The Ramsey Show - App - Why You Should Avoid Prepaid College Tuition Plans (Hour 1)

Episode Date: June 21, 2019

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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 am Dave Ramsey, your host. Thank you for joining us. Open phones at 888-825-5225. That's 888-825-5225. That's 888-825-5225. Josh starts off this hour in Detroit.

Hi, Josh. How are you? Better than I deserve, Dave. How are you? Just the same, sir. How can I help? Dave, I have a question about our mortgage. We have about $850,000 invested, $25,000 in cash, but we still have

about a $154,000 mortgage. And our income's about $225,000. We have a plan to pay off the house in approximately three years. We're wondering if you would recommend pulling out some of our investments, paying the capital gains now when in retirement, you know, our tax liability is going to be so much less. And we look to retire in about seven years. Capital gains tax liability won't be different. You're in a 15% tax bracket on capital gains. You still will be in retirement.

So it wouldn't matter if we just paid off now? Yeah, I mean, at least that part of the equation doesn't. So great income, by the way. How old are you? 46. My wife's 45. Well done. And what is the 850 invested in?

How much of it's in retirement accounts? 400,000 in a 401k, about $370,000 in company stock, and then about $80,000 in another investment account. Okay. The company stock purchased on stock plan or given to you as a benefit? Both. The given to you as a benefit will be 100% cashed. Have you already paid income tax on that? We have. Yeah, everything that's given to us, we've already paid on.

Okay, so then the only thing you'll have is capital gain on it. And you're heavy on company stock. We are. Yes, we are. Yeah, that scares me so um that's another reason to do it i'd take 150 of that and pay off the house today plus enough to pay the capital gains and i'd rebalance my portfolio i don't i um the problem is you've got this wonderful income coming from this company and you've got half of your freaking net worth in this company. And so if this company turns down or worse than that goes south, you in a real world of hurt.

So that lack of diversification scares me. I'm going to move and have no more than about 10% of your total net worth, which is you're probably worthwhile in excess of a million. So $100,000, $150,000 in company stock when all the smoke clears. Yeah, I mean, we actually just went over a million just a few months back. Congratulations. At 46 years old. How much of this did you inherit? None.

You started? We just... How much of it did you steal? Are you a crook? No, no. Well, I mean, that's what people think, isn't it? No. Did you steal or are you a crook? No, no. Well, I mean, that's what people think, isn't it? No, we live on about, you know, our monthly budget's around $4,500. Wow, so you're living on about 80 grand making two and a quarter.

Mm-hmm. That'll make you a millionaire. That'll work. Well done. What do you do for a living? We both work for, can I say the name of the company? I don't care. We both work for Home Depot. Oh, okay of the company? I don't care. We both work for Home Depot.

Oh, okay. Wonderful. And that's all that company stock. Well, it's a great stock, great company. Obviously, it's been great to you guys. But regardless of who it is, and you and I had the discussion before I knew who it was, so it doesn't matter who it is. I'm still not going to be in company stock as heavy as you are.

So, yeah, I'd pay that off. But you're an everyday millionaire. You're one of Chris Hogan's everyday millionaires, man. You did it. 46 years old, starting from nothing. Well, and it's all, you know, it's a combination of us working together, common goals, and, you know, live on less than what you make. Well, and you've obviously excelled at your careers.

Yes. What college and you've obviously excelled at your careers. Yes. What college did you graduate from? Neither one of us have graduated. Really? No college degrees? Wow. That's cool. Okay.

Very interesting. Yeah, just got very, very good at what you do for Home Depot then, huh? Okay. 60, 70 hours a week, we'll get it done. Yeah, man. Boom. Just like that. Old-fashioned idea. Very

neat. Hey, a guy emailed or tweeted rather this morning. He said, next time you and Hogan are doing one of those Millionaire Theme Hours, ask them how much TV they watch. So how much TV do you watch? We have a couple shows that we catch pretty regularly, but it depends

like this time of year we don't watch TV. Okay. So how many hours a week would you average? Five. Wow. Yeah. A tenth of what the average person does. There you go. So you don't know who got thrown off the island. That was all I said.

