Ask Farnoosh: Should I Put My Home in a Trust?

Summary

Podcast Summary: So Money with Farnoosh Torabi – Episode 1824: "Ask Farnoosh: Should I Put My Home in a Trust?"

Introduction In episode 1824 of So Money with Farnoosh Torabi, released on May 9, 2025, host Farnoosh Torabi delves into crucial financial questions from her listeners, focusing primarily on estate planning and retirement strategies. The episode, part of the "Ask Farnoosh" series, aims to provide actionable insights and expert advice to help listeners navigate complex financial decisions. Skipping the usual advertisements and introductory segments, Farnoosh addresses three significant questions: the implications of placing a home in a trust, adjusting finances due to early retirement, and the distinction between money market funds and money market accounts.

---

1. Should I Put My Home in a Trust?

Listener Question from Sarah [17:09] Sarah reaches out following a previous episode on wills and estate planning with Heather Zach. Her main concern revolves around the tax implications of placing a home in a trust, specifically regarding the "step up in basis" for inherited properties.

Understanding the Step Up in Basis Farnoosh begins by explaining the concept:

"The step up in basis, this is a tax break for people who inherit assets like real estate. When you inherit a home or property, the cost basis steps up to the fair market value at the time of the original owner's passing." [05:00]

This means if a property appreciated in value, heirs would only owe capital gains tax on the appreciation post-inheritance.

Trusts and Step Up in Basis Addressing Sarah's concern:

"If the home is in what's called a revocable living trust, the step up in basis still applies. However, if the home is in an irrevocable trust, the step up could be reduced or lost." [07:30]

Farnoosh clarifies that most trusts people use for estate planning are revocable, maintaining the step up benefit. She emphasizes the importance of consulting with a professional when considering irrevocable trusts due to their complex tax implications.

Benefits of a Trust Farnoosh outlines the advantages:

• Avoiding Probate: "Without a trust, your home may go through probate, which can take months and incur legal fees. A trust allows for a smoother, private transition of assets to heirs." [09:50]
• Protecting Heirs' Interests: Ensuring that assets are managed according to the grantor's wishes without court intervention.

Personal Anecdote Farnoosh shares her own estate planning choice:

"I don't currently have my home in a trust. My estate planning attorney advised that given our current life stage—being married with young children—it wasn't necessary. Our co-ownership structure already bypasses probate." [12:15]

She acknowledges that estate plans are dynamic and may need revisiting as circumstances change.

---

2. Navigating Early Retirement and Financial Adjustments

Listener Question from Lee [17:09] Lee writes about her husband's decision to take early retirement from a federal job to start a consulting company and develop a medical device. She seeks advice on ensuring financial stability, considering her own student loans, substantial income, and retirement savings.

Assessing the Retirement Picture Farnoosh advises Lee to:

"Assess your long-term retirement picture. Understand what you have saved and what you'll need to support your goals." [18:07]

This involves evaluating current savings, projected income, and future expenses.

Enhancing Liquidity Given the shift to entrepreneurship:

"Improve your cash liquidity to at least a year or two of essential expenses. Consider high-yield savings accounts or money market funds to ensure you don't need to dip into retirement accounts prematurely." [19:45]

Retirement Projections and Professional Guidance Farnoosh recommends:

"Work with a financial planner to run retirement projections. This isn't a forever commitment but a strategic move to understand your financial trajectory." [21:30]

Entrepreneurial Income Streams For Lee's husband:

"Consider opening a Solo 401K or a SEP IRA to continue investing for retirement through his consulting business." [23:10]

Aligning Financial Goals with Life Vision Emphasizing the importance of shared values:

"Have intentional discussions with your partner about your financial 'why' and align your money decisions with the life you are creating together." [25:00]

Farnoosh underscores that financial planning is not just about numbers but about supporting the desired lifestyle and future dreams.

