Don't Make THIS Common Roth IRA Mistake

Josh made a mistake. Knowing his impending sticky situation, he wrote us: "I over contributed to my Roth IRA this previous year (2024) due to making too much. What should I do?" Fear not, Josh, we're here to help answer your question. Stick around for the full livestream as we break down 9 questions from you - the financial mutants! Jump start your journey with our FREE financial resources Reach your goals faster with our products Take the relationship to the next level: become a client Subscribe on YouTube for early access and go beyond the podcast Connect with us on social media for more content Bring confidence to your wealth building with simplified strategies from The Money Guy. Learn how to apply financial tactics that go beyond common sense and help you reach your money goals faster. Make your assets do the heavy lifting so you can quit worrying and start living a more fulfilled life. Learn more about your ad choices. Visit megaphone.fm/adchoices

• 0:00Speaker 00

  Don't do it. Do not make this common Roth IRA mistake.

• 0:09Speaker 01

  Rebi, I am so excited because we know that sometimes in life mistakes happen. Sometimes something goes a different way than we had planned or anticipated. And so then we have to figure out, how do we reconcile? How do we fix it? And that happens all across our financial lives. And one thing that I love is that we get to sit in these seats and help you figure out how to correct those mistakes, or maybe even how to avoid those mistakes. So if you have a question, or there's something that you're curious about, or you want us to weigh in on it, we have the team right now out in the wings collecting your questions. And we want to load you up because we do believe that there's a better way to do money. So with that, Creative, I almost said your name wrong. Creative Director Rebi, I'm going to throw it over to you.

• 0:54Speaker 00

  Yeah, we do have a question about this potential Roth IRA mistake. I think it's a great question from Josh R. It says, I over contributed to my Roth IRA this previous year in 2024. And that's the thing that I think you don't, you don't expect it to pop up, but it could. So it was due to making too much. Can I re-characterize the contribution and earnings as a traditional IRA and then do a backdoor Roth before filing? So he has a solution here. Do you think it's a good one? What should you do in this situation?

• 1:25Speaker 01

  I love this. So the first part of his question is, hey, I over contributed. One of the things that's just worthwhile knowing is if you work with a large custodian like Fidelity or Vanguard or Schwab, they won't actually let you over contribute. They won't let you put more in than whatever the annual limit is. And right now, for those under 50, the annual limit is $7,000. But what it sounds like happened, and it says in this question is, well, I over contributed, not in the fact that I put more than the limit in there, but what I actually did is my income was higher than I thought it was going to be.

• 1:55Speaker 00

  Great problem to have.

• 1:56Speaker 01

  It's a really good problem to have. You crossed over the income threshold and say, hey, you can't do Roth contributions. Or maybe you're in that phase out where it says you can do them, but you can't do all 7,000 of them because there is an income threshold that if your income falls And there you can only do a certain portion of the Roth contribution. So whatever do I do? Well, here's the good news. You've caught this and you've recognized it before we get to the tax filing deadline. Since you've done that, one of the things that you can do is exactly what you asked your question. You can re-characterize, reclassify those contributions that had previously gone into your Roth IRA. You can re-characterize, reclassify them as a traditional IRA contribution.

• 2:37Speaker 01

  And the good news is if you catch this before you file your tax return and you re-characterize, you get to move those contributions from the Roth into the traditional as well as the earnings attributable to those contributions. Because a lot of times what will happen is people won't pay attention to this, won't notice this. They'll get past the tax filing deadline, they'll get a letter. Uh oh, turns out that I put money in there that I wasn't allowed to and I filed my tax return and it was not right. Well, then what do I do? Well, if that happens, you don't get to re-characterize a contribution. You have to do a return of excess contribution. Where now, instead of pulling, putting the money from one account into the other, you have to actually refund those contributions, refund those earnings.

• 3:18Speaker 01

  The earnings are going to be subject to taxes and are going to be subject to a 10% penalty. So if you can catch this early on, it really, really, really makes your life a whole lot easier. So re-characterizing is a great tool to use and you can put them into the traditional. Assuming that you have an account structure that will substantiate this, you can re-characterize to the traditional and then you can do a Roth conversion and then convert those contributions to Roth. So basically you're sort of back-dooring into doing a backdoor Roth. But when you do that, the earnings would be taxable. You would have to convert the, you could convert the after-tax portion that went into traditional and the earnings would be taxable as part of the conversion, but it's a great solution. And so then last thing that I would just throw out here for Josh is if you're close to that threshold,

• 4:03Speaker 01

  if you are someone who's like bumping up against the Roth IRA limits or you think you might be, you may want to move away from being like a monthly Roth contributor. And we love monthly contributions, we love dollar cost averaging, but it might make sense to move to an annual contributor where essentially you save up that money in an after-tax account or you put it into a broke, into a high-yield savings account. And you just wait until you get to January and then when you get to January, you look, okay, what was my income last year? Where did I fall? Did I qualify for Roth? If I did, great. I'm just going to take that money and I have up until the tax filing deadline to fund my Roth for last year. If I did not, well, okay, great. Can I do a backdoor Roth? I can put it in additional, I can convert. I think you're just going to save yourself a lot of headache because generally

• 4:48Speaker 01

  what happens is someone will do this, they'll run afoul of this once and then they'll recognize, oh my gosh, I gotta go undo 12 contributions and re-characterize, dah dah dah dah dah. You'll only do it once and you'll recognize, man, it's just a lot easier to get it right the first time and not have to go screw, not have to go back in time to fix it.

• 5:05Speaker 00

  Absolutely. But you did give some good thoughts on if you do have to go fix it. So Josh R., I hope that really helps you out. And I have some other good news for you. It is a Tumblr day. So we're going to be giving away Money Guy tumblers to everyone who we answer their question on the show. So Josh, if you would like one, just email [email protected] and we will get one sent out to you.

• 5:26Speaker 01

  I want to, can I tell, can I say, can I tell them something?

• 5:28Speaker 00

  Of course.

• 5:28Speaker 01

  I just want you guys to know, our fearless leader around here, how awesome he is. He, he sent me a Slack this morning. He's like, hey, man, I'm just, I'm not feeling great, but you know what? I didn't sleep good. And let's be clear, we all love 4-hour Brian. It's our favorite Brian.

• 5:43Speaker 00

  It's fun.

• 5:43Speaker 01

  He's like, I'm not feeling great. I'm under the weather, but you know what? I'm going to show up. I'm going to power through. We're going to do this. And I was like, man, don't do that. If you need to stop and rest and slow down, he just got back from some travel, do that. We will handle the live stream and all you're going to miss is...

• 5:58Speaker 00

  We'll make it happen.

• 5:59Speaker 01

  But he was going to do that and he was going to do that for you guys because he loves getting to the show so much. He's like, I'm going to power through it.

• 6:04Speaker 00

  It's very rare that he actually like misses a live stream. Absolutely.

