Are You In Trouble (With the IRS)?

You DO NOT want to mess with the IRS. As Tax Day draws near, tax planning questions are filling our inbox. We're kicking off this livestream that gets into some finer details that might apply to you and your unique situation! After that, we answer more of your financial questions. We end with a spicy question about how to handle a new relationship with a whole life insurance policy... Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Brian Preston?

  Uh oh, am I in trouble with the IRS?

• 0:07Speaker 01

  Brent, I am so excited to talk about this because sometimes we find ourselves in a situation where we might get a letter, or might get a notice, or might see something on our tax return that makes us say, huh.

• 0:21Brian Preston?

  Yeah, no, when I get those letters in the mail, I mean, that's, that's the only problem with informed delivery.

• 0:27Speaker 01

  Is, well, exactly, and you immediately come into my office and we talk about it. And we love that when these kinds of things happen in your life, we get to be the voice of reason, we get to explain to you what's going on, how you should navigate it, and what you need to know about that specific situation. We love that we can answer all these kinds of questions for you. So if you have a question and you want us to weigh in on it, we have the team right now in the wings, collecting your questions in the chat. So if you want us to speak to something you're curious about, get it in the chat right now. With that, Creative Director Rebi, I'm gonna throw it over to you.

• 1:02Speaker 02

  Yeah, we're gonna kick it off with Joe's question. He says, "I had a full-time job last year, and I have a side business. I didn't know I was supposed to be making quarterly tax payments, and I am now getting hit with a penalty. How do you know when you're supposed to make the payments, and what do I do now that I owe this penalty?"

• 1:22Speaker 01

  You know, this, this is so funny, because one of the things we do at, at the, in the Wealth Management firm at Abound Wealth, is we love to review all of our clients' tax returns, right? We want you to send us a copy of your tax return before you file, so that we can look over it, make sure everything was spelled out correctly, make sure there are no mistakes. And what's so funny is, it is always interesting, because this happens sometimes, a client, for the very first time ever, you know, it'll show, you know, amount that you owe, or amount refunded, and then like, like two or three lines below that, it will show penalty. And immediately, they'll be like, what's this? Whoa, whoa, whoa, whoa, whoa, what, what, what happened? And I think a lot of people, especially in this economic environment we found ourselves in over the last 10 years, have begun to see this, because now we sort of live in this

• 2:05Speaker 01

  gig economy, where it's not just your day job, it's

• 2:10Speaker 01

  It's not just your W-2 wages where your earned income is coming from, but a lot of people have side income. A lot of people get paid as independent contractors. A lot of people do gigs. And when that gig income reaches a certain level, it begins to impact your tax return in such a way where the IRS says, whoa, whoa, whoa, whoa, wait, wait a second there, fellow. Wait a second, lady. You did not pay us what you owed us, when you owed us, and we have a problem with that.

• 2:36Brian Preston?

  Well, this is the part when, when you're an employee, a W-2 employee, you start realizing, man, it's kind of nice that when I get my paycheck, that there's already withholding for taxes. My employer is forced to pay for half of my social security and Medicare. So that's all covered. It just kind of automatically happens. But then when you do a side hustle, you realize you're treated as an independent contractor. So it all falls on your shoulders. So let's come back to the question that Joe had. Let's first lay out some ground rules. How do you know if you're in trouble or how to stay out of trouble? The IRS is constantly running, there's a calculation going on in the background. And here's, here's what you

• 3:16Brian Preston?

  need to know. You need to either pay 90% of current year's taxes as you make the money, by the way. This is not something where you just wait until December 31st and send them all, you know, send them 90%. You have to do this as you earn the income. Or you have to pay 100% of prior year's taxes unless you make $150,000. If you make over $150,000, then you need to pay 110% of last year's taxes.

• 3:42Speaker 01

  And that's in order to avoid any sort of penalty from underpayment for the year.

• 3:46Brian Preston?

  That's the safe harbor provision for the IRS. Now, look, I've been there. I've done a lot of tax preparation for, I did over, I mean, 16 years of tax prep. And it was not uncommon that people would get in this trap, that they'd realize, oh my goodness, I didn't make estimated tax payments. I made more income than I was anticipating. What do you do? How do you protect yourself? Or is there any way that you can work some, you know, magic to get yourself out of it? Let me tell you about a little known thing that a lot of people don't realize, is that you, if you do get caught in the quicksand of an underpayment- First, think about the fact, did you earn this money all at once? Specifically, maybe you got a big bonus in the fourth quarter, or you did all because you're trying to pay for Christmas gifts or holiday gifts.

• 4:31Brian Preston?

  So you went and did a lot of gig work in the fourth quarter specifically. If you can annualize your income based upon when you earned it, there's a chance you can minimize those underpayment penalties. So I want you to, if you get in trouble with an underpayment penalty, go look up annualized installment method, and you'll fill out the form 2210, and you'll be able to figure out how you can minimize those taxes as much as possible. Because I was able to help a lot of business owners, as well as self-employed people, who I would say, "Look, let's go look at when you earn the income versus when you were supposed to make the payment, and see if there's a way we could annualize this out to kind of lower that penalty down as much as possible."

• 5:11Speaker 01

  Now, this is maybe a hot take. In my opinion, I think paying estimated taxes is kind of annoying. Like, I don't love the process of it. One, because the dates don't line up. You know, you gotta pay them on April 15th, and then you gotta pay them on June 15th, and then you gotta pay them on September 15th, then you gotta pay them on January 15th. It doesn't make any, it doesn't follow the normal, like, calendar stuff. And so, if you've ever done a tax return, and you've ended up owing, one of the things that either your tax preparer, the tax software we'll use, will automatically do, anytime you owe, is it will immediately make a recommendation that you ought to start paying estimated quarterly payments, and it'll give you a voucher amount to begin paying. So if you're someone who owed money last year, and you see it, and you're like, "Oh, my gosh, now I gotta start making estimates," that may not be the case.

• 5:56Speaker 01

  Because remember, if you are someone like Joe, and you have a day job where you do have W-2 wages, and you do have this side gig, it might be possible for you to just adjust your withholding on the day job, and if you can adjust it enough to withhold, you may not have to make those estimated payments. So it's one of those things, if you're just slightly owing at the end of every year, and you make enough in your day job, you may not have to go through the rigmarole of doing estimates. You could just adjust your W-4, withhold more taxes from your normal paycheck, and you may avoid having to run into the situation of...

• 6:30Brian Preston?

  Or if it's just a one-off thing, maybe you just had some money come your way. And now the tax prep software or your CPA is saying you need to make estimated tax payments. Make sure you go the extra step. Tell your tax preparer or input in on the software that no, next year's income is going to be back to where it used to be. So this is what I don't want you to do. I know money's tight in a lot of, in a lot of aspects. I don't want you making estimated tax payments and giving that money interest-free to the government for a full year before you get it back. So that's why you've got to be an active participant in your personal taxes, in your financial life. And this is, once again, another one of those reasons when we tell people, this is a complexity of success.

• 7:15Brian Preston?

  And if you find yourself, you're like, man, now I'm starting to have more and more struggles with not only my taxes, but also my investments. This is why we take the relationship to the next level.

• 7:24Speaker 01

  Love it.

• 7:26Speaker 02

  Be an active participant. I like that. Joe, thank you for your question and we appreciate you being here on the live stream with us today. S. Sand has a question next. He says, "My wife and I are in the messy middle and neither of us grew up with much. How can we teach our young kids to be good stewards and have an abundance mindset? Thanks."