---

3. Money Market Funds vs. Money Market Accounts

Listener Question from Melissa [29:13] Melissa and her husband are considering consolidating their bank accounts and debating between high-interest savings accounts and money market funds for their emergency funds, especially with plans to purchase a home within the next year.

Defining the Instruments Farnoosh differentiates between the two:

• Money Market Accounts: "These are savings accounts typically FDIC insured up to $250,000. They offer safety and liquidity." [30:00]
• Money Market Funds: "These are mutual funds that invest in short-term debt securities. They are not FDIC insured but are heavily regulated and generally low risk." [31:15]

Risk and Protection She highlights the safety of FDIC insurance:

"With a money market account, your deposits are protected by the FDIC, ensuring you don't lose money even if the bank fails." [32:00]

In contrast, money market funds, while low risk, do not offer the same guarantee and are susceptible to market fluctuations, albeit rarely.

Recommendations Given Melissa's timeline:

"For funds you may need within a year, opt for FDIC-insured accounts like high-yield savings accounts or CDs. They offer competitive yields with greater security." [32:30]

Farnoosh advises against using money market funds for short-term goals due to their investment nature and potential risks.

---

Conclusion In this episode, Farnoosh Torabi provides comprehensive answers to pressing financial questions, emphasizing the importance of informed decision-making in estate planning and retirement strategies. She reinforces the value of professional advice and aligning financial choices with personal goals and life stages. Whether considering placing a home in a trust, navigating early retirement, or choosing the right savings instrument, Farnoosh equips listeners with the knowledge to make prudent financial decisions.

Notable Quotes:

• "A revocable living trust still counts as part of the owner's estate, so the step up in basis still applies." — Farnoosh Torabi [07:30]
• "Improve your cash liquidity to at least a year or two of essential expenses." — Farnoosh Torabi [19:45]
• "For funds you may need within a year, opt for FDIC-insured accounts like high-yield savings accounts or CDs." — Farnoosh Torabi [32:30]

For more detailed discussions and personalized advice, listeners are encouraged to join the So Money Members Club at SoMoneyMembers.com.

Transcript

[Workday]

When you're a forward thinker, the only thing you're afraid of is business as usual. Workday is the AI platform that transforms the way you manage your people and money today so you can transform tomorrow. Workday moving business forever forward.

[Maybelline]

Ever wonder what your lashes are destined for? The cards have spoken. Maybelline New York Mascara does it all. Whether you crave fully Fan lashes with Lash Sensational big bold volume from the Colossal a dramatic lift with falsies Lash lift or natural looking volume from Great Lash, your perfect lash future awaits. Manifest your best mascara today. Shop Maybelline New York and discover your lash destiny. Shop now at Walmart.

[Farnoosh Torabi]

So money episode 1824 ask Farnoosh.

You're listening to Sew Money with award winning money guru Farnoosh Torabi. Each day get a 30 minute dose of financial inspiration from the world's top business minds, authors, influencers and from Farnoosh yourself. Looking for ways to save on gas or double your double coupons. Sorry, you're in the wrong place. Seeking profound ways to live a richer, happier life. Welcome to so Money.

