← The Stacking Benjamins Show
The Stacking Benjamins Show
We Answer Your Awesome Questions: HSAs, Roth Conversions, Trusts, and More (SB1730)
01:15:43
Loading summary
Transcript342 lines
- [00:00]
A
This episode is brought to you by Navy Federal Credit Union. Tapping into your home's equity shouldn't come at a high price. That's why we offer our home equity loan options. We cover 100% of closing costs, which could save you hundreds. And with our fixed equity loans, you can consolidate debt and lower your monthly payments. Plus, we have no application origination fees. So if you want to get more out of your home base, learn more@navy federal.org Navy Federal Credit Union. Our members are the mission. This episode brought to you by Progressive Insurance. Do you ever find yourself playing the budgeting game? Shifting a little money here, a little there, hoping it all works out well, with the name your price tool from Progressive, you can get a better budgeter and potentially lower your insurance bill, too. You tell Progressive what you want to pay for car insurance and they'll help find you options within your budget. Try it today@progressive.com Progressive Casualty Insurance Company and affiliates Price and coverage match limited by state law. Not available in all states.
- [01:13]
B
My plan is sound, mathematically sound. It cannot fail. It's perfect. Three months from now, I will be worth $50,000. Independent for life.
- [01:34]
C
Live from Joe's mom's basement, it's the Stacking Benjamin show. I'm Joe's mom's neighbor, Doug, and today the star of the show is you.
- [01:52]
B
You.
- [01:53]
C
We're sharing your calls, emails, notes in our Facebook group, and more as we dive into HSAs, trusts, auto insurance, the efficient frontier, health and retirement, and a whole bunch of stuff I can't think of. And now here are three people who are buckled in and ready to answer your questions. It's Joe, OG and CFP Anna. Alum can't figure out I was gonna give her the whole, oh, JJG treatment and I couldn't figure out how to.
- [02:24]
B
Do ends in a syllable. It's a lot harder.
- [02:27]
A
Maybe next time we got to put Anna at the top.
- [02:29]
C
I think it would have just sounded like Anna Aluminum.
- [02:33]
A
Hey, everybody. Welcome back to the Stacky Benjamin show. I am Joe Sal Se. Hi, Average Joe. Money on X, Twitter, whatever it you might call it these days. And the guy who these days and every day we call OG on the show is sitting across from me. Mr. OG's here. How are you, brother?
- [02:49]
B
Oh, I'm just happy to be here. It's the middle of the week. It's the middle of a short week, so it's. It's even better.
- [02:55]
A
You know what I dislike about labor day week is you get to Friday and you're like, wow, that was Great. But then the following Wednesday, like, are you kidding me? I still have two days left of this. Like, I have to work all five days. How tough is that?
- [03:09]
B
Yeah, tough for a guy like you find.
- [03:12]
A
We'll find a way to get through. Of course, next week I to Portland. So I get to work exactly one day next week, which is not too tough.
- [03:19]
B
How are you going to handle it?
- [03:20]
A
The person who's going to hopefully do all the work, OG on this show is a woman who you have the pleasure of working with. Anna Ellen joins us. How are you?
- [03:30]
D
Hey, everyone. I'm good, thanks.
- [03:33]
A
Welcome to the party. Anna, your life must be a party because you get to work with OG Every freaking day.
- [03:40]
D
Yeah, I talked to him Monday through Friday. Oh, it's a blessing.
- [03:44]
A
Pinch me.
- [03:45]
C
Look how forced that smile looks. Why she's picking up that sign.
- [03:51]
B
That paycheck depends on it. Say nice things or else.
- [03:57]
A
It's like that. My boss told a funny joke laugh, right? It's great. The golf clap.
- [04:02]
B
Wait, yeah, I've heard that laugh before.
- [04:05]
A
So, Anna, what's your favorite part of being a cfp?
- [04:08]
D
My favorite part of being a cfp? I didn't expect that to be the first question. It's really fun working with people. Recently I transitioned from associate advisor, where I was working more under Josh and another advisor, and then transitioned into being lead advisor. And it's super fun being able to talk to clients, give them advice, and just become kind of friends with them. I really enjoy that. It's super fun every day. I've just grown to really, really like it. Growing into this role now, that was.
- [04:40]
A
Always my favorite piece. Watching people attain their goals and knowing that every day you help them get a step closer. I don't know when you see people's able to afford to help their kid buy the first car or, you know, somebody getting a house or retiring, like, that was super fun. But if you had advice for people just breaking into the business, because as you know, this is a hard business being a financial planner. We get questions all the time from people about being a financial planner. What would your best advice be to somebody who thinks they might want to be a financial planner?
- [05:11]
D
I think finding the right people to help guide you in the path.
- [05:16]
A
Well, I know still clearly haven't found that.
- [05:18]
D
I know we're laughing about OG for that. He has been an amazing mentor to me. Obviously, he's my boss too, but I don't know if I would be where I am right now as a lead advisor and working with clients without him.
- [05:33]
A
Oh, Doug, it's getting all right. Yeah.
- [05:39]
B
Tell me more, don't stop. Tell me more, don't stop ever.
- [05:42]
A
We're sorry, Anna, can't stay. Not at all. We're super happy you're here today with us, Anna, to help us answer our Stacker questions as if you're brand new here. We have a phenomenal community and you have asked us a lot of questions. If you have a question for us, by the way, head to stacky benjamin.com voicemail and we'll answer your question as well. We try to answer at least a couple a week. In just a second, Anna and Og and I are going to dive in. But before that, we've got a couple sponsors to help us keep on keeping on so that you don't have to pay any money for any of this. Goodness. So we're going to hear from them and then Anna, Og and I starting off with a question about Roth conversions. This episode is brought to you by Navy Federal Credit Union. With rising housing prices and steeper mortgage rates, we know homeownership may seem too expensive to be achievable. But that's why we offer a Home Buyer's Choice loan that can open the door to affordable homeownership. Our Home Buyer's Choice loan has no down payment options available, which means you don't need to wait years to save money. And with our no refi rate drop, you might be able to lower your rate in the future without refinancing. Plus, while most lenders require borrowers to purchase private mortgage insurance unless they can make a 20% down payment, we don't require PMI. Finally, we offer fixed payments, so your monthly payment will always be the same. So if you're looking for your first home or your next home, you can open the door with a Navy Federal Home Buyer's Choice loan. Visit navy federal.org to learn how you can achieve homeownership. Navy Federal Credit Union Our members are the mission. Terms and conditions apply Equalizing lender loans subject to approval and eligibility requirements. Learn more@navy federal.org Our first question comes from Stacker Paul, who is. Well, he's ready to do some Roth converting guys. Hey Paul.
- [07:45]
E
Hi Joe and Og. Really grateful for the show. Thank you. You've taught me so much. I'm now confident it's time for a big jump into NFTs. I'm 62, gainfully employed in a semi retirement job to pass the day and buy some health care. The kids are in college or have successfully fledged the nest. Our family Reached our fine number some years back with no debt and a portfolio of low cost ETFs mimicking Vanguard target aid funds with a good dose of Paul Merriman small cap value added in and years of safe cash assets. After three decades of marital bliss, my spouse abruptly decided to become a free agent. The divorce attorney dust has since settled and with the division of wealth, I may be homeless, but I have a substantial chunk in fresh traditional IRA. In my asset column, things break down to about $500,000 in the traditional IRA, a comfortable Roth $400,000 in a taxable brokerage I bonds and CD ladders. Tax wise, I routinely land in the low end of that 22nd percent bracket. Here's my question. With regard to entering the complex moving parts of Medicare and Social Security taxes in the next three to eight years, what's the best play for Roth conversions? Should I push to convert all the traditional IRAs over in the next three years and swallow hard at 24% or draw conversions out in a decade? Doug the dad jokes work for me. Keep up the good fight. Cuckold in Carolina.
- [09:05]
A
Hey, Paul. Or I'm not even gonna. I can't even refer to him as he referred to himself.
- [09:11]
C
Caroline, let's just answer the question.
- [09:13]
A
You know what I love, Paul, I love the fact that you were able to keep your sense of humor through all of this. But I may be homeless, but that's great. And to really be positive, you've done a great job saving and I think that's really going to help you going forward. And it seems like asset allocation wise, you have a lot going on. But let's talk about this. Anna and OG, he's got this issue. He's in the 22% bracket, but he's looking at coming up additional taxes on Medicare and Social Security. First of all, I think we got to break down what is this Roth conversion thing anyway? Oh gee, like what's he trying to accomplish with a Roth conversion? For our new stackers, at the base.
