The Ramsey Show - App - What Should I Do With This Inheritance? (Hour 3)

Episode Date: October 12, 2022

Ken Coleman & George Kamel discuss: Should I move out of my parents' house? Switching jobs for a small pay increase, What to do with an inheritance, Taking a pay cut for a less stressful job, Putting 5% down on a house, The best retirement options. Have a question for the show? Call 888-825-5225 Weekdays from 2-5pm ET Want a plan for your money? Find out where to start: https://bit.ly/3nInETX Listen to all The Ramsey Network podcasts: https://bit.ly/3GxiXm6 Learn more about your ad choices. https://www.megaphone.fm/adchoices Ramsey Solutions Privacy Policy

Девочка-пай Live from the headquarters of Ramsey Solutions, broadcasting from the Pods Moving and Storage Studio, this is The Ramsey Show. It's where we talk about your life, your money, your work, and your relationships. I'm Ken coleman joined by george camel it is a free phone call if you want to jump in we're here to help you to give you some hope through some practical clear steps forward triple eight eight two five five two two five triple eight eight two five five two two five george you ready to go game on yeah you got all your answers your cue cards ready to go 5-2-2-5, 888-825-5225. George, you ready to go?

Game on. Yeah, you got all your answers, your cue cards ready to go? I have sports references ready, Ken. I mean, this is, wow. Here we go. Ben is up in Phoenix, Arizona. Ben, how can we help? Hi.

First, I just want to say my parents are huge fans of the show, and they've been teaching us the concepts of financial peace for a very long time, and they just definitely wanted me to shout them out for this. Nice. What are their names? Jenny and Marianne. Jenny and what is it? Marianne. There it is.

Jenny and Marianne, thank you for being long-time listeners, and there is the shout out. Raising a good kid. All right, how can we help today? So I've found myself in a pretty fortunate position. I just graduated in May from college, and I got a job here. I don't have any debt and I moved back in with my parents, but I'm trying to decide if it's a good idea to move out. And I certainly would like to, um, but, um, I'm saving up for, um, you know, I'm planning to get engaged to my girlfriend pretty soon. And, um, she is, uh, gearing up to go to med school, uh, within the next two years. And, um, thinking about all the debt that comes with that. Uh, I'm just wondering if it's a good idea to move out yet or. Yeah,

it's time to move out, man. You got no debt. You have a great income. It's time to fly the coop and have some dignity on your own and have that independence. That's great to hear. So, it sounds like making $78K, can you afford a place on your own that's 25% of your take-home pay? Yeah. I got to ask you, when George said that you you're like oh it's great to hear why do you need our permission what's behind that are you feeling pressure from mom and dad to stay a little longer no so um i uh everyone that i talked to at my job has said um you know i'll write that out as long as you can oh and i uh yeah but they're broke you're not they want to stay children you're an adult

okay yeah all right and then i moved at 20 and it i think it really there's nothing wrong with going home for a season if you're trying to pay off debt and really do something aggressive like that but man it really stunts your growth long term to just have that safety net and just, I'm just going to live with parents because it's easier and I got meals here. At some point, you've got to be an adult and go, I've got to pay my own insurance and learn how to cook a meal. That's absolutely right. I've got to take the old man opinion here on this one. This is under the guise of, well, it's financially smart to stay with mom and dad. That's just avoiding responsibility.

This is the generation that came up with the term adulting, which I can barely say without spitting. So, yeah, good for you and your response. You need to do what you believe is right, and George is absolutely right. It's going to make you so much more fulfilled being your own man and getting out there. So, yeah, go for it, man. My guess is your take-home pay is probably somewhere in the $4,500 a month range?

Yeah, probably around $4,200. Okay. So if you can find a place for about $1,000 in your area to rent, that's great. If you need to get a roommate, that's fine too. If the place is $2,000 and you get a roommate that covers one of it, then I think that's a wise move. I had roommates up until I was about married and it was great. Yeah. So here's the deal. Turn off the noise, Ben. They're going to criticize this move when you go back to work. You got to be a big boy. Put your big boy pants on and be okay with them disagreeing with you. But that's real. I mean, let me just

say this. In no way am I knocking Ben, but peer pressure is real. I mean, peer pressure isn't just a middle school, high school phenomenon. You know? I mean, it really does affect adults as well. You got a chorus of people going, oh, you should do this. Well, it's part of the pessimism about everything's so expensive and none of this is our fault and the other generation set us up for failure. And while some of that is true, it's also your responsibility for what comes next. Yeah. And you can't just sit back in a corner and go, well, as long as mommy and daddy are here, I'm going to be okay.