Welcome back to AskFarnouche everybody, the Friday edition of this show where I tackle your biggest money questions. It is Friday, May 9th. I'm actually traveling tonight and let me just say, thank goodness I switched from Newark Airport to JFK for my flight. If you've been following the news, you know that Newark has been facing massive delays, cancellations, long lines, and the New York Times actually ran a piece with some smart tips on how to save time and money at the airport, especially during disruptions like these. I, for example, was able to get a full refund from the airline supposed to originally leave out of Newark. But United, where Newark is their hub, made an announcement that said even if you don't have a refundable ticket, we will refund you cash money if you choose to forfeit the flight. Because we can't guarantee we're going to get out on time, if at all. It's an you know what show. That being said, some flights are on time and no disruptions, but I didn't want to take the risk. This trip is very important. You'll hear about it. Just follow me on Instagram. And so I was able to cancel the flight, get a full refund and rebook on another flight, different airline. But this way I've improved my chances. I'm hoping of getting out on time and successfully getting to my arrival. A lot of people don't know that you can actually get a refund on your flight if the Airline delays your flight by, I think it's more than three or four hours, or diverts your flight. And let's say you at that point decide, I'm not going to take this flight anymore, and you give up your ticket. You can get reimbursed. This happened to us earlier this year. We were flying to Florida. We were supposed to land at the West Palm beach airport, but for whatever reason, they said that they weren't landing planes at this airport. And we flew around for a while, and then, then they diverted us to Fort Lauderdale, which was only about an hour and change away from the West Palm Beach Airport. And at that point, they said, look, you have a choice. You can leave the airplane and forfeit the flight, or you can stay on the flight. And we don't know when we're going to take off again, but those are your options. And at that point, with two kids and all the delays, we said, you know what? We're just gonna get off the plane. We can't be on this plane any minute longer. I also knew that because of this, I would be able to get a full refund. So got off the plane, we deboarded. And the staff, as we were leaving, they, like, scanned my ticket, and that was like, okay, you're forfeiting your flight. You're not allowed to get back on this airplane. And I was fine with it. We paid for an Uber to get to our hotel, and as soon as I got home, I asked for a refund for that leg from United, and they gave it to us for all four of us. And even though we got pretty close to our destination. Now, the Uber wasn't free, but it was nice to get, you know, over $1,500 back from the airline. So just a hot tip for all you. If your flight does get disrupted and you decide to not continue with that flight for whatever reason, you're entitled to a full refund. And this is actually a law that was passed during the Biden administration. Who knows if it's going to persist, but just put that in the back of your pocket now. We're going to get to this week's questions soon. First, though, if you haven't checked out our episodes this week, on Monday, a live interview conversation with Zarna Gar, comedian, author of the new book memoir this American Woman, which just made the New York Times bestsellers list. She and I were in conversation in Montclair at Loopwell, which is a wellness center, talking about her book and her journey to becoming the comedian and writer today. And then on Wednesday. How to Invest and Build wealth in Real Estate this year, this of all years, we had Liz Faircloth on the show, co founder of Invest Her, a global platform and network that helps women invest confidently. We talked about how to identify the right markets to invest in. Now we're not talking about buying a home for your family, but investing for the purposes of generating cash through rental income. What are the risks to consider before diving in and why? Just having knowledge isn't enough. You need the right network, how to find the right people to help you get successfully to the finish line. We also talked about short term rentals like Airbnbs versus long term rentals, pros, cons, co living models which are a thing now, and how Liz protects her time and energy as an entrepreneur, real estate investor and mother. Questions this week we're going to get into in just a moment, including a thoughtful note from Lee in the audience, whose husband just took early retirement from a federal job and is starting his own business. So what will this mean for him and Lee? Lee wants to make sure they're financially on track because now she's also envisioning her own work shift in the next decade. A popular listener topic should you put your home in a trust? And what happens to the step up in basis if you do? This is actually a question that came because of our episode last week about wills and estate planning and trusts. Our listener had a really smart follow up question. And finally, a classic point of confusion. I'm going to break down the difference between money market accounts and money market funds. They sound alike, but they're very different when it comes to risk and returns. All right, let's get to the mailbag. Remember, if you have a question for this show, you can always hit me up@ Farnooshomoneypodcast.com you can also DM me on Instagram arnooshtarabi Let's get into it. Our first question is from a listener named Sarah who listened to our recent episode on Estate Planning with Heather Zak, who's a wealth advisor and an estate planning expert. If you haven't listened to that episode yet, highly, highly recommend it. As I mentioned on that show, I listened to that episode quite, quite a few times myself. And my husband and I, we have our wills and all the things and yet I still found some areas for potential improvement. And Sarah's question is a follow up to that episode. She's curious. With regards to homes and property, she says Heather Zach, our guest, spoke about putting those items into a trust. However, Heather didn't talk about how this can affect the step up in basis if the home gets passed along, say, to adult children at the time of a parent's death. Sarah says, my understanding is that if a home is in a trust, the inheritors do not receive a step up in basis, which could mean they pay a lot more in taxes if they sell the property. Whereas if the home is not in a trust, then there is a step up in basis when the home is passed on to the person or the people who inherit it. Can you clarify this point? And thank you for all that you do. All right, Sarah, thanks so much for writing in. And I think this is a really good question. And just to clarify for everybody listening, I'm going to go through some basics and just explain what a step up in basis means and why anybody would want to put their home in a trust to begin with. Just sort of to re clarify what Heather talked about in that episode. And then I've got a fun fact about my own situation which might be interesting to listeners as to how we've set up our property and are we using a trust? Well, stay tuned for that. But first let's talk about what is that step up in basis that we often hear about. So the step up in basis, this is a tax break for people who inherit assets like real estate. When you inherit a home or property, the cost basis, meaning the value that's used to calculate taxes, steps up to the fair market value at the time of the original owner's passing away. So for example, if your parents bought a home for 200,000 doll and it's worth $700,000 when you inherit it, your new cost basis is $700,000.