- [09:54]
B
Level, when you contribute money to retirement, you basically picking do you want to pay taxes on that today or pay taxes on the future for the longest time? Especially people that have been, you know, saving money for a long time or been in the workforce for a long time, the default answer was save money before you pay taxes. So your pre tax 401k, your traditional IRA, that sort of thing. It's been a while since the Roth has been out 2520, almost 30 years now. But in the workplace plan department, Roth 401ks surprisingly are still pretty rare. I think everyone has one now, but still most people don't participate in the Roth 401K. And I think a lot of that has to do with just inertia. But basically over his career, he's put a bunch of money in pre tax accounts. So he hasn't paid taxes on this money at all. And in exchange for that, as that money sits there and grows and does its thing for 30 years, like he said, he's not paid a dime of taxes. The trade off is that the IRS says eventually you got to start paying us. You pay taxes when you withdraw the money, and then if you don't want to withdraw it, they still make you pay taxes with a minimum schedule of withdrawals starting when you turn 73, increasing to age 75 here shortly, but 73. So what he's talking about is, can I strategically decide to pay taxes on this money today and be in charge of when I want to pay those taxes? Or is it better to wait or is it better to do some sort of combination of that? So you could take that pre tax money, move it to a tax free bucket, which makes it tax free forever. But along the way, you know, on that little trip from one bucket to the other, you got to pay the IRS some taxes. So the question is, is do I do the default plan starting at 73? Do I just take the money out as I need it and pay taxes when I need it, or do I be more intentional and try to pay taxes at the rate at which I want to pay it and move this into a the tax free bucket?
- [11:38]
A
Yeah. For anybody considering doing this, let's break down just the pieces. The first thing is, so, oh geez, you explain the money is in a pre tax account, then you're going to take the money out of that account, you're going to move it over to the Roth account. You're going to have to calculate what the tax is before you do that because you have to pay the tax one time without penalty today. And then whoever your custodian is, Schwab, Fidelity, Vanguard, whoever it might be, they will help you make that transfer. And then when you pay your taxes, you pay the tax bill, you declare it on your taxes and you pay, you pay the tax bill.
- [12:14]
B
And a lot of times along the way they'll withhold taxes as part of that conversion. So if you say, well, I'm going to convert 100,000, you take 100,000 out of your IRA and you decide I want to pay 20,000 in taxes so you put 80,000 back in your Roth. That's kind of a less than ideal way to do it because you can see what's happening, right? You're taking 100 grand out of your accounts, but only putting 80 back in. It's much better to have that cash set aside outside of your investment account to be able to pay that tax. But effectively that's.
- [12:42]
A
Is there just a box to check that says I don't want you to withhold?
- [12:45]
B
Yeah, you have to do that. You have to tell the custodian, like you said, Schwab or Vanguard or whomever, you have to tell them how much you want to withhold for taxes, if any. And just recognize that at the end of the year you're going to get a 1099 that says here's what you did, and then you fold that into your tax return.
- [13:02]
A
So here is then the problem he's up against. He says he's in the 22% bracket in the bottom. So normally I would say take as much as you can up to the next bracket, see how much tax that is and convert as much Roth as you can. But he's looking at possibly higher taxes in the future if he waits too long. Because later on there's going to be tax. Anna, there's going to be tax on his Medicare and Social Security if he waits too long.
- [13:27]
D
Yeah. So my thought on this situation here is that absolutely max out 22% bracket, if you can, why not even get into the 24% bracket too? You're not too far off at that point. Go into that area as well. Do that before you're 62. Do that before you get into where if you do have Roth conversions that are going to affect income, that could eventually affect your Medicare premiums, that is where it gets a little bit more dicey. If you can get this done now and you do have the cash, like Og was saying, you can pay the taxes with cash as opposed to taking money out of the actual conversion amount. So you're putting less in. That would be probably the best bet that you have. But ultimately it's what can you afford to do? Can you afford to pay the taxes right now on that and still put money into the Roth and pay the tax bill with cash? Or is cash a little bit strapped right now and maybe this isn't the best time? Like Og said, you could really wait until you are forced to do it at RMD age and you're forced to take money out and do taxes. You don't have to do Roth conversions. It's just optimizing your portfolio at that point.
- [14:36]
A
I love the idea of simplifying things by doing as much now. And I like what you said there. I can see the calculation. I don't think this is as easy as I do one or the other because I also like that, you know, Anna, you were talking about having the money to pay the tax maybe available because. Because. OG to your point, if you have them withhold, you're taking money away from your retirement. You don't want to do that. OG I feel like it's a little more complicated than, than Paul's making it. I can see the spreadsheet here. What's the tax going to be if I wait versus what's the tax going to be if I front end load this? I feel like there's some nuance in deciding how this and that's going to depend on not just his income today, but where he expects his income to be later.
- [15:20]
B
Well, I mean, the reality is that all of those things count and the things that are unforecastable also count. So the thing that we don't know is what are really going to be the tax rates in 10 years from now or 15 years from now when this break even eventually is supposed to happen. Because if you take money out of your account today, even though it's, you say, well, I'm going to pay for it from cash, it's still out of your net worth, right? It's like if you had a million dollar net worth, now you have a $980,000 net worth. It's just, that's just how that works. And so the question is how fast can you recover that 20,000 that you lost and pass what would have been $1 million growing instead of 980,000 growing, if that makes sense. And so that break even can take 10 years or 12 years or 15 years. And the big unknowable thing is what is going to be the tax rate, like Anna said, at 73 when he has to take the money out? What if tax rates are 15% and you took it out at 24? You know, that's a really bad trade. Just like if tax rates are 32 and you took it out at 24, you're going to high five yourself. So I think there's some unknowable things. The other piece is, you know, and Anna alluded to this as it relates to your Medicare premiums that look back as two years. So if he's 62 today and you know, thinking, okay, well maybe next year I'm going to, I'm going to start taking advantage of these Roth conversions. You have to forecast your income for what that's going to forecast what that's going to do to your Medicare premiums two years in advance. We don't know what the Medicare premiums are looking like in two years, except we know that they're going to be more expensive if you cross a certain threshold. So that's an impossible thing, but something you have to take into consideration. And then the last piece, I think.
- [16:53]
A
But then also to stop you right there, that is another reason to bias toward doing more now.
- [16:58]
B
Yeah, the known. Known versus the unknown. Unknown, I think. And simplicity, like you said. And I think the third piece of this is really just from a cash flow standpoint. You know, when you retire early on in your retirement is generally when you're spending the most money. Right. Like that's when you do the trips. That's when you, you know, you said he still got kids in college. It's kind of the people say this, that's the go go years. That's the time you're doing those things. And so what happens if you have all these fun plans and then you also have a major cash flow issue. You need a roof repair or there's a car accident and you have insurance deductibles or, you know, whatever healthcare issue, and you have some out of pocket expenses. So now you have this big healthcare expense or you have this big out of pocket expenses. You weren't planning on top of a year that you were planning on having a pretty good. And now you also owe the government 50,000, probably not the year to do Roth conversions, even if mathematically from a tax standpoint it makes sense. So I think Roth conversions are a year by year decision that you make the decision in the fourth quarter based on what's going on, you know, what's going on in the market, what's going on, my cash flow. How are things doing for a lot of people this year? The stock market's up, they're feeling pretty confident, you know, from their investment portfolios. Maybe you're ahead of your glide path of where I thought I should be for the end of the year. Maybe it makes sense to do a Roth conversion this year for some amount.
- [18:15]
A
Let's speak briefly to our younger stackers. I think that Anna, there's a case to be made here to just avoid Roth conversions. And if you can afford it, put money in the Roth 401K immediately.
- [18:26]
D
Yeah, that's step one, even for him. If he's contributing to a retirement account, make sure you're contributing to Rothschild. And if you're young and your tax bracket isn't as high as maybe it potentially could be in the future, make sure you're maxing out on the Roth side as opposed to pre tax. And then that way you don't run into this situation in the future.
- [18:45]
A
Yeah, if you could afford the little bit of pain now to pay the tax today. I always like I was biased toward the Roth. Let's move on to episode 1724. We had Len Penzo riding along with us. Main thrust of that episode was talking about donor advised funds with Adam Nash from Daffy. Adam Nash, of course, one of the creators of Wealth Front before he created Daffy. During that conversation, remember our headline was about auto insurance and about the dos and don'ts of having an auto claim and stacker. Betsy had this comment about auto insurance. She said one thing a lot more people could self insure if they chose to is roadside assistance. I dropped mine a long time ago. I keep my older but reliable car in good repair. I carry jumper cables and a spare tire and I know how to use both. I know how to get around without a car. And if it were necessary, which it hasn't been yet, I could summon and pay for a tow truck. I think a lot of time og people don't think.
- [19:47]
C
I can conjure wizard.
- [19:49]
B
I know I can conjure a tow truck.
- [19:52]
A
Betsy standing on the side of the highway in her, in her wizard cap.
- [19:56]
B
Like the Big Book open. There's like a cauldron Gryffindor sweatshirt throwing like a dead field mouse in there and it bubbles up.