I got a term. What is it? It's like quiet quitting. It's lazy living. I'm just going to live at home with mom and dad. This is your third term you invented. There was excusism, compound impact. Impact, and now this one, lazy living. I should probably take the rest of the show off.

Write these down. I don't want to hurt myself. Brilliant. Yeah, there it is. All right, Carlos is on the line in Albuquerque, New Mexico. Carlos, how can we help? Hey, how's it going, you guys? We're having a blast.

What can we do for you? Well, I appreciate everything you guys do for everyone. And so my biggest question is, I got a job offer, and I'm kind of stuck on whether to take it or not. All right. What was the job offer? So the job offer, so the job I do right now is I'm an automotive technician. Okay. And the job offer is basically to go just to another shop.

So basically I'll be doing the same thing, but they're offering me a dollar more. What's the jump? From what to what? It's working from a dealership to an independent shop. Okay. What's the numbers? Is it 18 to 19? No, it's from $32 to $33.

Yeah, that doesn't even matter. Let me take a wild guess. You're calling because your brain and your heart are having a wrestling match. Your brain's telling you, man, it's a no-brainer. You've got to take the other job. They want you. It's a dollar more. But your heart's going, I don't think I actually want to go over there am i about right or am i

wrong i mean you're you're about right um i guess like my biggest thing is here where i where i currently work you know i have a lot of a lot of more leeway here so they understand what do you mean by leeway you know they like, you know, with my kids that they'll let me, you know, if I have to go to my daycare. Flexibility and they value you. Right. Yeah. So here's the deal. I wouldn't even consider the new job unless they would promise you the same flexibility.

I wouldn't even consider it. I can hear it. You know, that's why your heart's going, do we really want to leave and leave this type of value, this type of flexibility that's really good for us? For a dollar more, it's just not worth it on paper. independent shop will promise you the same flexibility and value the same way, but you're going to have to ask people who work there. You're going to have to talk to people who already worked there and go, hey, this is what I have at the other shop. You think they'll allow me to do that here? They'll tell you the real, real. Get an idea of what the culture is like over there by talking to guys and gals that are doing the work, not the leaders who are interested in hiring you. But Carlos, unless you find that, I'd stay where you are.

George, you agree? Yeah, I'm with you on that one. It's not worth it if it's going to be a tougher work environment. You go, this wasn't worth the extra few thousand. Yeah, just wasn't. When the head and the heart are in a wrestling match, you've got to listen to the heart. Always.

This is The Ramsey Show. សូវាប់ពីបានប្រាប់ពីប្រាប់ពីប្រាប់ពីប្រាប់ពីប្រាប់ពីប្រាប់ពីប្រាប់ពីប្រាប់ពីប្រាប់ពីប្រាប់ពីប្រាប់ពីប្រាប់ពីប្រាប់ពីប្រាប់ពីប្រាប់ពីប្រាប់ពីប្រាប់ពីប្រាប់ពីប្រាប់ពីប្រាប់ពីប្រាប់ពីប្រាប់ពីប្រាប់ពីប្� Welcome back to The Ramsey Show. I'm Ken Coleman. I'm joined by my colleague, George Kimmel. We're here for you. 888-825-5225. Talking about your life, your money, your work, your relationships. 888-825-5225. Right now is the time of year when it's make or break when it comes to our goals.

We're heading into the holiday season, and it's hard to stay motivated. George loses all motivation for his figure around Thanksgiving. I know this is true. You wear the Sands Belt pants. I gain at least two pounds. But whether it's finding a better job, making more money, paying off debt, building stronger relationships, it can be hard to keep the momentum going. But in a couple weeks, we have the day.