[ZocDoc]

So the good news is if you.

[Farnoosh Torabi]

Sell the home for $700,000, you're not going to owe capital gains tax on that $500,000 increase. You're paying capital gains on essentially a $0 increase. Right. And this step up can save families tens, even hundreds of thousands of dollars in taxes. So with regards to Sarah's question, do you lose the step up in basis if the home is in a trust? So I have good news. You do not. If the home is in what's called a revocable living trust, and I'll get to a difference here between revocable and irrevocable. But a revocable living trust, which is what most people have if they have trusts, still counts as part of the owner's estate. So the step up in basis still applies. But if the home is in an irrevocable Trust, which is less common and removes control from the original owner, then the tax treatment, it may change and the step up could be reduced or lost. And so that's why it's always important to work with a professional if this is something that you intend to do, if you intend to leave property to a loved one. Now, what's the financial difference of putting your home in a trust versus not putting a home in a trust? So without a trust, your home may go through probate, which if you listen to the episode with Heather Zach, you know, it's a legal process, and it can take months, it can take longer than months, and it can take legal fees. Essentially, this is like a court process to ensure that all that's stated in your will is executed properly. And without a trust, your, your estate becomes part of the public record. The, the step up in basis still applies, so you're, you're covered there. But again, because it's going through probate, it might lead to delays, there may be some disputes, there's again, legal costs. Potentially. This is if and only both of the homeowners, assuming you have a co owner in the home, pass away with a revocable living trust, you avoid probate. So you save all that time, legal fees, the process remains private, the step up in basis still applies, and typically it's a smoother transition of assets to heirs. So in short, a trust doesn't save you money right now, but it can save your heirs time, money and stress in the future. But here's a fun fact about my situation. So I don't currently have my home in a trust. And that was intentional. That was professional advice from our estate planning attorney. I brought this up to him. I said, I've been hearing all about this, you know, putting your home in a trust. And TikTok tells me, I need to do this. And he was like, look, right now in your life, stage right, you are married, you and your husband own your home together, and your children are young. It's not necessarily for now, again, we co own the home. And so that means if something were to happen to me, my husband would automatically assume full ownership. It doesn't have to go through probate. And so right now our estate plan is very streamlined because of the stage of life that we're in. However, that doesn't mean we're not gonna revisit this down the line, especially as our kids get older and our estate may become more complex. And this is something that we talked about on that episode with Heather. When is it a good time? To revisit your estate plan. A trust may eventually make sense for us, may make sense for controlling how our assets are passed down, and would make things essentially easier after we both pass on and our kids are grown. So if you're listening to this, wondering should I get a trust? The answer is maybe. And it depends on your goals, your family structure, and how much complexity you want to avoid for your heirs. And yeah, if it's done right, you can still get that important step up in basis either way, but it's got to be a revocable trust. If you haven't listened to that episode with Heather Zach, I'll put that link in our show notes for easy access. It was a really, really helpful one. And as a reminder, that episode was actually previous recording of a workshop that we held for our so Many members in the so Many Members Club. If you're interested in that, that link is also in our show notes.

