← HerMoney with Jean Chatzky
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- [00:01]
A
Our Finance Fix program was built to help women like you feel confident about your finances, from everyday spending to long term retirement planning. With our personalized step by step retirement calculation, you'll finally have a plan that works for you. And right now, we've got a special limited time offer. Get 25% off with code FALL25. At checkout, you'll learn how to rethink your spending, uncover hidden savings and build a retirement strategy tailored to your life. Just go to financefix.com that's fix with two x's and register with the code fall25 for 25% off. See you in class. Hey everyone. Jean Chatzky here. Today I am so excited to share something brand new we've been working on. You've told us how much you love our hermoney mailbags. The listener questions, the real life stories, the honest conversations. Well, we wanted to take it to the next level. So today you are getting a sneak peek at our first Patreon exclusive Mailbag episode. This one's powerful. A listener, a single mom of a toddler, just received a cancer diagnosis and reached out with urgent questions about how to handle her finances. What happens with her cancer insurance payout? How should she balance paying off debt with saving for emergencies? And how can she prepare for unpaid leave? While focusing on her health, Catherine and I dive into it all from whether those insurance payments are taxable to how to protect your money when life suddenly changes course. And this is just the beginning of what we are building for our subscribers on Patreon. In fact, if you sign up today, you'll have access to our next Patreon Only Mailbag episode. It's a call in AMA mailbag where I sit down with listener Haley to talk through her investment strateg and how to prioritize between her 401k, HSA and IRAs. If you love what you hear and you want more, head over to patreon.com hermoney to join me. You'll get bonus episodes, ad free listening and exclusive behind the scenes content. Plus you'll be supporting the show you love. We can't wait to see you there. All right, ready to get into it, Katherine?
- [02:24]
B
Ready when you are, Jean.
- [02:26]
A
Okay, you want to start?
- [02:27]
B
Absolutely. Our first question today comes from Megan. She writes, I was just diagnosed with cancer last week. I'm grateful to be tackling this at 40 instead of 20 years down the road. But doing it as a single mom with a 2 year old and on my very first day at a brand new job has been way more than I bargained for, thankfully. I have a cancer insurance policy that I brought with me from a previous job's cafeteria plan. Does that make sense to you? Cafeteria plan?
- [02:53]
A
Yeah, Cafeteria plan is like a menu of benefits where you get to sort of one from column A, one from column B. You get to pick and choose different things. It was a term that really was more common I think in like the 90s and the early 2000s. I haven't heard it much lately, but I guess some still exist.
- [03:17]
B
Yeah, interesting, she continues. While I was there, the premiums were deducted from my paycheck, but I always paid 100% of the cost myself. My employer didn't cover any of it. My last day at that job was Aug. 15 and before leaving I confirmed I could port the plan over now the premiums Auto draft from my checking account. From what I can tell, even though they used to come out of my paycheck, they were always after tax since the monthly cost didn't change when I switched to paying directly. Here's where I need help. A rider on the policy pays a $10,000 lump sum upon diagnosis, and that claim has already been approved. I should see the money hit my account any day now. The policy also reimburses at flat rates for specific treatments. So far, I received about $60 from my MRI and $450 from my biopsy. I'll be undergoing a double mastectomy soon and possibly chemo, both of which are covered in part by my health insurance and reimbursed through this cancer policy. My main questions Since I've been paying the premiums with after tax dollars, are these benefits considered taxable income? Should I expect a tax form from the insurance company, or do I need to set aside money myself for state and federal taxes? And beyond the tax piece, I'd love your advice on how best to use this money. Should I set it aside in case my short term disability leave runs longer than expected since I don't qualify for FMLA at my new job? Or do I put it toward debt like the $4,500 I still owe the IRS from 2024? If I do hold onto it, should I keep it in my Ally High Yield Savings account or park it somewhere else? A brokerage account is an option, but only for a year or less, which feels a little risky with medical bills coming in. Thank you so much for taking the time to answer my questions. I've had the pleasure of publishing a few pieces on the hermoney.com website, and I have immense respect for Jean and the team.
- [05:04]
A
Well, first of all, and Catherine, I know you share this. We are just sending all the love in the world your way. You know, it's. I feel like we're at the age now where we hear about people in our lives, in the lives of the people that we know and we love in our community who receive diagnoses every single day. But when you lay it out in so much detail and so much financial detail, it's just heartbreaking. And I know that you're going to come through this. I am thinking about you and we are sending support to you and to your family and just wish you all the best. We haven't had this question actually in seven years of, of doing this podcast. And so I asked Katherine if she would just get the lowdown on exactly the tax treatment of cancer insurance and how this works. Katherine, why don't you talk about that and then we can talk about how Megan should use this money.
