Ask HTM - Break-Even Bank Switch, Doubling Down on a 457b, & Financing an ADU for Extra Cash #1042

Summary

How to Money Podcast Episode #1042: Ask HTM – Break-Even Bank Switch, Doubling Down on a 457b, & Financing an ADU for Extra Cash

Date: September 29, 2025
Hosts: Joel & Matt (iHeartPodcasts)

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Episode Overview

In this engaging listener Q&A episode, Joel and Matt tackle a variety of personal finance topics including:

• Optimizing Health Savings Accounts (HSAs) and high-yield savings for maximum returns
• Weighing the pros and cons of moving large sums between banks for better APY
• Navigating dual workplace retirement accounts (403b vs 457b) for public sector employees
• The ins and outs of early vs delayed Social Security claiming strategies (with new legislative updates)
• Financing accessory dwelling units (ADUs) to boost retirement income
• Affordable healthcare options for self-employed families
  The hallmark “frugal or cheap” debate opens the show, setting a friendly, conversational tone, and each listener scenario is handled with practical wisdom, nuance, and actionable tips.

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Key Discussion Points & Insights

1. Frugal or Cheap: Transplanting Native Plants

• [05:01] Matt and Joel debate whether it’s “frugal or cheap” to transplant native seedlings from public land into your own yard.
• Matt sees saving native plants (destined to be destroyed by maintenance crews) as environmentally positive and cost-effective:

  “I’m not only saving myself money, but I am preserving the local plant scene. I don’t know what you would call it, maybe like Captain Planet, but for your neighborhood” – Matt [09:01]

• Consensus: Frugal – especially if it's not for commercial use. Mixed feelings about florists for-profit picking.

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2. Listener Question: HSA Optimization & Bank Interest Rate Chasing

A. Should I Move HSA Assets to Fidelity for Lower Fees & Better Investments?

• [10:35] David from Virginia asks if he should transfer his HSA from a high-fee employer plan to a self-managed Fidelity HSA.
  • Both recommend the move. Most employer HSA plans are fee-heavy and offer poor investment options.
  • Fidelity is praised for being low-fee, with excellent investment selection:

    “Fidelity remains the best, I think, for many reasons.” – Matt [13:07]

  • Use a “trustee-to-trustee” transfer process. No limitation on frequency, but beware of recurring outgoing transfer fees; don’t move money too often if fees stack up.

B. Should I Chase Higher APY for Large Cash Balance?

• [11:16] David also asks if it’s worth moving $220k (from a recent property sale) from Ally (3.5% APY) to CIT (4% APY).
  • For six-figure balances, small APY differences are “worth sweating” and can yield thousands over a year.
  • For average savers ($10–20k), rates matter less.

  “If you’ve got 200 grand in savings, yeah, you probably do want to sweat those details.” – Joel [20:23]

  • Online banks like Ally are user-friendly; if you love their features, it might justify a slightly lower rate. Consider short-term CDs as a hedge against falling rates.
  • Taxes from the home sale should not be overlooked before committing all funds.

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3. Listener Question: 403b vs 457b for Public Sector Retirement

[26:14] – Terri from California

• Career public sector worker with pension, Roth IRA; asks: invest in 403b or 457b (or both) through Fidelity?
  • Both accounts are great when offered by a low-cost provider like Fidelity.
  • Always prioritize the account with an employer match first—usually the 403b.
  • After maxing a match, the 457b becomes preferable for next-tier savings, because:
    • No early withdrawal penalty (unlike 403b/401k) – flexibility for early retirees
    • Unique “Three-Year Double” (special catch-up) provision lets late savers supercharge contributions before retirement

  “Being able to take money out of [the 457b] early without the IRS hassling you in any way...is a clutch feature.” – Joel [32:15]

• Both accounts can be used together for super-savers. But don’t let saving overtake living—balance present enjoyment with future security.

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4. Listener Question: Early vs. Delayed Social Security (After Pension Offset Rule Change)

[37:05] – Ron from Ohio

• Early 60s, wife is a retired teacher; with the repeal of the government pension offset, is it better to claim Social Security early (let IRA keep growing) or wait for bigger checks?
  • The classic trade-off: Claim now (IRA grows, less time for higher SS payments) vs. Claim later (lock in 8% guaranteed annual increase to SS check).
  • If healthy and with a history of longevity, delaying Social Security gives larger survivor benefits.
  • For bequests: You can leave IRA money to heirs; SS ends with you.
  • New Social Security Fairness Act (2024): Teachers and other public workers no longer see SS checks reduced due to their pension—this is a big positive for Ron’s wife.
  • For complex cases, invest $50 in Maximize My Social Security (recommended by the hosts) for tailor-made strategy.

  “That fifty bucks is well spent; it could really be the difference between tens of thousands of dollars in your pocket...” – Joel [48:08]

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5. Listener Question: Should I Use a HELOC to Build an ADU for Extra Income in Retirement?

[52:58] – Gail via Facebook Group

• Planning to retire, wants to tap home equity with a HELOC to build an Accessory Dwelling Unit (ADU) that will (hopefully) cover its own loan payments from rental income—expected payoff within 5 years.
  • Hosts approve of the strategy, emphasizing:
    • Get realistic cost and income numbers first (don’t use overly optimistic estimates).
    • Short-term rental (Airbnb) could boost returns but requires more work; long-term rental is lower maintenance.
    • Ensure sufficient project funding—unexpected costs can extend payback timelines.

  “If you take out a HELOC, paying it off in short order is ideal...get a firm number in hand before you sign off.” – Joel [56:44]

  • Extra income stream can be a “game changer” for retirees and aid with gradual transition out of the workforce.

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6. Listener Question: How Are Self-Employed Families Affording Healthcare?

[57:58] – Anonymous via Facebook Group

• Family of four, one self-employed, considering leaving employer health insurance to become a one-income family.
  • Small business owners have few good options on the ACA marketplace—premiums can be “stratospheric.”
  • Health sharing ministries are a common choice among self-employed; Matt shares personal numbers:
    • Family of six, monthly “share” is $375 (like a premium), with a $12,000 annual “household share” (like a deductible).
    • Out-of-pocket expenses for the past decade averaged $289/month, including two childbirth years (which cost ~$9-$10k).
  • Key caveats:
    • Health sharing is not insurance and is not federally regulated.
    • Faith-based eligibility or, for non-religious families, look for a secular sharing program like Sedera.
  • The high cost of tying healthcare to employment is seen as a major obstacle to entrepreneurship and family flexibility.

  “It disincentivizes entrepreneurship in this country...it’s the biggest reason, Matt, that I hate that healthcare is tied to employment.” – Joel [62:41]

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Notable Quotes & Memorable Moments

• On transplanting native seedlings:

  “I’m not only saving myself money, but I am preserving the local plant scene...maybe like Captain Planet, but for your neighborhood.” – Matt [09:01]

• On Social Security timing:

  “You could begin to tap some of your investments for income now in order to guarantee yourself a higher Social Security payment down the line.” – Matt [41:41]

• On 457b vs 403b flexibility:

  “Being able to take money out of that account early without the IRS hassling you in any way about those withdrawals is a clutch feature.” – Joel [32:15]

• On health sharing:

  “Some folks are literally paying $375 a month for a family of six...our family household share, which is code for deductible, is $12,000...” – Matt [60:03]

• On using Maximize My Social Security:

  “That fifty bucks is well spent; it could really be the difference between tens of thousands of dollars in your pocket over the decades to come.” – Joel [48:08]

• On entrepreneurship & healthcare:

  “It disincentivizes entrepreneurship in this country, so this is something we really need to figure out...” – Joel [62:41]

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Timestamps for Key Segments

• Frugal or Cheap: Native Seedlings – [05:01]
• HSA Optimization & Bank APY Switching – [10:35]
• 403b vs 457b Strategy – [26:14]
• Social Security Claiming Strategies – [37:05]
• Financing an ADU w/ HELOC – [52:58]
• Affordable Healthcare for the Self-Employed – [57:58]

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Tone & Style

Staying true to How to Money’s signature style, the conversation is accessible, friendly, and sometimes irreverent—packed with genuine encouragement and helpful, jargon-free advice. The hosts blend personal stories, banter, and solid expertise to create a practical, upbeat resource for listeners at all stages of their financial journey.