- [20:03]
A
Just like Paul had a name for himself. Betsy's name now is Gandalf.
- [20:07]
B
Betsy Gandalf.
- [20:08]
A
But I think Betsy brings up a good point, which is I think og often we get these riders on insurance like the tow truck, the roadside assistance and we think, well wait a minute, if I didn't pay for that and I know my way around a car a little bit, I might be able to save a few bucks in self insure.
- [20:26]
B
Yes, I agree with this 100%. Even if you don't know your way around a car, how much is an Uber and a tow truck once every X number of years? It's not that much. I remember one time, this is before we had kids, we were driving up to my wife's cottage in Michigan in the wintertime. The snowplow had gone down the main road but nobody had plowed the driveway. And everybody from up north knows how this is. The snow gets kind of this big mound at the end of the driveway.
- [20:52]
C
Always right after you've just shoveled it.
- [20:54]
B
Yeah, well, no one shoveled this. So it was right after it snowed. So it was even worse. You know, it's like midnight or something by the time we'd gotten up there. And I'm driving a little sedan and I'm looking at this going, how are we going to get in the driveway? I'm like, you know, obviously Leroy Jenkins it right, like, and just go, just floor it. That was a bad idea.
- [21:11]
A
What could go wrong?
- [21:12]
B
So we end up like teeter tottering, half on the snow and half, you know, back of the car is sticking out into the road. So you trudge into the garage and try this digging it out ourselves. It's finally 1:30 in the morning. I'm like, this is ridiculous. We just call tow truck. So call tow truck. They're like, it's going to be an hour before we get somebody out there. It turns out it was two. And then I get out there and the guy's like, it'll be 300 bucks. And I said, yeah, just take credit card. He's like, no, I take cash.
- [21:39]
A
You're kidding me.
- [21:40]
B
And I'm like, well, cash is in town like 10 miles away and it's icy roads. He goes, it's okay, I'll follow you. If you get stuck, I'll pull you out again. And so I drive. I had to drive all the way into town to give to the ATM to get this guy some cash to turn around and drive back by myself. The route I just came, hoping I don't put it into another ditch. Finally pull into the neighbor's driveway and just park it for the day. He gets up the next morning and he goes, I was really stupid of you to try to do that last night. And I said, oh, are you up? And he goes, oh, yeah. I watched it for my bedroom. Just the whole time I was going, what kind of idiot is this? He said, I got this nice plowed, you know, 10 car driveway because he has a apartment building. And he says, why didn't you just park in that? I said, well, I would have if I would have known I could.
- [22:21]
C
He's like, well, that story sounded like the Michigan version of Deliverance with the banjos playing. And the guy's like, oh, I'll wait for you to get cash.
- [22:29]
B
I felt like this is long before find my friend on iPhone. And, you know, had to tell the wife if I'm not back in three hours, call the police. So the tow truck was 300 bucks. And that's where I'm getting with this story. And I could have just as easily had that on my car insurance that whole time. It still would have taken the two hours to get somebody. It just would have been included in my car insurance for the last 25 years.
- [22:51]
D
I feel like it makes sense when you have maybe younger kids who maybe drive like an older car. When I was 16, 17, 18, I drove an old Ford Explorer that every time I drove down a hill and took a left turn, the car would shut off.
- [23:09]
B
And that is awesome. That is such a great. That's such a great feature of the Ford explorers. Yeah, the 1987 Explorers, that was my favorite year.
- [23:20]
C
Rather limiting.
- [23:21]
D
I still drive one. It's a little bit newer and I don't have the same issue.
- [23:25]
B
You can turn left now.
- [23:27]
D
I did call a total. We had AAA at the time. Called them probably four or five times a year. So in that case, I was getting a little bit of a benefit there by having the AAA as opposed to calling a tow truck every time, paying $300 for it to be towed. And also I was a 16 year old, 17 year old. I had one number I had to call. I knew what to do in the situation, and that's all I had to do. Now, maybe I don't necessarily need it, I have it, but it is nice. And it's not very expensive either.
- [23:57]
A
Well, and that's the thing, right, is cost versus benefit. I think people often aren't evaluating how big is this annoyance versus the amount that I pay and is it worth it to pay for that? My bias when it comes to insurance. And Betsy, I'm glad that you brought this up. Thank you for the note on this. My bias is different, I think, than most people's is when they start out. When I was. When I was young and broke, I tried to raise my deductibles. I tried to make sure that there was as much coming out of my pocket as possible, which was 100% stupid. It was so stupid. But the reason was, was that I didn't have any cash. So I thought a great place to save money was in my insurance premiums. That's the last place you want to save money because you don't have an emergency fund. It's actually once you get that emergency fund in place that you can then bias more toward having. Having less insurance or deciding, you know, is it worth it for somebody else to take the risk so that I Just don't have to think about it. Betsy, thanks a ton for the question. We've got stacker Eric, who called in. Guys, Eric wants to talk about trusts. You ready to talk about trust? Oh, gee has trust issues, Doug?
- [25:04]
C
Yeah, I want to talk about this.
- [25:05]
B
All stemmed from that trust fall that you guys walked away.
- [25:07]
C
We need to do this as an intervention.
- [25:12]
A
And by the way, before we move on, I do want to say something too about oh, geez cottage story, which, Doug, you and I know about the early years of OG heading up to the quote cottage, which people think is a mansion on a lake. I think this is like, what was it, OG like 22 adult people in an. In a 600 square foot house.
- [25:34]
C
Yes.
- [25:34]
B
I mean, in the wintertime there's nobody there because no idiot drives up in the snow because the driveway is not plowed. What kind of dummy goes to the cottage in the middle of the winter?
- [25:44]
A
Just one.
- [25:45]
B
Yes.
- [25:46]
C
I think OG said to me once, the place is so small, I need to go outside to change my mind.
- [25:51]
B
It's a little snug. It's very homey. Get a lot of family time. Yeah.
- [25:57]
A
What was that, that joke they talk about? One comedian was talking about like Manhattan apartments. It was really spacious. There was a room for a bottle of water and a pencil.
- [26:06]
C
Right.
- [26:06]
A
It was great. All right, on to Eric and Trust. What you got? Eric, Joe, Og and Dub. Quick question for you. Can a third party trust get a step up in basis? My wife and I have a son with some disabilities and we've left everything in our beneficiary information to his third party trust so as not to screw up his benefits. But I'm curious as to whether or not that trust can get a step up in basis.
- [26:35]
E
Thanks.
- [26:35]
A
Appreciate you guys. Bye. Eric, thanks so much for the call. And first, I want to applaud you on doing the work that it takes. And this is not OG a small amount of work to make sure that special needs trusts are in place so that if something happens to you that you're able to do the right thing.
- [26:54]
B
This is why this stuff exists, right. Is to make sure that you can take advantage of all the full benefits that you're entitled and then also protect the money. Basically, yeah.
- [27:03]
A
The income stream makes sure that everything's set up so if something happens to Eric that his beneficiary is taken care of. Doug.
- [27:10]
C
Well, before we dive into how, let's talk about why. Why is Eric interested in stepping up the basis?
- [27:17]
A
Great question, Doug. So why? Why is he looking for a step up in basis. What does that mean, Anna?
- [27:21]
D
Step up in basis is when, if Eric were to pass away, the assets that are sitting within his trust get moved into his child's special needs trust. Those securities or whatever else is sitting in there. The cost basis that it's at currently, let's just say it's $10. The market value is $100 today, the day that Eric passes away, the new cost basis is $100 when it goes to his child's trust. What that means is the child, when they take the assets out, are going to pay less in taxes, less in capital gains taxes on that asset.
- [27:59]
A
Yeah. Here's a shortcut stackers that doesn't work as well as people think that it does. They will often put two people's name on the same account to try to just pass it on to a beneficiary. So let's say I own a bunch of Microsoft stock that I bought in 1995 and I still have it today. But I put Doug's name on the account with me. Now I pass away Doug. Doug has all the tax due because Microsoft has gone up by a bunch. When Doug sells it, his name's on the account. People make this mistake all the time thinking it's a shortcut and avoids probate. And it does. But we created a huge tax problem. If Doug were my beneficiary, I then would pass it on to Doug today and there would be. None of. Doug would pay none of that tax.
- [28:48]
C
Yeah. Hold on. Why did you say if Doug were my beneficiary? I didn't like that part.
- [28:53]
A
We'll take that offline.
- [28:55]
B
Meaning to talk to you about.
- [28:56]
A
There's only a few things you have to do to earn it. You got to earn it, Doug. You got to earn.
- [29:00]
B
This is very common, by the way, with houses. For some reason, people love to do this and they act all. They're just so proud about it. Like, oh, I, boy, did I pull one over the government.
- [29:10]
A
That happened in my immediate family.