The typical millionaire can't tell you who got thrown off the island. There you go. I love it. Way to go, Josh. I'm proud of you. Yeah yeah that's exactly what i'd do brother i'd pay the house off today pull out enough to pay the capital gains too i'd rebalance this portfolio move some of that company stock over into good growth stock mutual funds with your smart buster pro or whoever's advising you on your finances and um and uh you know, tax-friendly situations there, you're probably going to want to look for some low turnover ratio type mutual funds that don't tax you as they grow because it has a low turnover ratio.

And so that's the portion that's not in a retirement account. That's what you need to look for. So you've got a great situation, sir. You've done a wonderful, wonderful job. Very proud of you. Open phones at 888-825-5225. Sherry is on Twitter, or Sherry. My husband and I are in baby step three.

That means they're out of debt and they have their emergency fund. We have no kids. We plan to leave anything we have to our church. Would you still recommend not pre-planning or prepaying our funerals i would always pre-plan a funeral i would never prepay it you have the money to pay the funeral and you pay it out of are they someone pays it for you after you die out of your out of your money anytime you prepay anything, funerals are the two biggest ones out there. Your rate of return is the rate of increase in price, the inflation rate.

So how much does college go up a year? Well, the average is about 7% a year for the last 54 years. So when you prepay college, you're making 7% on your money. Not bad, but you could have made 12, 11 and a good mutual fund okay so that's why we recommend you do 529s and mutual funds instead of prepaying college how much a funeral funeral's gone up uh for the last 50 years yeah maybe probably the average inflation rate would be my guess somewhere around four percent a year. Let's just call it that.

And so you're making 4% on your money when you prepay your funeral. And I wouldn't do that if that's the actual inflation rate. And I think it's probably pretty close. Might be 5, might be 3, but it's not 10. And so, you know, you don't prepay. You instead invest the money in 10%, 11%, 12% mutual funds, which is a lot more than 4%. And you'll have a lot more than you need to be buried that way. You're not King Tut. So it's not going to be that hard.

Or the Queen of Egypt or whatever you need to be to do that. So there you go. I just don't prepay stuff like that. I instead invest it and pay it when it's time to pay it. This is The Dave Ramsey Show. Did you know that if you combine the data breaches that have occurred in the past 12 months, almost every American has had their personal info compromised or hacked. Over 50% of our listeners and viewers tell us that they or someone in their family has been a victim.

And 70% of those folks have had it happen more than once. See, this is unbelievable. Once thieves get your info, the risk never goes away and they can use it whenever and however they choose. It truly has become an issue of not if, but when. That's why the only plan I've ever recommended is through Zander Insurance. I actually sat down with them, and we put together a plan that I felt provided the best protection,

but didn't waste dollars on things you could easily do yourself, or were just gimmicks. The key is getting protected before you're a victim, and it's too late. Go to Zander.com or call 800-356-4282. We are all at risk, and it doesn't make sense to wait. Numbers don't lie. That's Zander.com or 800-356-4282. Thanks for joining us, America. This is the Dave Ramsey Show.

Bridget is in Austin, Texas. Hi, Bridget. How are you? I'm fine, Dave. How are you? Better than I deserve. What's up? So, Dave, I have a question.

I just started doing the Total Money Makeover, like literally just started it. I want to get out of debt. I'm just sick of everything that I've done to myself. And I have a question regarding our home right now. We live in a home. It's valued at $360,000. We owe about what we've paid. We owe about $200,000, and I think it's like $35,000.

And I want to buy a tax foreclosure home so that we don't have a mortgage anymore and then just make that home what we want it. And I don't know if I should even do that or not right now or if i should just get going with the total money makeover and make a decision once we get into that yeah well let's do that um what is the um have you bought foreclosures before um no but i have a family member that buys them on a regular basis she does this and i've been talking to her about it. My dad is a contractor, so he does the roofing. He does all the build, all that different stuff he does.