- [06:15]
B
Yeah, absolutely. I called several insurance professionals just to make sure we had the absolute right answer because we did not want to get this wrong. I know so many times these things feel like, well, it depends on who you talk to. But thankfully this answer was pretty clear cut. Everybody that we talked to said the same thing. Specifically, I spoke to Brian Burke at Sun Life and Anthony Martin at Choice Mutual. They said the money that pays out from a cancer policy is not considered income. So Megan will not get a tax form from the insurer, nor will she be expected to report these payouts on her tax returns. And Brian pretty much said the same thing, which is that every person's tax situation is unique. But in general, if the premiums are paid by the member on an after tax basis, those benefits are not subject to income tax.
- [07:02]
A
Perfect. That's great. And that's good to know because it means that you get to keep the $10,000. You get to keep whatever else this policy pays. And I assume that this cancer policy is going to sort of ride sidesaddle with your health insurance, that your health insurance will probably be primary and this policy will step in and cover the things that it's doesn't cover. I'm very glad that you have it, Honestly. For most people who have a comprehensive health insurance plan, cancer insurance, like mortgage insurance and other sort of specialty coverage is not private mortgage insurance, but the kind of mortgage insurance that might pay a mortgage if you were to get sick or a credit card balance if you were to get sick is not something that I would typically say you should buy as long as you have the primary underlying coverages that would kick in and protect you from bankruptcy because you have an out of pocket maximum. That said, I'm thrilled for you that you have it and I think that you should use it in the way that is going to reduce your stress level as much as possible. So I probably would pay off that debt from the irs. I don't know if you've got a payment plan rolling with the IRS usually for a debt that size. If you want a payment plan for the irs they will put you on one. But the IRS is pretty notorious when it comes to collecting money that it is owed and they do things like garnishing wages and annoying you in other ways. And so I'd like to see that headache just off your plate. Everything else I would try to hold onto. I'd park it in your high yield savings account. I would dip into it when you need to dip into it when you have expenses because perhaps you're out of work for longer than expected. You have to take more paid time off or unpaid time off than expected. I would use it for those things. I would try to use it to make your life as easy as possible as worry free as possible as you are going through this treatment and we are just all thinking about you and hoping for the best. Katherine, did I miss anything? Anything that you'd like to add?
- [09:45]
B
You know the only thing I can think of is the mention of that beautiful new two year old and how long you're going to be out of commission and what your what your support system, what your village looks like around you. I know you said you're a single mom Megan, so I would just say make sure you have enough money earmarked and set aside to give yourself a much, much needed break. Particularly if you're going to continue working when you come home, if you are on chemo, you have had a double mastectomy, you're going to need help around the house, you're going to need somebody to cook dinner, you're going to need somebody to help with bedtime routine maybe, maybe school drop off. So just make sure there's enough set aside for you to have some time to yourself.
- [10:28]
A
Yeah, absolutely. Such a good point, Katherine. I'm sorry that I didn't say that before and I think if you have a village, Megan, around you, if you've got friends, I've got a number of friends who've gone through treatment for cancer and a var of things over the years and they sort of fall into two camps. Some of them are very, very happy to take us up on offers of the meal train and taking the baby wherever the baby needs to go. And others really dig in and want to do it themselves. It is okay to accept the help. Your friends want to do something. They want to do something and they don't know what to say, much less what to do. And so by giving them something to do, it's almost as if you're giving them a gift because it feels really good to help you when you're going through something like this. So just, just think about it that way and, and accept all the help that comes your way.
- [11:29]
B
That's such a good point. I know when I've offered to help people before, I say let me know if I can do anything because I don't know what else to say other than that blanket offer. And if they came back to me with something specific, I would be so happy. Like yes, thank you. Thank you for giving me this assignment.
- [11:43]
A
Yes, thank you. You can bring me coffee from Dunkin Donuts. I would love it. Anyway, thank you. Katherine, Megan, thank you for writing, thanks for being part of our community, and thank you all so much for joining us for this subscriber only Mailbag. We'll be back soon with more of your questions and deeper dives into the money issues that matter most to you right now. If you're enjoying your Patreon subscription, don't forget to spread the word. Share it with a friend, a colleague or other, anyone who could use a little extra her money in their life. And of course, thank you for being part of our very first group of subscribers. We couldn't do this without you. If you've got any other money related questions we'd love to hear from you, just send them our way by emailing us at mailbag@hermoney.com the average career in.
- [12:29]
C
The US spans 40 years, but real estate investing can cut that timeline to just 15. I'm Dave Meyer, host of the Biggerpockets Real Estate Podcast and I transformed my financial future future through rental properties and so have thousands of others in our community. Every week we bring you real investors sharing real strategies with real results so you can build wealth, buy back your time, and even retire early. Don't miss the latest real estate insights and advice. Watch, listen and subscribe by searching for the Biggerpockets Real Estate Podcast on your favorite podcast platform and on YouTube.