- [29:12]
B
I did this. And how great is this? And you're like, yeah, you just. What, what, What'd you build the house for in 1940, Grandma? Oh, Grandpa built it for $8,000. Like, well, great news. Now everybody's got to pay freaking taxes on this. We could have just got it tax free if we just had a normal beneficiary. Super easy.
- [29:30]
A
That's all we had to do. So we know that people get a step up in basis. Oh, gee. Does this third party trust get a step up in basis?
- [29:37]
B
Yeah, it's the same thing. Because a trust is just an extension of you. When let me put it this way. Assuming that the money gets transferred into the special needs trust on Eric's death, then yes, that's what would happen. Or if his trust converts to a special needs trust or something. If he's putting money into a trust today that is meant for his kid and is a irrevocable trust, then it is what it is. Right? Like then that's the gift as of today. So I think he means like, hey, I've got money and when I pass away and my spouse passes away, then this money is meant for my child and it's going to go into a special needs trust to take care of him. In that case, yes. Asterisk. This is something you want to talk to your estate planning attorney about and also your tax person just to double check because there might be some nuances here that we're not talking about with, with a big broad brushstroke. But generally speaking, if it's your money and it goes to somebody else, they get a step up.
- [30:34]
A
After the break, we are going to have our TikTok minute. This is a part of the show where we shine a light on a TikTok creator who's either creating some brilliance or or air quotes brilliance. We got one coming up. But first, Doug, time for our break for today's trivia. What's going on, man?
- [30:54]
C
Hey there, stackers. I'm Joe's mom's neighbor, Doug, and if you ever heard of that contest between a chimpanzee and professional stock traders, well, that happened this week. Back in 1993, a sweet a Swedish newspaper pitted the chimp against five stock analysts. And you've already guessed what happened, right? Of course the chimp won. But here's the question. What instrument did the chimpanzee use to beat the five analysts? I mean, besides the wooden club? I'll be back right after I go monkey around during the break.
- [31:30]
B
Hey, it's Ryan Reynolds here for Mint Mobile. Now I was looking for fun ways.
- [31:34]
C
To tell you that Mint's offer of.
- [31:36]
B
Unlimited Premium Wireless for $15 a month is back.
- [31:39]
A
So I thought it would be fun.
- [31:41]
B
If we made $15 bills, but it turns out that's very illegal.
- [31:47]
C
So there goes my big idea for the commercial.
- [31:49]
B
Give it a try@mintmobile.com Switch upfront payment.
- [31:52]
D
$45 for a three month plan equivalent to $15 per month required new customer offer for first three months only. Speed slow. After 35 gigabytes of network's busy taxes and fees extra.
- [31:59]
A
See mintmobile.com does it ever feel like you're a marketing professional just speaking into the boy? Well, with LinkedIn ads you can know you're reaching the right decision. You can even target buyers by job title, industry, company, seniority, skills. Wait, did I say job title yet? Get started today and see how you can avoid the void and reach the right buyers with LinkedIn ads. We'll even give you a $100 credit on your next campaign. Get started at LinkedIn.com results. Terms and conditions apply.
- [32:30]
D
Abercrombie Kids is bringing the ultimate first day energy back to school. It all starts with on trend outfits for that front door photo shoot. Plus the coolest tees, shorts and jeans to take them through the rest of the year. Get them ready for their close up and keep them comfy too. Make this grade their best one yet. Shop all things back to school in store, online and in the app.
- [33:04]
C
Hey there stackers. I'm expert stack, stock picker and guy who's used to working with monkeys. Joe's mom's neighbor Doug. Ah, if only Joe and Og could be trained the way these scientists trained that chimp to pick stocks, we wouldn't have to work in the basement. Check that. We would, but we wouldn't have to. I mean, why would we pass up on free rent and the peaceful zen like sound of water constantly dripping. So anyway, after a month, the chimpanzee pansy earned 190 bucks on an initial investment of 1250. The stockbrokers, they only earned 130. So what instrument did the chimp use to beat the five stock analysts? If you said a dart, you won. And now three people who love throwing darts at financial security. Anna, Joe and Og didn't the Wall.
- [33:55]
A
Street Journal did something similar to that as well? Og, I think I remember the Wall Street Journal also doing a competition that was very much like that. Yeah, but very, very famous moment when the chimp throwing the dart beat the analyst. Hey, let's see if you can guess the TikTok Minute. This is the part of the show where we shine a light on a TikTok creator who's either creating something brilliant or air quotes brilliant. Anna, it's your first time here. You think we're going to see some brilliance or some air quotes brilliance today on the TikTok Minute.
- [34:27]
D
I don't know if I've seen much brilliance on Tick Tock so I'm gonna say air quotes brilliance.
- [34:32]
A
Boy, Doug, you could tell it works it. How'd you get through that interview Anna, with that point of view, hire her. You know the good news about this one, Stacker Jenny sent this in our meetup group in Minneapolis St. Paul. Just watched Join or Die, that documentary we discussed back on episode 1697 where we talked about how if you join a group and you don't isolate as you get older, you're much more likely to not only be happy but also have some longevity. While Stacker Jenny said this has a lot to do with the same thing, Bob Lodich at Seedtime Money had this related stat on TikTok. Here's Bob.
- [35:13]
F
People who say that their health is poor are 400% more likely to die in the next four years than those who say that they are healthy.
- [35:20]
B
What?
- [35:21]
F
Even if they are equally healthy at the time. So not like some like backyard hillbilly study. This is at Yale.
- [35:27]
A
Wow.
- [35:28]
F
Five other studies that involved 23,000 participants Mir that same result.
- [35:32]
D
Oh my gosh.
- [35:33]
F
I think this has deep implication to our finances because I, I see so many people that have spoken things like, I'm just bad with money. We're always broke. It's always hand them out. It's, there's never enough. My challenge to you is to ask yourself, what are you speaking over your life, what have you been speaking over your finances, over your family? Are they aligned with his word or are they aligned with fear? And so bottom line, you know, this isn't magic, this, but I think our words are more powerful than we realize.
- [36:03]
A
Great stuff actually from, from Bob.
- [36:06]
D
Yeah, I take it back, I take it back.
- [36:08]
C
It looks like the new kid was wrong.
- [36:09]
A
It is pretty rare. I mean, Bob Lodich, great guy at Sea Time Money, but you know, you guys work with people every day. And Anna, it's so funny. Back when I was a financial planner, if somebody was positive and optimistic and had a can do attitude, I'd meet with them again for their next meeting and they'd accomplished a bunch of stuff. And if somebody came into the meeting and goes, I don't have enough, I can't do it. I can't. Even if these two people, to Bob's point, had the same amount of money and the same opportunity, man, just that attitude difference changed everything.
- [36:40]
D
Yeah. I think they also call it a scarcity mindset. So when you are really concerned about your resources and you're really concerned about what's going to happen with your finances in the next year, you're really caught up in just like what's happening today and you have really negative mindset. I really do See that those people have a harder time progressing and moving towards their financial goals, like you were saying. Whereas the people who have a positive mindset and are really excited about what they've accomplished already and what's to come, I find that they do move a little bit faster towards those goals, which is really awesome. I've been trying to do that in my own life, too. Not just with finances, but every other part of my life, whether it's fitness goals or finance goals, career, anything really you can apply this to. It's not just finances.
- [37:30]
A
It is so wild. It's funny. This is what I like OG about the financial plan is that I would have clients come into my office and I'm sure nothing has changed, right? Well, I see it on social media all the time. I know nothing has changed. People would come in, they want to talk about what's going on with the government, what's going on in, quote, society, what's going on with Jerome Powell and the Fed. What are they going to do, these statistics that have nothing to do with them. And when I would refocus and go, hey, our plan says that you need to have $42,000 by today in your retirement funds. Let's count that. And all of a sudden we get rid of all that crap. And we'd focus instead on whether you're a header behind on your own goal. Like, wow, the change in attitude when we focused on your goal instead of all the other stuff changed the whole game.
