“You Should Fire Your Tax Advisor”

Summary

The Ramsey Show Highlights: Episode Summary – “You Should Fire Your Tax Advisor”

Introduction

In the January 5, 2025 episode of The Ramsey Show Highlights, hosted by the Ramsey Network, listeners receive actionable advice on personal finance and retirement planning. This episode centers around a caller's financial dilemma, particularly focusing on retirement goals and the pitfalls of poor financial advice. The hosts, including experts like Dave Ramsey, provide insightful analysis and practical guidance to help listeners navigate their financial journeys.

Caller’s Financial Situation

The episode begins with a listener, referred to as Caller B, reaching out for assistance with his retirement plans. At 47 years old, Caller B aspires to retire by 55. Initially confident in his fiscal responsibility, he recounts how listening to Dave Ramsey in 2022 made him realize his financial strategies were flawed.

Caller B [00:08]: "I thought I was pretty fiscally responsible and then I started to listen to you in 2022 and realized I wasn't as smart as I thought I was."

Debt Management and Company Truck Loan

The conversation delves into Caller B’s current debt situation, which primarily consists of a company truck loan. He has a three-year loan with monthly payments of $1,500, offset by reimbursements ranging from $1,100 to $1,700 based on mileage driven for his company.

Caller B [00:34]: "The only debt I have is I've got a company truck where I got a three year loan and it's 1500 a month, but I get reimbursed 1100-1700 depending on how many miles I drive from my company."

Host A emphasizes the importance of systematically managing this debt to ensure the truck is paid off without incurring more payments beyond the three-year term.

Host A [01:08]: "You have to systematically keep money moving that direction so you can upgrade the truck periodically. Yeah, but no more payments."

Retirement Savings and Tax Advisory Concerns

The discussion shifts to Caller B's retirement savings, highlighting his 401(k) contributions. Since April 2022, he has accumulated $19,000 in a Roth 401(k), $67,000 in a traditional 401(k), and $18,000 in an HSA. Despite these contributions, Caller B expresses concern about his progress toward retiring in seven years.

Caller B [02:27]: "Well, you're tracking. You're dumping a bunch of money."

A pivotal moment arises when Caller B reveals his dissatisfaction with his tax advisor, who advised switching from a Roth 401(k) to a traditional 401(k). Dissatisfied with the advice, Caller B decides to change his tax advisor, labeling the former as incompetent.

Caller B [01:41]: "My tax advisor said that I should be doing a traditional 401k. You should fire your tax advisor because you said... Yeah, so."

Host A [01:52]: "I'm serious. It was a heart attack. They're trading a tax deduction for tax free growth. This guy can't do math."

Income and Family Considerations

Caller B shares his financial details, including an annual base salary of $111,000 and a bonus of $56,000, totaling a substantial household income. He supports a family with three children, with his wife staying home to care for them.

Host A [02:32]: "What do you make?"

Caller B [02:32]: "My base pays 111,000 and then my bonus was 56,000 this year."

Host A [02:38]: "Yes. Three kids. But my wife stays home with the kids, so it's just my income."

Analysis and Recommendations

Host A commends Caller B for making prudent financial moves but cautions that his current retirement timeline may be overly ambitious. He suggests leveraging Ramsey’s online calculators to project his retirement savings' growth and assess their sufficiency.

Host A [02:44]: "You need to do some calculations. You can use some of the calculations calculators on our website... And start saying, okay, what will I have when I'm 55?"

Host C reinforces the notion that retiring at 55 might be too aggressive, advising Caller B to reassess his goals through detailed financial analysis. He underscores that financial retirement differs from complete professional retirement, emphasizing the importance of staying active for mental and physical well-being.

Host C [03:34]: "I think the 55 is a little too aggressive... financial retirement in my mind is different than just straight professional."

Conclusion and Final Advice

The hosts collectively suggest that while Caller B is on the right track, he should refine his retirement plans by thoroughly evaluating his financial projections. They stress the importance of continuous financial education and strategic planning to achieve a comfortable and sustainable retirement.

Host A [04:18]: "You can start to run your numbers out and it'll give you some insights onto where you are so that you're doing... you're doing pretty good, Rick."

Closing Remarks

The episode concludes with a reminder about the Ramsey Network app, encouraging listeners to download it to enhance their financial planning efforts.

Host A [04:27]: "Brought to you by the Ramsey Network app. Download today to go further with Ramsey."