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For more links, calculators, and resources from this episode, visit howtomoney.com.

Transcript

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[Joel]

Hey, it's Joel and Matt from How2Money. So back in the day, we took our first international trip together to Ireland. That was a long time ago. At this point. We left on Halloween of all days.

[Matt]

Castles, Irish countryside, ghost stories. It was the the full Irish experience, Joel. We stayed in this remote Airbnb right out there on the water and we actually even split another place with a host and her daughter to save some more cash. It was great.

[Joel]

Those Airbnbs, man, they really helped make the trip what it was. And if you're heading out on an adventure, let your place help cover the cost of that trip. With Airbnb's Co host feature, someone local can even manage things for you while you're away. Find a co [e-mail] host. Where do you see your career in 10 years? What are you doing now to help you get there? The sooner you start enhancing your skills, the sooner you'll be ready. That's why AARP has reskilling courses in a variety of categories like marketing and management to help your income live as long as you do.

[Matt]

That's right. AARP has a bevy of free skill building courses for you to choose from because the steps that you choose to take today will help you to love what you do in the future. And that's why the younger you are, the more you need AARP. Learn more at aarp.org skills welcome to how to Money.

[Joel]

I'm Joel.

[Matt]

I am Matt.

[Joel]

And today we're answering your listener questions.

[Matt]

You know what, buddy? We've got listener questions to get to. Some very specific questions that we're going to answer. These are our case studies. We talk about personal finance very broadly. Actually, we get personal when it comes to different things that we're doing. But there's a greater variety in the different types of topics we're able to cover when we get to hear from all of you wonderful listeners out there.

[Joel]

Yeah, I appreciate the specificity of some of these questions and it dives into the details that sometimes we're covering the main points, kind of glossing over some of the particulars. It's nice to dive in deep sometimes.

[Matt]

I totally agree. For instance, listener is wondering if he should be jumping to a higher interest savings rate bank if it's going to be worth it. Turns out the amount of money that he's got on hand pertains to the answer that we'll give. We're going to talk about 403bs, 457s. These are the less traditional retirement accounts that we're going to get to.

[Joel]

And some people have access to two major retirement accounts, which is insane.

[Matt]

More than that as well. But these are accounts that we don't talk much about. But I think I want to make it a point for us to cover these a bit more often. We're also going to hear from a listener who's looking to build an adu, an accessory dwelling unit, as to whether or not they should finance it. We'll dive into those particulars as well.

[Joel]

Yeah, I, man, I was super close to building an ADU in my backyard back in the day. Remember there was a company around the corner from us who had started a business, kind of like the old Sears Roebuck catalogs. And they said, we've got three types of ADUs we build. Which one do you want?

[Matt]

Three month price.

[Joel]

Yeah. And I loved.

[Matt]

They all had super suburban, preppy names. It's like, are you going with the Worthington?

[Joel]

I forget what they're actually called. The Kirkwood I think was the mighty one.

[Matt]

But they were very cool looking.

[Joel]

Yeah, they were cool looking. And I remember when they launched, the prices were pretty solid. And I was like, oh man, that could make sense as an investment stamp from an investment standpoint. But then prices continued to go up on those ADUs over the years. I can't imagine what they cost now.

[Matt]

They started gaining steam.

[Joel]

Yeah. So I can't wait to tackle that question a little bit, because ADUs are something near and dear to my heart, especially as we need more housing supply in this country.

[Matt]

Totally.

[Joel]

But you have a frugal or cheap you wanted to start off with. Yeah. Yeah.

[Matt]

Okay. So is it frugal or cheap to transplant seedlings, little plants that you might see on the side of the road, maybe from public lands?

[Joel]

What do you think are these marijuana plants, Matt? Because I don't. Okay. Don't want you to be trafficking in.

[Matt]

Illicit activity legal in some states. But is it federally still.

[Joel]

Still federally, yeah.

[Matt]

What kind of weird time do we live in that you kind of have to. Like, it's like this in between. It's like the. It's like you're in limbo.

[Joel]

I know.

[Matt]

You know, in the states, like, you're in purgatory. You're not in heaven, you're not in hell. Like, where do you end up landing here?

[Joel]

The federal government is essentially saying states, we're just going to close our eyes, let you do what you want to do, and then. But then those small businesses have to deal with the fact that banks don't. But now we're getting off on a tangent.

[Matt]

Yeah. Yeah.

[Joel]

Okay.

[Matt]

So that's as far as we'll get.

[Joel]

Into marijuana policy, which could change, but. Okay. Okay, so tell me more about what you're doing and the nature of your endeavors.

[Matt]

Okay, so specifically, so near our house, there is a quote unquote trail. A lot of people will walk, run. You run on. Run on it a good bit. A lot of folks will bike on it. I bike on it to our little studio here, our office. And a lot of the property adjoining or like right next to that trail is public land. Like, it's right of way property. And I don't know, every few months you see the. The city folks will come by and they've got their truck and they a. I hate it because they're always. They always park up on the actual path and they block it. And I'm like, hey, man, there's people who want to run, you know, and bike, but I guess it's better than out on the road and whatever.

[Joel]

There's no other place for them to park.

[Matt]

Not going to complain, I guess, but they just pull out the weed eaters, the mowers, and they're just like chopping it down. But what if you See a plant and you're like, wait a minute, I want that in my yard. Do you think it's okay to. This is different than like pulling something out of somebody else's yard.

[Joel]

Yeah, of course.

[Matt]

This kind of reminds me of like me. I used to pick a fig off of a local a nearby because otherwise.

[Joel]

They fell on the ground, went to waste. Yeah.

[Matt]

An ultra local scenario here. No. I would eat a fig on my lunch break as I would walk around the block and I would only pick off one, but it seemed like they were totally going to waste in a similar way. That's how I at least see some of these seedlings.

[Joel]

But.

[Matt]

Yeah. What do you think?

[Joel]

I don't know what the legal ramifications can or would be. I just can't imagine one. Anybody's gonna care if they see you doing it legally.

[Matt]

This isn't a legal question. This is. Do you think it's frugal or ch.

[Joel]

Going to say frugal? I'm going to say it's fine.

[Matt]

Yeah.

[Joel]

I don't feel bad about it. I don't do it because I don't care about, like interesting plants the way you do. But.

[Matt]

Well, that's the thing. So it's starting to cool down, the temperatures are dropping, and this is planting season. Like, if you are into gardening, getting plants in your yard, it's not as hot, so it's easier on the plants. Like the roots. I think they, over winter they get established that way. Come spring, these things are ready to go, man. You know? But when it comes to purchasing plants, they can be expensive. Some of the ones that Kate's looking at, I'm like, wait, how much does that cost for a five gallon? That's a lot of money. Like, can we not just continue to like, find some of these cool plants on the side of the road here? And here's one of my arguments. I'm glad you think it's frugal, first of all. But secondly, you know, I'm doing it anyway, I guess even if I was.

[Joel]

Like, whoa, bro, you still do it.

[Matt]

One of the reasons is because most people, like, I'm not pulling up green giants, right. Like that plants that most people are looking for, like, these are quote unquote native species. Native plants which most people call weeds.

[Joel]

Yeah.

[Matt]

Which is why they're just whacked down. I, or in Kate in particular, tends to like these native plants because they're more interesting looking. Like, they're just cool looking. So it provides a nice variety in your garden. You're able to maintain some of the. Some of the local flora. Is that it? Yeah, the local plants, flora, fauna.

[Joel]

Yeah.