- [38:18]
B
There's so many different things here. I was thinking about the Napoleon Hill book, Think and Grow Rich. How old is that book, right? And it's all about mindset and positive mental attitude. And the thing that you focus on is what's going to show up in your life. You can think about Stephen Covey and the Seven Habits book. Tony Robbins has a big thing about, you know, it's impossible to lie to yourself. So when you're talking about your, your money stuff, or like, you know, you sit there and you stew or you think about your fitness goals or, you know, whatever, and you. And you're just kind of going, like, why can't I get this right? And your brain goes, because you're an idiot with money. Like, that is in your soul at that moment, right? Like, there's no way to. You have to change the thinking on that. When you focus on the things that you can control, it's so much more powerful because that, that takes away all those externalities. I mentioned a week ago that I got back into Ted Lasso and I know this is old news for everybody. I think I'm in the second season, and it's the season where the psychiatrist or psychologist is part of the team. And Ted has reluctantly let her into the organization. And it's kind of reached a head where now he's having this big breakdown. Spoiler alert. And he's talking about his dad and he's, you know, I hate my dad, and I hated how he did this. And, you know, in this. And she's just sitting there with him, and she goes, what did you love about your dad? And I know this is all scripted, but this would happen in real life. And I know Anna's experienced it, and so have I when people just go, da, da, da, da. They're all on the Jerome Powell thing, or they're all about all this stuff. And you go, well, what's going well? And they're like, wait, what? Like, no, no, like, I get all that. But what's going well so far? Because let's just. Just kind of put this pendulum back to the middle for just a quick second. And in the show, you can see that flip for him. Obviously it's scripted and it's meant to be, but that's how it really would work.
- [40:02]
A
It's a pattern interrupt.
- [40:03]
B
It's a pattern interrupt because he's going, I hated my dad. He did this. He screwed us. You know, he did this. He did this. I hate. And she goes, what did you love about him? And he's like, wait, what? She's like, well, what? There had to been something. He's like, well, I mean, there was this one time, and then he tells a story and you're right, it totally. For those. For those people that have used record players, you know, not probably just you two guys, but yeah, I have one.
- [40:29]
D
It's in the basement.
- [40:30]
C
They're coming back.
- [40:30]
B
Oh, wow. All right. I guess I'm the yes, I have one.
- [40:33]
A
And a going old school.
- [40:34]
D
Yeah, it's put away because my one and a half year old would destroy it. But I have one.
- [40:39]
B
Got the vintage. All right. Who knew? But if you scratch the record, right? That's what you're trying to do. You're trying to interrupt the pattern, trying to scratch the record. So, okay, I agree with this. TikTok. Fine, there's one.
- [40:50]
A
How about that?
- [40:51]
B
There's one.
- [40:51]
D
So far I agree, too. But you can't really go wrong on this topic. No, positive thinking is awesome. I agree with OG like, we'll have meetings with clients and when you get stuck in that, like, oh, we got daycare bills, we got this. That came up the roof. Everything's going wrong. And then you show them the big picture and you're like, well, even if things are going wrong today, you guys are looking awesome. They leave that meeting feeling so good and that gives them motivation, keeps the momentum going. It's just another level of keeping that positive thinking going.
- [41:22]
C
Yeah, listen to Anna trying to save face here and be like, oh, I was in the whole time. Yeah, I love this one. Yeah, I knew it was going to.
- [41:29]
A
Be great, you know. Thanks to Stacker Jenny for bringing the star attention. And for people that haven't watched this documentary, Join or Die about not isolating as you get older and about being a part of a community and how.
- [41:38]
B
Important my goal is to isolate when I get older. That's where I'm like, I'm looking forward to, to not having to hang out with you guys. Like, when do I get to not do this? You know, I mean, it's fun and all, but there's a day when I can like not have to be around people ever again. How great is that going to be?
- [41:56]
A
I think you want to watch this movie og, because you think so?
- [41:58]
B
All right, maybe I'll check.
- [41:59]
A
Yeah, I think a big part of that is beware what you ask for.
- [42:01]
B
Yeah.
- [42:02]
A
Let's move on though. Stacker James has a question.
- [42:04]
B
I don't have any friends.
- [42:07]
A
OG's like, but I don't want friends. Stacker James wants to talk about some end of life planning.
- [42:16]
G
Hey guys, James from Saudi Daisy, Tennessee here. Just wanted to let you know that I really enjoyed your episode with Tim on estate planning. I don't really have a question, but instead a bit of real life situation from my past to highlight the potential for very near end of life planning. Several years ago, my mother in law was nearing death. She was the primary beneficiary of a trust from her husband's estate and I was trustee. The trust had some appreciated assets to attend. About a $400,000 gain. I could have and thought about distributing the assets to her account so that we as AIs could get the step up basis. When it came down to it, while my wife was essentially watching her mother die, I just could not pull the trigger as emotions got in the way and it felt wrong to benefit from my mother in law's death. I guess my point is there are some end of life tactics that could be implemented. It's planning and you should not feel guilty about planning. In my case, if my mother in law knew that we could have gotten that sort of step upon basis and I didn't take it. She would have probably given me a talking to or as we would lovingly said, she would have given me the big hairy eyeballs. As always, I very much enjoy the show, especially the trivia. You go, Doug.
- [43:30]
C
He had me at hairy eyeballs.
- [43:32]
A
I'm a little lost though, James, on what you did.
- [43:35]
B
I got it.
- [43:35]
A
Oh, James, you're nodding. Yeah, yeah.
- [43:38]
B
This is an estate planning technique and I think there's some. I don't think he should beat himself up too badly because I think there's some limitations here around timing because of this issue. So what he's saying is mom had some assets that had appreciated and because of the way the trust was structured, if we were going to inherit it, we were not going to get the step up. Like mom got the step up a long time ago. The assets have appreciated and now we're going to get the.
- [44:04]
G
But.
- [44:05]
B
But we're not getting another step up basically is what his thinking was. So his thought was, well, if I give all these assets to mom right before she dies, like legally give them mom, then she gives them to us, then we get that step up again. I've seen that work the other direction. So again, estate planning kind of 301 here, but let's say that you're a CEO of a company, you have a bunch of highly appreciated shares and you have 85 year old parents. What we've seen happen is the kid gives, gives mom and dad these appreciated shares. So by the gift they get the basis. So they now have all these shares with a big tax problem. Right. Ten years later, mom and dad die and give the shares back to the kid with the step up in basis. This is a little bit more complicated and from an estate planning technique, you definitely need to have a pro here. And I think there's some timing issues there as it relates to. You can't do it like on their deathbed and then like bingo bango, look at me, tax free. So I don't think he missed anything.
- [45:10]
A
No. I swear to God she's still alive. I swear to God she's still alive.
- [45:13]
B
Yeah, it's like, die, damn it. We need the step up.
- [45:19]
D
Yeah. James, I feel like you did the right thing. I don't know if it would be good if she's like, last couple days you throw some paperwork in her face so I wouldn't beat yourself up about it. Yeah.
- [45:31]
B
But this goes back to what Tim was talking about in the episode. It's all about Planning, not the plan. Right. It's really going through these thinking tools of, here's where we are. Here's what you know, here's where all part of the expression where all the bodies are buried. Right, Right. Like we need to know where all this stuff is. Too soon, too soon, too soon. She's still warm, for God's sakes. You got to have an idea of where all this stuff is so that you can put a good plan together. And sometimes there's some unintended consequences. And we're going to talk about unintended consequences. But you got to be careful with that plan, because what happens if, in my example, you give mom and Dad a bunch of shares and you go, wink, wink, nudge, nudge. You can get them back to me. And they go, actually, we've decided we're going to donate it to church. You know, it's their money right now. They could do what they want. And, you know, so you got to be careful. So definitely get a pro here. But I don't think you should beat yourself up over it, you know, it's okay.
- [46:23]
A
Yeah. Great story, James, and thank you so much for the kind words about our episode with Tim Semirol. People want to go back to that. That's episode 1723, where we dive into a bunch of questions. And you know what?
- [46:35]
B
I think we should start naming the episodes, like, you know, at the beginning of movies where it has the copyright, but it's in Roman numerals. Can we start doing that?
- [46:42]
A
Xxvi.
- [46:43]
B
Yeah. Would it be like M? I don't even. What's 1500? MV?
- [46:50]
C
Mm x x?
- [46:52]
B
No, that's C.C. i don't know. 500 is 10.
- [46:57]
A
Yeah.
- [46:57]
B
C is 100. I don't know.
- [46:59]
C
It was M.C. everything.
- [47:02]
B
Because it was before the M. 8 at 19. Yeah, the M is a thousand.
- [47:06]
C
500.
- [47:08]
B
Now it's Mm. Anyways, whatever. Carry on.
- [47:11]
C
Right?
- [47:11]
B
I can see Joe's eyes glazing over. He's like, what are we talking about? Money questions. Let's change about the Romans.
- [47:18]
A
Yeah, let's talk about the important stuff, like changing our numbering to Roman numerals. That'll keep them coming.
- [47:24]
B
MVXC I I L M I. I don't know.