And I've kind of talked to him, and he said he would help us with pulling the home together with anything that we need to work on. Okay. And how much debt do you have, not counting your home? Not counting the home, we have, and I haven't looked at all of it yet, I'm going to say probably about $70,000. That's a mix of car loans, credit cards, and things like that that we have. And what's your household income?

I am not working. I'm working, work from home, making half of what I used to make, which is about $54,000. My husband makes about $60,000 to $80,000. He's a semiconductor, and it depends on the industry. Okay, so you're making around $100,000, $110,000, give or take. That's what we were making. Yeah, and that's what you're making now or not?

No, no, because I'm not working the job that I had before. Okay, what is your household income now? Right now, our household income is probably about, I would say, maybe $80,000, $70,000 to $80,000. Okay. All right. And how much do you own your cars? On my car, I owe a little less than $10,000. His car was fairly new, so he probably owes about $20,000-some-odd on it because he bought it pre-owned.

Yeah. So you've got $30,000 in car debt alone. That's a bigger issue than your house. Okay. And, you know, you may want to relook some of those decisions unless your income is going to go up dramatically. You've got an awful lot tied up in cars that are going down in value. I bought and sold foreclosures for years, and tax sales are a needle in a haystack.

They're very, very difficult to find a deal on where you can get clean title and get the title insured because there's not a recourse on the thing. And, you know, you can get yourself in a real bind for a little of that stuff. Maybe your family member really knows what they're doing. Apparently they do. That sounds fine. But you're not going to get a $360,000 house for $100,000 very often.

I've probably done in excess of 2,000 real estate deals, and I've probably done just a handful that look like that. They're very, very, very rare that those kinds of ratios are there. So for you to end up with a debt-free house in the scenario you're giving me is, I would say there's a 1% chance of that happening or less in what you're doing. And I've done a bunch of it, a bunch of it. So no, I think you work your total money makeover. You assess these cars and decide are they worth keeping because they're a big chunk of your problem.

And you guys get into your budget. You start working that. I think you're going to figure out what's going on when you do that. Kate is with us in Pittsburgh. Hi, Kate. How are you? Hi, Dave. I'm great.

It's an honor to talk to you. You too. What's up? So, I'm an attorney.'s an honor to talk to you. You too. What's up? So I'm an attorney. My fiance is currently studying for the bar this summer, which means that, and so I'm marrying somebody with a sizable mortgage on their brain, and I also have one of those. But I'm wondering, so I've been working, I'm coming up on my first year of practice, and I'm getting great experience. I'm working for a legal aid and working on some federal grants.

But that being said, right now we're only making about $65,000 a year together, and we have about $340,000 of student loan and then my fiancé's car. And I'm wondering, you know, should i be looking for a new job because i know my earning capacity is much bigger yes um yeah yes you need to make as much money as you can make you have a huge mess right you don't have you don't have the luxury of taking something for the experience you have 340 000 in debt okay so even though i'm only a year into practice it's not burning am i burning a bridge am i i'm just not sure how to exit click well i mean you've got to do that with some class and

thoughtfully but i don't know that you have to you didn't marry them you went to work for them right right and so um you know no i don't know how you'd be burning a bridge you if you can go make twice as much you you should. Okay. And he should, too. Now, later on, once you're debt-free and, you know, you've piled up some money, if you want to make some different choices in your career track and, you know, move over into an area of the law that doesn't pay as well because it's fulfilling to you, that's fine. But today, today you've got a mess.

Right. And that's what I was thinking, too. Yeah, both of you. When are you getting married? In October, October 6th. It's going to be a big year this year. Yeah, a really big year. So hopefully he passes the bar and, yeah.

And we get married and our income goes way up. Yes. And there will be a lot going on. Good for you. Very cool. Hey, thanks for the call. Open phones at 888-825-5225. You jump in. We'll talk about your life, your money.