• 7:48Speaker 01

  Yeah, so I think educating our kids. So a lot of financial mutants have this story. Hey, I grew up in humble beginnings and because of things that have happened in my life, because of people that have supported me, because of work that I've put in, I've ended up in a better financial situation than I started in. And with that better financial situation I started, my kids are now experiencing a different childhood than I experienced. And perhaps some of the things that made me unique and equipped me to be able to attack the world the way that I have was some of those experiences I had when I was a kid, and now my kids aren't having them. So what do I do? My wife and I talk about this, it seems like on a weekly or monthly basis.

• 8:29Speaker 01

  It's how do we let our kids recognize that the way that we live and the opportunities we have might not be the norm? That might not be what everyone else is experiencing. And how do we get them to understand the value of making sound financial decisions? I talk about this all the time. You know, my kids are pretty young. I've got an almost 10 year old, and almost eight year old, and I have a two year old. So they're at like various stages of their understanding of finances. But one thing that we start very early on for our kids is anytime money comes about, I got home yesterday, lemonade stand. It was awesome. It was so awesome. You would not believe like the guilt that these neighbors will just.

• 9:07Brian Preston?

  Oh, no, I know.

• 9:08Speaker 01

  And they started tipping my kids.

• 9:10Brian Preston?

  Oh, my gosh.

• 9:10Speaker 01

  It was unbelievable.

• 9:11Brian Preston?

  I've drank so, I've gotten so many lemonades I've thrown out because they have grass in them or other stuff.

• 9:17Speaker 01

  But you still pay for them.

• 9:18Brian Preston?

  Charging in, by the way, they, they charge you like two bucks for these things that, so, okay. I, I think that's good.

• 9:25Speaker 01

  So anyways, my kids did this, my, so my, my two little girls, they did this yesterday. It was awesome. They made, they made like 20 bucks in like 15, 20 minutes. It was wild.

• 9:33Brian Preston?

  You can only get away with that for a few times though. That's why I tell them, you know, just, you know, don't do this too often because then people are gonna just be like, yeah, there, there they are, shaking us down.

• 9:43Speaker 01

  So I had this conversation, as they're both like counting out the money, but it was, it was actually an odd number. It's $21. Like dad, it was 21. How do we split this up? Well, me and mom supplied the supplies. You give us a dollar, then y'all can split the rest. That was how we split that up. Uh, and I said, anytime money comes into your possession, what do you do with it? And they know, it's almost like rote memory this, anytime we get money, we give, we save, we spend. We give, we save, we spend. We give, we save, we spend. So if you can begin even instilling like that kind of mindset in your kid, as they begin to progress and as they begin to age, then you can start diving each into each one of those. Okay, now we're gonna save. How do we save? And that's something that you did with your daughter was like actually diving in, how do I actually save?

• 10:25Brian Preston?

  Yeah, I, I wrote down a few quick things because I've got older kids. Um, I've got one that, man, it could get me all teared up if we think about how close she is to graduating from college. And we just got back from spring break and it's nice when your older children who initially don't want to go on the trip, but then they find out where you're going and you're like, yes, I was able to bribe them to go one more year. Because this stuff, you just, you're not guaranteed those memories and it's just. You get so sentimental the older you get. Um, here's what I wrote down. I wrote down three key things and it will, well, the last one is prime the pump. So I'll talk about that, but scarcity. I first want to tell you, I think one of the things that I always struggle with, um, families who grew up with not much. And now you have, you, you have more abundance in your life.

• 11:08Brian Preston?

  And I see it with my neighbors and others is that you're not doing a good job of, of adding some scarcity in your children's life. So they know how to handle resources or even understand how hard it is to come into resources. Cause I think sometimes if you grow up in abundance, that sometimes that can get lost. So I always, on the first car, um, my, my, my daughter paid for half of her first car. That's awesome. And, um, and then, you know, now we upgraded her once she got to college, but it was still something that was a used, very reasonable. But she paid, she drove it all through high school. And I thought that was a good thing to let her have some skin in the game on that first purchase. And then the, the other thing that I, I, I tell people, you don't have to be scarce on the memories though.

• 11:51Brian Preston?

  I think it's okay if you're taking your kids on good trips and memories, those things will serve them well. But you don't have to give them the nicest cars. You don't have to make sure that they, you just give them 50 bucks, 20 bucks, a hundred bucks anytime they ask. It's okay to add scarcity in their life. The other thing I think you ought to do is, and this is my opinion, but I, but I, I've, I've, I've just got a lot of experience seeing people who come from these backgrounds. I could look at Bo, I look at myself, is make them work. Um, you know, as soon as my daughter got to, you know, 14, 15, and then 16, once she was definitely mobile with a vehicle. Um, I, I like kids working fast food. I mean, there, there are so many benefits to getting your kids working in the public.

• 12:35Brian Preston?

  First of all, they need to learn the value of, of, of working your labor turns into money. There is something very valuable about understanding and appreciating that you work hard, you make money and it's a good thing. So when my daughter worked at Chick-fil-A for, for those years, it was great because you realize the public's crazy. And that you, you know, but you've got to still put on a happy face and be good with people. And those EQ skills will serve you for years. To come. I remember there's some crazy stories I could tell you from working the drive through at the Hardee's in my hometown. I mean, it was just, you get a lot of experience. I know you've told me all kinds of stories when you were a server at Chili's.

• 13:11Speaker 01

  Absolutely.

• 13:12Brian Preston?

  All through those years. So make, make your kids work. I think it's important. I understand. Now, Bo, you might have a different point because I know you were an athlete all through that. And I think that's a whole nother work ethic that you can also give a lot of credit to. And then the last point, what Bo was talking about, I do believe you should prime the pump, meaning that you want to, as you're trying to create good stewards, but also good productive adults, you need them to understand that their money actually is not just for consumption. I love that Bo talks about the, the give, save, spend. But I think a lot of people, even beyond the, the giving and the, the saving, they get too carried away with the, the spending and actually never do the saving. So what I've done, as soon as my daughter started working, I said, you know what, we're going to

• 13:56Brian Preston?

  open up a custodial Roth IRA and I will match it dollar for dollar. Now you have to stay within the limits, you know, of what you can, can't fund a Roth IRA for more than your earned income, but you can, but that ties into the whole, let them spend some of the money.

• 14:10Speaker 01

  Absolutely.

• 14:10Brian Preston?

  But, and I was amazed at how that was, it really was priming the pump of an engine, is pouring gas in the carburetor because it was just amazing to watch how, you know, she would get some additional money. And she'd be like, hey, does that offer still stand that I can make a contribution to my Roth IRA? And I'd be like, yeah, for sure. And I've watched, and what's also really cool is when you start getting those monthly statements and you, you compare how many hours she would have to work for what the money made just in that past month. And then if you want to go to moneyguy.com/resources, go look at our wealth multiplier tool, as well as our downloads. That stuff is so valuable because I mean, you get an, an 18 year old, where I'm doing this off memory,

• 14:55Brian Preston?

  which is a mistake. You should never do stuff math off memory. But it ain't like a hundred and eight dollars or somewhere around there. It's, it's, but for a 20 year old, it's 88 times over, you know, and it's just, it's so incredible if you can use, and by the way, if you go to the moneyguy.com/resources, we actually have the wealth multiplier all the way down to one years of age. So if you want to get the grandparents all excited about your kids and, and making them, um, you know, have a pot of money at some point that they're saving for college, that's a great resource too.

• 15:24Speaker 01

  Love it.