- [47:31]
A
We have a couple more we want to tackle here in the next few minutes, but we got a nice note from an anonymous person in the basement because they were sharing some of their personal financial picture said, hello, I'm seeking advice about changing my portfolio from its current state to one more in line with the efficient frontier. About 84% of their investments are in the total stock market index where they're buying just a little bit of everything. About 8% of our market equities are in the total stock market indexes held in our taxable brokerage accounts. While I don't have dollar figures here, the 8% is not insignificant. It's a tad less than my wife and I earned per year. The remaining 92% is simpler. These are tax favorite accounts or my 401k which is reasonably good choices for getting closer to the efficient frontier. The basic question here that they dive into is when they're moving stuff over to be more efficient. They're seeing recommendations of US large cap growth and large cap value. And based on their understanding there's some overlap between the total stock market indexes in those. So does it make sense in the taxable accounts to go from total stock market index over to the large cap growth large cap value? Like is the juice worth the squeeze to make that? And they've held these for a long time. So there's going to be, they're going to be taxes to pay. My initial take on this OG was, was definitely not. I, I don't think when you look at the long term results between the large cap growth or value index and the total stock market index there is enough of a return difference, volatility difference in a taxable account to make that change.
- [49:11]
B
Especially when you have so much more money outside of the taxable accounts and tax favored rebalancing in your 401k or IRAs or Roths. Just make all of your rebalancing choices over there where it's tax free. Doesn't cost you anything easy.
- [49:23]
A
Totally. And as you're selling, sell from those total stock market index positions when it's.
- [49:28]
B
Appropriate or as you're purchasing more stuff. Stop buying that and start buying your small companies or your international and your brokerage account to help diversify it. But I wouldn't, I never like martyring myself to the IRS in the spirit of like no marginal improvement.
- [49:44]
A
Yeah. And especially when you look at the long term results of these. I mean when I was doing the research about the total stock market index and the S&P 500 over like a 50 year time frame and I took different 50 year timeframes, the results were fairly close to identical where we're not that much different. I guess it's gotta be OG because over long periods the large cap kind of drives the bus.
- [50:09]
B
Well, I mean this is the fundamental piece around diversification. You're trying to add non correlated assets. And so when you take a look at those different buckets and you say, oh, oh, well I need to add this. I don't have any large companies that have been around a long time. Is it a diversifier by adding it to your portfolio or not? And clearly it's not. So why would you add it to do what? What's the purpose? The purpose of diversification is to have a bunch of stuff that acts independently of one another so that you get all of the return of all of the market just kind of over different periods of time. That if you look at an asset class and say if I add this, does it add a diversification benefit of non correlation to my existing portfolio? If the answer is no, then what the heck are you doing putting it in there? You're adding complexity. You're adding another line item on your statement for no reason. I would say small companies add diversification benefits. Big companies and small are diversified from one another. International companies are diversified from US Companies, up and coming countries. So we call that emerging market that is a diversifier. Real estate commodities are diversifiers. But if you say, well I can go mid cap growth or small cap growth, which one? Well, they're the same. I get that they're different stocks but they perform in the similar manner. They're going to behave similarly. So if you have mid cap in your 401k, you don't get any benefit by having small cap statistically. So just keep it simple.
- [51:36]
A
Our friend here pointed out that I made a video about this. We'll link to it in the show notes at Stacky Benjamin's for people that want to, want to look at the basics of understanding how to diversify your portfolio a little more scientifically. I also spoke about this at the economy conference last year. And we'll also link to really a great video that our friend Dinah Miriam made of that event. And me on the stage talking about that and what the happiest retirees.
- [52:02]
B
It's a really great video of me. Will link to me.
- [52:05]
A
It's so fantastic because it's a great.
- [52:08]
B
Video that Diane made of me. I want to make sure that you guys get another video of me.
- [52:12]
A
I'm just saying the, the production quality was fantastic. The fact that you get to put.
- [52:17]
B
Lipstick on a pig Diana.
- [52:21]
A
At me is a bonus. See what I was talking about, Anna? This is what it's like working here.
- [52:25]
D
Yeah, it's super fun.
- [52:26]
A
Fun in air quotes. Last question of the day comes to us from Stacker Patrick and he wants to talk about HSAs, guys. Health savings accounts, Patrick. Bring it.
- [52:37]
H
Hey, Joe. OG and of course, Big D. I have a question about HSAs. I'm married and my wife and I have about $55,000 saved and invested in an HSA in my name. We don't use that money for current medical expenses. We're able to pay for those through our normal cash flow every month. It's just going to keep building up and we always max out the contributions. I'm 34 and my wife is a little bit younger than me, so we've got a lot of Runway here for this hsa. Invested dollars to compound. My plan is to save that money for long term care. If we ever need that, you know, 50 years from now, hopefully by then it could be a substantial amount of money. Is that too much money? Is that something we should be taking out and withdrawing so it doesn't get to be too big of a sum? I'd like to know your opinion, especially because inflation could make it so that current expenses today might not be worth a dinner at the Sizzler in 40 or 50 years. Thanks.
- [53:52]
C
Before we dive into this, can we talk about how awesome Patrick's accent is? Just, I mean, the Minnesota accent, wherever, you know, North Dakota, south, wherever he's calling from, it's. Oh, yeah, we got to worry about the cash flow.
- [54:05]
A
I just love just awesome dialects all over the world, all over the United States. It's just so, so fun.
- [54:10]
C
It's great. So much better than the Michigan.
- [54:12]
A
I just like that you remember to call you Big D, which we.
- [54:14]
C
Big D. Well, everybody loves the Big Dallas.
- [54:17]
D
Give you so much love, Doug.
- [54:19]
A
Yeah.
- [54:19]
B
Unwarranted, but, yeah.
- [54:21]
A
Not sure why. As they should. By the way, Patrick, before we dig into your question, 34 years old, we just gotta acknowledge this. 34 years old and $55,000 in this HSA. That is incredible. Damn. Yeah. Nice job. Nice savings job, Patrick. And it goes back to what Doug's dad told me, which was, careful.
- [54:43]
B
You said it on Monday, there's a lady present.
- [54:47]
A
Not that thing, the other thing.
- [54:49]
B
Oh, no.
- [54:53]
A
On Monday. On Monday, you said your dad said that saving is not a feeling, it's an action. Right?
- [55:01]
C
No, he didn't say that about saving. He just said that in general. He said we really said it when we were. My wife and I were thinking about, are we ready to have kids? And in that context, his piece of advice was, being ready is a decision, it's not a feeling.
- [55:16]
A
Okay, well, maybe it didn't apply, but it sounded good at the time it sounded cool. Yeah.
- [55:22]
B
Why is this like the scene from Anchorman where he's like, when in Rome? And she's like, no, still don't have it. Like trying to use all the phrases that he's learning and just throwing stuff out. Joe's just to try in new things just to see if that makes sense.
- [55:37]
A
Patrick. Apparently what Doug's dad said does not apply. However. Anna, do you like the idea of the 55,000, earmarking that toward long term care?
- [55:46]
D
I love the idea of it. When you are older and you're 65 or how whatever age, after 65 you can take the money out of the HSA for whatever purpose. At that point you don't have to earmark it for long term care. I would say max it out. Max out your HSA. If you can do that, you're already at 55,000. And he mentioned, is this too much money? No, there can't be too much money in an HSA because sure, it could be for long term care if you want. That's awesome. If you don't end up using long term care, you could take the money out and use it for something else. After age 65, doesn't have to be long term care, but if that's how you mentally count it for, then that's great.
- [56:28]
A
That's the cool thing, Patrick, about the HSA is that this becomes like a supplementary retirement vehicle. Anna. I mean, this doesn't even have to be a health savings account if there's extra money thereafter. 65.
- [56:40]
B
Yeah.
- [56:40]
D
You can kind of look at it as almost like an IRA. You need to know that it's not 59 and a half like a regular IRA. If you want to take it out for stuff other than medical expenses, it's age 65, so a little bit older, but for the same purposes, you bring it out and you take the money out. You pay taxes on it, but you don't pay penalties on it at that point.
- [57:00]
A
Just like a traditional pre tax 401k.
- [57:04]
D
Yeah. At that point, send it, max it out.
- [57:07]
A
Yeah, I like that. Do you like the idea, this early OG of earmarking it toward long term care?
- [57:13]
B
You know, I'm one of these people that thinks that everything is for everything, everything counts, basically. So if it makes sense in your brain to say, well, this is my money for this, then that's okay. And the, the example that I use is if you had $50 million in your IRA, would you say, well, that's not my health money, that's for retirement? No, you would be like, I have $50 million. I use what it for whatever I want. You know, I can buy a house with it or go on vacation or do whatever. We like to compartmentalize, like in our brains, like where things are like, this is my retirement money, this is my health care money. But Anna's right. I mean it's just basically another place to save another $8,000 or 8,300 bucks, whatever it is this year for, for a couple. And if you don't use it, this is the big thing that I would say. You're 30 years old, you don't have any idea what the future is going to be. No offense to the 30 year olds around, but. But you don't know nothing about nothing.
- [58:02]
C
Pull up your pants and face north.
- [58:03]
B
Talking to you.
- [58:05]
D
Yeah, watch it.