Micah is with us in Austin, Texas. Hey, Micah, how are you? Pretty good. How about yourself? Better than I deserve. What's up? Hey, so me and my wife, we just recently relocated to Austin, Texas, and we've been using every dollar. We haven't done financial peace university, but basically what we're trying to figure out with our debt right now,

if we should sell my car or not because I bought it new. I've got a good deal on it. My dad works at Honda, so I've got a good deal on it. But just trying to figure out right now if it would be the best decision to sell it based on what we make and how much we owe. So what's your household income? Right now, not much. She's making about 40. And then I just got into real estate. So I'm in the process of getting my license right now. So you don't have a job? So I'm just Ubering right now. I'm Ubering, and I'm about to take my exam next week.

Oh, my goodness. Okay. And so what do you owe on the Honda? On the Honda, I owe $19,000. Okay. Well, the rule of thumb that I use is this. If you have more than half your annual income invested in things that have motors and wheels, you have too much tied up in things that are going down in value

because everything with motors and wheels goes down in value. Right. And so you're at that point, without a doubt. I'm sure you've got another car, right? Yeah. What's the other car worth? Her car, we owe about $5,500 on it. Yeah, okay.

And so you're over half your annual income today. Now, as soon as you start making money in real estate, that won't be true. So if you can go make $40,000 or $50,000 this year in real estate, or in the coming 12 months, not just this calendar year, but if you can do that, then the car is a keeper, assuming you don't have so much other debt that you can't pay it off. The second rule of thumb I use on cars is, can you be debt-free but your house in two years or less and keep this car? Well, we don't actually own right now.

We're renting right now. I just left my car. Debt-free except how much debt do you have other than these two cars? So we owe about $200,000. Okay. No, you don't need to be driving a $20,000 car payment with a $200,000 debt. So, yeah, you've got the student loan-itis, it sounds like. What a mess.

Wow. Yeah, you've got to go make some money, man. And you're going to have to live on nothing for a while. You've made some decisions that will put you in the corner. When you paint yourself into the corner, you get paint on your feet. This is the Dave Ramsey Show. Thank you. Thank you for joining us, America. Britton is with us in Palm Springs, California. Hi, Britton. How are you?

Hey, Dave. How are you doing today? Better than I deserve. I see is with us in Palm Springs, California. Hi, Britton. How are you? Hey, Dave. How are you doing today? Better than I deserve. I see on my screen you're debt-free. Congrats. Yes, sir. Thank you very much. I appreciate it.

Absolutely. How much have you paid off? I paid off about $16,000 over the last year. What kind of debt was that? A new car. Oh, okay. And what was your range of income during that year? It was about $50,000.

Okay. What do you do for a living? I work security at a high school. Good for you. Okay. And what kind of car was this? It was a, I actually bought, Dave, I actually paid off my house in 2016, and I made a poor choice of buying a brand new car a couple months later.

Okay. But to answer your question, it was a Toyota Camry. Oh, okay. Cool. How old are you? 29. Okay. Why'd you decide to pay it off? Well, I mean, you know, I didn't... Oh, you're talking about my house or my car? No, your car. Well, I didn't want to have any debt, you know.

I already paid off my house. Yeah, that didn't bother you at the time you bought it. Well, unfortunately, when I bought it, I actually started listening to you about a you at the time you bought it well unfortunately when i when i bought it i actually started listening to you about a month or two after i bought it which was pretty funny okay so that's what that's what got you moving then okay yes yes sir so well congratulations how's it feel to have everything paid off house and everything oh it's awesome you know just to be able to uh max out my roth ira give, you know, even more and just to help people out is definitely amazing, you know.

You'll be in a position to do that for sure. Very, very well done. Will you go back in debt again? Well, I hope not. I mean, that's not the plan. I mean, I know eventually my house is two bedrooms. Eventually I'm going to, if I get married and have kids, I'm going to have to upgrade. But, I mean, definitely not planning on going into debt.

Okay, good for you. Very cool. Well done, sir. What do you tell people the secret to getting out of debt is? You know what? Well, my friends always tease me, and they tell me I'm kind of boring because I don't go out and spend a bunch of money. But I always tell them, you know, I think it's not necessarily a bad thing to be boring.