[Matt]

But then also, it's a huge money saver if we're able to be like, oh, let's just pop that over into the yard, get that going. When otherwise it would just either get sprayed with Roundup or get weeded down to, you know, not existing anymore.

[Joel]

So you're saving one of these poor little plants from.

[Matt]

I'm not only saving myself money, but I am preserving the local plant scene. I don't know what you would call.

[Joel]

What you call it, like Captain Planet, but for your neighborhood. Yeah.

[Matt]

For the different varieties of plants out there, you know, it's not the typical plants that you're picking up at Home Depot. Um, so there are, by the way, there are local nurseries that specialize in native plants, but they're. They're few and far between.

[Joel]

And those probably cost even more because they. There is like, there. There aren't as many of those taken care of nurseries in existence. Right.

[Matt]

Yeah, that's true.

[Joel]

Okay, so keep gathering your.

[Matt]

You think it's fruit plants, man?

[Joel]

Go for it.

[Matt]

I'm for it. Related.

[Joel]

I'm curious to see if some listeners disagree. If they send you an email and.

[Matt]

They'Re like, cease and desist, I would love to know. Yeah. Their thoughts. On a related note, what would you do if you knew of a local florist that doing something similar, more so maybe like taking clippings and then putting them in bouquets, selling them at local.

[Joel]

Coffee shops, perhaps getting the free flowers and stuff like that. I think making money on it feels different than planting it on your own yard.

[Matt]

I agree.

[Joel]

Yeah.

[Matt]

This is a conversation Kate and I have had because of the fact that it's more of a business. It feels like you're taking a public good and then making a profit off of it as opposed to. I guess the way I'm looking at it, it's like sort of like you're saying more of a preservation of the thing. But yeah, I'm not going to put anybody on blast or anything. But that's not.

[Joel]

That's something that, you know who you are.

[Matt]

That's something that Kate and I have noticed.

[Joel]

Nice. All right, good times. All right, let's. Let's move on. If you have a money question we'd love to hear from you, go to howtomoney.com ask or just record your question on the voice memo app of your phone, email it over to us. Hopefully we can take it next week on the show. Matt, let's get to a question. Specifically let's talk about HSA's health savings accounts. We haven't really covered that in a bit.

[David (Listener Caller)]

Hello, Joel and Matt, this is David from Harrisonburg, Virginia. Recently started listening to this show and it's been super helpful. So thank you. I have two questions. I have an employer sponsored HSA plan through Health Equity. They have some higher fees and maybe not quite the funds that I would like to invest in. They don't have the greatest selection of ETFs. So I was wondering if it would make sense to maybe do an account through Fidelity and transfer those HSA dollars into Fidelity every month to get some better fund options. I recently started maxing out our family HSA plan last year.

[Joel]

So the account is growing quickly and.

[David (Listener Caller)]

Just want to make sure I'm doing the best version of that. My other question is on High Yield Savings Account. I am currently with Ally and I'm getting 3.5% APY but I'm seeing CIT banks rates are at like 4% APY right now and I do have about 220k in there due to selling a rental home last month. Probably won't be there long term, but I was wondering if it's worth the switch to a better APY savings rate in the long run. Would love your thoughts. Thank you.

[Matt]

All right, David, thank you for being a part of the HTM nation. Just kidding.

[Joel]

We're grafting you into the family. We're not going to family instead of nation.

[Matt]

Yeah, let's go with family or.

[Joel]

Sounds a little too brash to me.

[Matt]

Oh, oh, I know. I was making a joke of the fact that we said that a few weeks ago. I don't think it took and I'm not very interested in propagating. Ooh, there's another plant term. So you said grafting. I said propagate. Now, David, thank you for being a how to money listener. We will get to your savings account question, but first let's tackle the hsa, the health savings account. And I think this, I think there are more folks out there who might have this question than we're hearing about because there are a slew of different HSA providers and not all of them are created equal. HSA providers, they often offer limited or pretty crummy, AKA expensive investment options. So trying to get your health savings account dollars over to Fidelity, I like it, man. I think that points to the fact that you're thinking like you're thinking next level when it comes to what it is that you can do with your health savings account, not just your streets.

[Joel]

Ahead, as some might say not. Is that from the show community? You remember that. Wait, streets, Streets ahead. Instead of like two steps ahead of the game, you're streets ahead.

[Matt]

Oh, I missed that.

[Joel]

What season? I don't know. Okay.

[Matt]

A lot of folks think of HSAs as how they pay for medical expenses, but of course, when you're thinking next level, you're not spending those dollars. You are investing those dollars as well. And there are other solid options, but fidelity, it remains the best, I think, for many reasons, by the way. So here's a stat. Only 18% of people actually invest inside of their HSA. So you are in the minority to think of your health savings account as a retirement account.

[Joel]

And so some people can't because they use it as a way to pay for current health care, which I totally.

[Matt]

That's how it was originally created.

[Joel]

Yeah. But if you can get past that and have enough savings to pay for current year health care expenses out of money that you have on hand and you can invest those HSA dollars, it's just, it becomes a super powerful retirement account that most people don't see as a powerful retirement account. And we want to kind of change that narrative. Right. And David is buying into that, which I think is really, really cool. So, yeah, hsa incredible account to grow tax free wealth if you are so inclined. And if you're intentional and the fewer fees that you're paying, that means like the more your money is working for you. Which is part of the reason, Matt, you and I mostly dislike fees. Right. And we want people to go away from banks that charge high fees, like the big banks, which we'll get to in just a second. But especially given like the HSA contribution limits and how there are more fee heavy providers in the HSA world than there are in almost any other investing accounts that you could participate in, it can have even more, I think of an impact on the ability of those dollars to compound. So transferring your HSA money, it's helping you to avoid potential nasty fees. There might be like a monthly or a quarterly fee or something like that that your HSA provider charges. And because you're putting, you know, a few thousand dollars, not like $20,000 into this, they have like an outsize, like I said, outsize impact. So. And then going somewhere else too might give you not just fewer fees, but also better low cost investment choices. So you're going to want to initiate what's called a trustee to trustee transfer in order to get those Dollars from your current HSA to Fidelity. It's pretty easy. The other thing is, which I think most people don't realize, Matt, you can do this as often as you'd like, no limit. So you could say I'm going to do this every couple of weeks instead of doing it once a year or something like that. If you're one of those hyper optimizers who wants to get that money into that new HSA as quickly as humanly possible.

[Matt]

Honestly, it makes me think of a few months ago I was looking to move some money over to a donor advised fund, Joel. And I thought, you know who makes it easy to do, to do that kind of thing? Robinhood. So I hopped over to Robinhood because I remember specifically this is I guess last year, a couple years ago, doing that with some crypto they had recently linked and said, hey, you can instantly transfer over crypto.

[Joel]

I clicked on that too and I appreciate that. It was awesome. The link between Robinhood and Daffy is strong.

[Matt]

It is, it is. And so I was. I incorrectly assumed that the same was true of other assets. Sadly, no, it is not the case. It is a $100 acatz, the acats transfer, which is, dude, it's such. It's so frustrating because so the A, I don't even know what it stands for, the whole ACATS thing, but the first letter, the A stands for automated, which means wait a minute, this seems like this is something that is automatic and so you shouldn't be charging me a hundred dollars to make a transfer. So all that being said, be like.

[Joel]

Charging a hundred bucks for an ach.

[Matt]

Yeah, it was so dumb. And I was like, nope, not going to do that. So I just hopped over to Vanguard and transferred funds ETF from over there instead. But what I'm pointing to is fact that $100, let's say for you, like it could be something, it could be like the equivalent of 1%. But if it's every time that you make a transfer, like let's say on a monthly basis, well all of a sudden instead of it being a 1% overall fee that you're eating, it quickly ramps up the more often that you do it. And so this is an instance where like sometimes we'll say, well, don't let the, don't let the tail wag the dog. But this is an instance to where the fee actually has a pretty significant impact on how much you're going to be able to invest. So you want to know what that fee amount is before you initiate this transfer.