- [58:08]
B
But I'm saying like there's a lot of life to live between 30 and 65, or in his case, 30 and 85 that he's thinking about for long term care. You don't know if there's going to be a kid that falls and breaks an arm and that's a $5,000 deductible. You have a job loss and then you have a healthcare expense and you're like, oh, thank God I've got this thing. So it gives you some flexibility. So if you have the cash flow to save it, this is a great place to put it. If it makes you sleep better at night, going, this is my long term care money. I did some quick calculation and I said, hey, If I had 50 grand in an account for the next 50 years and it grew at market rates, I'd end up with about $4 million. You go, that's enough for health care, right? Or long term care? Well, long term care costs $6,000 right now a month and it inflates by 6 or 7% a year for the next 50 years. What is it going to cost? About a million dollars a year. So there's your four years, there's your four years of long term care at a million bucks a year, if that's what ends up happening. But I would think about it a little differently, personally, I would say this is just part of my net worth that I'm continuing to grow. And the idea of having it in this protected bucket gives me a bunch of flexibility in the future. And that's really what I'm interested in, is can I. It's the same question that we had at the very beginning where it's the, with Roth and traditional, we get this question all the time. Should I do raw? Should you do both? You need the flexibility because we don't know what the future is going to hold. And having different places where you can strategically take money from depending on the circumstance in an advantageous manner that takes the IRS out of the middle of it is awesome. So if you end up with a health care expense and you're 57 and you're like, bang, tax free, or you retire early and you're like, I want to do this boom tax free. And I do a conversion at 12%, like that's awesome too. So it's great to have all the different buckets. Keep your foot on the gas. You want to gain flexibility.
- [59:57]
A
Yeah. I want to go back to earlier, you know, when Betsy was talking about car insurance and she doesn't need the roadside assistance. Patrick, the more money you have in that hsa, the more you'll be able to self insure for whatever you want. The long term care fine, your, your car insurance, raise your deductible, whatever it might be, just putting more and more money there. I personally do like the idea of bucketing. I know our friend Alan Corey did this when he started buying real estate. He would buy a piece of real estate and it would create enough cash flow that he didn't have to pay the electric bill anymore. And he thought of that house as his electric bill, then the next house was his grocery bill, then the next house was the gas bill, and then the next house, he's like, because I hate paying bills. So I wanted all these houses and next thing you know, he had a real estate empire. Just thinking about the bracketing. So I think to Anna's point and Og's point, Patrick, I'm. I'm going to third this one. If it helps you go forward by putting it in that bucket.
- [60:53]
C
How many neighborhoods did he have to own before he could pay for all the streaming services? Because that's what I'm working on now. Yeah.
- [61:02]
A
87. I. Why is it when I cut a streaming service, by the way, immediately they come out with a new show that I get FOMO about? I cut Apple TV a few months ago and they came out with that Seth Rogen show that I want to watch studio and I can't and I. And I can't watch it yet. Yeah, that's what you said. That's what you said. But you and I disagree so much that I'm like, oh, I bet I'd like it. Then I'm in.
- [61:24]
B
Doug hates it. I'm gonna love it.
- [61:26]
A
And by the way again deeper dive into HSAs. Let's transition out into the back porch. Although this whole show has been a back porch where the back porch normal. At the end of the show we have our community piece talk about what's going on with all of our stackers. But clearly today you showed up with some take questions. If you've got questions for us. Stacky benjamins.com voicemail the way James and Patrick and Paul and Eric all called in, you can all get in T shirts. Yeah, absolutely. But tonight, HSA 100 finally tonight, right?
- [61:57]
C
We've been talking about this for weeks. It's in a few hours, isn't it?
- [62:01]
A
Yeah. If we just got done talking about HSAs and you're like I don't even know what the hell Ananoji you're talking about. Just the basics. What is this thing? Open enrollments coming up. How does it work? I'll be on YouTube tonight stacking benjamin.com hsa to sign up and come join me this evening.
- [62:21]
C
That's tonight, September 3rd in the year 2025.
- [62:25]
B
8:30 Eastern.
- [62:27]
A
Yeah, 8:30 Eastern. 5:30. Specific as Doug likes to say, good stuff on the HSA front. We also Doug got a couple notes.
- [62:39]
C
Yeah, we did. We got a great note from John who said really enjoyed the discussion about the fan dueling of our 401ks.
- [62:46]
A
Talking about all the maybe the. Anna, this was a discussion we had about all of the. All the private equity going into 401ks now and how our before we know it our 401k is going to be like fanduel where I could just bet inside my 401k whatever I want.
- [63:02]
D
That'd be smart.
- [63:02]
C
Joe, it took you 14 or 15 years but you finally came up with the phrase that will define your career in politics. Fandueling the fan dueling of our 401ks. It was so good. That was so amazing. Anyway, John said got to thinking about my diversification and then bam it hit me. I have added draftkings as well. So there you are just changing lives, Joe.
- [63:26]
A
John maybe missed the point of that whole thing.
- [63:30]
B
Unless that four way parlay hits in.
- [63:32]
A
Which case fire doesn't matter. Yeah. John, thanks for the kind words. Thank you to all of you for hanging out. Hopefully you can hang out with me and talk about HSAs tonight. Thanks to all of our stackers that helped us make today's episode. And Anna, thanks to you for hanging out.
- [63:50]
D
Thanks guys.
- [63:51]
A
Was it every bit as bad as you thought it was going to be?
- [63:53]
D
No, it wasn't. That bad?
- [63:55]
B
It wasn't that bad. Put that on a T shirt.
- [63:59]
C
That's what we're striving for.
- [64:01]
B
How was your time on stacking Benjamin's quote? It wasn't that bad.
- [64:05]
A
Not as bad as expected, right?
- [64:08]
B
It's like a movie poster with the reviews of, like, Siskel and Ebert. Not as bad as I thought.
- [64:14]
A
It's like the back of Len Penzo's book. You know, all those reviews. Penzo's an idiot. Five stars. If you're somebody who's here, though, because you are not hoping to gain a little bit of knowledge about an HSA or you don't want to hear about John's DraftKings picks, you're here because you really want to put together a full financial plan. Well, guess what? OG and Anna's calendars are open. So if you're looking for better help in your corner, it's stackinbenjamins.com OG gets you to Anna's and OG's calendar to set up a consultation to talk about how their team can help your team as we. Man, plan for 2025. Plan in 2025. And I hate to say this, because it feels like the year just started for 2026. I think I just threw up in my mouth. 2026.
- [65:04]
C
This is news to me. I'm really interested that you said this, Joe, because every time I've tried to get on either of their calendars, there's never an opening in this calendar year. But now you're busy telling everybody else there's availability.
- [65:15]
D
Doug, we have a special link for you which has no availability.
- [65:21]
A
But it's coming. You're getting ready to open a spot, I'm sure. Just keep checking, Doug.
- [65:26]
B
Refresh the page.
- [65:27]
A
Yeah, refresh.
- [65:28]
B
It's like trying to get Ticketmaster tickets to the show. You just.
- [65:31]
C
That's what it feels like.
- [65:32]
B
Spam the refresh button.
- [65:33]
A
But before you refresh, Doug, what are our big takeaways from today's episode?
- [65:38]
C
Well, Joe, first, take our advice on Roth conversions. As you're plotting when they work, evaluate your tax situation today and in upcoming years. The idea is to pay as little as possible now to create great tax opportunities down the road. Second, HSAs, while they're very good to pay some bills today, they're even better if you're able to let them grow so your earnings pays lots of bills down the road. But the big lesson, don't tell Joe's mom about dart throwing monkeys. She'll turn that into an insult where the monkey is better than Doug. At washing windows. I'm gonna show you, mom. I'm way better than monkeys at washing windows. And I can take out the trash faster than they can, too. Watch this.
- [66:25]
A
Damn it.
- [66:26]
C
She got me again. Thanks to Anna Allum for joining us today. To find time on Anna's calendar, go to stackingbenjamins.com OG and finally, thanks to you for joining us with your question questions. Have more. Call us@stackingbenjamins.com voicemail and be a part of our upcoming show. We'll also include links in our show notes@stackingbenjamins.com this show is the property of SB Podcasts, LLC, Copyright 2025, and is created by Joe Saul Sehi. Joe gets help from a few of our neighborhood friends. You'll find out about our awesome team@Stack jackingbenjamins.com along with the show notes and how you can find us on YouTube and all the usual social media spots. Come say hello. Oh, yeah. And before I go, not only should you not take advice from these nerds, don't take advice from people you don't know. This show is for entertainment purposes only. Before making any financial decisions, speak with a real financial advisor. I'm Joe's mom's neighbor, Doug. And we'll see you see you next time back here at the Stacking Benjamin show.
- [67:57]
A
Sam, welcome to the after show. This is the part of the show that doesn't exist. Anna, if. If you want to talk about the. Well, you just don't talk about the after show.