• 15:25Speaker 02

  Love it too. S. San, thank you for being here. I hope that question helps you think about parenting as you talk to your kids about money. And yeah, we just always appreciate these questions on the livestream. So on to the next one from Hero of the Table. It says, "My income is on the edge of the limit for Roth IRA contributions. I intend to wait until January or February to make my contribution to either a Roth or traditional IRA, depending on where our income ends up. Should I put the monthly contribution into a high-yield savings account or a taxable brokerage during the coming year?"

• 16:03Brian Preston?

  So let me peel this apart, Bo, and then let you answer it. Is that really, this is a pretty simple question, but it's got a lot of fancy stuff on the front end. First of all, I want to give Hero of the Table, you are also the hero of don't free fund the Roth IRAs if you are right on that threshold, because you just create a lot of work for yourself. So this is, if you give Hero credit for being right on that, now it's a question, Bo, of how do you handle your cash to maximize it?

• 16:31Speaker 01

  Yeah, I think one of the things, you know, a lot of folks would say, "Oh, well, I don't want the money to just sit there." I love the idea of dollar-cost averaging. I'm going to just start dollar-cost averaging into my after-tax account. I'm going to buy some index funds. And while you can do that, there is a risk that you run, because when it gets to January, February of next year, what if you, I'm going to do math in my head, because I can do this math. If you're doing $500 a month into your account, and you were going to plan on putting $6,000 in an IRA, what if the market goes down? And over the course of that time, that $6,000 that you were going to put in there has turned into $5,000 now, or $5,500, you have a little bit of a problem. So I would think one of the things you could do is, I don't think it's crazy to think about parking in a high-yield savings account, but you said something really interesting. I'm going to wait till January or February,

• 17:15Speaker 01

  and I'm going to see if I qualify for Roth, or if I don't qualify for Roth. Now, hear me out on this. Even if you don't qualify, but you were structured in such a way where you could do backdoor Roths, there's a really good chance you're gonna say, hey, if I can do any type of Roth at all, I'm gonna do it. So while I may be funding a traditional IRA, I'm not gonna fund it for the pre-tax benefit of it. I'm not gonna take the deduction on that. I know I'm gonna do a non-deductible contribution. Well, if you know you're gonna do that anyways, and you're already at the threshold to where you think you're gonna cross over the Roth, you could still do backdoor Roths. A lot of people don't realize this. You don't have to make over the Roth income to do backdoor Roths.

• 17:57Speaker 01

  You can make under the Roth threshold and still do backdoor Roths, and it's totally okay. So for a lot of our folks, a lot of our clients who are right there at that threshold, like some years they're over, some years they're under, but they wanna go and get the money in Roth as soon as possible, we're gonna just do backdoors every year, backdoors every year. And that's totally fine, totally permissible. And that way, you're not necessarily having to wait that extra year. But if you're not in that situation, I think it's okay to park that money in cash. And then when you get to January, February, stroke the check, get it invested, and let that money work for you. Agree, disagree, wanna fight about it?

• 18:30Brian Preston?

  Well, I do want, I just wanna make sure. We love backdoor Roth contributions, but remember, you have to have the right account structure.

• 18:37Speaker 01

  Oh, did you see that comment the other day?

• 18:39Brian Preston?

  Well, no, I just know I've had a neighbor who called me all excited because he's like, man, I did the backdoor. And I was like, but don't you remember we talked on your back porch and you have a rollover IRA? I was like, so you can't do a backdoor without screwing up the whole basis and how you're gonna... He's like, oh, my gosh. So I always put that disclaimer out there is that make sure you can't have any other IRA assets except for like an inherited IRA or Roth IRAs, because SEP IRAs blow it up, simple IRAs blow it up, rollover IRAs blow it up. So just be careful about that. I don't disagree if you have the right account structure. You can go ahead and plan accordingly. But you don't wanna do 12 conversions. You're still probably gonna end up in a very similar situation as Hero,

• 19:23Brian Preston?

  and you're gonna be doing this as a one-time transaction. Also, when I answer the question about... Cash, because we still, we're in that, we're right there on the cusp of where things are probably going to change for cash is because forever, you know, everybody's going to your high yield savings account, you know, the, the banks that are still FDIC insured, but if you notice, those are still paying three and a half to 3.7, I think, but, um, and then you've got your money market mutual funds that are at the brokerage accounts. That's like your Fidelities, your Vanguard's and so forth. And those, they got as high as they were paying, you know, close to six, got it, you know, and it was easy to get five. I've noticed those have slowly been coming down to where I now think you're in the low fours, but

• 20:07Brian Preston?

  they're still ahead. But there will be, if we get any more interest rate drops, we'll probably hit a crossover point at some point. And that's where he wrote, your question is, I would just go with what's easiest to say, oh, if you already, like I already had a taxable account, like at one of the big brokerage companies, and then I also had a high yield savings account at like Allah or something like that. So I can sit there and I just maximize the one that's paying me the most. I mean, it's because they're, they're both secure. It's, it's good. It's just, um, look at the rates, do the research and then choose, but just know it's coming because as soon as rates go down, you'll see the banks will hold their rates higher a little bit longer than the brokerage companies. It's going

• 20:48Brian Preston?

  to be almost immediate that those, those money market mutual funds will now be underperforming the high yield savings accounts.

• 20:54Speaker 01

  This is a brief aside. If you guys wonder if we read the YouTube comments, we do. If you wonder if we go through and read the subreddit thread, we absolutely do. And the other day, did you see the comment that got, somebody was like, oh man, these guys talking about the backdoor Roth, and I got so excited, but man, they didn't say anything about the pro rata rule, man, these guys should really do some content on the pro rata rule. Every time we ever talk about it.

• 21:17Brian Preston?

  I try, I try to make sure I put the disclaimer in there.

• 21:20Speaker 01

  So that guy's just not deep enough into the money guy ecosystem.

• 21:23Brian Preston?

  No, but my neighbor fell into the same trap. So I mean, I want to make sure, that's why I put that disclaimer out there is because.

• 21:28Speaker 01

  We always talk about it.

• 21:29Brian Preston?

  I get it. I look, I get excited and miss all kinds of, I mean, it's easy. You get, you hear something like, man, I was told Roth was off limits and then we get y'all excited and then you're so excited, you don't hear the disclaimer. So that's why I'm glad that we're giving it a little, little extra punctuation.

• 21:43Speaker 01

  Yeah. Like we do every time.

• 21:44Speaker 02

  Like you do every time. Yeah. Our, our actual shows that cover that more in full absolutely share those details. So you should go look those up on our YouTube channel or podcast platforms.

• 21:55Speaker 02

  All right, are you ready?

• 21:55Speaker 01

  He really said, "I will be doing a backdoor."

• 21:57Speaker 02

  Oh.

• 21:57Speaker 01

  Because I don't have any other IRA assets. Awesome. That's great.

• 21:59Speaker 02

  Love to see it. All right, next question is from Heather B. It says, "I have a pension from my corporate employer. If I retire early, I can choose when to start receiving benefits up to 65, and it grows, and it grows the later I wait. Should I start ASAP, or push it back, or take a lump sum? What do you think about this pension?"

• 22:23Brian Preston?

  Oh, man, there is so much in that question.

• 22:25Speaker 01

  You won't believe our answer to this, Heather.

• 22:27Speaker 02

  It depends.

• 22:28Speaker 01

  Yeah, look at her, you really got a nut. Yeah, it absolutely depends. And unfortunately, this is a mathematical equation. It's not incredibly uncommon for someone to have this option. Hey, when I retire, I can either take a lump sum benefit of my pensionable amount, and I can take that lump sum, and I can do a direct rollover into an IRA, into a pre-tax type retirement account, or I can annuitize the benefit, and I can receive a monthly payout. And even when I annuitize, I can pick when I want to do that. I might start my annuity at 60, or 62, or 67. How do I decide? Well, what you have to do, unfortunately, is you have to break out a pen and paper. I'm just kidding, it's not really pen and paper. You've got to break out a spreadsheet, or some software, or a calculator.