[Joel]

If the outgoing transfer fee, like you said, is 20 bucks. Well, it might be worth doing that once a year to move many, many thousands of dollars over, but it's probably not worth doing that once a month to move hundreds of dollars over.

[Matt]

No, I wouldn't do it because that's.

[Joel]

A much bigger percentage of the overall.

[Matt]

Assets at 20 bucks. Given the maximums for family HSA contribution, I think I'd be willing to do that a few times a year. But more than that, it starts feeling expensive. Less than that feels less optimized from an investing standpoint. So I don't know that's where I would land.

[Joel]

Tough to find that balance. But it's. Yeah, it's a shame, I guess, that there aren't better HSA options widely available if you do have fidelity. Although I think those. Because of all the tax benefits, the fees that are. That many of these HSA providers charge, well, it's still worth contributing to an HSA because the tax benefits are so stinking significant. So don't avoid the HSA because of those, but find ways to minimize the destruction that those fees are doing to your dollars. Sure. Alright, let's talk about savings accounts and David's question there. I think, you know, some people are just way too dialed into interest rates and kind of parsing the difference between banks and. Well, this one's offering three and a half and this one's offering three and a quarter. So I'm moving. We definitely don't want people banking with the big banks because they're getting paid.01%. It doesn't matter how high rates go. Like the big banks just aren't budging. They're not going to pay you anything reasonable on your money. So.

[Matt]

Yeah, and point zero one is not an exaggeration.

[Joel]

No, it's like it's.

[Matt]

That's actually real. That's actually, that's very accurate. Like I looked up specifically, some of.

[Joel]

Those accounts might go as high as 0.05.

[Matt]

You know, specifically bank of America, it's their Platinum Honors account that goes up to point zero four percent.

[Joel]

Oh man.

[Matt]

Which is like the dumbest thing. Platinum Honors, like what is this, like Magnum Money or something like that? They're trying to make it sound so special that, oh, if you earn Platinum Honors, you are among the elite and you are because you have to jump through so many hoops. You have to have like a ton of money with them and satisfy a bunch of other requirements and oh yeah, yeah, you get four times what the rest of the customers get. But it's still only 0.04%.

[Joel]

It's still 100x less than what banks that we like, actually. So, yeah, doing business with the big banks, you do at your own peril. It's a complete waste of your time and you're not maximizing the return that you can get on your savings. And so, you know, the gap between the big banks and our favorite online banks is massive. Right. As we're outlining here. But the gap between a great online bank and the very best one is a lot smaller. So that is true. Rates, they're changing all the time. Normally we just want you to do business with an online bank that's in the top tier. But Matt, this question is pointing out. David says, hey, I got a lot of cash on hand right now. And he's got so much money in savings that if you, let's say, had that cash sitting in a bank account for a whole year and you got just an extra half a percent of a return, we could be talking about four figures. Right? We could be talking about a lot of money easily for people with $10,000 in savings, which is admirable. That's great. That's enough for most people, I don't.

[Matt]

Think lower stakes when it comes to interest.

[Joel]

You don't need to stress between 3 and 3.5%. But if you've got over six, you know, six figures, if you've got 200 grand in savings. Yeah, you probably do want to sweat those details.

[Matt]

Yeah. I see this being as like the impetus to get him to consider moving to a slightly better bank and then just trying it out and seeing if the services that they offer are worth the additional quote, unquote hassle. Right. Because a lot of times once you get switched over, there's no additional hassle. But all banks are. They're not created equally and they do offer different. They all have different strengths, specifically. I'm with you, David. I'm literally with Ally as well. And I know they don't pay the highest rate, but I have been so happy with their customer service and the different services, the overall rate that they are willing to pay that I have stuck with them over the years.

[Joel]

The free perks or the user interface can make up for a slightly lower fee. Yeah, Ally has the pockets and stuff.

[Matt]

It's a Polish man. It's so good. Yes, they got the no penalty CDs, so that's something to consider. But, well, he mentioned CIT and that is a great option. They certainly remain one of our favorites. They consistently pay the absolute top tier rates. But I don't think there's any harm in staying with Ally if you've been like ultra happy with them. Maybe you do want to consider one of those CDs, one of the short term CDs until you know what it is that you want to do with that cash from the sale of that rental property. Six months to bump up a full percentage point in your return could certainly make sense. And then in addition to that, one of the advantages that you are realizing is that you are able to protect that cash from potential interest rate declines. But be sure to check out betterment as well. Their savings account has offered really good rates recently with higher rates for new customers in particular. In addition to that, I would say don't forget, and it sounds like this is what you're doing, but don't forget that it sounds like you might have a tax bill due given the fact that this is a rental property.

[Joel]

Yeah.

[Matt]

So make sure you set that money aside and that this isn't something that.

[Joel]

You just blow through.

[Matt]

But I don't think Dave is going to quickly burn through 220k.

[Joel]

Joel doesn't sound like it.

[Matt]

No.

[Joel]

All right, Matt, we got more questions to get to, including what what do you do when you have multiple workplace retirement accounts open to you? Which one do you prioritize? We'll talk about that and more. Right?

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[Joel]

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[Matt]

All right buddy, we are back from the break. We're gonna talk about the high cost of healthcare here In a minute. But before that, let's hear from a listener now who is weighing some of the different menu options that she has before her when it comes to where it is she should invest her retirement dollars.

[Podcast Host (Intro/Outro)]

Hi, Matt and Joel. I'm Terri from Northern California and I have a question about tax advantaged retirement accounts. Some background. I'm in Money Gear 7. I've been working in the public sector for about 19 years, and I expect to end my career there in another 15 years or so. I should have a pretty solid pension coming to me right now. The plan is for the pension to be the bulk of my retirement income, but I'll supplement that with Social Security and personal savings. I'm also currently maxing out my Roth ira. So getting to my actual question, through my employer, I have access to a 403 and a 457 through Fidelity. I've been putting money in the 403, but I'm wondering if I should switch that to the 457. I'm not sure what the advantage is for one or the other. Thanks for any advice.

[Joel]

Ooh. Like this question. Matt and I love that Terry is in money gear number seven. Just nice to hear from people who are very far along in their financial journey. We try to offer advice for people who are all along the spectrum there, but it's nice to see someone have had a ton of success in the first couple of years or first couple of decades really of being an investor.

[Matt]

Yeah, Money Gear 7, that's like cruising altitude when it comes to the money gears.

[Joel]

Tons of choices. Lots of the world is your oyster.

[Matt]

You may unbuckle and go to the bathroom.

[Joel]

That's right. Yeah. It's nice that she has a pension too, man.

[Matt]

Even have a drink if you like to splurge. Well, the.

[Joel]

Yeah, I guess you're right. Yeah, you can pay that extra for the drink. Used to be like on the house. Not anymore. Right.

[Matt]

So this is in the 70s.

[Joel]

Last time I was on a Southwest flight, it was like what was a cocktail, maybe $10. Do I ever splurge? No, of course I don't for that. I don't even splurge for the nice seats, so. But I do like to if I get well and sorry if I'm going to lament on this, but Southwest changing their boarding structure soon, I'm gonna miss being able to get on, you know, in that mid a group and still finding an exit row seat. That's gonna be a bummer.

[Matt]

So now the. The trick is, and I've seen you do this is that when you're buried in B or at in the C group, you just look to the middle seat in the very front of the plane because those seats are gonna be taken by somebody. You can either go to the very back and sit in the middle seat, or you take the middle seat. I mean, we're giving away our secret.

[Joel]

What can I say? The other thing that people do, or.

[Matt]

You immediately take the middle seat right there at the front of the plane. You got plenty of legroom.

[Joel]

There's all these ways that people create. Put a menacing look on their face or contort their body structure to prevent you from taking the middle seat next to them in that front row.

[Matt]

Oh, I do that. It's like I make it look like I've got gas.