• 6:11Speaker 01

  So he, you know, he just, I want you guys to know how much he loves you guys and how much he wishes he was here right now doing this.

• 6:16Speaker 00

  Miss you, Brian. Feel better.

• 6:18Speaker 01

  Oh man, what if he popped in the live chat right now? That'd be awesome.

• 6:22Speaker 00

  I have a feeling he's not going to. But you never know.

• 6:26Speaker 01

  I hope he's resting, that's what I hope.

• 6:27Speaker 00

  Yes, exactly. All right, next question is from Amon. It says, "How should I include overtime and house hack rental income when calculating my savings rate? For context, I'm 28, married with three kids, and in step five of the financial order of operations."

• 6:46Speaker 01

  Love it.

• 6:46Speaker 00

  What do you think?

• 6:47Speaker 01

  Married with three kids, step five.

• 6:48Speaker 00

  Married with three kids, step five.

• 6:50Speaker 01

  So, it sounds like the name was Amon, is that right?

• 6:54Speaker 00

  Yes.

• 6:55Speaker 01

  Amon?

• 6:55Speaker 00

  Oh, I don't know, maybe I said it wrong.

• 6:56Speaker 01

  Amon, Amon. It sounds like where you are is you are in a situation where you have some variable income, right? Like, it's not as easy to nail down what your income is, because you have overtime, which makes it fluctuate. And also, you have house hacking, rental income coming your way. Well, when we say that our goal is for you to save 25%, what we're really looking for is a 25% savings rate on your gross total income, no matter where that income comes from. So, a lot of people think, "Well, hey, you know, I'm a salaried employee, I get a $50,000 salary, plus I get a bunch of bonuses, all right? I'm gonna save 25% of $50,000." That's fine, until those bonuses come in.

• 7:38Speaker 01

  But if you have enough bonuses coming in, then all of a sudden, now you're making $100,000, and you're only saving based on that base, you're actually undersaving. And what's gonna happen is, is you're not gonna be able to build a stack of money large enough to replace the lifestyle you've become accustomed to living. So, the question for you, Amon, is, "Well, how do I factor this in? What should I consider?" I would take my regular pay, my regular wage, I would add the overtime to it. I would also add the rental income coming in from me house hacking, and I would save 25% of that amount. And if you're saving 25% of that amount, you know you're gonna be saving the right amount. Because we have a great resource, if you go to moneyguy.com/resources. It's not called "How Much Can 25% Do For You?" I think it's called "How Much Should I Save?"

• 8:23Speaker 00

  Yes, that's it.

• 8:24Speaker 01

  "How Much Can I Save?"

• 8:25Speaker 00

  How much should you save?

• 8:27Speaker 01

  "How Much Should You Save?" I almost got there.

• 8:29Speaker 00

  It answers the question, "How Much Should You Save?"

• 8:32Speaker 01

  Actually shows you exactly if you save 25% starting at various ages, what kind of income can that replace for you? What kind of standard of living can that provide? Well, if you're saving 25% off the top of all of your gross income, then you're going to set yourself up to hit that number, to get to that place of financial independence, that much more quickly. Now, some people will say this, well, Bill, I don't, I don't work overtime all the time. I only do overtime every two months. And so if I try to save 25, I'm going to, the cash won't work out. That's fine. If you need to save 25% of your base pay, that's all right. Do that. But then when you have your bonus hit, when those RSUs come in, when you have the overtime happen,

• 9:15Speaker 01

  make sure you're saving 25% of that amount. So you might have to do some like sporadic one-off saving. But if you can do that, when you get to the end of the year and you add up all of your income, then you add up all of your investments, that all of the investments column should total 25% of whatever that gross income number was.

• 9:32Speaker 00

  Great answer. Amon, thank you, or Amon, we're glad you're here, however you say your name. I just wanted to try to say it right. But the good news is you get a Tumblr. So if you would like a Tumblr, just email [email protected]. Can you hold up the Tumblr?

• 9:45Speaker 01

  Oh, my goodness. Look at this.

• 9:47Speaker 00

  It's a classic Money Guy Tumblr. And if we answer your question on the show today, we will give you one.

• 9:52Speaker 01

  If Brian were here, he would, um, he'd quack to tell you that it's not just a Tumblr, it can also double as a koozie.

• 9:58Speaker 00

  It's true. Transforms.

• 9:59Speaker 01

  I was waiting to see if Ruby did. She didn't do it.

• 10:01Speaker 00

  I, you know, we can't all be Brian.

• 10:03Speaker 01

  But that's my truer words.

• 10:05Speaker 00

  I will let him do his thing when he's back. All right. JB has a question for you.

• 10:11Speaker 01

  Hey, real quick question. I don't know if you guys know this. Um, I know you only answer questions, but I'm here.

• 10:17Speaker 00

  You have a question, though. You're allowed to ask questions.

• 10:20Speaker 01

  Did you guys check out, we had a brand new Making a Millionaire episode drop yesterday. A quick poll, poll people, can y'all, uh, how about this? Have you seen the new, uh, episode with Phil or?

• 10:34Speaker 01

  Are you gonna watch it later? No, it's not an option. I'm just curious, because like, it was, like, is we, I'm constantly looking for this feedback loop, because we love doing it. These are so fun. They take a lot of work. Like, we gotta do a lot of backend work. The team is amazing at putting together stuff. But they're a lot of fun. And I just want to make sure, one, for you guys, are they valuable? Like, the reason that we show up, the reason that we do this every Tuesday, and the reason we create this is because we want it to be valuable for you guys. So I want to make sure that making a millionaire is something that you guys are enjoying, that's adding value, that you're either seeing yourself in these people, or you're seeing these people as somewhere that you want to go, so that you can either be that millionaire, or that millionaire in the making. So I'm just curious, are you checking it out? And if you haven't, make sure you do.

• 11:18Speaker 01

  And if you want to know when we have new episodes come out, make sure you subscribe to the channel, because that's how you're gonna get notified. Every time we put a new piece of content out, we are moving towards quality over quantity, fresh content coming out almost every day, so that you can get loaded up to do money better.

• 11:34Speaker 00

  Fantastic. And yeah, Phil's episode that was released yesterday was really, I enjoyed it. I was there when we recorded it, and then I was listening to it again. And I was like, this is a fun one. It's a good one. All right, I'm gonna ask a question, then we'll go back to that poll.

• 11:47Speaker 01

  So normally, what I do is I ask a question, and then I go read all the comments in the chat. But I gotta listen, I gotta listen to you, because I can't, so I can answer the question.

• 11:59Speaker 00

  Well, yeah, you better, because you do have to answer this question.

• 12:01Speaker 01

  Got it.

• 12:01Speaker 00

  Are you actually ready for the question?

• 12:02Speaker 01

  Yes, ma'am, I'm sorry.

• 12:03Speaker 00

  This is from JB. He says, "I'm 30 with 300K in Roth assets. This is most of my net worth." So I know, this is very, uh, congrats, this is very good. "Is it time to diversify my buckets? Should most of my 25% be going to my taxable brokerage? My marginal tax rate is 12%. Thanks. What do you think?"