We could call it a Kickstarter day to kickstart momentum, to keep that momentum going for you. We call it the Smart Conference. It's one of our biggest events. We're going to be in Dallas for a day-long event where you'll get advice from leading experts on money, personal growth, career, mental health, and your marriage. Join me and the rest of the Ramsey personalities, Dave Ramsey, Dr. John Deloney, Rachel Cruz, George Camel, Christina Ellis, and it is going to be a fun day. It's live, in person, October 22. Get your tickets before they sell out.

Go to ramsaysolutions.com slash events. That's ramsaysolutions.com slash events. It's going to be a fun day, George. There's a live band, and I'm going to audition to be in it. I'm real excited. From what I understand, you might be making a cameo. I realize I'm on stage about four times at this event, Ken. Yeah.

So it's a never-ending party. Are we allowed to talk about the other fun thing we're all doing? I don't know if it's under... Or do they consider that to be taboo? Yeah. I don't know if we can let the cat out of the bag. But let's just say this. It's the most fun we have at an event.

High energy, high entertainment value. No question. Not your grandma's event. But bring her. Yeah. She'd love it. Your grandmother would love it. I might invite her. You might invite your grandmother?

I don't know that she can make on the plane these days. Yeah. Alright. Bless her. There you go. Alright. Bless her heart. What do you call her? Teta. Say that again? That's Arabic for grandmother. Say that again. Teta. Like T-E-T-A. Teta. Teta. Yeah. Did I say that right? That was mildly offensive, but I think

you passed the test. You passed. Oh, no. You passed. George, you can't walk me into offending somebody. No, you did pretty good. There was an attempt made. Yeah. Effort.

My version of your grandmother's name is far better than you saying Toyota. That is true. All right. I get heckled by the gang because I say Toyota instead of Toyota. Like a robot. Who talks like that? I'm from Boston, dude. What do you want from me? People in Boston don't say Toyota. Like a robot. Who talks like that? I'm from Boston, dude. What do you want from me?

People in Boston don't say Toyota, whatever that is, okay? They don't butcher it like that. That's offensive. He'll tell you. All right, very good. Speaking of Boston and the rivalry between the Red Sox and the Yankees, we go to the Big Apple. Thomas is in New York City.

Thomas, how can we help? Hi, guys. How you doing today? Well, we're having too much fun, as you can tell. How can we help? As a matter of fact, the New York Yankee game is tomorrow night. I'll be going to it for the playoffs. There you go. You got to see Aaron

Judge maybe hit one out of the park? I hope so. It's nice to be in the playoffs again this year. That's what I'm saying. The Red Sox aren't there, are they? No, they are not. I just wanted to point that out. I'm done with sports talk with Ken. How can we help, Thomas?

What's going on? Yeah, let's get on. We're not here to talk about sports. All right. Listen, I've inherited about $18,000 from my father who just passed. Oh, sorry to hear that. No, that's okay because he was 95 years old. He had a great rock.

Wow. I can't say anything. That's what I mean. I mean, people say, oh, you're sorry. I mean, 95 years old. He lived a great life. I hope to live that long. Come on.

Amen. You and me both, pal. Let's celebrate it. And what a legacy to leave you with a chunk of money as well to bless you. Yeah, I mean, it's not a huge chunk, but it is. You know, like I said, it's $88,000, and I'm trying to figure out what to do with this money or where to put it for now.

Like I said, I'm 55. I mean, I have a good job. I earn a good living. I have a pension with that job. I have a small savings account. I pay my bills. So it's not necessarily I need the money necessarily, but the end is coming soon, being 55.

Well, not the end, but... Yeah, wait a second. I thought we were living 40 more years. Got dark real quick, Thomas. I don't mean the end. Sure. You want to retire in the next five or 10 years. We got you.

We got you. Well, 10 years. I got to want to retire in the next five or ten years. We got you. We got you. Well, ten years. I've got to go at least 65 to get my full pension anyway. Okay. So do you have any debt? I do not. I got rid of my debt when I got divorced. Okay.

So no debt. You said you have some money in savings. Do you have a fully funded emergency fund? Three to six months of expenses? Maybe three. Okay. I've got like 14, 15 grand. And what kind of account is the 88K in? Was it a traditional IRA? It came from an annuity and an IRA, I think. Okay. I mean, I literally, I have the money. It's in your bank?

