Ask HTM - Special Roth Accounts, Investing During A Sabbatical, & Reverse Mortgages #985

Summary

How to Money: Ask HTM - Special Roth Accounts, Investing During A Sabbatical, & Reverse Mortgages #985

Release Date: May 19, 2025

In episode #985 of How to Money, co-hosts Joel and Matt dive deep into listener-submitted financial queries, offering practical advice and insights on specialized Roth accounts for children, investment strategies during sabbaticals, and the complexities of reverse mortgages. This detailed summary captures the essence of their discussions, complete with notable quotes and timestamps to guide you through the episode's key points.

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1. Joel's Dishwasher Deal: A Case Study in Smart Purchasing

Timestamp: [02:58] – [08:10]

Joel kicks off the episode with a personal anecdote about purchasing four Bosch dishwashers from Costco at a remarkable deal. Despite his wife's reservations, Joel explains the logic behind bulk buying:

Joel: "The more dishwashers you bought, the more you saved."

He highlights how leveraging multiple discounts and free installations allowed him to secure each dishwasher at approximately $360, significantly below the regular price of $700-$900. Although he initially intended to flip the dishwashers for profit, only two were sold, with plans to sell the remaining units through his father's assistance.

Key Takeaways:

• Bulk Buying Benefits: Purchasing multiple units can lead to substantial savings per item.
• Smart Flipping: While not always guaranteeing profit, flipping can be a viable strategy for recouping costs.
• Community Sharing: Engaging friends and family can help in offloading excess purchases effectively.

---

2. Listener Question: Opening a Roth IRA for a Child

Timestamp: [10:15] – [21:40]

Mary from South Carolina poses a thoughtful question about initiating a Roth IRA for her 12-year-old daughter who earns money through babysitting and pet sitting. She seeks guidance on documentation and whether Fidelity is an appropriate brokerage for a youth Roth IRA.

Matt's Insight:

Matt: "Mary, we've got to talk about the fees and yeah, I feel like I just made a reverse mortgage sound pretty great."

On documentation, Matt emphasizes the importance of tracking earned income to ensure compliance with IRS regulations:

Joel: "You want to make sure that you are not over contributing to that account."

He recommends maintaining a simple spreadsheet to record earnings and contributions, ensuring that only earned income is funneled into the Roth IRA.

Fidelity Recommendation: Both hosts advocate for Fidelity as a solid choice for youth Roth IRAs due to its no fees, diversified funds, and long-term reliability.

Joel: "I just can't think of many better options than being with Fidelity over the long haul."

Key Takeaways:

• Documentation: Maintain accurate records of earned income to comply with Roth IRA regulations.
• Brokerage Choice: Fidelity is recommended for its robust features and user-friendly platform.
• Early Investment Benefits: Starting young allows for significant compound growth over time.

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3. Listener Concern: Reverse Mortgages and High Fees

Timestamp: [25:24] – [34:49]

Hayden from Marlboro, New York, seeks clarity on reverse mortgages after hearing about them from his parents’ financial advisor. Joel and Matt address the often-overlooked high fees associated with reverse mortgages, comparing them to taking out a traditional mortgage but in reverse.

Joel Explains:

Joel: "The fees are high as they are with the traditional mortgage. We're talking origination fees, closing costs, appraisals, title search, all the above."

Matt adds severity by sharing alarming statistics:

Matt: "Close to one in five reverse mortgages, they actually end in foreclosure, often because the senior citizen there was unable to pay property taxes."

Alternatives Suggested:

• Selling or Downsizing: Joel proposes selling the home or downsizing as more viable options.
• Cash-Out Refinancing: Another alternative to access home equity without the exorbitant fees.
• Immediate Income Annuities: Matt mentions single premium annuities as a cheaper alternative for generating a steady income stream.

Key Takeaways:

• High Fees: Reverse mortgages come with multiple fees that can significantly reduce the benefits.
• Risk of Foreclosure: A notable percentage of reverse mortgages result in foreclosure due to unmet financial obligations.
• Consider Alternatives: Explore other financial products and strategies before committing to a reverse mortgage.
• Informed Decision-Making: Utilize resources from the Consumer Financial Protection Bureau and consult with a HUD counselor.

---

4. Listener Question: Investing During a Sabbatical

Timestamp: [35:47] – [44:43]

Yesel from New York City shares her situation of preparing for a sabbatical and seeks advice on whether to continue contributing to her investment accounts during this period of no income. She outlines her current investment strategy, including maxed-out IRAs and a fully funded emergency fund.

Joel's Advice:

Joel: "Don't let the current state of things freak you out to not do that."

He recommends continuing with her investment strategy if her finances are robust, emphasizing the importance of trusting the long-term investment process despite market fluctuations.

Matt's Strategy Suggestion:

Matt: "Consider doing strategic Roth conversions instead."

Matt introduces the concept of strategic Roth conversions as a tax-efficient method during low-income periods, allowing Yesel to pay taxes at a lower rate and benefit from tax-free growth in the future.

Key Takeaways:

• Maintain Investments: Continue regular contributions if financial stability allows, leveraging dollar-cost averaging.
• Strategic Roth Conversions: Utilize periods of low income to convert traditional IRA funds to Roth IRAs, optimizing tax benefits.
• Emotional Discipline: Stay committed to investment plans despite market volatility to capitalize on long-term growth.

---

5. Listener Question: Spousal Roth IRA Contributions

Timestamp: [48:30] – [51:08]

Matthew inquires about contributing to his wife’s Roth IRA despite her not having earned income, as she is a stay-at-home parent. He wonders if his income qualifies as hers for Roth contributions.

Matt's Explanation:

Matt: "Your wife is eligible to contribute to a Roth IRA in the form of what's called a spousal Roth."

Joel confirms that through the spousal Roth IRA, married couples filing jointly can contribute to a non-earning spouse’s Roth IRA based on the total adjusted gross income (AGI) of the household.

Important Points:

• Spousal Roth IRA: Allows a non-earning spouse to contribute to a Roth IRA using the working spouse’s income.
• Contribution Limits: Ensure total contributions do not exceed the couple's AGI thresholds.
• Joint Filing Necessity: The ability to contribute is contingent upon filing taxes jointly as a married couple.

Key Takeaways:

• Eligibility: Even without earned income, a non-working spouse can benefit from a Roth IRA.
• Maximizing Contributions: Couples can effectively double their retirement savings by utilizing spousal Roth IRAs.
• Tax Benefits: Contributions grow tax-free, providing substantial long-term financial advantages.

---

6. Listener Concern: Emergency Funds in Credit Unions vs Online Banks

Timestamp: [51:08] – [56:21]

An anonymous listener shares a financial misstep of keeping an emergency fund in a local credit union savings account earning less than 1%. They express hesitancy about transitioning to high-yield online banks despite the higher interest rates.

Joel's Perspective:

Joel: "High yield savings account. That though I would say is best done at an online bank."

He underscores the importance of maximizing interest earnings on savings to combat inflation, recommending online banks for their superior rates compared to traditional credit unions.

Matt's Recommendations:

Matt: "Have some cash at home... boost your savings rate by going with a bank that pays those super high rates."

He suggests maintaining a small amount of readily accessible cash at home while transferring the bulk of the emergency fund to high-yield online savings accounts. This approach balances accessibility with financial growth.

Key Takeaways:

• Maximize Interest Earnings: Transition emergency funds to high-yield online banks to earn competitive interest rates.
• Hybrid Approach: Maintain a small amount of cash at home for immediate access during unforeseen emergencies.
• Trust in Technology: Online banks offer secure, efficient, and higher-yielding options without the need for physical branches.

---

Conclusion

In this episode of How to Money, Joel and Matt provide invaluable advice on optimizing financial strategies tailored to individual circumstances. From leveraging bulk purchasing deals and maximizing retirement accounts for dependents to assessing the true costs of reverse mortgages and enhancing emergency savings, their insights equip listeners with the knowledge to make informed financial decisions.

Notable Quotes:

• Joel: "You do business with a better bank that pays you what you deserve on your savings."
• Matt: "Future Yesel is going to be very thankful."