• 12:28Speaker 01

  Something is afoot here. That's what I think. Because I'm trying to figure this out. 30 years old, $300,000 in Roth assets. Okay, so when I hear that, my immediate first thought is, oh, it's just a super high income. This is someone who, you know, they're gotten a place where they were maxing out their Roth 401k, doing, you know, 23,000, 23,500 there. Doing Roth contributions, 7,000, or doing backdoor Roth contributions, but to get to 300,000 by 30, all Roth means you would have been doing that strategy for a while, which means you'd have to have an amazing savings rate for a while.

• 13:11Speaker 01

  But then you kind of drop this bomb and say, alright, well, I got 12%. I'm in a 12% marginal tax bracket, which would suggest I'm not like a super high income individual. I have more questions than answers right here. I want to know, how'd you get that? Now, a few things could have happened. Perhaps earlier on in your twenties, you did have a big income. Maybe you, maybe you were a professional athlete for a number of years and you did that and you had a big income and you maxed out the Roth 401k and you maxed out your backdoor Roth. And now you've shifted jobs or shifted positions and now you're no longer in that same income situation. Or maybe you got real aggressive inside your Roth and you decided that instead of like buying low-cost index funds, that sort of thing,

• 13:56Speaker 01

  I'm going to go try to hit some home runs and maybe one of those home runs hit. I invested in XYZ in my Roth and XYZ went up 1,000% and I was able to liquidate or cash out.

• 14:07Speaker 01

  Sorry, none of this is your question. It's all just makes me very, very curious.

• 14:10Speaker 00

  No, it's interesting though. I didn't really like do the math as I was asking the question.

• 14:13Speaker 01

  It just, it just makes me very, very, or maybe another one just hit me of a plausible scenario of how this happens. Maybe this is someone who had a custodial Roth. Maybe this is someone whose parents said, hey, early on, we're going to open a custodial Roth and we're going to start maxing out. They did this in their, you know, early teens or teens or whatever and did that for a number of years and now they're 30 and the assets have performed well. I don't, JB, tell us all how. That's one thing. Let us know how. How did you do this? Let me actually answer your question now. Should I diversify? Well, can I have too much of a good thing? I don't think so. Roth is especially valuable because if you are in that 12% bracket, I'm going to argue that odds are later on in life, at some point

• 14:57Speaker 01

  in your future, you're going to be in a higher tax bracket. So, right now, the current year tax deduction is likely not as valuable for you. So, walking away from a 12% tax deduction doing pre-tax contributions is probably okay. And you're so young at 30 that every dollar you can save is going to compound, what is it, 23 times for a 30-year-old, based on our wealth multiplier. By the way, you can check yours out at moneyguy.com/resources. So Roth makes a ton of sense for you. So, is it okay if you just build up and continue building all your assets in Roth? I'm going to say, yeah. I don't, I don't think you need to shift to focus on the pre-tax. Now, one thing I would encourage you to think about, though, seems like you're ahead of the game. Okay, am I going to retire early?

• 15:40Speaker 01

  Am I part of the FIRE movement or the FINE movement? Do I think that I might want to access these dollars sooner than age 59 and 1/2, which is traditionally when I would start tapping into my Roth assets? I'm going to say, as that begins to take shape and as that begins to become more clear, you may want to think about your third tax bucket. You may want to think about, in addition to maxing out my employer-sponsored account in Roth and doing back to a Roth, do I have excess cash flow to fund an after-tax account? Because that after-tax account very well could be the bridge that bridges you from the time that you leave the workforce until you get to 59 and 1/2. I do think that is something worth noting, worth thinking about, worth thinking through. Now, before all of

• 16:21Speaker 01

  you financial mutants out there get on me, yes, I recognize, inside of Roth IRAs, you can tap into the basis, and if you're building up that much Roth and you have that much basis, then you can actually draw down on those assets before 59 and 1/2. Totally true. But the benefit of Roth is tax-free growth. So, the longer that I can allow it to build, the longer that I can allow it to compound, the more tax-free growth I can accumulate in the account, the better off I will be. So, do I think that it's time for you to diversify? I don't know. I need to know more about what your long-term plan is. Is it okay that you have a ton in Roth and that amount of Roth is going to continue to increase? Yeah, I think so. I don't think there's anything, I don't think there's anything wrong with that.

• 17:04Speaker 00

  Great. All right. Well, uh, JB, if you have any words on how you did that, let us know. But thank you for asking the question.

• 17:13Speaker 01

  Am I the only one perplexed by this?

• 17:14Speaker 00

  No, once you said it, I was like, he's right. This is a little bit interesting.

• 17:18Speaker 01

  Thirty years old, three hundred grand in Roth. That's, that's awesome.

• 17:24Speaker 00

  Yeah. Um, JB, if you'd like a Tumblr, a Money Guy Tumblr, just email [email protected] and we'll work on sending that out.

• 17:31Speaker 01

  But you gotta tell us all how you did it.

• 17:32Speaker 00

  I know, you have to include that in the email. Give us some context. All right. Emily and Josh F. have a question for you. It says, "We, married with five kids, really need a new car, but we feel so guilty spending the money that we have saved. How do we make sure we don't have a miser mindset?"

• 17:58Speaker 01

  Um, did the question say need or want?

• 18:01Speaker 00

  It says need a new car. I mean, they've got five kids, so I, that's a very plausible scenario. Like, they really do need it.

• 18:09Speaker 01

  Well, so you, uh, you have multiple children, right?

• 18:13Speaker 00

  I do.

• 18:13Speaker 01

  Um, and would you describe this season of life that you're in as being, um, difficult? Right? Do you feel like from a financial perspective, you have a lot of things pulling on you?

• 18:25Speaker 00

  Certainly a lot of priorities, like, that can't all be a priority.

• 18:28Speaker 01

  And time commitment, a lot of things. Would you say that this season feels, um, chaotic?

• 18:33Speaker 00

  Yes.

• 18:34Speaker 01

  Um, undefined. Uh, what's another word for that?

• 18:40Speaker 00

  Is this how you feel, Bo?

• 18:40Speaker 01

  I'm trying to think of, would you say it feels messy even?

• 18:44Speaker 00

  I would say that.