Yeah, no. Well, I have a check in my drawer, and I have a direct deposit. You want to count direct deposit automatically into my savings account of $45,000. Have you looked into the tax implications? Are there any on this? I was told by an attorney that I won't be taxed on this inheritance. Okay. I just wanted you to triple check that before you go spend it, and then tax day comes and you owe us $20,000. Yeah, I'm going to get back 30%, 40% almost probably, right?

Yeah. So I would work with a tax pro on that just to double check, depending on the type of account. But if I'm in your shoes, I'm going to apply it to my next goal. And if that's, you know, maybe add some to the emergency fund. Do you have a house right now? Do you have a mortgage? I do not.

I rent. Okay. Do you have any aspirations of being a homeowner? I'm not. You know, I did that. Been there, done that, he said. I did that for 20 something years. I was married for 20. The house ended up, we ended up losing the house due to the divorce through foreclosure. And so then I had to file bankruptcy and the whole nine yards. Oh my goodness. Going forward. Yeah. But going forward, that was 11 years ago. Okay. going forward, yeah, but going forward, that was 11

years ago. Going forward, I filled up my pants, my britches, and I kept going and I'm in pretty good shape right now. Okay. I might consider it only because if you live to 95 like Pops, that's 40 years of rent going up and expenses going up. And so I'd rather you have a fixed expense with a mortgage and maybe you can tackle that and pay it off and this money can help kickstart that. It did cross my mind. I mean, the housing market is not a joyride right now.

Sure. But also what's not going to be a joyride is 40 years of increased rent in New York. Right, right. And so that also worries me. So on this path, though, George, that you're bringing up, I think this is good, Thomas. In 10 years from now, let's fast forward 10 years, and you retire, would you stay in New York or would you be open to moving to another place where it's less expensive?

No, I probably, I mean, technically I'm in New Jersey, and I'm at the Jersey Shore, technically. So when you say New York, I'm not necessarily in New York City. Sure, gotcha. But, you know what I mean? I mean, I can afford the rent here. The housing market is still kind of crazy. I could probably buy something, but then, like you just said, George, about being, you know, 10 years from now, and then, you know,

what are you going to do? Are you going to stay in Jersey or go to Florida or or what i'm not sure yet didn't really cross my mind i'd be thinking about that yeah the worst case scenario you could just sell real estate at any time you know i mean that's not yeah and that real estate would appreciate over the 10 years while you decide and so now you've been building equity, the house has gone up in value, you sell it, and now maybe you could pay cash for something in your next spot versus having zero assets to your name. So I just want you to consider it. I think it's a great part of a retirement plan to have an asset like a home that will continue to grow in value and you control

your biggest fixed expense in retirement, which number one is probably housing, number two is going to be health care. Right, right. So something to consider with the inheritance. But if you need to upgrade the car, you know, I like to do three things when it comes to money. Give it, save it, spend it. So I'd start with the giving. If you want to give some of it and be generous, you want to save some of it, add to the emergency fund, maybe, you know, max out a retirement account, and then with the rest, enjoy some of it too.

Yeah, I guess so. So then, in other words, putting it into an annuity or something like that. I'm not a fan of annuities. I want you maxing out IRAs, 401ks, solid retirement accounts. I wouldn't mess with annuities at this point. Talk with one of our smart investor pros, RamseySolutions.com. Find several in your area. Go meet with them.

Talk through your options, and they're going to give you some tremendous advice. So there you go. I thought that was fun. Throughout the show today, I called you Jersey George. I know. And we take a call from Thomas, who's from the Jersey Shore. And he had the great accent to go with it.

Yeah, you should have said the bada bing, bada boom with him. That was the perfect moment. You missed it, but there it is. You missed the opportunity. You missed 100% of the shots you don't take. There it is. Don't move. More Ramsey Show coming right up.

One of the most common pieces of advice I give folks trying to get out of debt is to sell the car. But it's important to sell the smart way by using CarWiser. CarWiser is a completely free service that gets you offers from all the top online dealerships instantly. Just enter your vehicle information and boom, you're ready to pick up an offer and get paid. CarWiser saves you hours of time and hassle. So go to CarWiser.com slash Ramsey. That's carwiser.com slash Ramsey. Welcome back to the Ramsey Show America.