- [68:34]
C
Shut your pie hole.
- [68:35]
A
Wow.
- [68:36]
D
Like, actually, like, it's not.
- [68:37]
C
We don't.
- [68:38]
A
Yeah, we don't talk about it. What happens to the after show stays in the after show.
- [68:41]
B
Where have you been?
- [68:41]
C
We've had people listen to this show for years who were like, I just discovered there's a whole different part of the show.
- [68:47]
A
Yeah.
- [68:48]
D
Oh, but it is like, I've heard the after show. I'm like, are you guys not actually.
- [68:51]
A
No, but you have. I don't think you get. You haven't heard the afterclub. Okay. Yeah. Come on.
- [68:57]
D
This is all new to me.
- [68:58]
B
So exciting. You want to be on the inside circle. You have to.
- [69:02]
D
I feel like I'm like, going into cigar lounge or something.
- [69:06]
A
It's like, I want to know, you know, the secret knock now. The secret handshake.
- [69:09]
D
Yeah.
- [69:10]
A
How long has it been since any of you have. We also, generally, if you're new here, we don't talk about financial planning in the after show either. So if you're here for financial Advice.
- [69:18]
C
See you.
- [69:18]
A
We'll see you next time. Sometimes we do, but not today. This is a financial decision that a company made. When's the last time any of you have been to a Wendy's? Let's see who's been to the Wendy's.
- [69:28]
B
Latest.
- [69:28]
A
Because I went yesterday for the first time in years. You win.
- [69:32]
C
I went during this show. Joe. I'm not.
- [69:36]
A
But that. I'm saying, among the three of you, I will bet money that Doug has been to a Wendy's sooner than either Anna or OG.
- [69:45]
B
Yeah.
- [69:45]
A
Doug, when's the last time you went to Wendy's?
- [69:49]
C
I think it was four days ago.
- [69:52]
B
Whoa.
- [69:54]
A
Anna, how about you?
- [69:55]
D
It's probably been like five years maybe. And really just the frosties. Like, I don't really eat the meats there.
- [70:02]
B
Yeah, I'm a fan of the square cheeseburger. The double square cheeseburger. I can go down with the best of them, but it is.
- [70:09]
C
Listen, it's a spicy chicken meal deal with no mayo. Because, I mean, I got to keep this swimmer's build somehow. Right? And then you do the $5 biggie bag on the side.
- [70:20]
D
The what?
- [70:21]
C
What is five dollar piggy bag?
- [70:23]
D
What's a biggie bag?
- [70:24]
C
Oh, my God.
- [70:26]
A
It's the thing that the person next to the drive through is selling all the kids.
- [70:30]
C
No, it's not a dime.
- [70:33]
B
Here's the other meal for the other person in your car, sir. Oh, excuse me.
- [70:37]
C
It's the side meal. So it's appetizer. The biggie bags have like, they have a $5.
- [70:43]
A
You get a meal before your meal. Yeah, like an appetizer meal.
- [70:47]
C
Yes. And so it's a burger. You get nuggets, you get fries and a drink that's just. But they're little. So that's the side meal you start with. That depends on if I'm feeling frisky or not. Sometimes I just chisel that down before I leave the parking lot. And then. Yeah, then I get into. Then I get into the spicy chicken meal. Once I get back on i75.
- [71:08]
A
Okay. It's like a method actor, Anna. He's got a certain process, certain setup. Wow. He's got to be listening to something specific on the radio at the time.
- [71:19]
B
Set the mood, light a candle.
- [71:22]
C
This is my stop. This is my regular stop in West Branch, Michigan. As I'm heading up or down I75, there's a Wendy's there that counts on me to make their monthly rent.
- [71:37]
B
It's like the cartoon where they, like. And they gotta, like, pull the lever, you know? Yeah.
- [71:46]
A
Yes.
- [71:47]
C
Well, why did you bring this up, Joe? It wasn't just to expose my gluttony.
- [71:50]
B
And scene.
- [71:51]
A
Yeah, we didn't even need to know what I was going to talk about. That was good enough for me. So they have this tie in with the show that we've been watching Wednesday, a Tim Burton show. This is the second season. They did that stupid thing Netflix does where they show you the first half of the season and they take a break. Oh, God. Then you got to wait for a few weeks.
- [72:10]
C
I'm like, love is Blind does that too. And it just pisses me. I mean, my wife off.
- [72:14]
A
Either release them all at once or do it the one week at a time. So I just get in a cadence. But don't let me binge half of it in three days and then wait two months. So now I'm waiting for the second half of. Of Wednesday. And I like quirky shows like that. But your results with Wednesday may vary. I can see why some people wouldn' love it much. I don't think, Doug, you'd like Wednesday that much. Have you watched it?
- [72:35]
C
Nope. And I saw the previews. I'm like, no, that's not me.
- [72:38]
A
Yeah, OG wouldn't like it. And have you watched Wednesday?
- [72:40]
D
I haven't. We're pretty, like, Knee deep in Ms. Rachel Elmo, stuff like that.
- [72:47]
A
So you got to build up to it.
- [72:48]
D
Yeah, yeah. The good thing is they're on YouTube. You can binge them if you want. But yeah, we're Ms. Rachel. We're just kind of stuck in that. Have you ever heard of Ms. Rachel Cocomelon? She's like the icon of gen A or whatever the young generation is.
- [73:03]
A
Whatever the next Next Next gen is.
- [73:04]
D
Yeah, yeah.
- [73:06]
C
No, never heard of it.
- [73:07]
D
Oh, my gosh, Doug. My life revolves around this Rachel.
- [73:11]
A
Wendy's has a tie in with the show Wednesday and they have this whole meal that you can get, but Cheryl had like a sore throat yesterday, so she's like, you know what? I'd really like a Frosty. We pull up and they're advertising the Raven's Blood Frosty. And so we pull up and Wendy's has made the great idea to make AI be the person at the drive thru. So you're not talking to a person. You're talking clearly to AI. And you can even see as your orders appearing on the the screen. It's printing out the words that you're saying. It's printing out the words. It's telling you back as you order. So Cheryl Goes, raven's Blood Frosty. Oh, I wonder what that is. So I roll down my window and it says, can I help you? And I said, yes. What's a Raven's blood Frosty? And the AI answers, it's the Frosty that's in the Wednesday theme meal, whatever they're calling it, the meal of whatever. We go, well, what is it? And then it tells me again, it's the Frosty that comes in the meal. Have you ever gone up to a, a drive through and gone, so what is a cheeseburger? Oh, it's the thing that comes in your meal. Like, that's the answer that I want. What's a Coca Cola? Oh, it's the drink that comes with your meal. Well, unbelievable.
- [74:28]
C
What's a tostada? Beans, meat and cheese.
- [74:32]
A
After I argue with it a couple times, this woman comes on and she's like, it's a dark cherry Frosty. And I turn to Cheryl, she's like, yeah, get me one of those. Get me a medium. But Cheryl likes chocolate ice cream. And so we pull around and, and the woman working at the drive thru, all of her care had been gone weeks ago. Like she just totally, she literally just takes my credit card and I'm trying to ask her, is this a chocolate frosty, a vanilla frosty, or is it like a cherry ice cream? Like, how does this work? She wouldn't even look at me so I could ask the question. And then she opens up the, the door with the credit card and the Frosty and she just hands it to me and I go, hey, I just have a question. She goes, huh? Hands it to me and slams the door shut.
- [75:21]
D
Oh, no.
- [75:23]
A
So I don't know what was worse, the AI or the person, like which piece of this was. But man, it's going to be a while.
- [75:30]
C
Not the flagship Wendy's in the chain, is it?
- [75:32]
A
Apparently not. Yeah.
- [75:34]
B
I was going to say, the good news is that after you get your receipt, there's the, there's the thing where she just flips the iPad and goes, it's going to ask you a question.
- [75:41]
D
Right?
- [75:41]
B
You're like, I bet it is. Negative 10%.
- [75:46]
A
I love that one too. It's gonna ask you a question here. I don't have anything to do. I have no idea what the question is. It's a surprise to me. It asked me.
- [75:53]
B
Yeah, it's just a random question, you know, why is the sky blue?
- [75:57]
A
Yes. Not that you just wash your own car using the Whatever. Would you like to give us a.
- [76:02]
B
Tip that would be actually a good way to do that. Like, if instead of be like, a good play on that stupid stupidity, like, it's going to ask you a question and then it'll say, like, you know, why is the sky blue? And give you a couple of answers. And if you answer correctly, it's like, hey, you get 5% off your meal. Good job.
- [76:18]
A
So, Stackers, just one more thing. If you could just look at your device. You're listening to this on the device is going to ask you a question here.
- [76:24]
B
It's going to ask you a question.
- [76:25]
A
Real quick at the end of the episode.