[ZocDoc]

Have you ever woken up with a funky symptom like a swollen, itchy eye or a tight pain in your neck and immediately googled it or searched TikTok.

[Farnoosh Torabi]

To see what's wrong?

[ZocDoc]

We've all gone down that rabbit hole, but it's time to get the help and care you really need with ZocDoc. ZocDoc is a free app and website where you can search and compare high quality in network doctors and click to instantly book an appoint appointment. We're talking about booking in network appointments with more than 100,000 doctors across every specialty from mental health to dental health, primary care to urgent care, and more. Once you find the right doctor, you can see their actual appointment openings. Choose a time slot that works for you and click to instantly book a visit. Appointments through Zocdoc also happen fast, typically within just 24 to 72 hours of booking. You can even score same day appointments. I can't tell you the number of Times I've used ZocDoc in a pinch, and you should too. Stop putting off those doctor's appointments and go to Zocdoc.com somoney to find and instantly book a top rated doctor today. That's z o c-o c.com somoney zocdoc.com somoney.

[Farnoosh Torabi]

It'S not what you say, it's.

[ZocDoc]

How you say it.

[Farnoosh Torabi]

And when you show up in a Range Rover Sport, you don't have to say much at all.

[ZocDoc]

This is the vehicle for those who.

[Farnoosh Torabi]

Lead with quiet confidence, where power, poise.

[ZocDoc]

And performance speak louder than words. The Range Rover Sport combines a dynamic sporting personality with refined elegance and agility, delivering an instinctive drive that feels as purposeful as it looks. Its distinctly British design doesn't shout for attention, but it gets it. And when the road changes the Terrain Response 2 system with seven drive modes Adaptation apps Like a seasoned traveler, inside luxury is not an add on, it's a standard. Breathe easy with the cabin air purification system, enjoy serenity with active noise cancellation and explore in comfort whether you're gliding through city streets or carving through winding country roads. There's even a plug in hybrid engine option with an estimated electric range of 53 miles, because even raw power can be smart. Explore Range Rover sport@range rover.com US that's range rover.com US Sport.

[Verizon]

Now at Verizon we have some big news for your peace of mind. For all our customers, existing and new, we're locking in low prices for three years guaranteed on MyPlan and MyHome. That's future you peace of mind and everyone can save on a brand new phone on MyPlan. When you trade in any phone from one of our top brands, that's new phone piece of mind. Because at Verizon, whether you're already a customer or you're just joining us, we got you. Visit Verizon today. Price guarantee applies to then current base monthly rate. Additional terms and conditions apply for all offers.

[E Trade]

Support for this podcast and the following message is brought to you by E Trade from Morgan Stanley. With E Trade you can dive into the market with easy to use tools, zero dollar commissions and a wide range of investments. And now there's even more to love. Get access to industry leading research and insights from Morgan Stanley to help guide your decisions. Open an account and get up to $1,000 or more with a qualifying deposit. Get started [e-mail] terms and other fees apply. Investing involves Risks. Morgan Stanley Smith Barney LLC Member SIPIC E Trade is a business of Morgan Stanley.

[Farnoosh Torabi]

All right, time to help out Lee in the audience who writes a beautiful note about a transition happening in her life with her partner. And I think that we can see ourselves in this. You know, a lot of us are going through or want to go through some important transitions this year. For whatever reason. I know many of you in the audience like me. You're in midlife and with that comes so many new beginnings and endings and not to be afraid of them, but as I write in my book, A Healthy State of Panic, it's important to take inventory of everything and take a real big step back and ask yourself why? Why do I want to make this change? Why do I value what I value and have that lead to the best it can your financial decisions? But here's the question at hand. This is from Lee, who writes in she Says Farnooche. Hello. I'm a huge fan of your work, longtime follower of this podcast.