For more detailed discussions and resources, listeners are encouraged to visit howtomoney.com.

Transcript

[Announcer]

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[Matt]

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[Matt]

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[Announcer]

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[Joel]

Welcome to how to Money. I'm Joel.

[Matt]

I'm Matt.

[Joel]

Today we're going to answer some of your listener questions.

[Matt]

And that's because if we answered all of your listener questions, we'd be sitting here for at least another hour before we run out of all the questions.

[Joel]

What's the meaning of life? Matt? That question came in. We were like, we'll pump that to a future episode.

[Matt]

Maybe we'll save that one for the Ask Me Anything, which is an upcoming special episode. You can look forward to that one. Should we that's going to be episode 1000.

[Joel]

I think now is a good time.

[Matt]

Start thinking.

[Joel]

If you're listening to this episode and you're like, I have a random question for Matt and Joel. Email it over to us. And you can just, just type it out even if you want.

[Matt]

Sure.

[Joel]

Because I have a feeling a lot of people are reticent to send voice memos. So if you just want to like type that question out, anything perfectly not finance related, just yeah, I want to.

[Matt]

I Want all the random questions, but that'll be episode 1000. But today, we, in fact, are going to answer your financial questions. We're going to talk about some special. The special Roth account, Joel, that we rarely get to talk about. I'm looking forward to that. We're going to talk about your personal finance. Not you personally, but an individual's personal finances and specifically investing, whether or not she should change that during a sabbatical, how that impacts her money. We're going to talk about reverse mortgages and more. Plenty to get to during today's episode. Joel, do you want to share your story about your dishwasher?

[Joel]

I think I should.

[Matt]

Your dishwasher saga.

[Joel]

So I saw a really incredible deal on this website called Costco.com for Bosch dishwashers. And I say dishwashers with an S, Matt, because I did not just buy one. I asked my wife ahead of time if I should partake in this stunt. She flat out said, I don't think so. And yet I did it anyway.

[Matt]

Well, the reason why is because she. She pointed to the fact that you've been partaking in this type of behavior a lot in recent. She's like, you've kind of been stocking up on a lot of stuff recently. She was like, Joel's. He's got tariffs on the mind.

[Joel]

I'm going off the deep end. Okay? So here's why. I bought not one, not two, not three, but four dishwashers.

[Matt]

I didn't know it was four of the same variety.

[Joel]

Well, the fourth made every dishwasher a little bit cheaper. So was it.

[Matt]

Was it a punch card? And the fourth one's on us.

[Joel]

Something. Something like that. Okay, So I was. I've not liked our dishwasher, Matt since I moved in. And it doesn't clean the dishes terribly well, even though it's like, a nice brand or something. It's KitchenAid. All the rest of our appliances are KitchenAid. I don't care about matching appliances. I just want a dishwasher that cleans my freaking dishes.

[Matt]

Just needs to work.

[Joel]

Yes.

[Matt]

So I'm with you, Bosch.

[Joel]

If you look at Consumer Reports, if you look anywhere, the best. Everybody says they're the greatest.

[Matt]

Easily the best.

[Joel]

Costco had Bosch dishwashers on clearance. The price ended in 97 dol. You know, it's. You know, it's. You know that it's the cheapest price you're going to get. On top of that, Costco said, hey, if you buy multiple appliances, we'll give you 100 bucks off per Appliance, basically. And on top of that, they said Bosch is also offering a deal. Basically something like 250 off an appliance once you get past 2. So the deal, like, stacked on top. And so the more dishwashers you bought, the more you saved.

[Matt]

Triple word score, baby.

[Joel]

Right. It was very, very much like that. So. And free installation, so that's also pretty nice. I sold my old dishwasher.

[Matt]

Get four dishwashers installed at your house, dog.

[Joel]

You're set. So clearly, I don't need that many dishwashers. So what I did was I asked friends and family, hey, do you want an inexpensive dishwasher? Do you want to go in with me on this? You thought you might. You backed out, which is fine.

[Matt]

I will say, I didn't know how serious you work, but, like, oh, I. Let's set the stage.

[Joel]

I'm serious as a whole.

[Matt]

Like, I think I had made some cocktails for us. We're sitting around on the back patio. The breeze is blowing. It's a Friday. And you had mentioned that, and I was just like, oh, yeah, dude, we could. I could totally see us sticking one of those in, like, at a. Like, if not at our own house, at the very least at a rental.

[Joel]

Perhaps, but ultimately, just hold on to it for the future.

[Matt]

Well, that's the problem. I feel bad because I feel like I kind of left you in the.

[Joel]

Lurch a little bit, but not at all.

[Matt]

You were like, hey, this is still available to you. And I was just like, well, if I don't take it, what are you going to do with it? Because I would only take it, sell.

[Joel]

It for more than I was going to sell it to you for.

[Matt]

Yeah. I would only take it to flip it because I don't currently have any rentals that need a dishwasher, so a. Some not taking advantage of the free install.

[Joel]

Yeah.

[Matt]

And I also did some more digging, and this was a 300 series, you said.

[Joel]

Yeah.

[Matt]

And by all means, a great dishwasher, but evidently it's the 500 and 800 series of Bosch dishwashers that have the ability to dry the dishes really well. And that is the number one thing that we hate about our dishwasher.

[Joel]

Oh, really?

[Matt]

Is. Well, specifically plastics, because the dishes are fine, but the kids, we always pack their lunch and the plastic containers, it's like those little subdivided little Tupperware sort of deal. They're a pain in the butt to get to a. To clean, but then for them to dry in the dishwasher. And so that. That's been the whole impetus behind us thinking about getting another dishwasher.

[Joel]

So you abandoned me.

[Matt]

Yeah, I left you.

[Joel]

My dad, he was looking for a new dishwasher anyway, so this was perfect. So he got, like, a bargain basement price.

[Matt]

2.

[Joel]

Also. Also free Costco installation for him, too, which is awesome. And so then now I've just got two dishwashers.

[Matt]

Two of them.

[Joel]

And honestly, considering the price per dishwasher I paid, so what was the price I should be able to profit.

[Matt]

Yeah.

[Joel]

What was the final price? Was like 1430 for four dishwashers.

[Matt]

Okay, so what does that come up to?

[Joel]

It's like 360something. 360 per dishwasher. Right.

[Matt]

And this is like a $900 dishwasher.

[Joel]

It's like a. It's like a $700 dishwasher, but tax also. Right. So that's literally after tax, installation, everything. Right. Incredible. So, yeah, I'm gonna be able to sell these on Facebook Marketplace for more than what I paid for them.

[Matt]

I was doing you because. Economies of scale, Joel. Because I was thinking. Well, that's why I had mentioned that I would just flip it. And I was like, well, if he's going to go through the hassle of creating the listening, taking the picture, making it sound like a legit posting, that's half the battle.

[Joel]

That's true.

[Matt]

And so may as well be able to roll in some additional profit off that second dishwasher dog.

[Joel]

True story.

[Matt]

So let me help you.

[Joel]

Help me help you. So it's. This is the kind of thing I think most people see that, and they. They balk at it. And I'm the kind of guy who says, I don't know, this sounds like a fun challenge. And also, it's a heck of a deal, man. It's like a win, win, where I essentially get this free dishwasher put in and my dishwasher troubles are over because I just had this really fraught relationship.

[Matt]

You had enough of it.

[Joel]

It was tough. My wife was like, it's not that bad. And I was like, I'm the one who does the dishes. It sucks. I hate it. Yeah, I hate it. So I'm happy. And hopefully my wallet will be happy at the end of the day, too, because $1,400 for four dishwashers?

[Matt]

Yeah. That's incredible.

[Joel]

Well, in today's America, Matt.

[Matt]

Well, a, the fact that you sold your old one. B, the fact that you're going to be able to.

[Joel]

Yeah.

[Matt]

I mean, you're gonna make. Yeah. I think you. I don't think you're gonna come out ahead necessarily.

[Joel]

I think I am. Let's wait and see.

[Matt]

But you might get close.

[Joel]

I think. I think I had 14.

[Matt]

Well, how much did you get for your. Your used dishwasher? Like 100 bucks.

