Podcast Summary: How to Money – Episode #988: Ask HTM - Buying a Used Mattress, Best Use of an Inheritance, & Disqualified from a Roth

Release Date: May 26, 2025

Introduction

In Episode #988 of How to Money, hosts Joel and Matt tackle a variety of listener questions centered around personal finance dilemmas. This episode delves into the practicalities of purchasing a used mattress, strategically managing a substantial inheritance, and navigating the complexities of Roth IRA eligibility. Joel and Matt provide insightful, jargon-free advice aimed at empowering everyday individuals to make informed financial decisions.

Section 1: Buying a Used Mattress

Listener Question: Buddy from Downers Grove inquires about the frugality versus costliness of purchasing a used mattress from a store's showroom.

Discussion Highlights:

• Joel and Matt's Personal Experience: Both hosts share their positive experiences with used mattresses. Joel mentions, “We slept on that thing for over a decade. Super comfortable mattress” ([24:42]).
• Considerations for Used Mattresses:
  • Comfort and Condition: Ensuring the mattress meets comfort needs and assessing its physical condition before purchase.
  • Return Policies: “I would want to know the return policy. Can I bring it back within 30 days if it’s not right?” Joel emphasizes the importance of understanding return terms ([29:14]).
  • Extended Warranties: Generally discouraged unless necessary, as Matt notes, “Extended warranties rarely are a smart move” ([30:32]).
• Negotiation Tips: Buddy’s scenario involves a 50% discount offer. Joel suggests negotiating further for better deals or added benefits ([29:13]).

Notable Quote:

“How often are you paying attention to your sleep score on your watch?” – Matt ([26:43])

Section 2: Best Use of an Inheritance

Listener Question: Cheryl from Nebraska is set to receive a $150,000 inheritance and owes $110,000 on her mortgage. She seeks advice on whether to pay off her house or allocate funds differently.

Discussion Highlights:

• Immediate Considerations:
  • Mortgage Interest Rates: If Cheryl’s mortgage has a high-interest rate (e.g., 7%), paying off the house swiftly may be advantageous ([10:07]).
  • Low-Interest Mortgages: For mortgages with low rates (e.g., 3%), Matt advises that investing the inheritance might yield better returns than accelerating debt payoff ([10:09]).
• Tax Implications in Nebraska: Joel and Matt remind Cheryl to account for potential state inheritance taxes that could reduce the received amount ([13:20]).
• Liquidity Importance: Maintaining cash reserves offers flexibility to handle unforeseen financial challenges ([13:44]).
• Diversified Use of Funds:
  • Debt Elimination: Prioritizing high-interest debts like credit cards before considering mortgage payoff.
  • Investment Opportunities: Maximizing contributions to savings and investment accounts for future growth.
  • Life Enhancements: Using part of the inheritance to fund education, start a business, or other life-changing endeavors ([16:09]).
• Behavioral Finance Considerations: Matt cautions against impulsive spending, suggesting strategic allocation to prevent the inheritance from "burning a hole" in Cheryl’s pocket ([17:31]).

Notable Quotes:

“Cash is finally doing something for you now. It’s certainly not trash.” – Joel ([13:20])

“Allow yourself that freedom if you’re in that kind of place.” – Joel ([19:57])

Section 3: Disqualified from a Roth IRA

Listener Question: Cheryl (possibly the same listener) has fully funded her Roth IRA for the year but, due to significant capital gains, may now exceed the income limits for contributions.

Discussion Highlights:

• Understanding Income Limits:
  • Roth IRA contributions phase out at $150,000 for singles and $236,000 for married couples filing jointly ([36:12]).
• Corrective Actions:
  • Withdraw Excess Contributions: Remove the excess amount plus any earnings by the tax deadline to avoid penalties ([37:05]).
  • Recharacterization: Convert Roth contributions to Traditional IRA contributions, which may be beneficial depending on overall financial goals ([38:55]).
  • Backdoor Roth IRA: For those consistently exceeding income limits, executing a backdoor Roth IRA involves contributing to a Traditional IRA and then converting to a Roth IRA ([41:49]).
• Tax Implications: Failure to correct excess contributions results in a 6% annual penalty on the excess amount ([40:33]).
• Long-Term Strategies: Adjusting future contributions through higher 401(k) contributions or strategic charitable giving to manage adjusted gross income and maintain eligibility for Roth contributions ([37:25]).

Notable Quotes:

“We are not going to be able to give a clear cut answer because it is so dependent on your personal money goals.” – Matt ([09:47])

“It's going to add up so 6% on the excess that you made.” – Joel ([41:17])

Additional Topics Covered

1. Changing Brokerages:

   • Listener Question: Ryan considers switching from Schwab to Fidelity or Vanguard due to differences in interest rates and investment processing times.
   • Advice:
     • ACAT Transfers: Utilize Automated Customer Account Transfer services to move assets without triggering taxes ([55:42]).
     • Handling Proprietary Funds: Some funds are brokerage-specific and may require selling, which could incur capital gains taxes ([56:30]).
     • Money Market Funds: Explore higher-yielding options within Schwab before deciding to switch ([53:27]).
   • Notable Quote:

     “Don't pay these capital gains when you don't need to.” – Matt ([55:42])

2. Car Warranties:

   • Listener Question: Becca questions the value of a $6,100 extended warranty for her new Volkswagen ID4, considering the existing battery warranty.
   • Advice:
     • Manufacturer’s Warranty Sufficiency: Emphasize that the standard battery warranty provides long-term coverage ([47:16]).
     • Reliability Rankings: Suggest choosing reliable car models over buying extended warranties ([50:27]).
     • Consumer Insights: Citing Consumer Reports, most extended warranty buyers on reliable brands regret the purchase ([51:02]).
   • Notable Quote:

     “The initial manufacturer's warranty should be ample.” – Joel ([47:10])

3. Beer Tasting Segment:

   • Product Review: Joel and Matt share their enthusiastic review of Anatomical Transmutation, a double IPA from Burial Brewing Company.
   • Highlights:
     • Flavor Profile: Described as a “perfectly funky, perfectly dank, fruity, earthy” representation of a hazy IPA ([57:51]).
     • Craftsmanship: Appreciation for hand-selected hops and meticulous brewing processes ([58:22]).
   • Notable Quote:

     “We have reached IPA nirvana, man.” – Joel ([58:23])

Conclusion

Episode #988 of How to Money delivers comprehensive advice on managing financial uncertainties, whether it involves making smart purchases, handling unexpected inheritances, or adjusting investment strategies. Joel and Matt’s engaging dialogue, punctuated with personal anecdotes and expert guidance, provides listeners with actionable insights to navigate their financial journeys confidently.

For more detailed discussions and resources, visit howtomoney.com.

Notable Quotes with Timestamps:

• “How often are you paying attention to your sleep score on your watch?” – Matt ([26:43])
• “Cash is finally doing something for you now. It’s certainly not trash.” – Joel ([13:20])
• “Allow yourself that freedom if you’re in that kind of place.” – Joel ([19:57])
• “We are not going to be able to give a clear cut answer because it is so dependent on your personal money goals.” – Matt ([09:47])
• “It's going to add up so 6% on the excess that you made.” – Joel ([41:17])
• “Don't pay these capital gains when you don't need to.” – Matt ([55:42])
• “The initial manufacturer's warranty should be ample.” – Joel ([47:10])
• “We have reached IPA nirvana, man.” – Joel ([58:23])