[ZocDoc]

Thank you for everything that you do.

[Farnoosh Torabi]

My husband has decided to take an.

[ZocDoc]

Early retirement option from his federal job.

[Farnoosh Torabi]

He's in his 50s and he's starting a consulting company while working on developing a medical device and I'm so proud of him. I'm also concerned about how we should be adjusting financially to make sure that we are set for retirement. I'm 10 years younger than my husband. I'm still paying off my student loans, but I have a good paying job. I make $165,000 a year and I have a solid start on my 403 retirement plan.

[ZocDoc]

I have about $260,000 saved there.

[Farnoosh Torabi]

My husband has $600,000 in his thrift savings plan plus a pension of about $4,500 a month that reduces by 20% annually. I'm currently contributing to my 403B about 8% plus my employer contributes 10%. I'm very grateful for this. I'm also concerned this will be paused like it was during COVID My husband will no longer be contributing to his thrift savings plan, so I wonder if I need to pick up the slack. I'm also worried about liquidity, but we do have a six to seven month emergency savings. Ideally I'm looking to go half time and consult in 10 years so I can spend more time traveling with my husband who may wish to mostly retire at that time. Any guidance you can provide would be so appreciated as we face this uncertain but exciting new phase in our lives. And I know now is the time to make changes to support our future. I told you this was a really thoughtful note from Leigh in the audience. Thank you so much Leigh for this thoughtful and really beautiful note and of course for being a longtime listener. I'm really thrilled for your husband and this chapter that you're both entering. There's a lot to digest here, a lot to unpack, and I can tell you you've already put a lot of thought into the trade offs, the possibilities. So let's talk and walk through it. So so you and your husband are what I call at an inflection point where your financial life is shifting from accumulation and growth to flexibility and preservation. You've worked really hard to get to this place and I think it now is an appropriate time to sort of hit, pause, take stock and make some intentional moves that will support you and set you up for success down the road. So here are a few strategies that I'd recommend for both you and your husband as you step into this next phase. Firstly, you've done this a little bit, but together I want you to assess your long term retirement picture. In addition to wanting to travel together and you going part time and him essentially retiring in 10 years, what do you have saved now and will have in the future to support your goals? Now, you mentioned 600,000 in the Thrift Savings Plan, the pension of $4,500, which I know reduces over time, but that's still substantial. A promising consulting and entrepreneurial chapter ahead. That's great. That's all on your husband's plate. You, my friend, you've got over a quarter of a million dollars in your 403B, a high salary, a generous 18% combined retirement contribution every year, and a healthy emergency fund of six to seven months. That is very strong. The question is though, will this sustain you both through 30 plus years of retirement? Especially as we know with that reduced pension income, the halted TSP contributions and potential employment changes down the line. So a few questions I would look to answer. What are our estimated annual retirement expenses factoring in inflation, when do we expect to each need to tap our retirement accounts? And will your husband's business generate any ongoing income even in his partial retirement? For this you can work with a financial planner who can run some retirement projections for a one time review. This isn't like a forever commitment. I want to express this to everybody that often we think a financial planner is a forever commitment, but many times they'll work with you on a specific project or a goal. In this case I would go to this planner and say we want to just kind of revisit our retirement plan and understand what is actually realistic. And, and at this pace of growth with our money, and this pace of contribution with our money, what are we looking at in 10 years? What's possible for us in 10 years? There are also retirement tools, online calculators that can help you with this. But I do think that sitting down with someone investing in a, you know, one to two session plan can be a great use of money. Okay, so that's retirement. The second thing I want you to review is your liquidity. Now you have a really solid emergency fund, but I hear that you are concerned about liquidity because your husband is now basically shifting to entrepreneurship and when his income Stream ends and it's a big one. Right? Federal job. You don't want to dip into your retirement accounts too early, which could trigger taxes or penalties. You do have six to seven months of savings, but I would look at improving that cash liquidity as much as at least a year to possibly two years of essential expenses in cash or short term instruments like a high yield savings account or a money market fund. We always say as entrepreneurs we have to be extra careful, extra precautious with our finances and having a six month cushion, while that's solid for us as entrepreneurs that aren't getting a steady paycheck, we may have longer gaps where we don't. You don't earn enough. So a year is, is typically the recommendation. A year to two years, possibly if your husband's consulting business generates income. Eventually I would build a cash cushion within the business to manage slow months without needing to touch personal savings. And of course you know this, but try not to take on any new debt, especially if your employer benefits might be paused. Again, I wouldn't want you to take on that additional risk if you can avoid it. It you asked if you should increase your retirement contributions, I mean you're already getting 18% into that 403B between you and your employer. Contributing. That's a fantastic setup if your cash flow allows for it. I wouldn't say this is priority. I would say your liquidity, your savings is more important than contributing more to retirement right now. But if there is extra, then you might consider contributing a little bit more to hit that IRS maximum, which is 23,000 for 2025 or it's 30,500. If you're 50 or older, you may consider bumping it up to get those extra percentage points in. But that said, don't sacrifice liquidity or even your lifestyle just to catch up. You've got over 10 years of prime earning years ahead. So consistency is important, not perfection here. You've already done a really nice job of saving and you're continuing to do a nice job of saving. Investing, I should say. Also quick note, if your husband is earning at some point money through his business, he has 1099 income coming in.