• 23:12Speaker 01

  And you have to look at, at the point in time that you make the decision, which would be most advantageous. And this is a little bit of a cautionary tale. It's not always one way or the other. We have a lot of clients that, when we do the analysis of the present value of their lump sum pension benefit relative to the present value of their future cash flow from the pension, the lump sum is way more attractive. And so, we communicate, "Hey, it really makes sense to roll this over." And then, we will have an exact, different client who works for a different company with a different pension calculation, and the present value of their future income stream is way more than the lump sum value, so it makes sense to take the pension. So, you have to actually sit down and do the math to determine which one is most advantageous.

• 23:57Speaker 01

  And here's what gets even crazier. We have clients who will be four, five, six years away from retirement. We're beginning to make these assumptions, and... Six years out, we'll say, okay, hey, lump sum made the most sense. Okay, four years out, hey, lump sum makes the most sense. Hey, we get 18 months out and now there's been a shift in interest rates, there's been a shift in the way they calculate the pension. All of a sudden, now the lump sum isn't the most advantageous. It's actually the annuitized benefit. So you have to do the math and redo the math all the way up until it's time for you to make the decision on how to take it.

• 24:27Brian Preston?

  This question immediately made me think of, you know, we got invited to go speak at Murray State to their athletic program.

• 24:34Speaker 01

  Choose up.

• 24:34Brian Preston?

  And then Journey Church. And it was a great experience, but we had in the Q and A after the church event, this was like one of the first questions that was asked to it. And I love it and I hate when we have to say it depends. Of course it does depend, but I can at least give you, because we're the king of creating order of operations.

• 24:53Speaker 01

  There it is.

• 24:53Brian Preston?

  Is, you know, with Millionaire Mission and other things. So here's the order of operations I at least can give you on the thought process of how you should think about this is exactly what Bo was talking about. You have to look at this pension and start doing some math calculations to figure out how fat was the design or how anemic was the design when they put this plan together? Because you might find out that, you know, that their stated retirement age is lower than most plans and that they actually pay out larger sums to where if you calculated, you know, the rate of return of what that lump sum they're telling you each year is and what it will be paying out from an annuitized standpoint, you might go, holy cow, I can't

• 25:35Brian Preston?

  believe there's a reason they must, they really want me to take this lump sum is because they really overpromised and I'm in a really sweet situation. Or you might look at it and go, are you kidding me? That's all I get. I have this lump sum, but they're only going to pay these benefits. So you have to do that analysis first. If you need to figure out, are you lump summing or are you actually going to take advantage of the pension? And it's all about the assumptions on how this thing was designed. So if you figure out this thing is a good pension, you don't want to take the lump sum. Because if it's anemic and it's not good assumptions, you're probably just when you retire going to do a trustee to trustee transfer. So it's a tax free, tax deferred event or you're just rolling it over. There's not going to be any tax consequences at the moment. And then you'll go invest that money and do it to your own way.

• 26:17Brian Preston?

  But if you figure out this is this thing is frothy and it's good. Now you have to say, when do I need the money? And here's why you don't want to potentially immediately take it if you don't need the money is because it's going to increase your taxes. And then also, if you're worried, well, maybe I'll die. Well, yeah, but most pensions also have a survivor benefit. So it makes sense, especially the way you described this Heatherby is that the longer you defer, the bigger your benefits. If you don't need the money, let it kind of do its thing. And then take it and do, you know, use the planning so it's got some longevity protection for you. But those are some things just to think about.

• 26:53Speaker 01

  For those of you who got glassy eye and you're like, oh, I don't have a pension. I don't have to think about these things. This act, this thought process we just went through is the same thing that almost everyone in their 60s faces when they decide how they're going to take social security. It's the same way that you think about it. Do I begin drawing it early? Do I begin drawing it later? There's a benefit for drawing later. If I draw it early, are there other things I'm going to miss out on? Are there other implications I ought to be thinking through? It gets very nuanced and it's so funny. All the people in the comments, they know our lines better than us. Personal finance is in fact, personal and the right answer for you is going to depend on your unique financial situation.

• 27:31Brian Preston?

  There is one flaw in your analogy there though. Cause it makes me want to fight is um, social security's survivor benefit is horrible. What is it? 255 bucks?

• 27:41Speaker 01

  Yeah, there's some, yeah.

• 27:43Brian Preston?

  There are some survivor, but if your parents, look, I grew up in a house. My dad died prematurely. And my parents both never made a lot of money, maybe about the same amount of money. So I'm a little bitter about how social security works.

• 27:57Speaker 01

  Cause he paid into the system for his whole life.

• 27:59Brian Preston?

  Paid in his whole life, died in his 50s and then since my mom and my dad made about the same amount of money. Pretty bitter about how that from a, you know, cause that's why. The first social media post I ever made before, this is back when people blogged. I came up with a Gen X scream or something like that. And it was my frustration with-

• 28:21Speaker 01

  Hold on, was that your username?

• 28:22Brian Preston?

  That was the blog I was trying to start.

• 28:25Speaker 01

  It was Gen X scream?

• 28:26Brian Preston?

  I was mad about social security. I was, and that was my main pro- because it is, there is some things about from legacy planning. If you grew up poor, there are some things about social security that drive me crazy. And we could fix a lot of this stuff, both from, that benefit could hopefully be updated in many ways, you know, just to make it better.

• 28:48Speaker 01

  Agreed.

• 28:48Brian Preston?

  But I think people are scared to, elected officials don't like to touch or talk about social security.

• 28:53Speaker 01

  It's a fact.

• 28:56Speaker 02

  All right, that was, sorry, we have got a lot of good questions today.

• 28:59Speaker 01

  That was from Heather.

• 29:00Speaker 02

  That was from Heather B. And we really do appreciate that question. We hope that that helps you think through your pension and all that that entails. All right, Thomas W.'s question is up next. Is 2% worth putting to a Roth IRA versus a Roth 401K? I get a 10% retirement match through my company and can put my contributions to a Roth 401K. What are the differences between a Roth 401K and Roth IRA? And then he added, I currently contribute 12% of my income plus the 10% match. I'm 22 years old and making near six figures.

• 29:37Speaker 01

  Holy cow. 22 years old, making six figures, that's awesome.

• 29:42Brian Preston?

  Thomas didn't give the option that I'm gonna say and then let you explain?

• 29:45Speaker 01

  Both. Both, yeah, I agree. Especially if you're 22, making near six figures. You've got a high income and hopefully not a lot of high expenses. And so you have some margin there. I wanted to zone in on kind of the middle of the question, because this is what I think the real crux of your question is. What are the difference in Roth IRAs and Roth 401Ks? And there are a few worth noting. The most notable of which I think is, with a Roth 401K, you can just put a whole lot more money in there. Roth 401Ks, you can take all the way up to $23,500 this year. Your salary deferral can be all right. With a Roth IRA, you can only do $7,000 a year. So if you're just trying to sock away the most amount of money, 401K is going to lie to do that. The other big benefit with

• 30:28Speaker 01

  a Roth 401K relative to a Roth IRA is that Roth 401Ks have no income limit. So you can make a million dollars a year and you could still put all $23,500 into your Roth 401K. Once you make over a certain threshold as either a single individual or as a married, filing jointly individual, you can't contribute to a Roth IRA anymore, at least not directly. You'd have to do a backdoor. So there are some benefits that the Roth 401K might pose over the Roth IRA. However, there are some benefits that the Roth IRA have over the 401K.