[Joel]

$125.

[Matt]

Okay, so 14 down to 13. So can you get 650 or more?

[Joel]

Well, no, because my dad's gonna pay for one, but he's gonna pay the actual price I paid, but I think I can.

[Matt]

Oh, so that gets it down to. So, a thousand.

[Joel]

Yeah. So I think if I make 500 bucks each on Facebook.

[Matt]

So if you make more than 500 each, you're coming. You're coming out ahead.

[Joel]

I'll report back.

[Matt]

I hate to be the bougie one here, but I'm the one that's holding out for the super fancy dishwasher that's got crystal dry technology, which I didn't realize I needed until I did some research.

[Joel]

It does sound fancy. Yeah, I. I don't care as much about that, but, yeah, I just.

[Matt]

The finer things in life, Joel, those idiosyncrasies.

[Joel]

This is something I used to do a lot more of back in the day. This kind of weird stuff. Find a deal, buy in bulk, sell off the rest, that kind of thing. Remember we used to take advantage of the deal to an Urban Outfitters auction, and we would buy stuff that was severely discounted.

[Matt]

Urban Outfitters anthro.

[Joel]

Yeah. And we would. We would sell that stuff on. On Facebook and make a decent buck after. Even after transportation costs and all that stuff.

[Matt]

Outfit our new house. We didn't have any furniture at the time, so for us, it was just a great way to. Again, to be able to afford the nicer things in life.

[Joel]

Right. So this is. This was my modern version of that.

[Matt]

Nice.

[Joel]

Um. Although I realize it makes me sound crazy. All right, let's move on. Matt, let's mention the beer we're having on this episode. This is a DDH refreshing by tired hands out of Pennsylvania. We'll give our thoughts on this IPA at the end of the episode. And if you have a money question, whether it's about a weirdo purchase you're thinking about making, we'd love to help you out. Just send your voice memo over to us. If you want the full instructions, you go to howtomoney.com ask or literally just record your question on the voice memo map of your phone and. And email it over to us. Matt, let's get to a real money question. A conundrum here, specifically from a listener who wants to know how or the details about opening a Roth for a kid?

[Announcer]

Hey guys, this is Mary from South Carolina. Joel recently said you guys need some great listener questions and I think I'm pretty great. So here we go. One of the reasons that we like listening to y' all is because you're kind of in the same ages and size stages. Our oldest is 12 and she's starting to earn some money from babysitting and pet sitting and stuff like that. And we went over some compound interest calculators with her. She is pretty excited about those. So wondering how detailed I need to get with documentation. So far I've just been putting memos and the money I transfer into her youth account with usaa. I don't know if I need to go all in like Matt and do a spreadsheet. That sounds pretty exhausting. Also, would you guys recommend Fidelity for a youth Roth ira? We already have our brokerage account for them. Thank you, Joel.

[Matt]

I feel called out sometimes. Like you've recently documented, you need to do the exhausting thing in order to get ahead with your money.

[Joel]

That's true.

[Matt]

No, but not always. Not always.

[Joel]

Sometimes there's a lot of low hanging fruit when it comes to personal finance.

[Matt]

Sure, sure. Mary, we appreciate you as a listener. Certainly see why it would be fun too, to having a kid who's also in the same ages and stages as us as well. Yeah. Our oldest daughters are going to be turning 12 this year as well.

[Joel]

That's right. Yeah. This summer. And obviously Matt, Mary's getting her 12 year old started off on the right foot. Right. And it's really, it's really fun to watch your kid become kind of a micro entrepreneur. And like 12, 11, 12 is kind of the perfect age, especially if you feel like your kid's got some maturity, like babysitting dollars, especially in today's economy. They can add up, they can add quickly. Like my daughter has been babysitting the kids across the street a little bit here and there. And it's so exciting to her to see like money roll in to come back home and be like, I was over there for like four hours, I made 20 bucks, you know, and the parents are thrilled because babysitting costs a heck of a lot more than that most of the time. And so, yeah, I think that.

[Matt]

Not if you're just the mother's helper though.

[Joel]

Right? Exactly.

[Matt]

Is it more like that?

[Joel]

That's exactly what it is. Yeah. Like she hasn't been left alone with them yet, but they can get a lot of Stuff done, cooking dinner for.

[Matt]

Them, doing laundry as well.

[Joel]

It's a Cinderella story, really down to it. But I think doing that, getting them excited about like making some money, then you know, that enticing that excitement about compounding, maybe even including a parent match if you're up for it. MARY and if you can, those are ways to spur your child towards becoming a lifelong investor. Just getting them excited about like what money can do for them. And you want her to be able to enjoy some of that money now of course. But you know, I think also getting excited about how those unspent dollars can and will grow, that's pretty neat too. You kind of want the both and.

[Matt]

Yeah, that's the personal finance education that's taking place, but at the same so you are instilling those values, which is amazing. MARY but on top of that, I mean let's imagine a $3,000 contribution towards a Roth IRA for over 50 years, let's say from age 12 to 62. So for 50 years there that's going to result in over $1.2 million just in a Roth IRA.

[Joel]

Wow.

[Matt]

Tax free dollars. Incredible. And yeah, by you helping her to get the experience, by investing some of the money that she's earning, it does both. She gets that financial head start, but also she's learning. But to your question, how detailed do you need to be on that record keeping front? I think having you got to have something, right? No matter what you need to have something, you don't necessarily need a super fancy spreadsheet or anything like that. And this I think the standard is lower than it would be for an hsa, a health savings account for instance. But because your daughter can only contribute earned money, you want to make sure that you are not over contributing to that account. And so because of that I still think it's really, you know, Mary is mentioning the spreadsheet specifically. I still think that that is the easiest way because you could create a document where you're like, okay, let me just write a quick summary like she's talking about in the memo of it sounds like what she's doing are transfers with her online savings account. Perhaps she's listing out the details within that. But I think what's easier than that is just going into your Google sheet, which is what I've got going on and literally just copy and pasting the previous line, changing the date and updating the hours so it doesn't have to be this super complex. It's been so long since I've updated my spreadsheet. Formula. I'm into it, but I'm not creating these complex functions. If then also, you know, like all that sort of thing.

[Joel]

It's really two inputs. It's like the date the work was accomplished.

[Matt]

I've got four. Like, literally, I've got four columns. It's the dates, the number of hours, the rate that she's being paid, and then the total number of dollars even.

[Joel]

That you could probably get by with a little bit less information. But super easy, though.

[Matt]

But especially that's the thing, like, literally the ability to just to copy and paste and then updating that. And it's not like I do that. I'll be honest. I forget sometimes, like, I always pay her, pay my daughter.

[Joel]

But you're not perfect.

[Matt]

I'm not perfect, but sometimes it'll be a few weeks before I'm like, oh, shoot, I haven't sat down and updated that. And I'll sit down and essentially I just kind of batch update that sheet. And what this actually looks like will be a work in progress. Because, again, the whole point is to get them investing. I haven't sat down yet, but I'm envisioning that I'll sit down with her at the end of the year and we'll say, all right, this is how much you officially earned over the course of the year. You can invest every single one of those dollars in the account and run some compound interest, calculators, calculations. Mary, like you are, and hopefully she will want to invest a lot. But then making it clear that, hey, I'm willing to provide a parent match, it doesn't have to be this extraordinarily onerous, heavy, exhausting task that you need to do every single time she earns a buck.

[Joel]

I think what you're trying to do by creating this spreadsheet and what Mary's probably trying to do too, or should be trying to do, is to avoid putting money into a Roth IRA that wasn't earned income. So, for instance, your daughter's probably getting money from birthdays or holidays or stuff like that. And like, over Easter, my kids got five bucks in their last Easter egg that they found Matt. But that money can't be contributed to a Roth because it wasn't earned. And so you want to separate those things out. And that's where the spreadsheet comes in handy. It's not like, oh, dollar that's in her account can be contributed to this Roth. It can't. Because if some of those were gift dollars, they're excluded from that contribution ability. So that is why I think you want at least some documentation. And I do think, Mary, you're right. Like, I'm not a spreadsheet guy.