Thrilled that you are here with us. I'm Ken Coleman. He is George Camel. The phone number is 888-825-5225. That's 888-825-5225. Kevin is joining us now in Laguna Beach, California. Kevin, how can we help? Hey, guys. Appreciate you taking the call.

You bet. Yeah. So I've been with my company for 15 years now. I've moved into the VP of sales role four years ago. Due to COVID, we went from 50 employees down to 11. We're back up to 26. But with that, you know, VP of sales turned into marketing, social media, partner business, a lot more than it was maybe two or three years ago. And, yeah, have a job offer on the table that is a lateral potential move, a little bit less than the pay, but definitely a higher ceiling. And just kind of wrestling and struggling with, do I stay where it's comfortable quote unquote or do i kind of go out on a limb and and risk something after 50 years at a company it's kind of hard to hard to walk away from what you know yeah i think you've laid out a pretty clear um opportunity and i think i've got an opinion on this one but i want to know how much less pay and then for how long? Yeah, so my current job has a salary of $205,

and then bonuses on top of that, but the bonuses are, we'll just say $205. The new job has a base of $160 with an on-target earning of $190 for year one, and then year two, they haven't laid out what that looks like. So it's $20K, $25K for the first year. for year one, and then year two, they haven't laid out what that looks like. So it's $20K, $25K for the first year cut. Well, you said $205K and then $190K. Yeah. Okay, so that's $15K.

Yep. And then the question is year two, because that's what you said year one is 190, you know, if you hit everything. Yep. What do you think year two and year three look like? They're putting that together by Friday, so I should have more information on that. Yeah, I'd want to know what that ladder looks like, because the way you laid it out is, all right, Ken, I make a lateral move professionally as far as title and responsibility, but less pay. The $15,000 less pay for an opportunity to climb, I would always consider that because I look at it as, well, how long am I going to have that deficit? And it doesn't seem like very long. They're going to get you the numbers and I think you got to weigh it there but the opportunity to take a an opportunity to get a higher ceiling or the way you put it higher

ceiling I'd put it as I've got a ladder that I could get on and climb and you know I don't feel like that you love the environment you're in now it may not not be bad. I'm not saying you hate it, but I don't think you love it. And I don't think there's much of a ladder or if there is one, it's not one you want to climb. Is that fair? I'm reading in between. Okay. Yeah. No, I report to the owner of the company. So, I mean, I am, I am as high as it goes right now. Yeah. See, I am a, I always preach progress because that's just how humans are wired. You know, I mean, Kevin, that doesn't make you a bad person. It makes you a human. We want to make progress. We want to grow. So I want to go where I can grow. And if I've got to go backwards temporarily, so one step backward in order to take

two steps forward, as long as I can absorb the pay cut and it is a short-term sacrifice, then I would absolutely do it. Yeah, okay. Yeah, and I mean, and things that they're going to lay out, hopefully by Friday is also equity in the company. Come on. Things like that. Come on with that.

I'm hoping and assuming you're in a great place financially, making this kind of money. We're comfortable. Okay. I mean, no debt, emergency fund. We're comfortable. Okay. I mean, no debt, emergency fund. We're comfortable. Yep. Yep. No debt, emergency fund, investing cash for car, our cars, investing 401k, all that stuff. So you can afford to take this pay cut. It's not going to affect your budget that much.

Yeah. And the wife is also a nurse that could go back, you know, a couple more days a week. Wonderful. In the interim. Yeah. That's, by the way, we've got options. Yeah, and that's what I want to point out to the larger audience. When I say absorb it, that's what I'm talking about. You're not, you know, it's not a four alarm fire and you're all of a sudden struggling and having to live off credit cards and all that crap. And, you know, you can actually do this and you're in a place to do it.