• 18:45Speaker 01

  Okay, messy. I would imagine that Emily and Josh also feel this. I feel like they're probably in the middle stage of their life, and it's a very, very messy stage, and they have five kids. So they have a lot of stuff pulling on them. And I think it's great that you have this mentality around, oh, I don't want to spend money. I hate spending money. I know that my money can work. I know that we want to save. But you do have to weigh... Needs versus wants. When I hear you have five kids, I've done this before, not had five kids. I have been in automobile that broke down. Now, it was not an old automobile, but it broke down with my wife and two kids in it. At the time, we had two kids. And it sucked. Like, you got a baby in a car seat, sitting back there,

• 19:28Speaker 01

  and all of a sudden, the car won't crank up, and it's like 92 degrees outside. It's just an awful scenario. If your car is so old, you're beginning to think that that's one of the places you may be. That, oh, okay, if I'm somewhere, and my spouse is somewhere, and the car breaks down, and the family's stuck, and now we can't get to our job. Well, that's a need. If it's, ah, I just, man, when we got that car, it was red, and I really don't like red cars. I really want a blue car. That's not a need. So you have to assess for yourself, is this a need? Is this a want? And by the way, I just want to be clear here. Neither of them is bad. Neither of the... It is okay to want a new car. I think so many people in the personal finance space

• 20:09Speaker 01

  try to like criminalize or demonize the idea that some people want nice cars, and that's okay. You just gotta do it so long as you're not sacrificing the other stuff. So long as you're not running afoul of 23/8. If you're buying a luxury car, you gotta pay it in cash, or pay for it all in, you know, inside of the 12 months. There's nothing wrong with those things. But if you're in this situation where you're trying to figure out, how do I fund all my goals? Okay, yeah, I'm saving and I'm building, but man, I'm not so flush that I can like go do a new car without sacrificing some of these other saving goals. If it's a need, and it's something that's like a family safety issue, or a reliability issue, or, hey, our car was great when we had three kids, but now that we have five kids, it just doesn't work,

• 20:52Speaker 01

  and I gotta like put, you know, one kid stacked on top of the other kid in the backseat. Well, that's a problem. Because at the end of the day, money is nothing more than a tool that allows us to accomplish the things we want to accomplish. Well, one of the goals that we might have is getting to work every day. Keeping my family safe. Being able to transport my family across town in one trip and not two trips. If you find yourself in that situation and buying a new car... Is a requirement, is a need, I think it's okay to do that. And I think you can do that without feeling a lot of guilt. Now, I want you to be prudent and be practical about it. Now, here's the hard part about five kids.

• 21:31Speaker 01

  Seven people. Not a lot of cars can traverse seven people. So you're kind of limited. You've got to go big SUV. You've got to go minivan. You've got to do something in that. So I want you to be reasonable and practical and pragmatic in the automobile that you choose and whether you go new or used and what brand and all those kinds of things. But if you need a new car, you need a new car. That's part of the journey. That's part of the process.

• 21:54Speaker 00

  Well, something did stand out to me about the way they worded it. They said, "I feel guilty spending the money that we have saved," which implies that they have saved money.

• 22:03Speaker 01

  For, I'm assuming for this goal.

• 22:04Speaker 00

  For emergencies or needs, or yeah, maybe this exact goal. And so I think sometimes when you're a financial mutant, you have to be like, "Oh, this is why we saved this money." Like, it's okay, like, to use it to live our life. So I think that like some, that might just be like a reset in perspective because they're asking about the mindset, like how not to have a miser mindset.

• 22:25Speaker 01

  And let me give you a glimpse into your future. We all save for financial independence. That's what we're all working towards, right? We save and build for retirement, financial independence, be able to live the life we want on our terms, the way we want to live it. We know that that's the goal. That's what we do. That's why we're saving. Do you know how many clients that I sit down with who do that for their entire career? My goal is to save for financial independence. And they get there and they retire. And man, is it hard for them to spend money. And I'm like, this is what you save for. You saved so that you would have money to live the life you want on your terms. It's not uncommon for financial mutants to really struggle with that. And so if you struggle with that at 30, there's a really good chance

• 23:09Speaker 01

  you're going to struggle with it at 55, 60, 65. That's why a really good plan in place and understanding what your money is and what it does for you and how it helps you accomplish your goals can be so valuable. So you know, hey, I'm saving for a car and I got this money going aside. Okay, now I need a new car. I'm going to use the money. Money. I'm just gonna follow the plan that I had. And if this has to cost you, if this causes you to stop saving, or reduce your savings for the moment, okay, that's fine. If it's a need, do it, and then as rapidly as you can, get back to saving, get back to building, get back to growing. And so long as you're doing that, you should not feel gang, uh, gangst.

• 23:50Speaker 01

  You should not feel angst or anxiety around, uh, making this decision to spend these dollars.

• 23:58Speaker 00

  Yeah, no, that's good stuff. Emily and Josh, thank you for asking the question. And I really do hope that that helps and that you can get a nice car for your family. And not feel guilty if you really need it.

• 24:12Speaker 01

  It's probably gonna be a minivan, right?

• 24:13Speaker 00

  I mean, for five kids, that's what I'd probably do.

• 24:17Speaker 01

  Like even if you go big, I mean, I guess big SUV could, big SUV could do the job done.

• 24:21Speaker 00

  Yeah, for sure.

• 24:21Speaker 01

  Oh, they're a lot more expensive though.

• 24:23Speaker 00

  Yeah, that's, I don't know. Yeah, it really just depends. A lot, a lot of factors there. And if you want help thinking through those factors, actually, I wanted to mention that moneyguy.com/resources has both a car buying calculator that can help you stay within the Money Guy rules and make sure you're not kind of getting ahead of yourself on the cost. And then there's also a whole car buying checklist that can help you think through things to consider when buying a car.

• 24:47Speaker 00

  Okay. Oh, I did want to go back to that poll. 68% of people say they have watched Phil's Making a Millionaire episode. So the majority of people, which is wonderful, it's a great episode, and then 31% that said they will watch it right after this livestream.

• 25:01Speaker 01

  Uh, what's, uh, what you guys don't, can I, can I share, can I share inside of baseball on, on Phil or no? Okay. A lot of, one of the questions we had, because if you've watched the episode, you saw the things that we talked about. You gotta know what some of the stuff Phil had going on was. People are like, oh, what did he do? What's going on in the stock market right now? And with specific companies that were mentioned that, like, oh, where's Phil at? Now, you'll be happy to know that a few, a few months after recording that, Phil followed up and said, hey, guys, I want to let you know how much I love this. I did this and this and this and this and this. And so he actually implemented a lot. Now, I don't know to what extent, and maybe I know more than I'm telling you, because maybe we might want to do a follow-up thing at some point.

• 25:41Speaker 01

  Uh, but he actually, he did. And so, uh, I think it was great. I think it was awesome that he followed up to let us know.

• 25:47Speaker 00

  Yeah, hopefully he's doing. Just fine in this volatility.

• 25:51Speaker 01

  Phil.

• 25:52Speaker 00

  But, uh, yeah, to his credit, it seems, seems like he listened to you.

• 25:56Speaker 01

  I think he listened.

• 25:57Speaker 00

  I really hope he did.

• 25:58Speaker 01

  I hope he listened.

• 26:00Speaker 00

  He had a lot of ideas. But yeah, you gotta go watch that episode if you don't know what we're talking about. Making a Millionaire came out yesterday. All right, ready for the next question?

• 26:10Speaker 01

  Yes, yes, ma'am.

• 26:11Speaker 00

  What?