[Matt]

Just make sure you're on the right side of the law.

[Joel]

Right? Yeah, exactly. Yeah. You don't want to be Jesse James in this thing. And then when it comes to where, where you open it, Fidelity is for sure a great place to open a kid's Roth. I mean, it's one of the few places we would wholeheartedly recommend. You can avoid fees and account minimums. Uh, she'll have access to cheap, incredibly diversified funds. And then wherever she starts investing, and this is, I think, one of the linchpins here, it's likely where she'll remain as she enters adulthood. Like, my first 401k was with Vanguard. And so I ended up opening multiple accounts with Vanguard over the years. Eventually I opened up an account with Fidelity too. But it was one of those things where like, hey, this, this is where I started. It's probably where I'm going, I'm going to stick around. And that will likely be true for your daughter. And I just can't think of many better options than being with Fidelity over the long haul based on kind of all the things that Fidelity Priority prioritizes as a company.

[Matt]

Exactly.

[Joel]

Yep. And she's, you know, she's not going to get a match like she would with maybe some of the newer brokerage firms, the, the Betterments and the Robinhood's. Those might be worth considering. But I think, I think the more boring nature of Fidelity's website, it's actually like a pro in a weird way.

[Matt]

Actually to her long term financial advantage.

[Joel]

Yeah, I mean, I think it might help her avoid some of the perils of investing too. Because if, let's say it is in a super flashy account and she's checking her balance a little more and she's like, there's all these pop ups about investing in crypto or individual stocks or leveraged ETFs or something like that.

[Matt]

Margin investing, right?

[Joel]

Yeah. Maybe as a 17, 18, 19 year old investor, she might be like, ooh, that looks like fun. And get kind of dissuaded from doing the normal boring thing that's really going to build wealth over time. And our kids are just a little bit younger than yours. They've just dipped their toes, I think, into this world really of making money. But I think kiddo Roths, I don't know about you, Matt. I'll be curious to see how that conversation goes with your oldest. But I'm hoping that for my daughter that I can do kind of a parental match and incentivize her to get started investing really soon.

[Matt]

Heck, yeah. I think it's. Let's mention an app we actually talked about on a recent episode that's called Half More. Like. Like Macklemore, but Half More. But their goal is to help parents to find ways to pay their kids for chores around the house so that they can contribute even more to that Roth IRA. But the problem here is that there's this annual $144 fee that's attached. It's not super unreasonable, I guess, and it will help you to jump through the. Some of the compliance hoops. I like what they're trying to do, but the real winning part of the app is being able to assign certain chores at home and, and paying your kid in a very IRS compliant way. If she's making money outside the house, though, DIY bookkeeping and just contributing, you know, in that sort of manner, I think that should suit y' all just fine.

[Joel]

It's almost like bringing a bazooka to a knife fight. Like, yeah, yeah, you probably just don't.

[Matt]

Seems unnecessary.

[Joel]

Yeah.

[Matt]

And it doesn't answer. Like, I remember during that conversation when a listener brought that to our attention. One of my concerns was the fact that. Is the data yours?

[Joel]

Yeah.

[Matt]

And this is an app. And like a lot of businesses today, they are reliant on subscribers, which means folks who are willing to kind of continue to pay that fee even if they're not fully utilizing that service. And I would certainly want to make sure that you could at least export that data to where you had some sort of record of that. Not feeling like you had to monthly fork over the change in order to maintain the data that you've accrued and built up over the previous years.

[Joel]

It's really unnecessary for most parents unless you're really trying to jump through some hoops and pay your kids for chores. And that app can help you do that. By the way, you're the custodian of this account, Mary. And she'll be given full control when she reaches what's known as the age of majority, which is typically age 18. Some states it's 21. Just depends where you live. And hopefully you're going to be able to get her excited to contribute a not insignificant amount over the coming years while she's still under your roof. Because, gosh, you've got like, what, probably five, six more years with her and then she'll hopefully have this ingrained as a habit she'll keep contributing more when she's out on her own. Maybe even when she's got like a part time job in college or something like that. That early start is so clutch. And the kind of doing it together over a number of years while you still have this significant influence over her life is, to me, it's, it's invaluable. And it just means she's not going to have to contribute nearly as much of her future income because of her diligence as a preteen and as a teen.

[Matt]

But she probably will because not only have you, do you have this financial momentum going for you, she's got this identity, this behavioral momentum going as well because she all of a sudden sees herself as that investor.

[Joel]

You mentioned, the $1.2 million number, Matt, that was if she saved $150,000 essentially over 50 years. That's amazing how much that amount of savings grow into. But if she just thinks about it, if she doubles that because she gets so into investing, the sky is the limit when you start that young.

[Matt]

That is a. We've got more to get to. We're going to talk about investing in a shaky economy. We've got uncertain times afoot, Joel, so we'll get to that plus more right after this. So, Joel, one of the major reasons we have a personal finance podcast is because it can be so difficult for folks to know what their money is doing or for them to know how it is that they're spending their dollars. They don't realize that they've got these financial blind spots like eating out or spending on food delivery. They don't know the full impact that online shopping is having on their ability to save and invest for retirement. Well, Monarch Money acts like your personal cfo. It gives you full visibility and control. It acts as a financial command center for all of your accounts, all of your investments, your personal goals that you have for your life.

[Joel]

I feel called out here, Matt, because I went into the back end of my Monarch Money account recently. The biggest surprise, how much money we spent at Chick Fil A. It's a problem that needs to be remedied, but at least I know that now you get insights, big and all, when you partner with Monarch. Without a clear financial picture, your financial dreams truly can feel out of reach. And Monarch makes managing money simple, even for busy lives. By the way, it's the top recommended personal finance app by users and Experts with over 30,000 five star reviews.

[Matt]

You know what, man? Get control of your overall finances with Monarch Money. Use code. How to [e-mail] in your browser for half off your first year. That's 50% off your first [e-mail] with code how to Money We've all got some old things laying around, but listen, if one of those things is an old 401k, well, it is time to take care of it. Whether you've recently left a job or you're just making time to get your finances in order, Fidelity can help you explore options for your old 401. A fidelity rollover IRA has no account fees or minimums. Plus you can choose from a wide selection of investments.

[Joel]

Learn more about options that may give you flexibility for using your money today and for your future. It's an easy to follow rollover process that makes it simple to get started online in under 15 minutes. And just in case you need any help along the way, you'll have access to one of Fidelity's rollover specialists. So why leave that 401 lying around? It's time to make sure you keep your money working as hard as you do.

[Matt]

That's right. Learn More about a 401k rollover at fidelity.com rollover consider all your options and the applicable fees and features of each before moving your retirement assets. Fidelity Brokerage Services, LLC Member NYSE SIPC so one aspect of owning your own business that some folks don't think about is setting aside money for taxes. It's a hassle if you forget about it, but you just gotta think ahead some. You gotta make those quarterly estimates, then it's no big deal. Similarly, Trust and Will makes creating your will easy and time efficient. Get you thinking ahead, which is good. But then you can focus on other important tasks. Their website is incredibly easy to use and it's tough to beat knowing that I have the peace of mind, that my wishes are secure and that Kate and the kids are taken care of.

[Joel]

Yeah, I love knowing that Trust and Will is designed by attorneys. Then it's kind of customized by me. Each will or trust is state specific, legally valid, and customized to your specific needs. Think about how difficult this necessary task used to be. Well, estate planning, it's easier than ever these days thanks to Trust and Will. It's so easy to get started and it's been used by hundreds of thousands of families and counting.

[Matt]

You know what buddy? Uncomplicate the process with Trust and Will. Protect what matters most in [e-mail] HowToMoney and get 20% off. That's 20% [e-mail] HowtoMoney.

[Joel]

We'Re back. We've got more money questions to get to. Let's get to a question now, Matt, about someone who listens to the show and they're worried about their parents potentially choosing a bad financial product.