• 30:59Brian Preston?

  Well, that's what I think you do. I can't believe we've made it into like the fifth or sixth question, and this is the first time we've said, "The Financial Order of Operations will lead you the way," is because you said something very key there, Thomas. Your employer gives you, I think, up to 10%. You put in 10%, you get a match. So that's a step two. So you're going to do the Roth 401K just to maximize that match?

• 31:21Speaker 01

  Yep.

• 31:22Brian Preston?

  But what I do like, and this gets to what Bo's question is, step five, when you get to Roth IRAs and HSAs, what I like about the Roth IRA is the next step before you go and load up even more into the Roth 401K, you get to control where.

• 31:36Speaker 01

  That's right.

• 31:37Brian Preston?

  Because a lot of times, your 401K, now, there's a lot of good ones. Maybe you work for a Fortune 500 company and it's with one of the low-cost providers, like a Fidelity, a Schwab, a Vanguard, or something like that. And those things are rocking and rolling. But you even have to be careful if you have a Vanguard, because I've seen insurance companies, it's kind of that will...

• 31:55Speaker 01

  He's like Vanguard subaccounts.

• 31:56Brian Preston?

  They'll put, they'll make it look like a Vanguard, and it will, but it's a subaccount. They add all kind of fees on top of it, and it's packaged into an insurance-type product. So you have to do, dial it down, look at those internal expenses to figure out where's when the Roth IRA, you control it all. I mean, you get to say, "Hey, I want the low-cost option. I don't have to worry about how my employer chose the 401K provider. I don't have to worry about the fees that might be in that 401K. I'll just go do this low-cost Roth IRA."

• 32:24Brian Preston?

  It used to be there were some other unique things. It's not even worth they modernized the tax law to where all those things about required minimum distributions and so forth.

• 32:33Speaker 01

  Much more simple now.

• 32:34Brian Preston?

  It has made it easier. So now it's a matter of how much can you save or need to save and can you maximize this moment? And somebody your age, because here's the thing, I know 25% savings rate is the freeing rate that we typically tell everybody. But there is a point where you are in such a unique situation at 22 years of age, almost making six figures, that you have all the makings of somebody who's going to be able to build incredible wealth pretty early. But you have to, I would look at this as like you were a professional athlete, is that professional athletes, the hard things for professional athletes is, is that they might earn, you know, 70% of their income in the only four years.

• 33:14Speaker 01

  The first few years.

• 33:15Brian Preston?

  So if you, if you squander while you're in these high income, don't, you know, it's kind of that, and I'm telling all kind of analogies, but it just comes to my mind, that whole conversation Dave Grohl's father gave him when he got his first big check from Nirvana was, you know, treat it like you're not getting anymore. And then once, you know, if you do this, you're 22 right now, by the time you get to your 30s, you're going to know your die is cast. Okay, now I can do like the know your number course or something, figure out if I'm ahead of the curve, behind the curve, or right where I'm supposed to be. But when you're right at the beginning of the journey and you have a high income, it's important that you try to get your critical mass built up, a base level of assets, so that it just the money, your army of dollar bills can start working

• 34:00Brian Preston?

  for you as much as possible. I think sometimes people start young, but by the way, that's not to, I'm like, consider me your coach. I'm the one you could get, yeah, you probably bench pressed by yourself a certain weight, but if I'm over you spotting you and making you do better, you will be stronger, you'll be faster, you'll be able to do so much more. So that's the only reason I'm putting this extra pressure on you is to make you better. You're already crushing it in a lot of ways.

• 34:24Speaker 01

  You get a good bench press analogy there. I'm in. I'm so in for that.

• 34:29Speaker 02

  Well, good answer, all the same, with the bench press analogy. Thomas W., thanks for your question. MM has a question next. It says, "My wife and I are 30-year-old doctors at the end of our training." Congrats on that, by the way. That's a long time. "Household residency salary is 50K a year. We are about to start our careers and our salary will grow to 600K a year. How should we prepare?" Unique situation here.

• 35:01Speaker 01

  Well, here's the advice. So, we obviously work with a lot of medical professionals who've gone through residency. Now, they transition into this stage of their life. And here's the best piece of advice that I could give you. And I give the same advice to college students, if you can believe it. Even college students who come out of college going into the first job. They say, "I want you to slow down and pause and just think about that on your salary of $50,000 a year, you've been able to make it work. You've been able to live life and pay bills and do things. Maybe you haven't been able to do all the things you want to do, but you have been able to navigate living on that income.

• 35:40Speaker 01

  Don't automatically assume that when my income goes from $50,000 to $600,000, my lifestyle has to move just as rapidly. Man, if you could figure out, man, what if we made $600,000 for a few years and we still lived like we made 50,000? I tell my college graduates this too. Hey, if you get your very first job and you start making 50,000, 60,000, 70,000 dollars a year right out of school, and you can live the first few years like you were living as a college student, like the guy who was stretching 20 bucks for a whole week, and you can master that, you'll be amazed at how much money that you're able to stack up and how powerful that money can be for the long term.

• 36:25Speaker 01

  So, the best piece of advice I would give you guys is to stop and slow down. And I would have, because it says it's a couple, right? They're both, okay. I would have a cool off here, but hey, you know what we're gonna do? For the first six months, we're working. We're just gonna focus on working. We're not gonna go buy the BMWs. We're not gonna go put the down payment on the house. We're not gonna go do the this, the that, the this, the that, the this, the that. We're just gonna kinda let a few paychecks hit, ease into this, and talk about, okay, what are our goals with money? What do we really, do we care about having the $5 million house in the hills? Or is the reasonable house in our area that we wanna buy and start a family and set, does that make more sense, at least at this present

• 37:06Speaker 01

  stage? Because that's the one thing I see, sorry, doctors get wrong, is they rush into the lifestyle immediately.

• 37:13Brian Preston?

  Well, I wanna talk about the mindset of, first of all, we don't know a few things that have not been shared, like student loan debt. Typically, doctors, yeah, you go from making $50,000 to $600,000, but what you're not sharing with us is, how much six figures of student loan debt do you have? Because that's built in. What's the interest rate on that? You know, there's a reason we have the Financial Order of Operations, is you've gotta triage your financial life to figure out, oh my gosh, you know, a lot of these student loans I had to take, six figures, because I'm a doctor, I've been in school forever, are much higher interest rates than I feel comfortable with. So that's gonna come into the plan. The other thing is, I want you to have the mindset, because I think a lot of times I see doctors, and look, you're gonna get targeted because you have a great

• 37:58Brian Preston?

  income, but you have a good income, but you're not wealthy. You know, there's a difference. You know, you can, you can-

• 38:03Speaker 01

  They call that Henry, right? High income, not rich yet.

• 38:06Brian Preston?

  Yeah, because you might have big student loans, you have, so you have a lot of potential with that high income, but you ought to have the mindset, you might very well be behind. And a lot of people go, wait a minute, didn't you hear they have $600,000? Well, what if they have $300,000 of student loan debt? What if you realize that they're now in their early 30s? What's the wealth multiplier for a 20-year-old? It's 88 times over. What's the wealth multiplier for a 30-year-old? It's 23. So you can see how we've almost about cut it in a quarter. And from any of your friends that got the, you know, the finance or accounting degrees and, you know, graduated at 22, they've been, they've been out there putting in some steps already on building up net worth. So I just, because I remember

• 38:50Brian Preston?