[ZocDoc]

He then may be able to open.

[Farnoosh Torabi]

Up his own retirement, a Solo 401K or a SEP IRA, which then gives him access to investing, continuing to invest for his retirement. And those contributions do reduce your taxable income, similar to an IRA, a 401. Now let's talk about you. I love that you're already thinking ahead about what would be an ideal situation in 10 years. I get it. You don't want to be working full time, especially with the age gap, your husband's retired, you're not. It would be nice to kind of split the difference and work half time and maybe consult so you have more control over your time. That's a very powerful move, and I think it's totally achievable. What you want to start thinking about now? What is going to be my ideal consulting work? What would that look like? Clients scope rates. Another question. How much income do I need to supplement my retirement and allow for travel? This may not be as much as you think, because by the time in 10 years when you're going to sort of semi retire and you can start to withdraw without penalty from your IRAs and from your retirement accounts, that may be close to what you need. And you may only have a small gap. And so you may only have to work like 10 or 15 hours a week. And then one last thing. I mentioned this earlier, but really important to take a big step back and talk about with your partner, your financial why transitions like this are a great time to revisit your shared values and vision as it pertains to your money. So I mentioned working with a financial advisor potentially. But the two of you should also have ongoing discussions and maybe very intentional meetings, like a money date with your husband. And ask yourselves, what does security mean to each of us right now? It's different than what it meant probably even just this time a year ago. And then ask yourselves, what kind of lifestyle are we aiming for at 60, 70, 80? Are there any dreams that we're deferring that we can actually start sooner? So, you know, bucket lists like, what are the things that you want to do? Start dreaming big. And again, this is an important exercise because it's centering you both on your values. And from here, you're gonna make the best financial choices. It's not just about where to put the money. It's about how to align your money with the life that you're creating together, you're already on a very thoughtful path. Absolutely have no concerns. This is just really food for thought. I think you're doing a lot of the right things. This is what I find. People reach out to me, not because, I mean, sometimes they really need to know exactly what to do. But in a lot of cases, like with our friend here, Lee, you know, like, you have a really good Spidey sense and you're doing a lot of the right things, but it's helpful to get a second opinion from someone you trust and I don't take that for granted. I really appreciate that you have chosen me to reach out to, to ask this and to share bits of your life with. You're doing a lot of things right and so the next phase is going to require just some strategic tweaks, more visibility into your cash flow, maybe, maybe increasing your retirement savings, but not the priority. I would rather a much deeper focus on liquidity and then celebrate your husband's doing something bold. You're laying the foundation for a future that's got more freedom, flexibility and optionality. I love it. I would love to stay tuned to your life. So please keep us posted and keep asking these great questions along the way. Happy to help you.