[Joel]

I believe it.

[Matt]

I learned from you. I learned it from the best.

[Joel]

Last time I went on the plane, I mean, I saw a guy like slumped over both seats, and then on the other side of the aisle, the guy literally had his leg up as he was reading a book. To just to create this sort of environment that says, you really don't want to sit here next to me.

[Matt]

You got to ask me.

[Joel]

Think twice. Yeah. And I was like, that's okay. I'm going to run past this because I think there's an extra row seat back there.

[Matt]

There's an option down the.

[Joel]

But if there hadn't have been, I would have sat in their lap just to mess with them.

[Matt]

Oh, yeah, why not?

[Joel]

Yeah, that's my style. All right, let's get to Terry's question. Terry, you're not resting on your laurels here, which is good because you're like, hey, I'm crushing it, but I want to do even more. You're maxing the Roth. You want to save and invest even more, which is great. And it makes me think of our conversation Matt with Dan Otter, which was episode 851. Dan is doing the Lord's work when it comes to helping teachers.

[Matt]

Oh, 3B wise.

[Joel]

That's right.

[Matt]

Org, right?

[Joel]

Yeah. Dot org. So if you were a teacher, it's a non profit and you want to figure out what's going on with your retirement accounts. The expert in that space is Dan, and his website is a treasure trove of helpful information. So. And one of the things he got to in that conversation was just that. Intentional. Teachers can retire incredibly rich, which is not something you typically think about with teachers. But as a teacher, yes, you can if you are. If you're thoughtful. And so, yeah, your efforts in addition to this Pension are going to increase your options significantly over time. Terry, you really, you really might retire with more money than people who were like big wig executives at companies and stuff like that because of your dedication and all the high percentage of your income that you're saving and investing.

[Matt]

True. That's true. Yeah. It's cool that Terry's got access to both of these accounts. The 403B, the 457. You could actually contribute to both if you wanted to save, if you wanted to invest even more, which is a pretty cool perk that some super savers take advantage of. And that would allow you to sock away almost $50,000 in a year in addition to your other investments like your Roth ira, which would be a ton of money. But I would say the first one to pick is the one that offers a match, which is most likely going.

[Joel]

To be your 403.

[Matt]

403S. Act more like a 401k. And just in case folks didn't know, we're never fans of leaving money on the table. I'm going to reach for everything, even if it's a plant on the side of the road. And I'm just like, I don't even know if I'm allowed to take that. But it seems like, it seems like.

[Joel]

It'S a free plant, fair game.

[Matt]

This is free money that would be left on the table were you to not take advantage of that match if that is something that is offered to you. So that was the first thing I would do, is make sure that you are aware of that. But if you don't have one of those, then I would say, what is it past don't stop, pass go. I haven't played Monopoly in forever.

[Joel]

What's the term don't stop or collect $200? I don't know.

[Matt]

Don't play. Yeah, it's been a minute. Anyway.

[Joel]

Oh, well, you. If you go to jail, it's. Yeah, you don't. You pass go, but you don't collect the $200 when you're going to jail.

[Matt]

There you go. Yeah, do that thing and go straight to the 457.

[Joel]

Sure. So what you're saying is match first in the 403B is invest until you're maxing that out and then revert to the 457. And there's a reason that the 457B is the next ideal choice before you sock more money into the 403. And that's one. Because she said it's with fidelity, which is one of Our favorite low cost companies. So if the account is with a low cost brokerage that is two thumbs up, extra plus and then fees are going to essentially be non existent, you're going to have a lot of low cost investment choices. But the other reason is because one major difference between the two accounts, which is the early withdrawal penalty. And so the 403B has one, the 457 doesn't.

[Matt]

Yeah, 403B again, more like a 401K 457 feels a bit more like a brokerage account.

[Joel]

It is this kind of like loosey goosey 403B equivalent that doesn't have some of the same draconian rules about early access. And so being able to take money out of that account early without the IRS hassling you in any way about those withdrawals is a clutch feature. And with like the insane effort that you're putting into investing for your future, you really might choose to retire early like you want. You might want this money before the age of 59 and a half. And in the 403B, in the 401K you're talking about paying tax and a 10% penalty, but in the 457 you are avoiding that 10% penalty. You still pay the, the tax. And so you want to be wise with how much you're taking out in a given year. But yeah, being able to tap those funds without the penalty before the age of 59 and a half is pretty sick.

[Matt]

That's amazing. Yeah, there's another cool feature as well that the 457 has, which is the three year like double feature. I don't, it doesn't really have a name but we should totally give it a brand.

[Joel]

Cool brand.

[Matt]

Yeah, the three year double, but it makes it even more appealing than the 43B. And the way it works is that if you haven't maxed out contributions over the prior three years, you can contribute quite a bit more than the $23,500 max that the account currently offers. And this is given though that you are in the three years preceding retirement age. Basically, if you under allocated contributions to the 457 over the past few years, you're getting closer to retirement and you are keen to toss gobs of cash and you can supercharge the amount that you sock in there beyond the standard catch up contribution that most retirement accounts allow for. So it's got the, it's got the, the typical catch up contributions that the, the 43B also has. But beyond that, it's got this this little, it feels like a boost. Like what were the racing games where you hit the nos? Was this, that was called like the.

[Joel]

Gas was like the mushroom on Mario Kart.

[Matt]

Yeah, yeah, yeah.

[Joel]

Okay.

[Matt]

Exactly like the mushrooms. There's three of them. So you got, you got three years to make this thing happen.

[Joel]

Three years. Although I was, we look into the details because there's, there's the catch up contribution and then there's also the three year rule that specifically applies to 457s and you can't do both, but you can take advantage of whichever one is larger for you.

[Matt]

You can't do them both in the same year.

[Joel]

Yeah, exactly. So know that. But that's what one of the other things that makes the 457B a pretty cool account that is again different from some of the accounts that most people have access to. And yeah, being able to utilize both means you can man, toss in a lot more pre tax dollars, reducing your AGI, allowing you to pay a low tax bill now, giving you a lot of flexibility into the future as well. So yeah, doing kind of the both and approach that we just outlined I think is going to lead to your ability to save and invest a lot of money and retire early if that's your desire. You're contributing to the Roth IRA on top of that. And so I guess just the last piece of advice, Matt, which we try to always incorporate as we're, you know, thinking about the how much you can stick away into retirement accounts. And some people are like, oh man, that's great. I make 100 grand. Let me invest $65,000 of that this year. Wait, am I going to be eating like essentially rice and beans and toast all the time? Just make sure you're not forgetting to enjoy your life while you're simultaneously saving for the future. That's true. It is easy to think, especially as you get nerdy into this. Man, all these levers I can pull and some of them are well worth pulling. And you just want to make sure you don't pull so many levers that you are feeling destitute in the here and now as you save for that future that you so look forward to.

[Matt]

Absolutely, yeah. For all the folks out there though who have access to a 457. So one of the reasons we don't talk about it as much is because it is limited to government workers, to police officers, to firefighters. But like man, if you are, if you fall within that category, I would most definitely be looking to the 457 because of the flexibility. It's so great that there's a. I feel like sometimes it gets misconstrued as well that like, oh, well, I'm not going to be an early retiree. Well, it's not. That makes it sound like you're going to bag work altogether as opposed to finding something else that you might want to move towards.

[Joel]

Right.

[Matt]

It's not just about abandoning something, but it's about being excited about what you might be moving into. And quote, unquote, retirement doesn't have to mean you not working, it simply means you leaving that employer.

[Joel]

That's right.

[Matt]

So you can, you can draw on those funds early while you're building a business or something.

[Joel]

Anything from your house.

[Matt]

Yeah. You don't have to be older in order to pull that off as well. So it's why it makes it very attractive, especially for early retirees. But Joel, let's hear from another listener who's looking to take on the best Social Security strategy. He's looking to stretch those dollars into some of those later years.