[Announcer]

Hey, Matt and Joel, this is Hayden from Marlboro, New York. You guys made a passing comment in a recent episode about the sky high fees associated with reverse mortgages, and I was wondering if you could talk a little bit about that. My parents have recently discussed that as a big part of their future plans recommended by their financial advisor. And they gave me some articles to look at and read, but I didn't see anything in there about, you know, particularly high fees. So I was hoping you guys could just touch upon that and maybe I could send this episode along to them so they're informed enough to make the decisions that they need to make, you know, in their retirement. Thanks very much. Cheers.

[Matt]

Joel, did Hayden say Cheers? Because like us, he is a fan of craft beer or from a cultural standpoint, he just likes to party. He's like cheers.

[Joel]

Or does he like the old school.

[Matt]

Television show Cheers with Norm?

[Joel]

Oh, man, I watched those reruns.

[Matt]

Yeah, my dad was a huge Cheers fan. I was probably one of the few six year olds that had seen like all the seasons.

[Joel]

I don't know if that's good parenting or bad, but I was more of a Gilligan's island fan myself, so.

[Matt]

See, I watched a lot of Cheers as a kid. Obviously a lot of jokes went over my head. But also, Dallas, did you.

[Joel]

I never watched that. That was the.

[Matt]

I can still hear the theme song in my head.

[Joel]

Think about how. There you go. Thank you for serenading me.

[Matt]

I'm going to keep going.

[Joel]

Think about how tedious it must have been to write some of those shows, like taking place all in one bar or all on a deserted island. Like, did. Did it not just like wear thin after a while? I'm sure it did.

[Matt]

Having limits and boundaries around what it is that you're trying to do, it can be even freeing perhaps. Yeah, maybe it, I don't know.

[Joel]

I've never created a writer to a show.

[Matt]

I got to imagine maybe. I don't know.

[Joel]

All right, let's talk about reverse mortgages. So. So, Hayden, I love that you're you wanting to help your folks out and let's just like maybe talk about what a reverse mortgage is real quick because some of you might be saying, I've never heard of this. What is this financial product? Well, basically, instead of Paying a monthly mortgage to own your home, which is what most people are doing for 15 or 30 years. Most people, 30, let's be honest, you're being paid to access the equity that you built up. And the upside is that for cash strapped seniors, and I say seniors because you have to be 62 years or older or you're not allowed to take out a reverse mortgage, they are able to stay in their homes while getting a steady stream of monthly income to cover their bills. So it feels like for a lot of senior citizens this win win if there's no other place to grab cash, it's like, well, I get to stay in my home and I have money to spend every month to that, otherwise where would I have found that money? And so in addition though to the fees that we're going to discuss, a reverse mortgage comes with downsides. So in particular, if your parents care about you and your siblings inheriting the home at some point in the future, a reverse mortgage limits that possibility. But Matt, we've got to talk about the fees and yeah, I feel like I just made a reverse mortgage sound pretty great. Stay in the home money coming in every month.

[Matt]

Yeah, no, let's, let's set the context, let's set the table here a little bit because it's interesting that Hayden's folks are leaning towards a reverse mortgage and that their advisor has suggested it as a smart approach because it might be. But if their advisor has helped them ahead of time to build up a nest egg over the years, it might not be necessary. The advisor's goal should be that they do not have to actually get a reverse mortgage because a combination of well timed tapping of Social Security typically by waiting longer, that's going to be, that's going to lead to a better outcome at least for one of the, the parents, they're one of the partners that + tax advantage accounts and in addition to that, maybe some frugal living there on the side that should hopefully be enough for them to live off of for many decades. A reverse mortgage is almost always considered an option of last resort in order to make ends meet in the event that the, the combination that I just mentioned of investments of Social Security if it falls short of the type of spending that they're looking to, to be able to perform and do in their retired years there. So again, decent planning should allow folks to avoid this product altogether. But assuming based on the fact that they're talking about it sounds like maybe that's not quite the case and so they're looking at what they have on hand to be able to satisfy the type of retirement that they're looking to live.

[Joel]

You might also see, by the way, a reverse mortgage referred to as a home equity conversion mortgage. That's just a fancy way of saying the same thing. It's just a different name for the same beast. But basically, yeah, you're grabbing money from that property instead of paying it off and then gaining liquidity from in the liquid asset. As we all know, that's not easy. So the fees are high as they are with the traditional mortgage. We're talking origination fees, closing costs, appraisals, title search, all the above. It's very, has similar characteristics to taking out a mortgage on a primary home. And you can typically have those fees taken out of the loan amount. So maybe it doesn't feel as bad, but they're still getting paid and your parents are still the ones paying the fees. They'd be getting charged interest and servicing fees as well as a mortgage insurance premium.

[Matt]

So it all gets rolled into the essentially it gets papered over so it.

[Joel]

Feels nice and tidy and like where are those fees at that the boys were talking about? And it turns out they're in there it just minimizing the amount of money they can take out of the house. And so one of the tough things about a reverse mortgage is that when there's this litany of fees being assessed in different ways, it's just hard to get an accurate account of exactly, exactly what it's going to cost you. But when you, when you read the fine print, you might be shocked to realize just how many thousands and thousands of dollars are coming out of this asset. As you're, it's like you're trying to get blood from a stone or something like that, Matt. And that's hard to do. And the same thing is true with a home. Yeah, it's always expensive to tap that home for money.

[Matt]

Yeah, it's just hard to gauge because of the fact that it's all getting rolled into one. But it is still happening, by the way. Let's look at some stats here. Close to one in five reverse mortgages, they actually end in foreclosure, often because the senior citizen there was unable to pay property taxes. So this often works out poorly, which should throw up an immediate red flag. So Hayden, for your folks, man, prior to getting a reverse mortgage, I would carefully assess the costs, specifically the fees there. Joel, you mentioned. So home equity conversion mortgage, that's the term specifically given to the fha, FHA backed reverse mortgages. But there's also private reverse mortgages out there as well, which might be even more appealing to some folks because they're saying, oh, I can go through this private lender and I can get a reverse mortgage at the age of 55, I don't have to wait another seven years, live like a pauper in the meantime. But guess what? That comes with even higher fees, even worse rates, even worse APRs especially. That's where it starts really getting ugly.

[Joel]

Yeah, agreed. So I would say suggest considering other alternatives. If I was your folks and they were like, we just can't afford to live in this house anymore. We want to, but we can't afford to live in it anymore with what we've saved and with the Social Security that's coming in and live the lifestyle that we want. So consider selling or downsizing or even a cash out refinance. Could be better. Could be better I say because that isn't a great option either. But it could be better than a reverse mortgage. They could invest cash that cash infusion, they could draw it down over the coming decades potentially or turn it into like a monthly stream of income with what's known as a single premium annuity, which does, it's like also known as an immediate income annuity, which is one of the cheaper annuities out there. There aren't many good annuities out there. A reverse mortgage just isn't the only viable option. It's just the one that gets the most press because it's the easiest. But the easiest thing isn't always what's best. And then you know, if they do decide to go in this direction, they're going to have to meet with a HUD counselor if they're going with one of those HUD initiated reverse mortgages. Matt. Right. The, the Consumer Financial Protection Bureau still around, the heartbeat barely beating. But they have a list of questions that your parents should be asking that we'll link to in the show [e-mail] make sure they take a look at that. They to be armed with the right questions is really important before they do this. And just know too that inheriting a property with reverse mortgage, that can be a nightmare as well. So again, not sure if that's in the cards or if that's a hope for you or your siblings, but know that that's a pain in the butt if they are in the middle of a reverse mortgage. These complex products, Matt, they remind, they remind me of like some of the commercials for fancy new pharmaceutical drugs. I like the idea if I had restless leg syndrome of getting rid of it. Right. But the cure often.

[Matt]

How restless of a leg are we talking about?

[Joel]

Right?

[Matt]

Exactly.

[Joel]

Yeah. I mean, fortunately, my legs not restless at all. But when you hear the side effects for some of those things, it's like, man, the cure is worse than the disease. The side effects can be truly awful on some of those drugs. And I don't know what percentage of the population develops a face rash or something like that after taking that drug or something even worse. But it's important to know that a reverse mortgage, I think of it like some of those pharmaceuticals where it's like, yeah, it'd be nice to get rid of that problem. But is it creating other problems that are even more nefarious? Potentially, that's true.