• 26:12Speaker 01

  Nothing. I'm ready. Yep.

• 26:13Speaker 00

  All right. I was like, what did I do wrong? Matthew Kay has a question for you. "Once I have my emergency fund with six months of expenses, do I continue to contribute money to that every month? Or do I use all of those dollars for steps five and six?" I thought this was a good, like, more granular Financial Order of Operations question.

• 26:36Speaker 01

  No, this, this is awesome. So do you happen to, you don't have it.

• 26:39Speaker 00

  I don't have it.

• 26:40Speaker 01

  See, Brian's not here.

• 26:41Speaker 00

  I'm not Brian.

• 26:41Speaker 01

  We don't have the thing, can't hold it up. Hey, if you would like your own copy of the Financial Order of Operations, you can go to moneyguy.com/resources and download your free copy. So this is what Matthew is saying. Hey, I've been working through the Financial Order of Operations, and I got to step four, emergency reserves, which says that I should have three months of living expenses or six months of living expenses. This is why we have the best team, the best team in all of financial content, right here. I've got all of my step four covered, and I've built up my three to six month emergency fund. Do I still need to continue funding that goal, or should I move on? And the answer, well, the answer is technically it depends, and I'll tell you why it depends. But the answer is yes. Like, once you complete a step of the Financial Order of Operations,

• 27:25Speaker 01

  it's designed to go to the next step. Hey, do I have my deductibles covered? Great, now I'm gonna get my employer match. Hey, do I, am I maxing out my employer match? Great, now I can go pay off my high interest debt. Is all of my high interest debt wiped out? Great, I can do emergency fund. Is all of my emergency fund fully funded? Great, now...

• 27:45Speaker 01

  I felt like I had to do it. Now I can go to step five. Now I can go to my tax-free savings opportunities. I can fund my health savings account. I can fund my Roth IRA. Yes, you absolutely can move on and move through. Now, here's the one caveat. Unless there are other short or intermediate-term goals that you know you have to save for. Hey, I know that I'm going to have to replace my car. I know I have this expense coming up. I know I have this thing that's not really an emergency because emergencies generally tend to be the unknown unknowns. I lost my job. I had a medical thing. I had something break that wasn't counting on breaking. That's different than a thing that I'm planning for. I need a new car. I'm going on a trip.

• 28:29Speaker 01

  I'm have this thing coming up. So if you have some short-term goal, it may make sense to continue saving cash above and beyond your emergency fund so that when that thing comes your way, you have the cash and capital to be able to satisfy that. Absent that being the case, yes, go to step five. Start doing your HSA. Start doing your Roth IRA. Start doing your backdoor Roth IRA. And then go to step six. Start maxing out that employer-sponsored retirement account. Take it all the way up to the annual limits, $23,500 if you're under 50. And then, once you do that, start thinking about that third bucket. Get into hyperaccumulation. Start building up that after-tax account. You just kind of plug your way through the financial order of operations.

• 29:12Speaker 01

  By all means, when you complete one step, go to the next step.

• 29:16Speaker 00

  Move on to the next one. Matthew K., thank you for that question. And if you would like a Money Guy Tumblr, it's your lucky day because it's Tumblr Day. Just email [email protected]. Okay, JP has a question next. It says, "What options are available if my employer only offers a 403B without any match? They use a company with high fees also. Can or should I just open my own 401K with Fidelity and Schwab to save on fees?"

• 29:49Speaker 01

  You can't.

• 29:50Speaker 00

  I was gonna say, I don't think you can.

• 29:51Speaker 01

  You can't. So you made me thinking, oh, I've heard the guys talk about this wonderful thing. Solo 401ks. That sounds incredible. I want a solo 401k. My 401k stinks. I'd rather have my own at Fidelity where I can control it. And as wonderful as that sounds, it's not allowable. It's not permissible. Solo 401ks are available to business owners or entrepreneurs who only have themselves as an employer, themselves and their spouse. So that's what a solo... If you're a W-2 employee that does not own the company, you just work for the company, you're kind of captive to the plan that you have available to you. So what if I am in a plan that does not have a match and has kind of crappy... I'm sorry, bad language, that has kind of bad investment options?

• 30:35Speaker 01

  Well, what do you do? Okay, first, you go to the Financial Order of Operations, right? You can get your free copy at moneyguy.com/resources. Well, you get to step two, employer match. You say, okay, I don't have an employer match. I don't have anything there. What do I do? You go to the next step. High interest debt, boom, knock it out. Emergency fund, boom, knock it out. Then you get right here to Roth, HSA. You go and max those out. Max out your Roth, max out your HSA. And then you get to step six, max out your employment account. Well, whatever do I do? Remember, I don't get a match on the 403B and the investment options aren't great. What I have to remind people is that one of the reasons we love employer-sponsored retirement accounts is for the tax incentive available in them.

• 31:18Speaker 01

  And the tax incentive goes one of two ways. I can put in pre-tax contributions and I can save money on my taxes this year when I put money in. So if I'm in a high tax bracket and I add up my marginal rate and my federal rate and it's above... My marginal federal, marginal state rate, it's above 30%, every dollar I put into my 403B can save me 30 cents in taxes. Do you recognize that's kind of like a 30% rate of return? It's kind of like... So even if it's expensive, even if the funds aren't great and the expense ratios are higher than I like... It's gonna take a long time for me to eat up that 30% embedded rate of return that I'm receiving, so I still like doing it, alright. Well, what about the other hand?

• 32:03Speaker 01

  Well, on the other hand, even if I, if, what if I don't do the pre-tax force? What if I do Roth? Well, I don't have that tax savings, but what have I done? I'm now getting more money in my Roth bucket that won't be taxed in the future. It's going to continue to grow tax-free. So, there might be a reason for you to fund your 403B, whether you're doing it pre-tax or whether you're doing it Roth, simply for the tax savings. And then what you try to do is you, you, you pick, you pick the worst of the crap. You're like, you pick the best of the worst. You know what I mean? The best of the worst, yes. You go in there and you're like, alright, are there any low-cost indexes? Well, maybe they're not a bunch, but there's one. There's a really good S&P fund. Okay, I'm gonna use that. And then with the other parts and pieces in my portfolio, I'll supplement. So that way I get like a rounded allocation. Okay.