[Ron (Listener Caller)]

Hi Joel and Matt. This is Ron from Columbus, Ohio. I've been a follower of your podcast for many years and appreciate the solid financial guidance that the two of you provide. My question is in regards to when to take Social Security. My wife and I are in our early 60s and well into money gear number seven. My wife is a retired teacher and I am semi retired but not yet drawing off of my retirement portfolio. I've long held to the opinion that delaying taking Social Security until age 67 or even 70 was the best option in order to maximize the monthly payout. However, I've recently questioned that for a couple of reasons. First, if I start drawing now, even at a reduced rate, I am able to both draw from Social Security for more years and avoid drawing funds from my ira, thus allowing my IRA funds to continue to grow while also collecting Social Security payments for more years. Second, and possibly more importantly, with the elimination of the government pension offset, my wife could start drawing Social Security as a spouse at 50% of my rate in the next year. Add to that the fact that with the political pendulum, who knows whether her benefit will always be available, and the fact that Social Security benefits in general could be reduced in the future to protect it from going bankrupt. Given those factors, I'm strongly considering taking Social Security earlier than I had previously planned. I'm curious to hear your thoughts. Thanks and keep up the great work, Matt.

[Joel]

First off, I just want to say congrats to Ron on being semi retired in his 60s. I think it's a great way to live. I think that's what I want to be in my 60s. I want to be working some, but not.

[Matt]

I want to be semi retired now.

[Joel]

Yeah.

[Matt]

I mean, but we need to keep working, Joel. We need to keep getting the content out there for all the how to money listeners.

[Joel]

That's right. Yeah. And there's something beautiful about being able to produce this show to help people. That's the whole. The whole goal behind it, right. Is to really help people maximize the dollars that are put in their hands to their ability to build wealth and their ability to live their best life.

[Matt]

And plus, Ron's like, matt, get off your butt.

[Joel]

He's like, dude, I put in 20 more years than you, man.

[Matt]

Talk to me in two decades.

[Joel]

That's right. That's right. Back off. All right. The cool thing, though, about that is you get to keep some income heading your way. You still working some. You get to enjoy the benefits that work can provide. I think that relational aspect is important. Having coworkers and a missional aspect to your life, especially if work does provide that for you. Being able to work part time can be the best of both worlds for people in that phase of their lives. Not everyone has that option, but Ron certainly does because of so much of the hard work that he's put in over the years. And so, yeah, I just think for a lot of people, maybe that should be on their radar is trying to go from not 50 hours a week to zero, but maybe this kind of sliding scale downward where you're like, I'm going to work. You know, I was working 40 to 50 hours. Now I'm working like 20 to 30. And then maybe, I don't know, I'm working 10 to 20, and you kind of slowly back off instead of like going from all in to all out.

[Matt]

Yeah, going from 50 to zero, like you're slamming on the brakes. I like the coast, which is why. I mean, I feel like that's why the coast fire. It works on so many different levels. But for Ron.

[Joel]

Well, it also bodes well for Ron, by the way, bringing in some money means, okay, cool, I can let those assets continue to grow.

[Matt]

Exactly. We'll probably find some way to get to that here. But his specific question, though, it's tough because there are a lot of different moving parts. Because, yes, taking Social Security earlier is going to mean that you can allow your investment portfolio to keep growing. That's great. But you could also take the opposite approach. And this is where we like to talk through all the different scenarios here, Ron, you could begin to tap some of your investments for income now in order to guarantee yourself a higher Social Security payment down the line. What you decide comes down at least in part to your goals and to your risk tolerance. But what you have to recognize here is that you'd be selling either at or nearish all time highs in the market, which is pretty attractive from a timing standpoint. From a. Do I need this money? Which, like. Well, I don't know if I need it, but it is at all time highs. And then by drawing on that portfolio sum, that would guarantee yourself a check that is 8% larger each and every year going forward, which is guaranteed. I don't know. This is kind of contrary to what it is that Ron was proposing, but I think it's worth considering.

[Joel]

It is worth considering. I agree. Because you got to think there's trade offs either way. And one trade off is I get the check now, I let my investments grow. The reverse is true. Which is what you're pointing into is where if you tap investments now, you're letting your Social Security check grow. And there's a reality that one way or the other, and it's really hard to decipher which one is going to be the most effective way forward. And so much of that is like.

[Matt]

Well, what's the market going to perform?

[Joel]

What am I invested in? Right. And yeah, how is the market going to perform compared to the guaranteed return I'd get by delaying Social Security? And I think part of this comes down to as well, like, how good a shape are you in, Ron? Are you like, still going on runs? Are you doing kayaking trips?

[Matt]

Like, what kind of physical shape? Yeah. Not financial shape, right?

[Joel]

No, financial shape. He's doing great. So. So now we're talking about. Well, yeah. What sort of longevity do you expect for yourself? That's obviously a tough question. We could all get hit by a bus tomorrow. Like, there's just. I almost got hit by a taxi.

[Matt]

I know you almost got hit by a cab.

[Joel]

A bright orange taxi.

[Matt]

Makes it sound like we live in New York City or something like that.

[Joel]

No.

[Matt]

Which we don't. But you gotta watch out for those when you're out there running, buddy.

[Joel]

I can tell the guy felt bad, but I felt bad too. Cause he almost killed me, so.

[Matt]

Because he almost ended my life.

[Joel]

Yeah.

[Matt]

Do you wear. Were you wearing, like all beige? Were you like blending into the sidewalk or anything?

[Joel]

I don't think so.

[Matt]

Emily's gonna start making you run with like a neon green, neon Green vest.

[Joel]

I don't know, maybe she's like.

[Matt]

Because at this point she's like, dude, the life insurance, not worth it. I just want you to do all the things that you've promised to do for the next.

[Joel]

The life insurance might be more valuable than me sticking around, but not true. Those are the kind of things that happen, though. And you're like, I mean, I did not see my life flash before my eyes or anything like that. But it does remind you that we.

[Matt]

Didn'T roll up onto the hood. It wasn't like the same.

[Joel]

I've done that before on my bike, gotten hit by.

[Matt]

Oh, my gosh.

[Joel]

When I was on my bike in downtown.

[Matt]

Buddy. I don't know. I'm starting to think this might be a you problem, not everybody else problem. Yeah, the fact that this is happening multiple.

[Joel]

No, he totally blew through that stop sign. That was.

[Matt]

Okay.

[Joel]

Not cool. That's his fault then. Yeah.

[Matt]

Sorry. To victim shame.

[Joel]

Thank you.

[Matt]

What's the term? Is that the term?

[Joel]

I think so. Don't blame me. It's not your fault. It's not my fault. Nope. Okay, so, but. And it's obviously tough to know this, but if you're likely. If you think you're likely to live into your late 80s or 90s, right. The effect of waiting to draw on Social Security, it becomes more pronounced. And so, you know, one tactic that often can make sense is for the lower earning spouse to take Social Security early. The higher earning spouse to wait until later. Right. 67 or ideally even 70, like you mentioned, Ron. And part of the reason this strategy makes so much sense is because it also guarantees a higher survival benefit for this surviving spouse. Right. Who continues to live after the other partner passes away. So it's just kind of like general Social Security strategy, claiming strategy that people take. And there's a reason it makes sense, if you're thoughtful about it, that taking that approach can. Can really maximize benefits. It means, hey, we're getting one check at least, claiming that early. We're waiting for quite a while to claim the other one. And you're kind of covering both bases.

[Matt]

Yeah, yeah, I do think so. Something he didn't mention was whether or not there are kids in the picture and whether or not we're talking about passing wealth down from a legacy standpoint. Because guess what, guess what. You can't pass down to your kids once you die.

[Joel]

Social Security.

[Matt]

So that like, that's the check in the. On the side of like, hey, maybe it's worth taking Social Security now, letting your portfolio Cook a little bit longer because guess, because you can pass 401ks, Roth IRAs. These are all things that you can pass down to your kids.

[Joel]

And so if you're so inclined.