[Matt]

Joel's new X handle, Maha Joel. Just kidding. Joel doesn't have anything against big pharma.

[Joel]

No. We're all excited about our new Fruit Loops with blueberry dyes, right?

[Matt]

Oh, yeah. Oh, I need to tell you about this. I had some algae the other day in this, like, this smoothie bowl that was. It was like, crazy blue. I'm just like, what is in this to make it that blue? And evidently it's this blue blue something. And they pulverize it, grind it up into this powder, and they sprinkle it on or they mix it into smoothies.

[Joel]

Blue something.

[Matt]

It gives it this crazy bright blue. It does not look natural, but evidently it is.

[Joel]

Is it?

[Matt]

We can expect more of that.

[Joel]

Is it blue, number 16? Is that what it is?

[Matt]

No, no, I want to say blue spirit spirulina or something like that, but it's like a blue green.

[Joel]

It's natural.

[Matt]

Yeah.

[Joel]

Okay.

[Matt]

Naturally occurring. An algae, I guess it comes out of the ocean. You can look forward to more stuff like that.

[Joel]

What a spectacular world we live in.

[Matt]

All right, let's get to another listener question. Joel is here from a return caller. That's what they call it in the business, a return caller. This is.

[Joel]

You're so Old School Radio.

[Matt]

A listener, which is funny because I never listen. But this is a listener who has prepared for a sabbatical. She's got this plan break coming up and wants to know how she should be investing.

[Yesel]

Hi, Matt and Joel. This is Yesel from New York City. I'm calling in with another question. Thanks again for everything you've been doing for the how to money community. So we all know that the stock market indexes are falling and the financial future is pretty shaky for a lot of us. I've considered myself someone who can pretty much keep my emotions out of my investing and saving strategies. And I've been continuously investing a set amount twice a month to my brokerage account. And last year I maxed out my traditional IRA and my SEP ira. I have a fully funded emergency savings account and a fund for the sabbatical, which I've just started. So obviously pausing on making money while thinking of investing is kind of making me nervous. Now I'd like to hear your thoughts about how I should go about contributing to my investment accounts for the time being. What are your thoughts about how to invest wisely? So should I pause for a period of time while not touching the accounts? Should I continue to invest just as I have been, or should I continue to invest but maybe with less money? Just for context, I have a Fidelity brokerage account that's invested in the total U.S. stock market at 60%, total international market at 20% and small cap index 20%. And I have the same allocation breakdown for my SEP IRA and traditional IRA. Thanks for your help, guys.

[Joel]

Yes, well, always good to hear from you. And I love that you've been able to mostly keep your emotions out of your investing. And that is something. I don't know how often we talk about that, Matt, but that's like so important, right? And sometimes that looks like checking your investments a whole lot less. If you're keen to like, opening that 401k statement every month, I don't know if you follow the news and you're like, eh, doesn't seem like it was a great month. Maybe I shouldn't look at the potentially substantial lower big number at the very bottom of that statement for a minute. Right. Because recoveries are always a reality. How long it takes to get there, that's anybody's guess. But yeah, I think it is easier said than done. But it's a really important thing to do. Basically trust the process. Right?

[Matt]

It's not easy. But like, I think that that's. I feel like there's two. There's a couple questions going on here, and that's one of them because she's like citing the unsteady economy and market fluctuations as causing her to second guess it. And while you might rationally know that you should be continuing to invest like you normally would, what are you actually doing in reality? Right? Like, like a. That doesn't mean it's easy. You know, you rationally know what it is that you should be doing, but then the emotions kind of kick in a little bit. You start getting a little bit nervous, especially as She's, I guess, experiencing some other life change that she has planned for. But still it's, I guess it's sort of the confluence of these multiple things that are taking place that I think is causing her to second guess her investing.

[Joel]

And I think it's, I think it's helpful to look at history because I get kind of someone might say, well, what if someone was coming up to your face with a. And they were going to swing it at you, swing a baseball bat at you? You would duck pretty quickly. Like, you would react. And so I think a lot of times when something fearful appears to be happening, action seems like the best thing to do, right? It's like, I'm going to avoid the bad thing. But when you look at the history of the stock market, the bad thing, how long does it impact the stock market? Sometimes it's for years, right? But even just look at the COVID bounce back or like, it didn't take that long for markets to correct after a substantial drop. So. And the thing is that the worst possible reality is that you're missing out because you try to avoid the pain. You're missing out on the comeback, right? That stocks will eventually get around to.

[Matt]

And aside from even. Because somebody might hear you say that and be like, well, yeah, that's because the government pumped tons of money into the economy to facilitate that bounce back. But even like looking further back into history, even looking back to like, this is a world that has endured the dropping of an atomic bomb, multiple atomic bombs, and then decades beyond that, the threat of like nuclear annihilation, like on a global level. But what did the stock market continue to do? Like, these are things that we continue to move past. It has a lot to do with, I guess, who you're reading, like, the headlines that you're looking at, because there's some folks who say that, like, no, man, it's different this time. But I think that's always the case. The classic phrase, the classic line, it's different this time. But I don't think it's actually different this time. That's, that's, I guess, the more positive, optimistic spin.

[Joel]

Yeah. Well, okay, so, you know, we want most people to continue invest when markets aren't doing so great. And I say most people, maybe not everyone and maybe not yesle. And I'll tell you why. Yesle, the average person is buying shares at a lower price. They're buying stocks on sale when the market is down, which is great. And we think that most people shouldn't change a thing like Most people listening out there right now, if nothing has changed in your life, you should probably be investing in the same way that you always have been. You know, keep on dollar cost averaging into those low cost index funds or the target date retirement fund of your choice. But Matt, I think Yesel is in a little bit of a different scenario. She's about to take a sabbatical, which means no income. Right. That's typically what, typically what a sabbatical means is like, hey, I'm not going to get paid for potentially an extended period of time. And so I get the desire to keep investing. Especially if you, yes, I'll identify yourself as an investor. I'm going to keep doing the thing like that's, that's what I'm doing. I'm building wealth for my future. But with no income coming your way for a little while, investing out of your excess savings, it might not be the best choice. It could truncate your sabbatical timeline or cause undue worry and stress. Right. It can even prompt you to feel like you had to find a new job quickly when you're, you are ready to reenter the workforce and you might have to settle for something that's not ideal, maybe even that pays less than you could have got if you'd been able to hold out. I think investing on savings that you might need to live off, I just don't know. That's a great idea.

[Matt]

Yeah. But I think that's the difference then too between. Because what she was saying though is that she not only has maxed out her retirement accounts, which is great. Not only does she have, does she have a fully funded emergency fund, but then she also has a separate fund for the actual sabbatical. And that's where I feel like that this feels to me more like an emotional response as opposed to the actual dollars because it looks like it sounds like she's investing for her future. Way off, way off into the future, in which case you see the market, like you said, on sale and it's just like this is a great opportunity as opposed to somebody who might be nearing actual retirement. Right. Not a mini retirement, but like the full blown, real fully fledged retirement. That's the kind of scenario where I think someone getting nervous about the market and finding ways to diversify even more makes a little bit more sense as opposed to, I think the situation that Yesle finds herself in which. So I guess at the end of the day for me, like, I don't see you needing to make any sort of change to how it is that you're investing, assuming that you've planned to invest because of the fact that you have had those funds set aside.

[Joel]

Yeah. If you truly have enough money to.

[Matt]

Do D all the above, then keep on trucking.

[Joel]

Don't let the current state of things freak you out to not do that.

[Matt]

Exactly. I think that's, I don't know. At least that's what I'm picking up from Yesil's question.

[Joel]

Can we throw out another option though, Matt, and this might be something. It didn't sound like Yesle had considered this, but I think this might be an even better use of some of those dollars right now. What if instead of investing new dollars. Yes. I'll consider doing strategic Roth conversions instead. So when you're taking a sabbatical, that means again, that you're not making money, your income is dropped off a cliff, which means that any money you do make is going to be taxed at a much lower rate in all likelihood than it was the year prior. So, you know, if you're single, income up to $48,000 is going to be taxed at the 12% rate. That's on top of the standard deduction. If you're married filing joint jointly, any income up to $96,000 is going to receive that more favorable tax treatment. We'll link to an article that we have on our website about this. But this is one of those situations where investing more is one way to go. But investing less, doing strategic Roth conversions and recategorizing that money and never having to pay tax on it in the future could be, could be a better move than just continuing to throw more dollars into those accounts.