So you don't have to take it, right? You could keep your options open, but I certainly would listen all the way up until they give you all the way up until they give you all the details and answer all of your questions yeah so i've been trying to get out for about four years now good so i've been i've been looking this feels right doesn't it it feels right um it's just kind of the unknown but also kind of the pay cut and it's the people who are closest to me and i guess who care about my

soul are saying take the job oh right like that's that to me is even more important than my or george's advice i don't know ken's number one for me but i know i get it you know i think you know what to do kevin yeah i mean listen this is this is good for you you got to listen to your heart on this one uh let's get all the details and and if it feels right, I'd walk into it. Absolutely. Because you'll climb, and you'll look back on this as, I think, a watershed moment in your life. Yeah. Awesome. Yeah. You're the man. Appreciate the insight. Yeah, man. Absolutely. It's one of the reasons people do this plan is because it gives you options. And when it comes to situations like this, it's not, well, we have $400,000 in debt to clean up, so we can't take this jump. We can't take the pay cut. It allows

you to do these kinds of things. Yeah, absolutely right. But let's also put this in quick context. Even if he was in the debt snowball, like if he was paying off debt, and he could absorb this by his wife going back to work uh selling some things cutting the budget yes which my earners tend to have yeah i still would consider it it's not long term we're not taking a long-term pay cut and if we can absorb it so if i can sacrifice in my finances if i can sacrifice you know and i'm eating can sacrifice, you know, and I'm eating on rice and beans, beans and rice, if I'm cutting the cable, if I'm sacrificing all these areas that we do financial, we can also sacrifice a little bit professionally in order to get going forward. Our friend John Maxwell, yeah, I worked for John for years. You've had the chance

to interview him. You know, he said one time, and it's a beautiful little phrase, you've got to give up to go up. And what do you have to give up sometimes in order to go up? And if you can handle it, I'm not saying it's a blanket, automatic yes, take a pay cut to make more money in the long term, but sometimes it's the right move, and you make the sacrifices necessary. So there you go. It's a good word. Let's go to Michael in Tampa, Florida. Michael, how can we help? Hey, how are you? Thank you for taking my call.

You bet. What's up? Hey, so basically my fiancé and I, we just paid off our debt. We're working towards saving for our three months of expenses. But my question is, I just got a job that's like an hour and a half away, and we're trying to basically save up for a home to kind of get us closer to my job. I remember Dave was talking about how he was okay with the 5% down for the mortgage, but I kind of want to know the reason why.

What's the reason between the 5%, 10%? I know the 20%, uh, I can avoid the PMI, but since this is a hectic drive, I kind of want to, we want to move faster than wait until we get to 20%, if that makes sense. Sure. Well, number one, the options are not either we buy a home tomorrow or we have to commute an hour and a half. I mean, you guys could rent for a while. It may not be fun. You may want to be a homeowner. But that's number one is to just realize you have more than one option here.

Number two, the 5% is for first-time homeowners, which it sounds like you would be. Right. And that still has to be within the parameters of a 15 year fixed rate mortgage. And the payment can't be more than a quarter of your take home pay around. Right. And so it's hard to do that with 5% down. It depends on your area. If you live, you know, in a rural area in the Midwest, you could probably get by with that living in Tampa. I don't know how those numbers would work out for you. Can you put 5% down and still have that be a reasonable payment? I don't know yet. That's why I wanted to call you guys because you guys are able to dumb it down for me. We try to put the cookies on the bottom shelf and partially because I'm

not that intelligent. George really understands dumb. I can't help it. It's right there. So, Michael, I would jump on to ramseysolutions.com, click on the mortgage calculator calculator and start to play around with those numbers. And you might find that, you know what, we're going to have to put 15% down to have this be a reasonable payment on a condo and a townhome instead of a single family home. And so either way, it may not be ideal. Your first house is never going to be the nicest house you live in. So you've got to understand that and do not combine finances until you are officially married. And so I heard some language there. I wasn't sure, but I wanted to clarify that.

But you can be a homeowner, but if you do it right now, the home might own you. And that is my fear. So do it the wise way, even if that means going slow. He is George Campbell. I'm Ken Coleman. And this is The Ramsey Show. Our scripture today is Colossians 2.8. See to it that no one takes you captive through hollow and deceptive philosophy,

which depends on human tradition and the basic principles of this world rather than on Christ. Our quote from Alexander Hamilton. Don't start singing, George. I wouldn't dare. Caution and investigation are a necessary armor against error and imposition. Now, see, you've got to read that one twice because they used good words back then. $10 words. They don't make them like they used to.