• 32:48Speaker 01

  Maybe these target date funds aren't perfect, but they're good enough. And I know that right now, if I'm early on in my investment career, early on in my trajectory, I know that my savings rate is way more important than my rate of return. So maybe, yeah, it's a little bit more expensive and yeah, the options are great, but I'm still gonna fund it. I'm still gonna put it. And then, and this is something I don't think people realize, it is perfectly possible to be an advocate for yourself. We have had people say to us, we've gotten these emails, "Guys, you told me that this was possible and I didn't believe it, but I listened to your show and I went to my HR department and I said, "Hey, did you realize that we have some pretty, less-than-ideal

• 33:31Speaker 01

  options inside our 403B? Have you ever considered maybe using a company like Fidelity? Or maybe adding in some low-cost indices in S&P 500 Index, a Barclays Bond Index, uh, international, you know, there's some really great, "Hey, by the way, here, here's a menu of options you could consider adding." And the person looks at it and HR goes, "Oh yeah, yeah, we can do that. Oh, no, no one's looked at, we put this plan in place 15 years ago. We haven't looked at it since." Yeah, and you can improve that. It doesn't have to change anything about it, but you can advocate for yourself and you need to communicate to them, "Hey, here's why it's not just good for me. This isn't like self-serving. It's good for me, but it's also good for all my colleagues and all my coworkers and the owner of the company or the executives of the institution."

• 34:15Speaker 01

  And you can advocate and you can communicate with them why making the plan better is actually better for everyone. It's a long way of saying, yes, I think there's still merit to contributing to it if you can, because there are some tax incentives available. But I'd also think that it makes sense to advocate for yourself to see if perhaps you can improve the plan.

• 34:38Speaker 00

  I think that was great food for thought. JP, thank you for being here. If you would like a Money Guy Tumblr, since we answered your question, just email [email protected].

• 34:50Speaker 00

  I like that. I like that because it comes back to the foo again.

• 34:53Speaker 01

  Always back to the foo.

• 34:54Speaker 00

  Not as exciting as that employer match, but still on the list in step six.

• 34:58Speaker 01

  Yeah, by the way, if you approach them and suggest, hey, y'all should really do an employer match. That's a harder sell. Selling low-cost investment options, real easy sell. Selling, hey, give me more money.

• 35:08Speaker 00

  Right.

• 35:09Speaker 01

  Hard. Still not impossible, mind you.

• 35:11Speaker 00

  A lot more factors at play there.

• 35:12Speaker 01

  You gotta be a little bit. You gotta know how to, you gotta know how to present that well.

• 35:16Speaker 00

  Yes. Okay. JW116 has a question. It says, I recently started step five and I'm maxing out my HSA.

• 35:25Speaker 01

  Nice.

• 35:26Speaker 00

  What is the best way to automate Roth savings on a tight budget? Direct deposit? Auto-investing? Or consistently depositing money each month? Thanks.

• 35:39Speaker 01

  What? Okay.

• 35:42Speaker 00

  Can I, I will say, I think, um...

• 35:44Speaker 01

  Direct deposit. Okay.

• 35:46Speaker 00

  I don't think you can direct deposit, right? To a Roth, can you?

• 35:49Speaker 01

  Some employers will allow you to do, now, this is, this is very much a payroll question, but, but it is not impossible. Some payroll providers will allow you to do a payroll deduction. Now, you're, I know you guys are already thinking, oh, my gosh, this sounds amazing. I can do a payroll deduction and save on my FICA taxes and send this straight to an IRA? No. No, you cannot do that. But some are set up where you tell them, hey, just every month, as soon as my paycheck hits, I'll want some money to go here and I want the rest to go to my checking account.

• 36:20Speaker 00

  Sure.

• 36:21Speaker 01

  And that's okay. Not a lot of employers.

• 36:25Speaker 01

  Employers or payroll departments are going to do that, but it is there. It is possible. JW, my answer for you is what's the best way to set up? I do love making it automatic and making it easy. Now, if your payroll department won't let you divert some of your paycheck to a Roth IRA, which most aren't going to let you do that, how do I do it? I think that was your second option, which was

• 36:45Speaker 00

  Yeah, auto investing or just depositing the money yourself.

• 36:49Speaker 01

  The problem with the third one is there's too much stuff that can go wrong. I get to the end of the month and there's just no money left over. I get to the end of the paycheck, there's just no money left over. I don't like the thought of you manually doing it because there's always, not all, in my experience, something always comes up.

• 37:04Speaker 00

  There's more room for errors.

• 37:05Speaker 01

  Well, I had that big birthday dinner I had to go to, or, oh, well, that thing went on sale, or, well, I went on a trip and I had to put more gas. There's always going to be a reason not to.

• 37:15Speaker 00

  Or you just forget.

• 37:16Speaker 01

  Yeah, right.

• 37:16Speaker 00

  It just opens up that opportunity.

• 37:18Speaker 01

  The market is, ooh, the market is scary and maybe this isn't a good one. I love making it so automatic that's hard to screw up. So if you're nervous about seeing the money first, have it happen the same day your paycheck hits. If I know I get paid on the 15th of each month, all right, great. On the 15th, my paycheck hits. On the 15th, I have 400 and it's not 483 anymore. What's 7,000 divided by 12? 583. I have $583 hit my, uh, hit my Roth IRA, pull out of my checking account every single month. I think that's a great way to set it up because what it does is if it happens automatic and you never see the money and you don't have to like quote unquote budget for it, you won't even recognize that it's gone. You won't even notice that it's missing.

• 38:01Speaker 01

  And it's going to get be much more likely for you to stay the course. And even times are right, like right now, when it's volatile and the market's kind of all over the place, those contributions just happen. They just hit and happen, hit and happen. I want you to make the good habits as easy as possible, like saving, investing, getting your money working for you, and make the bad habits as hard as possible, like skipping a month of Roth contribution. You know what you do if you're on, you gotta, oh, I gotta go in, I gotta press skip, or I gotta shut it down and then re. You want to make that part hard. Make the part of it leaving your paycheck or leaving your checking account, going into your investment account as easy as possible. And if you can do that, you'll be amazed. You'll get to the end of the year like, holy cow, I had no idea.

• 38:45Speaker 01

  Man, I maxed out my Roth and I didn't even, I wasn't even paying attention and it happened. That kind of stuff happens and it stacks and stacks and stacks and stacks. And then try to keep improving, try to keep adding to it.

• 38:57Speaker 00

  Love it. And hey, if you are on the step where you're ready to open that Roth IRA in step five of the foo, we do have a mini show coming out about that next week.

• 39:06Speaker 01

  I was gonna say, is that gonna air out? Next week.

• 39:08Speaker 00

  So be watching for that. Make sure you subscribe, turn on notifications, check back to the channel. Because it's all about how to actually go about opening that Roth IRA, everything you need to know. Kind of back to the basics and perfect for anybody that is in that step five of the Financial Order of Operations.

• 39:24Speaker 01

  Love it.

• 39:26Speaker 00

  Alright, Steve W. has a question. He says, "What are the Money Guy's thoughts on dollar cost averaging 1K a month to my 401K to Roth conversion? Or 10K in December? A lot of the market is close to down 10% off. I'm wanting to maximize on market trends. For context, this would be to max out my current tax bracket."

• 39:50Speaker 01

  Dollar cost averaging $1,000 a month, 401K to Roth conversion, or 10K in December?

• 39:58Speaker 00

  All at once.

• 39:59Speaker 01

  I don't understand your question.

• 40:01Speaker 00

  Oh.