[Matt]

Yeah. And especially in a year where you're going to pay less to Uncle Sam, that is a brilliant strategy.

[Joel]

And so the money that would have gone into that account is now going to go to pay taxes, which feels really unsatisfying. But when you think about holistic tax planning strategy, the whole goal is to pay tax at the lowest rate possible. And that's what you're doing. Right. When you're, when you're doing a Roth conversion in a year where your income is paltry, you're taking advantage of that long view tax planning and you're saying, no, I'm going to prioritize Roth in this year because it means less taxes for Yesle in the future.

[Matt]

Yeah, Future Yesl I think is going to be very thankful.

[Joel]

Yeah.

[Matt]

And I think future Yesel is going to be thankful that you took a sabbatical as well. We're big fans of taking these mini retirements along the way instead of just the typical nose to the grindstone approach where someday, way off in the future, you will retire. Highly underrated. Let us know how it goes and we wish you the best. But Joel, we've got more to get to. We're going to hear from a listener who is having a tough time letting go of the idea of having a brick and mortar banking institution at his or hers fingertips. We'll get to that and more right after this.

[Joel]

Let's talk retirement for a second. To me, it feels like it's getting harder for people to reach their goals for the future. We hear about inflation, rate hikes, the changing market. Are we even saving enough? And things keep changing, right? And here is where Fidelity comes in. Whether you're saving for retirement or close to living in it, Fidelity can help you get where you want to go, no matter your path or what happens along the way.

[Matt]

Yeah, but how? Well, they'll help you to create a free, personalized plan that adapts as your priorities change. They'll also show you what's called Timely Insights. These are small tips on ways to save and invest to help meet your goals. And you can monitor your plans so you can stay on target. The future is coming, and so is retirement. Get ready to take it [e-mail] TakeOn.

[Joel]

Expenses charged by your investments and other costs and fees associated with trading or transacting in your account. Apply Fidelity Brokerage Services Member NYSE SIPC hey there Joel, here with my buddy Matt from How to Money. Matt Summers right around the corner. I know you got that travel bug. What adventures do you have planned?

[Matt]

Oh man, you are going to love this. We're planning this epic road trip up the east coast with the entire family. Just think, lighthouses in Maine, monuments in D.C. plus everything in between.

[Joel]

That's amazing. I'm jealous. Thinking about stowing away in your luggage. But wait a second. How are all six of you gonna take this road trip?

[Matt]

Okay, so initially we were thinking about taking an RV, but I found some really awesome AirB's along places with something for everyone. And what I really love is that with Airbnb is we can always start our days with like a good breakfast at home. Like it's our home away from home and I love that routine. I don't know if you've ever tried getting a family of six out the door, let alone trying to find some breakfast in a middle of a city that you're not super familiar with. It's a challenge plus, it's a budget killer.

[Joel]

Yeah, that's true. Sounds like chaos, to be honest. And you know that's actually what makes hosting on Airbnb so special, right? You're giving travelers a chance to really live like a local. They even have the co host feature, which gives you access to a network of high quality local co hosts who can help take care of your home and your guests when you're not there. Find a co [e-mail] host what does the future hold for business? Ask nine experts and you'll get 10 answers. Will we have another bull market in 2025 or we're going to get a bear market? What about inflation? Will it continue to calm or will higher prices remain sticky? Wouldn't it be cool if someone could invent a crystal ball that would give us some foresight.

[Matt]

Well, until then, Joel, over 41,000 businesses have future proofed their business with NetSuite by Oracle, the number one Cloud ERP bringing accounting, financial management, inventory, HR into one fluid platform with one unified business management suite. There's one source of truth giving you the visibility and control you need to make quick decisions. With real time insights and forecasting, you're peering into the future with actionable data. When you're closing the books out in days, not weeks, you are spending less time looking backwards and more time on what is next. Our business is really small, but if we needed netsuite, we would be pumped about the time the cost savings that it provides. Whether your company is earning millions or even hundreds of millions of dollars, NetSuite helps you to respond to immediate challenges and seize your biggest opportunities.

[Joel]

Speaking of opportunity, download the CFO's Guide to AI and Machine Learning at netsuite.com the guide is free to you at netsuite.com howtomoney that's netsuite.com howtomone all right, we're back. We've got more money questions to get to. For now, let's get to the Facebook question of the week. This one comes from Matthew, who said my wife was about to make a contribution to her Roth ira, but she didn't make any money herself as she stays at home with our son. Does my income count as her income and can she invest in a Roth ira or am I the only one able to invest in a Roth IRA as I have income and not her?

[Matt]

Classic. I think Matthew isn't the only listener, Joel, who's been confused by this because you were told that to invest in a Roth ira. We may have even said this today you have to have earned income. Your wife isn't currently working. She does not have earned income. Seems like she would be ineligible. But of course, that is not the case because these things are never quite as straightforward as they seem. The IRS recognizes the shortcomings of that rule. Your wife is eligible to contribute to a Roth IRA in the form of what's called a spousal Roth. So that's the Roth account that we rarely talk about, Joel, even if she didn't actually personally earn a dime in that given year.

[Joel]

True. Yeah. That is specifically the perk when you are married filing jointly. So just remember that your total AGI, your adjusted gross income would have to be above what you contribute to both accounts, which I'm assuming it is. I'm assuming that you're making more than $14,000 a year. Seems reasonable, you know, making contributions to one for you and one for her. That's obviously a really smart move. We want couples across the country to continue striving towards that goal of maxing out two Roth IRAs every single year. And the fact is that even if one person in the house stays home, they are. They're doing a valuable service to the family and they also deserve to and are allowed to leg contribute to that Roth.

[Matt]

So what if it's a throuple, Joel?

[Joel]

That's a good question.

[Matt]

Then it's $21,000.

[Joel]

Can you marry. I don't think you can marry filing multiples like that.

[Matt]

No, no, I don't think the IRS counts that. Don't forget in the back end of your brokerage account or in your brokerage where you do your investing, not your brokerage account. You're not going to actually see something that's labeled or titled or there's not going to be a link that says open spousal Roth. You just contribute to a regular old Roth IRA for her like you would for yourself. There's no actual special designation. This isn' sort of special account. It's. That's how it's more of a process as opposed to like an actual account.

[Joel]

It's a colloquial way of talking about it. Even though when you go in the back end of the account to open it or to contribute to it, that's not how it's going to be labeled.

[Matt]

Yeah, you're not going to find that there. So I agree that maxing out two Roths year in, year out, if possible, that's going to garner you some incredible financial freedom over the decades. Get it, Matthew? Joel, let's hear from another Poster from Anonymous who writes one of my financial fails as having my E fund in a credit union savings account earning less than 1%.

[Joel]

I just threw up a little.

[Matt]

I know I need to move to a high yield savings account, but something about an online bank versus a brick and mortar local credit union seems scary for an emergency fund even though I know we could transfer as needed. Has anyone else had this hesitancy what you think, Joel? Have you ever felt this?

[Joel]

Honestly, no, I. It's like a roadblock. I have zero need for brick and mortar institutions or some institutions, but not banks in my life. And I guess I get why some people might feel especially like if you owned a small business, you're regularly making deposits to that, that physical bank or something like that, you might be reticent to kind of do away from that sort of oh I go to my bank to do things relationship, but I think most people don't have any need for it. And so first off, I do want to stress that we love credit unions, right. But also they're better for borrowing than they are for saving most of the time. Need not alone credit unions a great place to go mortgage or a heloc. I would look to a credit union first High yield savings account. That though I would say is best done at an online bank. They're different tools for different purposes and I want to use the right tool for the right problem. Our favorite online banks are typically, although maybe not always, but typically better for savings purposes. I would love to see folks utilizing both of these institutions for what they do best. I have a relationship with a credit union. I have had one for a decade and a half and I will continue to have that relationship. I've had a relationship with an online a high yield savings account at an online bank for a decade and a half too probably at this point. And I maybe longer and I will just continue to have both those relationships and they will just serve me for different needs that I have.