  I had one of my early clients- Only reason they're not clients is because Mayo Clinic's benefits are so good that they stole them away, which really upsets me because I loved having them as clients. But she used to, I loved how she would advocate whenever her new doctors would come out of their residency and say, "Don't go buy the Mercedes. Don't, don't do it. I know you've been in school so long, you feel like you should reward yourself for all this hard work, but you've still got a little bit more in the journey." Because it's back to, you've got to build the critical mass. I mean, you, you have no assets working for you. It's all built upon your labor at this point, and you very well could have multiple six figures of student loan debt. We've got to get all that under control so you can actually

• 39:33Brian Preston?

  get caught up. And you'll do it very quickly. That's why I'm saying a little ounce of preparation for somebody who's graduating with this type of situation is going to go a long way. But the problem I worry about is doctors, because that high income is so strong, you can go to a bank, they'll give you a mortgage on probably a multimillion dollar house. They'll let you finance that Mercedes for 84 months, and before you know it, you're going to be the typical trap of, "What have I done to myself?" You know, and I'm never, I'm going to have to work forever. Because, by the way, we have doctors on staff here. And because, let me tell you, medical profession has a lot of burnout, and it's hard, and there's

• 40:16Brian Preston?

  other things. I think, now fortunately, our doctor is because he was independently wealthy, he had a military life, he retired, and he came, but he just wanted to help in this way. But it is something, I see it all the time with doctors, where they can get burned out. And I just, you want to have a plan to where your money can start working harder and for you than you can with your back, your brains, and your hands.

• 40:39Speaker 01

  Love it.

• 40:40Brian Preston?

  You only have one brain.

• 40:41Speaker 01

  With your back and your brain and your hands.

• 40:45Speaker 02

  All of it. All of them. Well, MM, thank you for that question. And they did add some context and said, yep, they have a joint about 400K student loan. So good that you talked about that.

• 40:55Brian Preston?

  See, that's what I mean. So it's, so don't go crazy on lifestyle, because the banks will let you do it. And you need to feel, you need to have the mindset of scarcity and that you're a little behind in the beginning. I hate to be like that, because it seems on paper, you're like, "Holy cow, we're going to crush it." And you are, but you just, you got to kind of, you got to dig out of the hole a little bit.

• 41:13Speaker 02

  Give it a second, yeah.

• 41:14Brian Preston?

  And it's before you do that. That's why, once again... These two things can be your friend.

• 41:20Speaker 02

  Well, I was gonna say too, they also said, "Thank you. Look forward to buying the book."

• 41:24Speaker 01

  Love it.

• 41:25Speaker 02

  Millionaire mission fan in the making. All right, next up, we've got Calvin Awesome's question.

• 41:32Speaker 01

  Speaking of millionaire mission fan in the making, that sounded like eerily similar to Making a Millionaire, and I was gonna throw this out there. If you guys have not checked out the new show that we're doing called Making a Millionaire, they release every other Monday. We had a doozy of one that released last week. Thank you guys for checking that out and hanging out with us and Phil. We have more episodes coming your way. Well, the only way to know when we release a brand new episode is if you're subscribed to the channel right now. So if you have not subscribed, make sure you click that subscribe button so that we know you are out there.

• 42:04Brian Preston?

  Hey, a little sidebar, I'm sure we'll do a formal, you did some type of update, right, on Phil?

• 42:09Speaker 01

  I did. Yeah, last week on our livestream, I gave a little bit of behind the

• 42:14Brian Preston?

  That's good, okay.

• 42:16Speaker 02

  No mentioning it on this livestream. I thought you were gonna talk more about it. You were like, "We already did that."

• 42:21Speaker 01

  Well, people were like, "I wonder what happened." Well, Phil took a lot of our advice. Phil, he made some big changes after we recorded that, and it's awesome. I'm excited. I'm excited for Phil.

• 42:30Brian Preston?

  Yeah, we're recording another episode this Friday. I'll get excited.

• 42:33Speaker 01

  We are. Not with Phil. Well, we are recording another episode this Friday. It's gonna be great.

• 42:37Speaker 02

  Love it. Okay, back to Calvin Awesome's question. He says, "Me and my wife are about to have our first child and want to do a 529 plan. We're technically in step eight of the Financial Order of Operations," which is awesome. "But it seems fake because we don't own a home. Is the 529 still valid for us?" Interesting way of thinking about

• 43:02Speaker 01

  Well, I want to give you, I want you to give yourself some grace. If you're in step eight, and I'm gonna, let me articulate to you what step eight is. Brian, will you hold the thing up for me? You're getting your full employer match. You don't have any high interest debt. You have a fully funded emergency fund. You've maxed out your Roths and your HSAs. You're maxing out your employer spot your time of plan. You're saving 25% of your gross income. You are at the 25% savings rate now preparing to have your first child. So that's not fake. If you're at step eight, that's not fake. You've done it. If you're at a 25% savings rate and you've worked through, that's awesome. Now, the question becomes, and this is where I think you're facing some tension.

• 43:45Speaker 01

  You have to think about what your goals and priorities are. Because we talk about it all the time, Brian. Money is nothing more than a tool that allows us to achieve the goals that we have. The things are important. Obviously, you know, financial independence is one. That's why you're saving. And it sounds like paying for your kid's college is also a goal that you have because you're talking about opening a 529, but you don't own a home. And one of the questions I would ask is, is home ownership on the radar for you? Is that something that you want to do? Is that a goal that you do have? Well, if it is a goal that you do have, you have to figure out, how does that goal coordinate with the other saving that we're doing? As well as coordinate with being able to pay for our kid's college? Because I'm going to guess if your desire is to own a home,

• 44:28Speaker 01

  you probably want to own a home before this kid goes off to college. So it's going to be a nearer term goal than the college goal. And I think you just have to get serious about, okay, what are we actually working towards? And do we have a timeline around when we want to be able to do that? And once you figure that out, it will then begin to define the priority that you place on either doing a step eight, 529 type thing, or continuing to build towards that down payment for a home.

• 44:53Brian Preston?

  Look, I'm going to just go ahead and say this. I'll first want you to go to moneyguy.com/resources and look at our home buying checklist. You have to go through the checklist first. But I have a very strong opinion that if you are in, because part of the checklist is going to be, are you going to be in this community for the next five to seven years? I bullied Bo into buying his first house. I feel like Bo and I jointly bullied Rebi into buying her first house. You did. I'm very grateful for that. Because, look, I'll just go ahead and tell you, there is a life arbitrage thing. There's a reason. When the Federal Reserve releases, the Fred releases the net worth data for the majority of Americans, it's like almost all of their net worth is in their home equity.

• 45:37Brian Preston?

  Is because houses go up and, and you know, and it appreciates and plus it lets you grow roots, you meet your neighbors and community. I think about the fact that Bo, like you're going on trips with your neighbors. I know in the next, next month or two.

• 45:51Speaker 01

  Next month, yup.

• 45:52Brian Preston?

  I go on trips all the time with, with neighbors and, and do things and I see the kids like, what's funny is my daughter, um, she goes to bed pretty, my youngest daughter goes to bed and she's like, dad, I was, I was up late last night because the kids across the street were out there still playing basketball. Now, I don't know, and I heard them too. That ball was dribbling until nine. I was like, are they homeschooled? Where are these kids doing? I didn't understand how they were out. I mean, they're, but, but it is so fun watching kids grow up and, and things. So that's my, my opinion on that. And I don't, you know, but it also, there's some financial part. Cause I, I mean, I play around with all these calculations, looking at opportunity costs and so forth. And that's one, that's

• 46:34Brian Preston?

  why if you notice, when you look at all of our rules, first time home purchase, we're not like all those other gurus that tell you, hey, go save up 20%. We're like, no, get in there three to 5%, make sure it stays below 25% of your gross income. I know that's gonna be the stretch with where things are with housing right now, but I do think homeownership, it's a little bit hard. It's actually much harder now with where interest rates are, but there's always the opportunity that interest rates, if they come down, you're going to be able to refinance. Just don't be house rich, life poor, but it, but it is something that I think can add a lot of value.