You know, I'm just always on top of things with my money and always just making smart decisions and just being very intentional with my everyday choices. Yeah. Being broke can be pretty boring. Absolutely. In some ways. In some ways, it's rather exciting because you're stressed out. But, you know, being broke is – I'm probably more boring now that i'm not broke

come to think of it you know i don't know you never know you can do a lot more cool things when you're not broke anyway exactly good for you man well congratulations we've got a copy of chris hogan's retire inspired book for you that will be the next chapter i hope in your story as you become millionaire become a millionaire and uh course, call in on the Everyday Millionaire theme hour and be outrageously generous, as you mentioned, as you go along. So very, very well done. All right, it's Britton in Palm Springs, paid off $15,000 in one year. That's his car.

His house was already paid off, making $50,000 a year. Count it down. Let's hear a debt-free scream. Three, two, one. hear a debt-free scream. Three, two, one. I'm debt-free! There we go, man. This is how it's done. I love it.

Nancy is in Jasper, Georgia. Hi, Nancy. How are you? Hi, Dave. I'm great. How are you? Better than I deserve. What's up?

Okay, so I can't believe I'm great. How are you? Better than I deserve. What's up? Okay. So I can't believe I'm talking to you, but here we go. I am a 64-year-old woman, a widow, and we were debt-free about 20 years ago, long ago listening to you, but we got debt-free but not budget and savings. So the bottom line is that I am at a place where I have plenty of retirement funds available to me, but I would like to pay off my mortgage. And I just went through all of my reserves on some major home issues that I had to get resolved. And now I'm saying, how do I start getting this house paid off,

and should I do that instead of putting more in retirement and in rebuilding my emergency fund? What is your income? Okay, it's $72,000. So you're working? I am. Okay. And what do you owe on the home?

$102,000. Okay. And how much is in your retirement nest egg? $620,000. Okay? $102,000. Okay. And how much is in your retirement nest egg? $620,000. Okay. And so if you paid this off, you would have $500,000. Correct. And have no debt at all?

Yeah. Yeah. And I also have $13,500 in a company 401k, so I moved all that money into managed funds outside of my retirement, so I still have $13,500 in my other 401k. Okay. Do you have any money that is not in a retirement account? Not anymore. Okay, all of the $000 is in an IRA. All of the $600,000, it's in, it's actually in being managed funds. It's a split between, and this is, so don't yell at me.

It's in an annuity for $250,000 and $350,350 in responsible investing stocks. Okay. All right. That's fine. Okay. As long as it's a variable annuity and it's invested in good mutual funds inside that annuity. Yeah. It's not my first choice, but it's okay if you're there.

It's a little more expensive for you, but it's an okay way to go. It gives you some guarantees that you were probably liking when they were explaining it to you. Right. Yes, very much but yeah i in out of the other money obviously you're not going to touch the annuity you can't but out of the other money i'd probably pay off the house today why wouldn't you i'm really why wouldn't you just because i like i don't ever want to have to work again. What's the difference in 600 and 500? Yeah, yeah, yeah. Emotional.

Can I just ask you one question? Sure. What about stopping any more investment in any of the 401ks and using that as my emergency fund and then going aggressively after my mortgage. It's the same thing. It kind of is, isn't it? You're just swapping dollars.

The P's still under one of the shells. It's just which shell do you want the P under. Okay. You know the shell trick, right? I do. Yeah, it's the same thing. You're just swapping it around. And what's your deals?

Your deal is a three-year deal, probably. And my deal's by Friday. Oh, man. But, I mean, here's the thing. Let's try this, okay? If you pay off your mortgage and you hate it, you could go get another mortgage. Yeah, yeah, yeah, yeah, yeah, get another mortgage. Yeah. Yeah, yeah, yeah, yeah, yeah, yeah.

Okay. I'm messing with you, right? You are. You are. But I would have to pay taxes on that money. Well, so what? It's okay. Yeah, you're 64.