[Matt]

Totally. Yeah. It's also important that even in an emergency you don't typically need to pull cash out like right away like right now. Instead you can use a credit card which buys you time. Right. Like you still have the cash on hand in your account to back it up. But I can't think of too many money financial emergencies that I've encountered that required me to get a load of cash from a bank as soon as humanly possible. And then on top of that, our favorite online banks, they tend to have good fee free ATM networks as well. So if you actually are In a situation where you do need the cash on the spot, you should be able to access at the very least hundreds of dollars in a day. The branch doesn't even need to be open like you just go to the ATM that's a part of the network. That being said, if you do, I think another way to alleviate this problem would be just to have some cash at home. Because if you do feel that there's some comfort in having that, I don't know, like literally a thousand bucks, couple thousand dollars hidden away somewhere in a secure spot, if that allows you to then move the thousands of dollars of your actual emergency fund over to a high yield savings account where you are experiencing or earning interest, I think that could be a way to have your cake and eat it too.

[Joel]

That's why you have all those gold bars buried in the backyard. Exactly. Just in case, right? Yes.

[Matt]

No.

[Joel]

You never know what's going to happen.

[Matt]

It's so unlikely for that actual the.

[Joel]

Crazy emergency, what if the last of.

[Matt]

Us becomes real life event to take place. It's far more dramatic but very unlikely to happen. Whereas inflation and your savings getting eaten away by that inflation. It is much, much less dramatic but very like that is very likely to happen. So we want you to be prepared for both, I guess in a way. But for you to not pay the financial price for having all of your cash in a local credit union branch.

[Joel]

It'S an under considered fear, right? Is inflation. Because it is that persistent reality that most people just don't pay any attention to. We have of course paid more attention in recent years and hopefully that's caused more people to think twice about where they bank and the rate of interest they're getting paid. But I do think you're right Matt. Like for this poster, I don't want them to fret about instant access to all their money. What's. I mean, in what case is that really necessary? The biggest thing is to make sure you've got enough saved and that you're getting paid close to market rate on your savings. That's three and a half to 4% these days. That's what I'd be looking for. CIT is still paying top tier rates. Betterments. Cash account is fantastic too. Depending on how much you have saved. We, you know, we might only be talking about a couple hundred bucks this year in extra earnings. But upping your savings rate by going with a bank that pays those super high rates and consistently pays those high rates for years to come, that's not insignificant in the grand scheme of Things. And the truth is, while brick and mortar might seem like, oh, I can. Like a relief of some sort, oh, I can go get my money in an instant when I need it. Well, money, there's so many other ways to tap money instantaneously. And even just having a little bit more in cash at home, if that. If that can provide that relief. So you can do business with a better bank that pays you what you deserve on your savings. Do that.

[Matt]

Yeah. And honestly, the kind of event that would cause you to rush to the bank and withdraw a bunch of cash, I don't think that necessarily means that you would be able to do that with a local branch because I think whatever, unlikely, but yes, terrible event that would take place would hinder something like that as well. I don't know. I just like focusing on the things that I think are more likely to take place. Like, because then your mind starts going to like, well, man, maybe we should have some bottled waters and a first aid kit and throw that in the bug out bag. And there's folks. I'm not a prepper, but I know certainly some folks do that, but a.

[Joel]

Few guns, you know.

[Matt]

But you know, what I have done in recent years more often than not is pull the old generator out of the garage, fire that thing up so that I don't end up losing all my groceries and the fridge like that kind of. I mean, that seems like a much more, I guess, practical and likely outcome of the grid going down or even just getting hit by a big storm. Right.

[Joel]

So you're saying zombie apocalypse is not likely to happen.

[Matt]

I think it's less likely. As opposed to a big storm hitting your town and then it takes several days before the power gets turned on. That's happened to a whole lot of folks.

[Joel]

It's less interesting, but you're probably right.

[Matt]

Makes for less entertaining tv, that's for sure.

[Joel]

True story. All right, well, hope that's helpful, Matt. Let's get back to the beer we had on the show. This was. I picked this up when we. When I was in Texas. And this is from a brewery that's actually in Pennsylvania that doesn't distribute to where we live. And it's. It's called Tired Hands. This one is called Double Dry Hopped Refreshing.

[Matt]

Can't get these in Georgia.

[Joel]

No, we've only had one of their beers before on the show was a Saison. I still remember that beer as being fantastic. What was your take on this ipa?

[Matt]

Earthy. I had a nice bitter bite to it. But the hoppy flavors, it reminds me a lot of burial beers as well, which we've had a lot of those on the show recently where it's more vegetable and less tropical. Like, it's kind of got like this earthy. Oh, so funny. I feel. Are they Brazil nuts? We've had some of those at our house recently. And the kids are always like, it tastes like dirt. I'm like, how do you know what dirt tastes like? It tastes like what you.

[Joel]

I've seen your kids. I know how they know what wet.

[Matt]

Dirt smells like or wet earth smells like. And this kind of has that a similar vibe going on. It feels like it's a beer of the earth. Less flowery for sure, but, yeah, really, really tasty, really good.

[Joel]

So this is gonna sound negative, but I mean it as a positive. Like, if I was to rub some light sandpaper across my tongue, like, this beer sticks to my tongue in that way. It's got this, like, sappy goodness. This. This dense, juicy vibe, like you're licking.

[Matt]

A piece of felt. Yeah.

[Joel]

But also this, like, chalky consistency. And I. The best way where this, this beer just has like, these texture notes that are rare in an ipa. It just doesn't slide down your throat. It's like it's trying to wrap around every single one of my taste buds. And I get that. I'm down with that. Like, I really enjoyed this beer. I would love, love to try more beers by tired hands because the two I've had have been thoroughly enjoyable.

[Matt]

So they've been top notch.

[Joel]

Yeah. Most def.

[Matt]

Glad you and I got to enjoy this one today. That's going to be it for this episode. Find our show notes [e-mail] that's also where you will find lots of different resources over there. But, buddy, that's going to be it for this episode. Until next time, best friends out. Best friends out.

[Yesel]

In a world of economic uncertainty and workplace transformation, learn to lead by example. From visionary C suite executives like Shannon Schuyler of PwC and Will Pearson of iHeartMedia, the Good Teacher explains the great teacher inspires.

[Matt]

Don't always leave your team to do the work.

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[Matt]

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[Yesel]

Listen to leading by example executives making an impact on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.

[Announcer]

We love learning about this extraordinary universe.

[Matt]

And we love sharing what we've learned.

[Joel]

And on our podcast, Daniel and Kelly's.

[Announcer]

Extraordinary Universe, that's what we're gonna do.

[Matt]

I'm Daniel. I'm a particle physicist and I think our universe is absolutely extraordinary.

[Announcer]

I'm Kelly Wienersmith. I study parasites and there's just endless things about this universe that I find fascinating.

[Matt]

Basically, we're both nerds.

[Announcer]

Each Tuesday and Thursday an hour long dive into some science topics.

[Matt]

Learn all about our amazing and beautiful.

[Joel]

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[Matt]

Every Tuesday and Thursday on the iHeartRadio app, Apple Podcasts or wherever you get your podcasts.

[Yesel]

Being able to say I feel like crying, so I will cry. Today I'm a little depressed. May is mental health Awareness month and Deeply well is a sanctuary for your healing. I'm Debbie Brown, healer, well being, expert teacher and fellow seeker and each week we explore what it means to become whole through soul expanding conversations and practices. Today, wow. I feel really powerful and ready to serve and use my skills and it's like that's the heart of what it is to be an authentic woman. To hear this and more ways to prioritize your peace. Listen to Deeply well from the Black Effect Podcast Network on the iHeartRadio app, Apple Podcast or wherever you get your.

[Announcer]

Podcasts at T Connecting changes everything. You're listening to an I Heart podcast.