[Matt]

Yeah, yeah. Certainly not necessary or I don't think it should be expected in most cases. But that's something else. If you've got more than enough on hand and you're just looking to try to find a way to maximize what it is to maximize returns essentially and to figure out what it is that you're looking to pass on, I think that's a consideration as well. And speaking of maximizing returns, I think that's one of the reasons too that people decide to punt and to delay taking Social Security because they're looking for those guaranteed chill returns as opposed to staying invested in the S and P where there's a whole lot more volatility because that's, that's how you're going to maximize your return.

[Joel]

There's like historical average returns and then there's like, what are the returns I'm actually going to see? And the risk free nature of those Social Security returns of waiting for those. That's appealing. Yeah, exactly.

[Matt]

Yeah. It's not this predictable or straightforward, but if you look at the past couple years and you're like, all right, we're looking at 25% years. If you're looking at, okay, what should the next two years look like? I'm not going to do the math in my head, but it would take some sour years to get us to a 10%, 8% to 10% annual annualized return on average. That's again, going back to the timing element of possibly pulling some of that money out of the market.

[Joel]

Now let's cover the Social Security Fairness act, which Ron alluded to. This is a sort of niche thing, but it's going to really help millions of retirees because as a teacher who was not covered by Social Security in her job, your wife would have had her Social Security benefits reduced because of that pension offset that you mentioned. That is no longer the case thanks to legislation earlier this year, which kind of uncomplicated Social Security for people in that camp and also means they're going to receive larger checks. And so just a big chunk of teachers and government workers are now going to receive bigger Social Security checks than they previously would have received because of the way the law existed prior to this year. And this was also retroactive to 2024. So some people were going to get back pay in some of those benefits. And this is, I Think good news for those people. Obviously the specifics can vary wildly though. So especially with these changes, it's just one more really crucial factor to think through. I would suggest paying 50 bucks for maximize My Social Security. It's a website you can go to. We'll link to it it in the show notes on howtomoney.com but you're going to get, you know, specifics in the differences in annual and lifetime benefit for different claiming strategies that you could take. And they show data on you mentioned future benefit cuts. How is that going to impact my claiming strategy? And you know, I think there's a solid reason to consider claiming sooner. There's just some, a lot of evidence in that direction. But there's also other evidence saying that waiting could be your best bet. It's so, so it's so hard to tell you, Ron, without sitting down and looking at everything. And that's actually what this software is kind of has the ability to do. So I would say 50 bucks to have your data specifically laid out in an easy to understand format, helping you make a choice with, with all the different inputs kind of on a screen right in front of you, I think makes a lot of sense because that 50 bucks is well spent. It could, could really be the difference between tens of thousands of dollars in your pocket over the decades to come.

[Matt]

That's right. And one of the reasons we're mentioning this site too is it's just well run. This isn't a government website. It's a site that was started by a professor of economics from Boston University, which is a part of the reason why I think it works so well.

[Joel]

There's crummy calculators that are free that you can access or they're decent for really chill scenarios.

[Matt]

They're decent because they're free. But this is like a great, this.

[Joel]

Is a great resource.

[Matt]

Totally worth checking out.

[Joel]

If we're saying frugal or cheap, it's frugal to drop the 50 bucks here, given the question Ron's asking and what's going on with his particulars.

[Matt]

Absolutely. But buddy, we got more to get to. We're gonna hear from a listener who is asking about some of the different affordable options, at least on the healthcare front. We'll get to that and more right after this. This episode is brought to you by Navy Federal Credit Union. With rising housing prices and steeper mortgage rates, Navy Federal knows homeownership may seem too expensive to be achievable. But that's why they offer a home buyer's choice loan that can open the door to affordable homeownership. Navy Federal's homebuyer's Choice loan has no down payment options available, which means you don't need to wait years to save money. And with their no refi rate drop, you may be able to lower your rate in the future without refinancing.

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[Joel]

That's guardianbikes.com built in the USA, made specifically for kids. Guardianbikes.com alright, we're back. Matt, time to get to the Facebook question of the week. This one comes from Gail and she says preparing to retire in two years and want to get more income. I have a lot of equity in my house. I'm thinking of a HELOC loan for a small amount to build out in adu. The HELOC payments would be made from the adu, the accessory dwelling unit income that I would get and I estimate a five year or less payback. What are your thoughts?

[Matt]

All right, first of all, I like how Gail spells her name G A E L. Yeah, that's a rad spelling. But secondly, it's got to be like.

[Joel]

Celtic in roots, right?

[Matt]

Well, are you thinking like Gaelic, like a Gaelic ale? Yeah, I don't know, I think it might just be Gael and she's thinking what's a different way of spelling it? Maybe, I don't know. I think it's cool that she is looking to retire in two years and then she's looking ahead a little bit. She's trying to forecast, trying to plan for some cash flow and I think having a little rental property could be a potential game changer. The fact that she's looking ahead allows her to pursue this while she still has some income. I think that that is pretty wise. And adus in particular, you mentioned this at the beginning, Joel, but they have been growing in popularity around the country. They're certainly booming in California due to the loosening of building restrictions. I think was it maybe the late teens they loosened the laws and I think they exploded.

[Joel]

That's right.

[Matt]

In the early, early 2000s something like.

[Joel]

A quarter of new units going up in California are ADUs because those are like some of the easiest units to build in a state that's really hard to build in.

[Matt]

I love it. And if you have some extra land that you already own, Gail, I think building an extra dwelling unit here can offer some income while also increasing the value of that property as well. Not to mention, you're talking about doing this in retirement, which is pretty cool because it kind of. I think it allows you to transition to taking on sort of this additional project. And as to whether or not you look to do a short term rental, if you're looking for it to be more of a hands on thing, I think you could do Airbnb. Right. Like the ability to list this unit, maximize returns. Yes. It's going to require a little more hands on, maybe a little more cleaning, or at least even managing other folks who are going to be doing that work for you. But what's so cool is that you can dial it back and you can say, you know what, that's actually, that's a little bit too much from a lifestyle standpoint. That's not what I was picturing my retirement years to look like, and then all of a sudden get you a long term renter in there where you aren't maximizing the returns quite as much, but it's a lot easier.

[Joel]

Or be like our landlord and get a podcaster in their torrential space. Maybe that's the best.

[Matt]

I think that's the best because we don't spend nights here.

[Joel]

I know. We ride our bikes up.

[Matt]

We don't clog the driveway.

[Joel]

Yeah. We're conscientious.

[Matt]

We're a very green podcast.

[Joel]

Joel. I even like standpoint high five their child as I walk by and I'm like, what's up, man? And catch up. And I just try not to get.

[Matt]

Bit by the dog.

[Joel]

No, that too.

[Matt]

You get barked at, right?

[Joel]

Yeah. Oh, yeah. Okay. It's a very barky dog.

[Matt]

Always play it cool. He's not that barky.

[Joel]

He's kind of barking. I think you're. I think you're right, though. I mean, I think this is one of those things where maybe it could even provide a little bit of joy sometimes, like running your own little rental property, especially when you don't have a day job. You're. It's like cool. It gives me something to focus on and think about. And I'm kind of like we referenced earlier. You're not going from 100 down to zero all the way. But should you take out a loan? I think probably I'm okay with this. I mean, especially since you said you'd be able to pay it off in five years or less. That is a really good sign. Saving up cash would be ideal. That's a tall task. I Mean, there's a reason most people take out a mortgage when they're buying a home. And this is, is kind of similar, right, that you are taking out money from the value of your home to build something that is going to produce returns for many years to come. So if you take out a heloc, I think paying it off in short order is ideal. And then, you know, run the numbers to make sure they're, they're actually realistic. So how much is it actually going to cost you to build this ADU in your backyard? Make sure you have proper information and then you're not just making assumptions and you have to keep drawing down on that HELOC because maybe you didn't sufficiently plan for the actual cost. So get a firm number in hand before you sign off because you might be like, oh, I think it'll take me five years. But then you get the hard numbers and you're like, actually it's gonna take like eight and a half. I didn't realize that 10 years and.