[Melissa]

And last but not least, a question about money market funds versus money market accounts. Melissa writes in and says that she and her husband are trying to consolidate their bank accounts and get into a high interest savings account. Her husband is proposing that rather than a regular high interest savings account, that they put their emergency funds into a money market fund. She says, I'm doing some research on pros and cons and while they aren't insured by the fdic, they appear pretty low risk and they're heavily regulated. Would that be a good option for investing our extra cash? It would be cash that we don't need on a daily basis, though we may be withdrawing it within the next.

[Farnoosh Torabi]

Year or so to buy a house.

[Melissa]

Any thoughts on how to figure this out? And also let me know if I'm overthinking it. No, Melissa, you're not overthinking it. Money market funds are investment accounts. Money market accounts are savings accounts. Savings accounts are typically FDIC insured. You can put up to 250 grand in it and if the bank collapses, the FDIC comes in, gives you your money back up to $250,000. A money market fund is not insured by FDIC. It's essentially a mutual fund. And so there is some regulation. Of course, with all kinds of investments. There is the SIPC Securities Investor Protection Corporation. This is the equivalent of FDIC insurance for investments. That said, it doesn't protect your money if, let's say the stock market has a bad day and you lose value in your portfolio. This is if your brokerage goes under, SIPC sweeps in and provides up to half a million dollars in coverage for your investments. That includes 250,000 for cash. It is rare that a money market fund would lose the money, but it did happen. I just want to mention it did happen as recently as the 2008 financial crisis. At that time investors could only get 97 cents for every dollar that they had invested in a money market fund. That was an extremely rare time, but it is important to point it out that it is possible for you to lose at least some of the value of your of your cash in a money market fund in a crisis like the financial crisis that we had in 2008. As an alternative, High Yield Savings Accounts CDs too. If you don't need this money for the next year, you could opt into a of deposit which does have a term and you can start with as little as three months or six months. You can roll that into a longer term CD later if you decide you don't need it as early as six months or a year. But those also offer pretty competitive yields and they are FDIC insured. So my feeling is that if you have cash that you need in the next year to two years, go with an FDIC insured account. It offers more protection and in an environment like now where we are seeing high yield, the rates are very competitive with the funds. You're not really missing out financially by going with an account over a fund and if anything you're just getting more security. I think that if you are invested in a portfolio for retirement and there is an aspect of that portfolio that is a money market fund, fine, because you're not going to be touching that money for decades. It's not something that you're going to need immediately. But to hear what you're saying is like you want to have this money for a down payment on a home in the next year. You want to take zero risk. FDIC insurance all the way.

[Farnoosh Torabi]

Thanks everyone. That's our show this Friday. Thanks for all your questions. Keep them coming. You can email me [e-mail] you can go to the somoneypodcast.com website, click on Ask Farnoosh and either leave a voicemail or type in your question. I hope your weekend is so money.

[Verizon]

Now at Verizon we have some big news for your peace of mind. For all our customers existing and new, we're locking in low prices for three years guaranteed on my plan and my home. That's future you peace of mind and everyone can save on a brand new phone on my plan. When you trade in any phone from one of our top brands, that's new phone peace of mind. Because at Verizon, whether you're already a customer or you're just joining us, we got you visit Verizon today. Price guarantee applies to then current base monthly rate. Additional terms and conditions apply for all offers.

[Hydro]

Want a workout that actually works? Hydro delivers a full body workout that hits 86% of your muscles in just 20 minutes. Rowing with Hydro combines strength and cardio with thousands of workouts led by Olympians in breathtaking locations. No wonder nine out of ten members are still active one year later. Try hydro risk [e-mail] and use code row to save up to $475 off your hydro pro rower. That's H Y D R O W.com code roll.