making sure that they're not needling around in something, but you don't have a lot for them to get. And so they're not going to mess with you much.

They just don't. They'll hassle you. They'll bother you. They've been doing that already. But there's not a lot. You're kind of judgment proof, as I said. Mark is with us in Sioux Falls, North Dakota. Hi, Mark. How are you? Sioux Falls, North Dakota. Hi, Mark. How are you? Sioux Falls, South Dakota. I would think.

I just read what was on the screen, but we'll give Madison a geography lesson when I get off the air. How can I help? My wife and I are going to retire in about three and a half years, and I was just curious, do you recommend pulling the money out of a 401k first

or the Roth IRA first? How much is in the 401k? Probably about $750,000 and about a quarter of a million in the other. In the Roth? Okay. Yeah. It's a catch-22. It goes both ways a little bit.

The money you pull out of a 401k obviously is taxable but not got a penalty on it. And so whatever money you die with in there, you never pay taxes on. Now, your heirs will, but you would have never paid taxes on that money. And so it's kind of cool to leave that alone. If you do, though, you're going to take out the Roth money, and the Roth money has no required minimum distribution beginning at 70.5 RMD. And RMD requires that the traditional 401k or IRA has a minimum distribution beginning at 70.5. You have to take out, and you have to pay taxes on. And you don't have to do that with a Roth,

so it can grow tax-free for the rest of your life and go to your heirs tax-free. So all of that's kind of cool. So all of that said, and because you've got more in the 401k, I'm probably going to draw down on the 401k first but it's it's it's a it's a coin toss but that's the pluses and the minuses of doing either one that i just outlined and you can go that way if you have a reason for doing it differently that'd be okay there's not a there's not a hard and fast thing that um the beauty of the roth is you don't have the rmd you don't have

the required minimum distributions at 70 and a half the beauty of not Roth is you don't have the RMD, you don't have the required minimum distributions at 70.5. The beauty of not taking the money out of the traditional is it passes to your heirs and you never paid taxes on it while you were alive. That's awesomeness. So that puts this hour of the Dave Ramsey Show in the books. Our thanks to Zach and Madison in the booth. I am Dave Ramsey, your host. We'll be back with you before you know it.

In the meantime, remember, there's ultimately only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus. This is James Child, producer of The Dave Ramsey Show. Once again, you made The Dave Ramsey Show one of the top five most downloaded podcasts last year. To get your daily dose of motivation and inspiration, subscribe today.