• 40:02Speaker 01

  But I'll answer it. I'll answer it. I'll give you some answers and if I give you enough of them, hopefully one of them sticks. Let me, first part of the question that this could be. "Hey, market's volatile right now. Should I front end my savings?" It's not a bad idea, right? Market's down, I front end, I buy more. What if this is just the beginning? What if the market continues to go down from here and you get all of your savings done right now? And for the rest of the year, the market continues to go down? And you miss that opportunity to buy lower and buy lower and buy lower? One of the reasons we love dollar cost averaging is that it removes emotions from the equation. Now, when we say that, our natural bent is always to think, "Oh, we'll remove emotion."

• 40:44Speaker 01

  We want to remove the fear emotion. We want to remove that side of the question. It also helps remove the greed emotion. "Oh, I'm gonna do it now, do it now, do it now." It allows us to have a plan in place and stay steady and stay consistent. So, okay, should I do $1,000 every month for the rest of the year? Should I do $10,000 at the end of the year? I like the idea of staying systematic with that. Alright, that could have been your question. Here's the second part that could have been your question. Hey, I'm someone who's doing Roth conversions every year to max out my tax bracket, which I love, by the way. If you haven't checked out Making a Millionaire, we actually have a couple on there showing them that maximizing their tax bracket, doing Roth conversions could literally add millions of dollars

• 41:28Speaker 01

  to their terminal value of their portfolio. So if you haven't checked that out, make sure you go do that. Maybe you're that person. Now, if you are, and you've been saving, or maybe you're retired financial independent, you're thinking, okay, should I wait till the end of the year to do my Roth conversion? Or should I do it now? This one gets a little nuanced, and this is where it gets a little hairy, because I do like the idea of Roth converting during volatility. As you imagine, let's say that 10,000 is your number. You had an S and P 500 index, I'm going to put it up here, and you know, it got hit. And so it's down here right now. And I got $10,000 here, and if I convert this to Roth while the market is down, you know, I pay tax on, that's the taxable amount, and I pay tax, and it comes over here.

• 42:12Speaker 01

  You know what happens when the market recovers?

• 42:16Speaker 00

  You get me?

• 42:17Speaker 01

  I mean, I was just...

• 42:18Speaker 00

  You make money.

• 42:18Speaker 01

  Yeah, you, you recover inside of your Roth.

• 42:23Speaker 00

  Yes.

• 42:23Speaker 01

  You recover. So if you are someone perpetrating the strategy, and there is a big entry year decline, and you are a Roth converter, it might make sense to do that. We've done this for tons of our clients. You know, we have a lot of clients who we do bracket maximization on. And every year, we might convert 60, 70, 80, $100,000 to Roth. But here's where we try to be cute and clever with it. The hard part of bracket maximizing early on in the year is we don't always know exactly what our taxes are going to look like when we're in March. We don't know what our dividend income is going to be. We don't know what our capital income is going to be. We don't know other income sources that might come our way. So if you do a tax projection, and you convert the amount that you think is going to maximize that bracket,

• 43:04Speaker 01

  and then you have more income come throughout the year than you thought you were going to have, well, now you've blown into the next bracket, and maybe it wasn't such a great decision. So what we do is we try to be conservative in our estimation. And let's say that you're going to convert $100,000 as your plan. We realistically might convert 60,000 or 70,000 in March, right now, while there's volatility, while there's an opportunity, but we still give ourselves enough wiggle room so that by the time we get to the end of the year, if we did have more income sources, if we did have dividends, if we did have, if we did have capital transactions happen... We gave ourself a buffer and margin that we can still convert in December and still hit the top of that tax bracket without blowing over, without causing some other issues like Medicare surcharges, or Medicare surcharges, or losing the child tax credit, or whatever

• 43:49Speaker 01

  the thing for your tax situation might be. So, that very much could be a viable strategy, if you're talking about converting, to do bracket maximization. But you need to make sure you understand what you're doing. This is one of those areas, Steve, that it gets... I imagine a lot of people, as I was going through, that eyes glazed over, rolled in the back of their head, like, "I don't know what he's talking about." And that's...

• 44:13Speaker 00

  Sometimes that happens.

• 44:14Speaker 01

  Because this is more like complex financial planning. You want to make sure you do it right. This is one of those areas, that if you do find yourself in the situation, thinking, "Okay, well, I do want to do Roth conversions, but do I do them in the beginning of the year, end of the year? And how do I do an accurate tax projection to make sure that I stay inside those thresholds?" If you're asking those kind of questions, this might be the time that it makes sense to think about taking the relationship to the next level. And that's what we do here. It's what we call the abundant cycle. You come in, you learn as much as you can, and we load you up. It's not like there's a paywall here for you to get great information. We want to load you up that you learn, and you apply it to your financial life, so that your life gets better, and better, and better, and better. Your financial situation grows, and grows, and grows, and grows, till one day you get to the point where you're like, "All right, I did great saving, I did great accumulating,

• 44:57Speaker 01

  I've built..." Man, what he just walked me through with that Roth conversion strategy, I don't want to do it wrong. I don't want to make a mistake. I don't want to have a miscue that I was not planning on. We would love to be that resource to help you navigate that, because that's what we do for hundreds of clients every single year, serving people, asking those very questions. So, if you're in that situation, if you're someone who thinks you might need that kind of solution, go check out our work with us. You can go to moneyguide.com/moneyguide.com, work with us. Or you can go to aboundwealth.com, work with us. We would love for you to consider fulfilling the abundant cycle, to make sure that you measure two, three, four, five times, and cut once, when it comes to some of these advanced planning tactics.

• 45:40Speaker 00

  All right, Steve W., if you would like a Money Guy Tumblr, since we answered your question on the show today, just email [email protected] and we will work on getting that sent out to you just as a thank you for being here and being willing to ask your question and talk personal finance with us.

• 45:55Speaker 01

  Love it.

• 45:55Speaker 00

  All right, Curly Q. has a question for you next. It says, "Should I take R-I-M-A-A..." Did you say that, Irma?

• 46:03Speaker 01

  Irma.

• 46:04Speaker 00

  Irma, that's what I thought, but then I didn't want to be wrong. Let me start over. "Should I take Irma into account when deciding whether to do a Roth or traditional IRA? How much of a hit is Irma as opposed to future tax rates?"

• 46:17Speaker 01

  All right, I gotta think through this question. First, let me define what Irma is. You know what it stands for? Me either, I'd have to Google it. I don't have it memorized. I call it Irma.

• 46:30Speaker 00

  Income-related monthly adjustment amount, I believe?

• 46:34Speaker 01

  There you go. Income-related monthly adjustment amount. Income-related monthly. Basically, this is what a Medicare surcharge is. As you know, when you hit age 65, you enroll in Medicare. You go on a different type of health insurance than you likely had previously prior to age 65. Well, one of the things that happens is, is there are costs associated with a Medicare you go on, depending on the plan you choose and how it works. Well, if your income is over a certain threshold, there is a surcharge that you pay on a monthly amount for your Medicare premiums, and it's reassessed every year based on your income two years ago. I know that sounds confusing, but if I were in the Medicare age right now, which I'm not, the amount I pay for Medicare would be based on my income from two years ago, right?