Key Takeaways

1. Debt Management: Systematically manage and eliminate debts to free up financial resources for retirement savings.
2. Retirement Planning: Utilize online tools to project retirement savings and adjust goals based on realistic financial projections.
3. Tax Advisory: Ensure that financial advisors provide accurate and beneficial advice; don’t hesitate to change advisors if their guidance is questionable.
4. Income Utilization: Maximize income through strategic investments and savings to achieve retirement goals.
5. Holistic Retirement: Consider both financial stability and personal well-being when planning for retirement, emphasizing the importance of staying active.

This episode serves as a valuable resource for listeners aiming to refine their retirement strategies and underscores the significance of informed financial decision-making.

Transcript

[A]

Brought to you by the Ramsey Network app Download today to go further with Ramsey.

[B]

Well, I'm 47 and I'd like to retire at 55 and I'm not sure where to go yet. I thought I was pretty fiscally responsible and then I started to listen to you in 2022 and realized I wasn't as smart as I thought I was. So now I'm going to ask for help.

[A]

Oh my goodness. Okay, cool. So how much debt have you got today?

[B]

The only debt I have is I've got a company truck where I got a three year loan and it's 1500amonth, but I get reimbursed 1100-1700 depending on how many miles I drive from my company.

[A]

You get that whether you have a car payment or not.

[B]

Correct. So, yeah, I need to get that truck paid off and then still give me the same amount. But the truck has to be. It can't be more than three years old, so I have to.

[A]

You have to systematically keep money moving that direction so you can upgrade the truck periodically. Yeah, but no more payments.

[B]

Yes.

[A]

The program is independent of debt. It does not require debt. Yeah, you just used it to justify debt. So. Okay, so we're going to clear that now. What? How? What's your nest egg looking like in your 401k?

[B]

Well, I've only. I came out of a different position where I was in a pension program. And then April of 22, I started in with this 401k program and I've got. This is the big question is last year I started doing a Roth 401K.

[A]

Good.

[B]

And my talk tax advisor said that I should be doing a traditional 401k. You should fire your tax advisor because you said. Yeah, so.

[A]

I'm serious. It was a heart attack. They're trading a tax deduction for tax free growth. This guy can't do math.

[B]

That's what I thought too. So I kept doing the Roth 401k.

[A]

This year and changed tax advisors because I don't know what else he's doing. This dumb.

[B]

Yeah.

[A]

Anyway, so you don't have a lot there, so you're a long way from retiring in seven years.

[B]

Yeah. So I got 19,000 in the 401 Roth 401K, 67,000 in a traditional 401, 18,000 in the HSA. And that's all since April 22nd.

[A]

Good. Okay, well, you're tracking. You're dumping a bunch of money. And what do you make?

[B]

My base pays 111,000 and then my bonus was 56,000 this year.

[A]

Okay, you're married.

[B]

Yes. Three kids. But my wife stays home with the kids, so it's just my income.

[A]

Okay. Well, I mean, the beautiful thing about what you're doing is you're making all the right moves. I think the thing that'll help you is to just do some calculations. You can use some of the calculations calculators on our website. They'll help you. Or in the EveryDollar app, either one. And start saying, okay, what will I have when I'm 55? What will I have when I'm 60? Based on my current trend line with the lump sum I have now, plus the payments I'm putting in now, and that'll start to tell you, you know, give you some comfort level as to where you're going to be. I don't think you're going to be mathematically able to live like, anywhere near like you're living now at 55 years old with no work. So I think you're working a while. That's not a bad thing, though. You need to be doing something. I'm 64. I work, so it's not the end of the world.

[C]

Yeah, I would agree with that. I think the 55 is a little too aggressive. So now, you know, double down, do your numbers crunch and go, okay, what is it really going to look like? And again I the data DAV to back up what you said. The data is overwhelming for people who want to research it on what happens when you truly stop working. Now, financial retirement in my mind is different than just straight professional. I'm not doing anything any longer. I think that it's not good for the body and it's definitely not good for the soul.

[A]

Not good for the mind. It's a terrible thing to waste. Yeah. Doing something. Yeah. I just, it having enough money to not have to work is different than just not working. That's what you're saying?

[C]

100%. Yeah.

[A]

Yeah. But either way, either way, you can start to run your numbers out and it'll give you some insights onto where you are so that you're doing. You're doing pretty good, Rick. Sounds like it. I'm going to get out of the truck debt and I'm going to jack up on some of these other things. So the investment side and get this thing moving. Brought to you by the Ramsey Network app Download today to go further with Ramsey.