[Matt]

All of a sudden doesn't feel quite as smart of a move.

[Joel]

It becomes a different proposition. So yeah, also what's it likely to rent for? Do your due diligence on that because if you're making rosy prognostications, it could come back to bite.

[Matt]

You gotta be realistic. Yeah. And I really like the timeframe of shooting for five years or less. I wouldn't bank on this, but the fact that HELOC rates could decline in the near future, I think with that in mind, that causes me to think that, you know, I think a HELOC could make a whole lot of sense. As long as you have thought through what it is that, Joel, what you just mentioned, right, like that you're being realistic that you're not counting on the rosiest projections as to what your return might be. Let's hear from another anonymous Facebook group member. And she wrote, how is everyone affording healthcare? I'm considering leaving my job to become a stay at home mom. But my family's insurance has always been through my employer. My husband has a small business and we are a family of four with plans to continue growing. If you are self employed or a business owner, what are you doing? Health share plans. I would appreciate if anyone is able to share actual costs and experiences.

[Joel]

Joel, what you think, man?

[Matt]

What's going on with healthcare, man?

[Joel]

It's such a, it's such a pain in the butt, especially for small business owners. But it's becoming even more of a pain for people that are traditionally employed as well, it's one of those problems that's been brewing slowly and then rapidly. It's both at the same time. It's just this really problematic price increases over the past decades. Then when you have a 10% price swing in a single given year, it just feels like an extra punch to the gut. For listeners who have coverage to their job. They might be more insulated, but employers are still passing on increased costs at higher rates. And so, yeah, small business owners who are at a particular disadvantage. If your income is solid, prices on healthcare.gov can just be stratospheric. They can be laughable. You might look that up and be like, how in the world is my family going to afford $27,000 in premiums? For our family, that's just the. That's before we go see the doctor. Right. That's just the monthly premium amount total for a given year. And the coverage might be bare bones, even with an astounding monthly cost. So you have to be really careful to thread this needle because if you don't thread it well, then you could be talking about a huge percentage of your income going just to, you know, pay the healthcare piper.

[Matt]

That's true. Yeah. So the answer really might be health sharing, which is what our family has done. Ours currently costs $375 a month. There's a recent bump to healthcare health sharing ministries.

[Joel]

Yeah, our bump was pretty significant this year.

[Matt]

Yeah, they put like a special press release out where they're just like, explaining the fact that, like, hey, costs have gone up. This is why we're having to. Essentially, they technically can't call them premiums because it's not technically insurance. And so that's one of the things you have to keep in mind when it comes to health sharing, is that it is technically not insurance, it's not federally regulated, it is health sharing.

[Joel]

But so many people are migrating there because the cost of actual insurance, it's.

[Matt]

So much better, man.

[Joel]

It's impossible to afford. And so they're like, better over at health sharing. If I'm going to save, you know, 85% on the premium equivalent of a health sharing plan, then it's worth the risk.

[Matt]

I think some folks are, yeah, so literally we're paying 375, which you might be hearing and think, oh, my goodness, you are paying 375amonth for a family of six. Yes, that is exactly what we're doing. That being said, our family household share, which is code for deductible, is $12,000. So we're at one of the higher amounts, we're treating it more like a, a high deductible healthcare plan.

[Joel]

On top of that, there is no copay. Right. So when you go see the doctor, you don't pay $25. You're paying out of pocket $35 or something like that, which is what most people with traditional health insurance pay. We pay the full freight.

[Matt]

Get used to going to the doctor and paying a lot more and talking.

[Joel]

About what you're paying ahead of time.

[Matt]

Yeah, yeah. In order to negotiate that more affordable rate. But this poster was looking for specifics and so I was, because I'm a nerd and I've got all my expenses on Excel. I looked back at our medical out of pocket cost aside from our health sharing premiums that we pay. And over the past decade we have averaged $289 a month in out of pocket medical costs. So anywhere from. So that includes paying for like medication or paying for a doctor's visit, a physical, different things like that. And of course there's a wide spectrum of years. And so I wanted to share this too because she mentioned, mentioned that they're looking at still growing their family. That included a year, years when we added a couple kids. So that was on average over the past 10 years when we had two.

[Joel]

More kids, which I gotta imagine were your most expensive.

[Matt]

Those were more expensive years. Those were years that out of pocket. We paid closer to 9, $10,000. But it also includes years when we didn't have a kid that we're paying closer to $900 a year. So it swings. There are vastic, it oscillates in a crazy way. But that being said, I know we have saved so much stinking money over the years due to health sharing. So that's something, it's something to consider. There's a faith element, of course, that's.

[Joel]

Why it's able to be with some providers.

[Matt]

But some of the providers, that's true.

[Joel]

Because then there's like Sedera out there who doesn't have any sort of faith requirement. So it's worth, if you're like, oh, I'm not a part of a church or a faith tradition, then you can look into other providers who don't have that requirement. But yeah, if you are a member of a church or a faith tradition, you can, can potentially save more by being with one of those faith affiliated health sharing companies. So it's, man, it's such an expensive thing. It's such a conundrum. And this is one of the reasons I think it's the biggest reason, Matt, that I hate that healthcare is tied to employment, because the trade offs, the worst. It disincentivizes entrepreneurship in this country. So this is something we really need to figure out for individual families, for the burden that they face, but also for the economic dynamism that we want to see from our country. And I think we want to incentivize people to go out there and start something awesome and build a cool small business. But right now, we've made it kind of prohibitive with how expensive healthcare is. And typically, most people have to decide actually one of the spouses is going to remain working in order to get the healthcare benefits so that the other partner can go out there and start that business. And this couple is kind of trying to do, like, both of those things, start a business and not have that additional employment and healthcare coverage.

[Matt]

It's not easy.

[Joel]

It's not easy.

[Matt]

All right, we're going to touch long, but we've got to get to our beer, which was a cordial offering. It's got some art here, sort of like burial. They're going a little more metal, but. This was a peanut butter cup by Edmonds ost. What'd you think about this one, buddy?

[Joel]

I was underwhelmed.

[Matt]

Oh, yeah? You didn't like it?

[Joel]

I think I. Maybe it just had to do with expectations. And I like Edmond's ost, and I was expecting something great. I was expecting, oh, peanut butter Imperial stout.

[Matt]

They don't make a whole lot of stouts, do they? I don't think that's their typical. Yeah, their typical style. Maybe. Maybe that's why.

[Joel]

Maybe that's why. I guess I was expecting something like thick and rich and vibrant and peanut buttery. And it was.

[Matt]

You just want it to be the middle of winter. This happened last week, too, didn't it?

[Joel]

It's an Imperial stout, though, man. Like, come on. This. This tasted more like a porter with, like, a few Reese's peanut butter.

[Matt]

It was a little bit thicker than a. Than a porter. But I hear what you're saying. It felt a little like. When you say that it's an imper. Is it. Did it say it's an Imperial? Yeah, it says right here. Okay. Yeah. When you say that you're an Imperial stout, you expect at least three notes, you know, like. Like, it's a. Whereas this does feel a bit too notey. Right. It's kind of got, like the peanut butter kind of flavors going on, but then it's got the roasty flavors. It makes me think of like a peanut butter cup for sure, but with like dark chocolate. Like there's no, I don't know, there's no additional surprise element that makes I think a good beer great.

[Joel]

So I'll forgive them for this one and hope for a return to greatness on the next selection that we get from them.

[Matt]

Yeah, they're still a fantastic brewery, but that's going to be it for this episode. Buddy. Listeners can find our show notes up on the [e-mail] we'll make sure to link to any of the different resources that we mentioned and and that's gonna be it. So until next time, Best friends out. Best friends out.

[Joel]

It doesn't. Man, it doesn't taste like a 10%.

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