• 47:09Speaker 01

  I'm gonna disagree with that.

• 47:11Speaker 02

  Well, that's good, but you don't disagree with that.

• 47:12Brian Preston?

  I mean, didn't I, do you feel, are you glad we bullied you into buying a house?

• 47:15Speaker 02

  Yeah, no, I truly am. Uh, because I was really thinking I had to put 20% down. And so I was like, wow, I'm never getting a house. You know, that's how I felt at the time. And I know, I see that same sentiment. With our fellow financial mutants. So yeah, I was like, my world was totally open when I found the money guy home buying rules. I was like, oh, wait, I could potentially do this.

• 47:36Speaker 01

  And then I could.

• 47:37Brian Preston?

  And I'm still putting the caveat, you gotta go do the checklist. Cause I mean, we have some specific rules to make sure.

• 47:42Speaker 02

  And I did, like, they were really helpful. I did feel like those were, you know, they were really good guardrails. So.

• 47:49Brian Preston?

  Do you disagree with me? Cause I kind of picked on you.

• 47:51Speaker 01

  No, no, no, I agree completely. I, I, I do. I have, there's this like.

• 47:55Brian Preston?

  Cause you had a vision that you were gonna do everything out of, I think it was a two bedroom apartment over there.

• 48:00Speaker 01

  Yeah. So we sold our house in Atlanta. We moved up here, got the apartment. We're gonna do like the, like super mobile lifestyle. Ended up finding out we were pregnant. I was like, well, okay, I guess we're gonna go from a two bedroom apartment to a three bedroom apartment. And you're like, what are you doing, bro?

• 48:14Speaker 02

  I mean, you can do that.

• 48:17Brian Preston?

  Unless he's changing jobs on me, which obviously not, since we're partners. But it's, um, but it is, I was like, yeah, you, this is crazy.

• 48:24Speaker 01

  But yeah, I'm so glad that I didn't. But I do, I do hate people feeling like, I have to buy home, have to buy home, have to buy home. Cause I do see a lot of people.

• 48:31Speaker 02

  It doesn't have to be your goal. It happened to be for me.

• 48:35Speaker 01

  It's okay. You can become incredibly wealthy and reach financial independence and live the life that you want on your terms without owning a home, or maybe without owning a home in this season. And that's okay. But you just need to be realistic. If it is a goal, you can't like ignore it and act like it's not a goal and think it's just gonna magically happen one day. You do have to plan for it, especially in today's.

• 48:55Brian Preston?

  Yeah, we, we've actually, I, I should say, that's a, that's a good point. We had a, because we had a client in a very high cost of living area. Um, you know, out there in California, they built tremendous financial independence, then bought a house later.

• 49:11Speaker 01

  That's right.

• 49:11Brian Preston?

  They rented the entire time they were making their peak earning years out there in that high cost of living area. But then they moved to an area that was.

• 49:18Speaker 01

  Where they could actually buy and own.

• 49:20Brian Preston?

  So I mean, that's unique. I should, I should be careful putting my opinions out there.

• 49:25Speaker 02

  And like, there's other factors too. Cause I remember, like, we looked at like a three bedroom apartment and like the, the numbers were similar enough. Like if we found the house for this price and put this much down, like the numbers were close enough that it was like, yeah, this is probably a good idea. But that's not always the case.

• 49:41Brian Preston?

  But think about your husband. I mean, he's like a professional guitarist. He'd been miserable in an apartment. He's now you can turn the amp up. I mean, of course the kids are blowing that all up.

• 49:51Speaker 02

  Yeah, that's true. But anyway, for all of those reasons, kids, guitars, it was a good goal for us and I'm glad we did it. And glad we had the Money Guy rules. And if you want the Money Guy rules, I have to mention moneyguy.com/resources is where you can go and get all of those rules. You can use our interactive calculator to see what price of a home you could buy and play with the numbers. Or you can just download the PDF that walks you through all of the checklist that you need to think through to purchase a home in a smart way. All right. Ready for another question?

• 50:26Speaker 01

  Yes, ma'am.

• 50:27Speaker 02

  Julian D. has a question. It says, "I'm starting to talk about finances with my new partner. I haven't seen the details, but she has what sounds like a whole life policy. Worse, she described it as a great deal. What do I do now?"

• 50:45Brian Preston?

  Well, I mean, this is Bo's gonna say it. It depends. Because a lot of times, and now Bo, you're gonna have a unique perspective because you worked for one of those big companies that, you know, you, the first thing to do is say, write down a hundred friends and family and start calling, dialing for dollars, essentially. I will say, you know, a lot of, you know, the first answer might not be just cash it in.

• 51:11Speaker 01

  Sure.

• 51:11Brian Preston?

  Because you've, if you've had this policy for a few years, you've probably paid all the commissions. But what, how would you handle this?

• 51:18Speaker 01

  Well, it sounds like the question is, uh, this is a new partner and we're beginning to talk about finances. Whenever a couple begins to talk about finances, I want to be very careful of you coming in so hard on, "I'm right. I know what you need to do."

• 51:33Speaker 02

  There's layers. There's the science part. There's the relationship part.

• 51:37Speaker 01

  What I think is, what I think is probably the best approach is to begin the journey of, um...

• 51:44Speaker 01

  Mutual education and mutual investigation. Okay, hey, you have this whole life policy is a great deal. Let's look at it. Let's actually look at the policy. Okay, how does this work? How much does it cost? What? What was the reason you have whole life? Are there people who are dependent upon your income? Is there some reason why you need permanent insurance as opposed to term insurance? And you just kind of go through this litany of questions to determine, does this policy actually make the most sense for the person who is insured by it? And then you look at, okay, well, what are some other viable alternatives? Okay, well, we really want to have $500,000 of life insurance coverage. What if instead of having a whole life policy, we went and priced out term policy? How much would that cost? Is there a difference?

• 52:25Speaker 01

  Is there a difference in premium price that would allow us to accomplish other things? Oh, wow. Okay, man, I could solve that problem that we were so concerned about by buying the term, potentially taking that difference and investing. Okay, well, now, what are the best ways to potentially get out of this policy? Is it something we should surrender? Are there tax implications for doing that? Is this a policy that's super, super old? And we've made it through the early cost? And it's actually a pretty good policy. It's actually a policy that could be decent. But we don't really want to pay any more into it. Maybe we could do something like turn it into like paid up insurance where, okay, maybe it's not going to be worth a full $500,000, but we can do paid up insurance for $180,000 for the rest of my life. And it's just locked in based on the cash value.

• 53:08Speaker 01

  So there are a few different options that you have. But you have to go through this analysis of, okay, why do we have the policy? What would be the best solution to accomplish the goals that we had when we got the policy? And if we determine that this policy is not the best solution, what are the different alternatives available to me? To potentially come up with a solution that is not this policy or to alter this policy so that it better fits with my financial situation? Did I answer that?

• 53:35Brian Preston?