• 47:19Speaker 01

  So, a lot of planning later on in life for folks in their 60s is around, "Well, I don't want to have too much income because I don't want to trip this Medicare surcharge because it could be substantial." For a household, you know, you could have a Medicare surcharge of $200-plus a month. So, you think about, that's another, you know, $2,500, $2,400, $2,500 that could happen. If you do just a little bit of planning, stay under that. So, the question becomes, "How much of an issue is this? And how should I think through this?" Now, Curly Q.'s question was, "Well, how do I think about this with contributions?" And this is where I imagine Curly Q. is going. If I build up too, too much in a traditional IRA... Then when I go to pull that money out later, it's going to be taxed as ordinary income.

• 48:03Speaker 01

  Or when I get to age 75, I'm going to have required minimum distributions. If that account's big, my income will, I will not be in control of my income anymore. There's a chance I'll push through the Medicare surcharge limits. Yes, that's true. If I do Roth, then when I go to pull income out of the Roth, it's not going to be taxed, it's going to be tax-free. And at age 75, there are no RMD requirements for Roth IRAs. So should I take that in consideration? My opinion is when it comes to making Roth versus traditional assumptions, it's really based more on a tax rate arbitrage, less so than like little nuances like IRMA or Medicare premiums.

• 48:44Speaker 01

  And the tax rate arbitrage is, do I think I'm in a higher tax bracket now than I will be in the future? Or do I think I'm in a lower tax bracket now than I will be in the future? I think I'm going to be in the same tax bracket. If you're in a high-income tax bracket now, 30% and above, we think that pre-tax contributions make tons of sense. You put a dollar in, you get a tax deduction this year. You can think about it like a 30% plus imputed rate of return. If I'm in a low tax bracket, I'm not getting a huge tax benefit this year. It's going to grow tax-free. I'll likely be in a higher tax bracket in the future, pull it out tax-free. I would let that be the

• 49:20Speaker 00

  Wow.

• 49:20Speaker 01

  I would let that be the determination of whether I should make pre-tax or Roth contributions. And then when you get into your 60s and when you begin making decisions around like Roth conversion amounts and when to take social security and which one of your three buckets to start pulling from, that's where the IRMA surcharge comes in. And that's where you're really going to want to measure and think about how you're doing this. Now, one small, small note. I find it hilarious.

• 49:51Speaker 01

  Uh, cause look, we work with a lot of, we, we, we work with, well, we work with all kinds of people here, but a lot of our people are wealthy, like multi, multi, multimillionaires. I'm always amazed when I'll have someone with a huge portfolio and we're recommending a strategy that's gonna like convert hundreds of thousands, if not millions of dollars over the course of a planning period from pretext to Roth. The bit, well, Bo, there's gonna be a Medicare surcharge. And I have to remind him, I'm like, yeah, you're gonna pay $2,500 for this Medicare surcharge this year for me to convert $300,000 to Roth for it? Like you got, like the, the, the juice is worth the squeeze on that.

• 50:34Speaker 01

  So in all of our financial decisions, I don't want you to be penny wise and pound foolish. I don't want you to miss the forest for the trees because you're focusing, focusing on this one thing, like a Irma surcharge. Now, for a lot of our folks, we do want to avoid Irma because it sucks. We don't want you paying it. It's just a waste of money. If we can't avoid it, we should. But there are other times where it makes sense to blow through the Irma surcharges, to blow through the tiers, because the tax planning on the back end substantiates and corroborates that decision. Um, so I would just make, again, this isn't all those areas. It's really, really nuanced and no two financial situations are the same. You can have two 65 year olds in front of me. One of them Irma will be a huge consideration that we want to make sure we do not run afoul of.

• 51:16Speaker 01

  The other Irma could not be less significant to what they're trying to accomplish in their financial life. So while we note it, we note it, blow through it, and then I don't have to think about it again. Aren't you so glad you learned about the, tell me again what it was? Income?

• 51:33Speaker 00

  I closed the Google window.

• 51:36Speaker 01

  Income, RM, adjustment amount.

• 51:38Speaker 00

  Yes, that Irma.

• 51:40Speaker 01

  Got it.

• 51:41Speaker 00

  It's one of those things that I've seen, but I had never actually said it. So I wanted to make sure I was saying it right. Um, Curly Q, thank you for your question. We would love to send you a Tumblr if you would like it, just email [email protected]. You know, in the middle of that question, it was almost like your brain couldn't keep up with your mouth.

• 51:56Speaker 01

  But if you only knew how many times that happens.

• 51:59Speaker 00

  It happens a lot to my toddler.

• 52:04Speaker 00

  It's true. That's what I thought of.

• 52:06Speaker 01

  That's, well, that's something, I guess, isn't it?

• 52:09Speaker 00

  That's something.

• 52:10Speaker 01

  That's something.

• 52:11Speaker 00

  That's just what I thought of.

• 52:12Speaker 01

  What's funny is, you know, sometimes I'm, when I listen to podcasts, I'm like a, I'm a one and a quarter, one and a half speeder, right?

• 52:18Speaker 00

  Yeah, that doesn't surprise me.

• 52:19Speaker 01

  Uh, it's funny. People say when they listen to us, if you listen to us at two times.

• 52:25Speaker 00

  It's crazy.

• 52:26Speaker 01

  Brian sounds perfect. Like, it's just wonderful. If you listen to us at, uh, but then I sound like a chipmunk.

• 52:34Speaker 00

  You sound like a chipmunk, yeah.

• 52:35Speaker 01

  If you listen to us at like 75 or 50, you're like, wow, Bo actually is speaking normal now. But then Brian is like, yeah. So, you know, I don't know where I was going with that, but it's just an interesting.

• 52:47Speaker 00

  Just an interesting fact.

• 52:48Speaker 01

  Thanks for coming on my TED Talk.

• 52:49Speaker 00

  Interesting fact. Hey, we've covered car buying, we've covered financial order of operations, how much you should save and invest. All of those details about what we talked about today and more, honestly, if you want to go deeper and kind of see some of those numbers that you personally should be considering, all of that lives on moneyguy.com/resources. So be sure to go check that out. That's there all the time for you. We love being here at 10 a.m. Central every Tuesday, answering your questions, hanging out, talking personal finance. So just a big thank you for joining us today and always.

• 53:20Speaker 01

  We love that we get to do this, uh, because we really do believe that there is a better way to do money. That's the whole reason why we put this show together. It's the whole reason why we communicate with you guys, because we recognize that money is nothing more than a tool. It's a tool that allows us to accomplish our long-term goals. And there's a whole lot more to being wealthy than just the money. I'm Bo Hanson with Creative Director Ravi, Money Guy team, out. 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

• 54:03Speaker 01

  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.