If the $500,000 that's remaining is invested in decent growth stock mutual funds, and they're averaging 10% to 12%. In seven years, when you're 71, if you don't add anything to it, the $500,000 will be a million. It'll double about every seven years. And that's all I care is just to not be a burden. Yeah, and you won't have a single house payment. You won't have a payment in the world.

By the way, you're still working and making $70,000. Oh, and by the way And you won't have a single house payment. You won't have a payment in the world. By the way, you're still working and making $70,000. Oh, and by the way, you don't have a house payment anymore. So you can start banking. I mean, what's your house payment? I'm actually paying $1,000 a month. It's actually $700 and some. So you can take $1,000 a month plus whatever other money you want to invest. You can probably invest $3,000 a month.

I could. If you wanted to. I could. And, oh, by the way, if you needed to invest. You could probably invest $3,000 a month. I could. If you wanted to. I could. And, oh, by the way, if you needed to do something to the house, you just stop that investing a little bit and fix up the house with cash. And, you know, make sure your emergency fund's in place and make sure, and then just invest and enjoy

your money. You've done a really good job, you and your husband. Thank you. You've done a very good job. What's the house worth? It's worth about $125, but it's a log cabin in the mountains, and it is amazing. So sweet. You can't trade money for a good lifestyle.

Oh, North Georgia mountains are gorgeous. Yes. Absolutely. One of the prettiest places on earth. Yes, and I'm a hiker, so I'm loving it up here. There you go, man. So you got it dialed in. I'm going to give you permission to pay it off by Friday. And then if you hate being debt-free, just go get you a mortgage later. That Dave Ramsey's crazy.

I'm going to get me a mortgage. I don't like being debt-free. This is the Dave Ramsey Show. Edith is with us in Denver, Colorado. Hi, Edith. Welcome to the Dave Ramsey Show. Hi, Dave. I'm so happy to be able to talk with you. You too. What's up? My husband and I have been together for about six years, and we had a child about 19 months ago.

And I believe in Colorado they acknowledge common law marriage, despite us being married only two months, officially married two months ago. After this time that he and I have been together, he's asking me for a post-nuptial because he says he wants to protect his assets from before our marriage, saying that he is 14 years older than me at 48 years old and me 34. He wants to protect his assets because he's closer to retirement. And I wanted to see what you think about that,

considering he and I have been technically only married two months, but I don't know if common-law marriage matters. And also that, you know, what he's asking for. So you're married for two months. You have a baby. You used to live with him for years before that. And now he comes up and says he wants a post-nup because if you all get divorced, he wants to be able to keep all his stuff.

Right. Does that not hurt your feelings and scare you? It does scare me. I'm sorry? It scares me. It hurts me. Yeah. If you were my little sister, I'm a redneck hillbilly. I'd be tempted to punch him in the nose.

That's how it makes me feel when I hear it. What an irresponsible, selfish twit who has a brand-new wife and a brand-new baby, and all he can think about is protecting his own butt. That's what's coming through my mind. i just said it all out loud i said all that out loud didn't i yeah so there you go you know i mean we have a manhood crisis in this culture good lord what a little child so that's how i feel um now what do you do about it is another thing um i i think there's a lot going on here and um if i were in your shoes for the good of your child and the good of your future marriage i think you've got to dig out all the toxicity and poison and get it cleaned out for you to have a good clean relationship forward, and that's called marriage counseling.

So the answer is no, I would not give him a post-nup. But the fact that he asks for it indicates there are issues that need to be dealt with. Would you agree with that? Yes, we have issues, mostly stemming from, well, he and I have been having fights over the same thing for years because for the past two years he has been working and living in Oklahoma while I stay and work and take care of our daughter in Colorado. Why? Because he's there because he wants to make the money. He makes really good money.

Why don't you move to Oklahoma with your husband? I very much enjoy my life in Colorado. Yeah, but you married a guy who moved to Oklahoma. Yes. Y'all are weird. Yes. It doesn't matter. I don't want to continue to chase him.