Yeah. Let's soak on that one for a little bit. He's George Cannell. I'm Ken Coleman. This is The Ramsey Show. So excited that you are with us. Hey, if you like the show, please consider subscribing, leaving a review, and sharing it with a friend. That's how we grow,

and you're a big part of that. So there you go. Josh is on the line in Buffalo, New York. Josh, how can we help? Hey, guys. How's it going? Great to get the chance to talk to you guys. Yes, sir. Good to talk to you. Alright, so I've got a quick question about my wife's retirement plan.

We're going to start investing shortly. We took a little pause just to pay off some debt and buy a house. So my question is, we have the option to do a Roth 401k with our financial advisor, or she works at a hospital and the hospital offers a 457B deferred compensation plan. And really just my question is, should we do the 457B through her work or a Roth 401k with our advisor? How is your advisor allowing you to do a Roth 401k? Oh, I'm sorry. Not a 401k, a Roth IRA. Oh, there we go. I was like, I have never heard of this. I was thinking the same thing.

My mind is blown. Okay. So you've got the IRA option. Roth IRA or a 457B, yeah. Now, there are such things as Roth 457Bs. Do you know if she has a Roth option there or is it just traditional? It's traditional. It's not Roth.

Okay. So our outlook on investing in our framework is that match beats Roth beats traditional in that order. So does she have any match with her employer? There is no match. No match? No, there's no match. Okay. So beyond that, we are going to take advantage of all Roth options available to us. And it sounds like right now that would be a Roth IRA for each of you.

Correct. And so I would fully fund the Roth IRAs. That's 6,000 a piece. And if that doesn't get you to that 15% of your household income, then we're going to move to the 457Bs and put the rest into that. Gotcha. What do you have available? So I've got a Roth 401k through work, which I'm contributing to get the match, and then a Roth IRA with our advisor. Okay, cool. I mean, I'll tell you what I do personally, what my wife does.

She works here at Ramsey. We do all 15% into our Roth 401k. We have great retirement options and funds in that, and so because they're Roth, we just do all of it in there. And then if you maxed out 401k, you can move to the IRAs. Gotcha. Okay. Yeah, that was a question I could have asked too, because right now I'm just doing enough to get the match with my 401k at work. Sure. And I'm just doing the other, what is it, 14%? I think it's 6% at work. So 4% into- What's the match at work? 6%, but only 25% from the dollar.

Oh, okay. Okay. So beyond this, you want to get to 15% total of your household income invested. Right. Okay. So between those two, and there are income limits with the Roth IRA. So if you go beyond that, what is your household income? $140,000.

Okay. So once you guys hit that threshold, you can still contribute to a traditional IRA. You can look at things like backdoor Roth IRAs, mega backdoor Roth IRAs. And so I'd work with your advisor when you guys do get to that point, because I have a feeling your income will continue to go up, but take advantage of the Roth options and then whatever's left over, throw it in that 457. Awesome. That answers my question. That awesome thank you josh appreciate the call i want to go back i want to go back into the call because we got new people watching and listening every day and you said it really quickly and i want to break it down for maybe new listeners or viewers you

said way we look at our investment strategies we say roth beats match beats roth beats tradition sorry match beats roth beats tradition traditional i can't even say it. It's a mouthful. Let's be honest. Take it away from me, but I want you to- It's us trying to simplify it. Right, and I want you to simplify it a little bit more. Sure. So why match beating Roth?

Why Roth beating traditional? I want you to- So number one, we only encourage this once you are completely debt-free and have a fully funded emergency fund. All investing should be paused until you get those things taken care of. Once you've got those taken care of, we move to baby step four, 15% of our income into retirement. And we say match first because that is a 100% return on investment. Let me explain that. If your employer matches 4%, that means if I put in 4%, my employer automatically throws another four

on top of that. I just doubled my money. If we were in Vegas and I put a hundred bucks at the blackjack table, I now have 200 bucks. Boom. I knew you'd appreciate that analogy. As you would say, bada bing, bada boom. Bada bing, bada boom, 100% return. There it is. Now we move to Roth because that is going to grow tax-free. So you're using after-tax dollars to invest, but the money will grow tax-free and you can withdraw it tax-free. And I love that because when I get to retirement, if I have $2 million in my Roth IRA- You got $2 million. $2 million. And Uncle Sam already took his cut years and years ago, which means I actually have $2 million. And so you're also betting on the fact that taxes will continue to go up as we get older.