  No, you got the paid up policy. That's kind of where I was leaning towards. And then also, don't just, if there's a need. I always remind people, because the thing you'll see down the comments when the insurance people come in is they'll say insurable, insurability. Because if you have medical issues or something, if you already have Existing policy, don't just immediately cancel because you know, if you, if there's a chance, there's a family history, you know, you always want to make sure that you take that into account, your, your health profile. And then if there is a need for the insurance and you decide how you look at it, you look at your, your, your health profile and you say, I do want to replace this, you typically don't cancel the insurance until the replacement policy. If you decide to go term

• 54:16Brian Preston?

  or something like that, go do the term first and then replace the policy or do paid up. You have options, but then you always have to look at the taxability. So these are one of those things. It's another, once again, another complexity that we help clients out with is because there's a lot of moving parts and variables. We try to give you as much as we can on a free show, but, um, but a lot of times it is back to the point that personal finance is very personal and we'd have to actually see the numbers to, to, to make sure we put you in the right place.

• 54:48Speaker 02

  Love it. Julian D. Thank you for that question. I hope that helps you think through this conversation and the coming conversations as you start this relationship. And we just really appreciate you being here on the live stream. If you want to continue these conversations in any relationship or in any context that we've covered today, go to moneyguy.com/resources, because we have tons of free downloads and calculators that are all designed to help you dig into some of the details of what we've talked about, remind you of what these guidelines and Money Guy rules are so that you can actually apply them and customize them to your life. So be sure to go check that out. Moneyguy.com/resources. And as always, we'll be here every Tuesday at 10 a.m. Central, answering questions, hanging out on the live stream and talking all things personal finance.

• 55:33Brian Preston?

  So I behaved today.

• 55:35Speaker 02

  You did.

• 55:35Brian Preston?

  You notice I didn't have a lot of inputs.

• 55:37Speaker 02

  I did, actually. A lot of tangents.

• 55:40Brian Preston?

  Are we allowed to share that how, that anything about this set or anything? Are we not saying that?

• 55:45Speaker 01

  Nope. You cannot tell them.

• 55:47Speaker 02

  Too late now.

• 55:48Speaker 01

  You can't tell them the super exciting thing.

• 55:50Brian Preston?

  You know, here's what I've realized. Look, I've read the comments and people, some people, a lot of you, thank you, who say, I love bronze tangents. But I've realized there's a whole nother people, probably my fellow CPAs are like, just give me the facts. And I'm like, So I was like, you know what? I'll wait until the end. That way I reward the people, you know, with all the tangents that came to my head while we were doing the show. Cause I noticed we, you know, just a few sec. So Caleb, did you give me permission to share?

• 56:16Speaker 01

  He said, no, you can't share the very exciting thing happening in the studio.

• 56:20Brian Preston?

  So I get sentimental. No, but I do get sentimental about the fact that this set, which is kind of, you know, this is now our, is this our third official set?

• 56:28Speaker 01

  Well, it depends on how we count the early ones.

• 56:30Brian Preston?

  Cause we did, the first one was in a conference room. First one was in a conference room. Where Bo and I literally were breaking it down every time we recorded. And here's what's funny. We were recording a lot of those episodes at night after work. And let me tell you something that I never realized is that if you leave an open line open at night, like a, just an input line at night, radio waves are so powerful at night. AM radio waves. We actually had an episode that we had to throw away because it picked up some AM broadcast.

• 57:02Speaker 02

  I still want to know what technology you were using.

• 57:04Brian Preston?

  No, it was through a sound. I mean, that is a known thing at night.

• 57:08Speaker 01

  I would hold the antenna up with you.

• 57:10Brian Preston?

  At night, radio waves are stronger. That's why you can do Art Bell and all those company, those guys could do AM broadcasts across the country and, you know, okay, continue on. Second set was the brick set.

• 57:24Speaker 02

  Yes.

• 57:25Brian Preston?

  Now, the brick set was beautiful because it was in this hundred plus year old building. But what y'all didn't know is that thing was a sweatbox in the summer. And then in the winter, it was drafty and cold. So in between takes, we were constantly moving around. Then we got to this set when we, after we bought the building, we updated the building. And this set has been incredible. Um, and it's done so well, but we've decided we're going to modernize and even update this set. And that's going to be happening in just a few weeks. So we have maybe, I think, two more recordings in this studio. And then we're, we're going to have a voila.

• 58:01Speaker 02

  Yeah. I mean, Work will start. They will. You won't see it for a little while. I do want to say you're not going to see it in a couple of weeks. We need a little extra time, but it's coming.

• 58:10Brian Preston?

  That's probably why you didn't want me to tell everybody.

• 58:12Speaker 02

  No, I mean, you can tell people.

• 58:13Brian Preston?

  The other thing I was gonna share.

• 58:16Speaker 02

  At this point, it's gonna be really good.

• 58:18Brian Preston?

  Did they see my, anybody, any comments on my new scar?

• 58:21Speaker 01

  I don't think anyone, I don't think anyone's mentioned.

• 58:23Speaker 02

  I don't think you can see it really.

• 58:25Speaker 01

  I don't think anyone's noticed.

• 58:26Speaker 02

  It's not noticeable.

• 58:28Brian Preston?

  Okay. After we recorded the last time I was recording, I gave myself a full-on black eye, bloody black eye in the middle of the night. So Bo wanted me to share that with you guys for clicks, but for privacy, I didn't do it.

• 58:43Speaker 01

  But here's the thing. He said he's willing to. If we hit 1 million subscribers by the end of the month.

• 58:49Speaker 02

  You can see Brian's terrible shiner.

• 58:51Speaker 01

  He will, you hear that? He'll put it on social. 1 million of you guys subscribe. You can see the gnarliest black eye I have ever seen.

• 58:59Speaker 02

  It was pretty gnarly.

• 59:01Brian Preston?

  Yeah, it was, it was pretty, it was pretty intense. I mean, it was, it was, it was, if you've, if you've never had a black eye, let me tell you what's really weird is they run. So you get a black eye up here, but then, you know, a week later, you're on vacation and this thing is just running around your eye. It's an amazing thing.

• 59:17Speaker 01

  It was pretty awesome. I mean, since it all went away, I mean, it was pretty scary when it happened, but it's all pretty cool now.

• 59:22Brian Preston?

  Here's the other thing. You know what you do for a living when, right after it happens, I'm laying on the floor, blood just going in my, you know, and I'm getting it all clean up. My wife goes, at least you recorded today. So I mean, that's where everybody thinks in terms of, at least you got the shows in before.

• 59:36Speaker 02

  I did think that too. I thought, well, I kind of thought like, oh, that would be crazy if he was on the live stream today with that big black eye.

• 59:42Speaker 01

  It was gnarly.

• 59:43Brian Preston?

  It was, it was intense. Okay. I think I've taken enough time. I just, I had to get it out of my system, but you see how disciplined it was?

• 59:48Speaker 01

  The floor is yours. Keep going.

• 59:49Brian Preston?

  And probably only six people were left in the room, but it's okay. Those six people who stayed around, you got rewarded for all the tangents and me being disciplined on that. And here's the thing. There's more to wealth than just the money that you're building up. I want to make sure you're building purpose, you're building why. We love creating this type of content. I'm your host, Brian Preston, Mr. Bo Hanson, Rebi, of course, and the rest of the content team, Money Guy team, out.

• 1:00:17Speaker 01

  The Money Guy Show is hosted by Brian Preston and Bo Hanson. Brian and Bo are partners with Abound Wealth Management. Abound Wealth Management is a registered investment advisory firm regulated by the Securities and Exchange Commission in accordance and compliance with the securities laws and regulations. Abound Wealth Management does not render or offer to render personalized investment or tax advice through The Money Guy Show. The information provided is for informational purposes only, may not be suitable for all investors, and does not constitute financial, tax, investment, or legal advice. All investments involve a degree of risk, including the risk of loss.