He's moved to several different states in pursuit of various jobs, and I want to be able to settle down, and I want him to come to Colorado and be with me and the baby here. I wish I could roll back time and tell you not to have a child or marry this guy. I wish I could, but we're not there now. So you guys have got to work on some of these issues, and you've got to decide if you're going to move with your man or not and if he's going to be your man or not

or if he's going to continue to be a freaking little boy. Y'all got all kinds of stuff going on here, and you really do not have any probability of staying together like zero. You're going to be divorced if you don't deal with this stuff. You have you have you given me two really major red flags. I'm not a family therapist. I've just worked with people who divorce all the time for 30 years. And I can just see this coming just like a just like an old man that has seen stuff coming.

So that's me, old ugly Uncle Dave. Your car is running right towards the wall, and everybody has their foot all the way down on the accelerator. It's going to completely implode when it hits the wall if you guys don't deal with this stuff. And this posting up thing is a symptom, and this moving around thing is a symptom, and there's a problem under there that you all got to dig up and deal with. That's my advice to you, little sister. And if you was my little sister for real, that's exactly what I

would tell you. You need to be in the pastor's office. You need to be in the counselor's office and be sitting and getting some good pre-marriage counseling it's the only way you got a chance if you do not address these issues you will not be married much longer because he's going to be in another state he's going to find him another woman that's what's going to happen if he hadn't already that's what's coming melinda is with us in rochester new y. Hey, Melinda, how are you? Hi, Dave. I just had a question about an ABLE account. I have a Down syndrome baby.

He's almost two. And I'm in baby step two. We'll finish that in this coming year. So I just wanted to prep for four, five, and six. Okay. Refresh me. I knew what that was, but i can't make it come to my brain it's um i was researching it it's some kind of account where you put money in and they can use it for it doesn't count against them as as income or as money that they count against them so well

for government subsidy or government assistance yes sir okay all right and you're getting government assistance no i'm not and i don't did you want to personally no but i don't know how do you need to right now no okay do you anticipate needing to if you don't then you don't need to have money in this account if that's what it's if that's what it's designed to do i i that it's coming back to me i grant i generally remember what you're doing um what's your household income 80 000 okay and you have one child the special needs i have two one that's nine and then a special needs two okay almost two and the nature of the special needs you said was downs? Yes, sir. Okay. All right. And so, two, you probably don't know yet the extent of the severity.

Yes, sir. And so forth. And so, other than you have a precious, smiling child all the time, that's for sure. No question about that. But the, hmm, I wouldn't worry about an able today you're making eighty thousand dollars a year you can support two kids and you're not going to need government assistance and if the only purpose of the able unless i'm missing something if i recall properly and what you're telling what you understand is is the only purpose of it is that if they have money in there it doesn't count against them for getting aid, government aid.

And I'm thinking you're not going to need government aid. So what I would make sure I had is a special needs trust that is formed as a part of your will. And you should have a will that has life insurance named the beneficiary of your life insurance until you have multiple millions of dollars of assets. But until then, your life insurance beneficiary is in the name of the special needs trust, and the special needs trust is formed upon you and your husband's death. The money would go into that special needs trust to take care of this baby for their entire life. And the trust lays out, you know, you can lay that out. So you need to have a will drawn with a special needs trust that activates upon both of your deaths.

And that has a life, you have by a term life insurance policy with at least a portion of your beneficiary, your designated beneficiary on the life insurance policy is kind of income-based government assistance for this child. But I would much rather, you're making $80,000, let's just build up a big mutual fund like the kid was going to go to college and use that money to take care of that kid. And so let's put $150,000 in their name, just like you were going to if the child was going to go to college and use that money to take care of that kid. And so let's put $150,000 in their name, just like you were going to if the child was going to go to college. You'd do the same thing. And you're doing that for the other one over time. And you should be anyway.

It's part of your college planning. And so then you've got the money to take care of the child, for the child to be taken care of and so forth. And you should be able to self-fund and not be in need of government assistance. That's the only purpose of the ABLE account. Again, I'm not positive. I don't remember the details on it, but I'm understanding that from you. Hey, thank you for the call.

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