And historically, that has been the case. And then the traditional? And then traditional is where we go last, which is tax deferred. You're going to pay taxes on this later down the road, but you're going to use pre-tax dollars to do it. And so that is the last thing to take advantage of. Beyond that, if you are like, I ran out of all those options, you can just go into a taxable brokerage account, which is non-retirement funds. And a lot of people use this as a bridge account, Ken.

So let's say Ken wants to retire at 50, but he doesn't have access to his Roth IRA and his 401k without penalties until later on in life. And so this bridge account can be used to where you have a taxable brokerage account. You invest with a SmartVestor Pro or whoever in index funds, mutual funds, and you might have a million dollars in that brokerage account that you can now use to get by the 10 years until you have access to the rest of your funds. And so there's a lot of cool investing strategies. This is like next level wealth building. And part of our plan is we want you to build wealth and give generously.

And it's amazing what happens once you do that, especially early on as we continue to get calls of people in their 20s and 30s going, we paid off the house, Ken. Yeah. What do we do now? Yeah. Well, now you have 30, 40, 50 years to continue to build wealth and leave legacies and leave inheritances. We get so many calls about inheritances. And I love it because it tells me that person cared enough to leave a legacy. Yep. I want to also, you were rolling through, George, because you got this stuff down,

but you were rattling through the strategies here, the backdoor Roth. This is important for people to make a certain amount of income. Explain that. So if you fully fund your traditional IRA, for example, but you make too much income to qualify for the Roth IRA, well, you can convert that traditional after the fact to a Roth. And what that means is you're going to have a small tax burden because you're converting those funds. And we only encourage people to do that once they're in baby step seven, because it's going to cost you in taxes. And I'd rather that money go towards paying off the house and investing and all those things. And so it can be a great strategy for those that high earners who are going, well, I want to make sure that I'm investing as well, as well as I can. And so those backdoor options

are still, it's not really a loophole. It's completely legal. Biden was in talks about removing this. It hasn't actually happened. We got a lot of calls, people freaking out going, well, they're going to get rid of it. And the threshold for that income. The Roth IRA, let me see what the income limits. I think the backdoor Roth is, is it 180? Roth IRA income limits. I'm seeing if you earn more than 144 in 2022. If you're married and filed taxes jointly, it goes up to 214 for a married filing jointly. 214 married filing jointly.

Okay. Yes. And so that's an option there. If you can't contribute to the Roth IRA, if you are above that, in which case you still have other options. Okay. Real quick to kind of put a bow on this. We have a great resource at ramsaysolutions.com. That retirement calculator is a wonderful tool. Oh, I love it.

So tell people about that. Give us 20 seconds on that great, 30 seconds on that great resource. Yes. ramsaysolutions.com. You can click on our free tools and check out the retirement calculator. And what this does is give you a really clear picture about what it's going to take to retire when you want and to afford the lifestyle you want. Because a lot of people say, well, Ken, when can I retire? And I go, well, what kind of life do you want to lead? Yeah. Then there's a lot of people who go, is it too late? You can retire with 800,000. You can retire with 10 million. It just depends on the lifestyle you're looking for. But this gives you a clear picture. You put in your age, the age you want to retire, how much money you currently have in investments, how much you're contributing monthly, and what you think your annual return will be.

We say, you know, 8%, 9%, 10%, that's realistic. And that gives you a clear picture about what life's going to look like 30 years from now, 10 years from now. It's doable. RamseySolutions.com. Check it out. It is a wonderful tool. Hey, George Campbell, always full of great information. Good times. I had no idea you were that versed in all the retirement stuff. I'm a giant nerd, Ken.

What can I say? I'll tell you what. It's why Dave can go on vacation. Let's just be honest. He deserves it. Hey, good stuff. Good hour. I want to thank the team behind the glass for keeping us on the air.

And you, America, for listening. This is your show. It is The Ramsey Show is one of the most popular podcasts in the world? It's your daily dose of advice on life and money. Check out all of our shows from The Ramsey Network wherever you listen to podcasts.