Talking Real Money - Investing Talk
Financial talk radio veteran, Don McDonald and former host of Serious Money on PBS, Tom Cock, join forces to talk about real money issues. In each episode, they solve real money problems, dole out real investing (not speculating) advice, and really explain the financial issues that effect all of us. Plus, it's actually fun! Talking Real Money is a podcast designed to provide the real help we all need to enjoy a really great future. Call in with your questions anytime at 855-935-TALK (8255).
Talking Real Money - Investing Talk
Find the Robot
Use Left/Right to seek, Home/End to jump to start or end. Hold shift to jump forward or backward.
It’s Friday Q&A—with a small experiment. Don slips one AI-generated voice among the listener questions and challenges you to identify the robot, with his complete two-book library hanging in the balance.
The financial questions are thoroughly human: where to keep a future car fund, whether an $11,000 Roth-conversion program earns its fee, when children can fund Roth IRAs, and what happens when bond holdings move from a traditional IRA into a Roth.
Don also tackles the enviable problem of an oversized HSA, its inheritance rules and post-65 flexibility, plus the timing tradeoff for Social Security survivor benefits.
0:46 — Friday Q&A and the find-the-robot challenge
4:03 — Where should a $70,000 car fund live?
7:21 — Is an $11,000 Roth-conversion plan worth it?
9:39 — Roth IRAs for children—and newborns
11:13 — Bonds that move into a Roth conversion
13:54 — The $500,000 HSA problem
16:43 — When a surviving spouse should claim Social Security
Oh, how many podcasts have a Bollywood theme? Come on. None, I bet.
Bollywood Theme Intro
SPEAKER_01We have a theme of almost every genre I can imagine, and I'm still learning more. I know, I told you, I'm having fun. I hope it's contagious. Welcome to Friday. It's the Friday QA day, and I'm Don. And I do the Friday QA show. And that's this one. And the Friday QA show consists generally of questions, that's the Q part, that you have spoken through your microphone on your device at talkingrealmoney.com by clicking on the little microphone button. By the way, there's a two-minute limit. Two minutes is a lot of time. But if you have to record a second part, just click again and record a second part, and I'll edit them together. But two minutes should be fine for most. So go to Talking Real Money, hit the mic, and then record it. Now, every once in a while we hit a bit of a spoken question drought. For some reason, we rarely have a typed question drought. People like to type, even though speaking is faster and more efficient. But either way. So we have little droughts and we had a drought. And so I went to Tom and I said, before you kill another tree, send some questions digitally to me, and I will go into I have a subscription with 11 labs, which is where I have cloned my voice just in case. I don't know. I don't know what I'm going to use it for, but I've cloned it. Um and have that question, have one of his questions spoke. I was going to have like three of them this week because I only had two questions, but I have more now. So I was going to have AI speak them in different AI voices because they're getting very, very, very good. So since I really didn't need it, but I'd already done it, I decided to try a little experiment on today's podcast. There are going to be several questions that were spoken and digitally enhanced to make them sound better. And then in there somewhere from the first to the last, and I'm not saying where, there will be one question that was text a speech by 11 Labs AI for which I pay. So here's the deal. Don't cheat, okay? But go to talkingrealmoney.com and on the contact form, not the ask a question, but the contact form. Uh tell me which one you truly believe is the AI voice. And the first person who gets it right will get my entire library of books. Both of them. A copy of Financial Physics and a copy of my novel, The Line Uncrossed. We'll we'll send you both of those. But you can only vote once. One time. That's it. Okay? Trusting you on your honor. It's the honor system.
Car Fund Strategy
SPEAKER_01All right. So I'm not telling you which one it is, but we're going to start with, well, this question.
SPEAKER_05Hi, Don. Longtime listener. We started listening about uh $10 million ago. So I have a question about the car fund. We have about $70,000 earmarked for a new car. So what do I do with that money until I need it? So some background is uh married, uh we got a net worth of about $4 million. We have no debt whatsoever because we own our house and no mortgage. We max out our $401Ks, our IRAs, and the HSA every year. We contribute about $2,000 a month to a brokerage account on top of all that. We have about a one-year emergency fund in our high yield savings account. That's pure cash. So after the bills are paid every month, any excess money will go into the car fund or any other big budget items that we're budgeting for, like a new roof that we'll probably have to put on next year. So we're trying to cash flow all that. So I gen usually buy a used car and uh usually drive them until the wheels fall off. So I don't know when I want to buy a new car. The car I'm driving now could die next month or next year. Uh my wife and I have three cars, so I won't need to immediately go and buy a new car. I can wait. Uh so I'm wondering, should I just do CDs or something else like just another high yield savings account? Thanks.
SPEAKER_01What hidden inside this is uh a really interesting idea that has been bouncing around in my brains for a while. With the advent of ride sharing, the need for more than one car is reduced in most families, I believe, particularly just couples. I did the math recently, and the savings of only having one car as opposed to two and then using Lyft or Uber, or now in my area, at least my area soon, uh not it's not all the way down to my house, but it's getting there, Waymo. Uh the savings are huge. If I was just to use Lyft or Uber or Waymo for the short trips, just it within you know like a 15-mile radius, I could save thousands of dollars every year on uh wear and tear on the car, you know, the the amortized costs of the car because uh every year they depreciate insurance, uh tags, maintenance, fuel. I mean, I did the numbers. It was thousands, potentially thousands of dollars. So you're right, you may not need another car. If you've got three, you know, then you can go longer term on the money. And that really is the determinant. If you can comfortably go two years, for example, then I might do a one and a two-year CD or a two-year CD because you're gonna lock in the higher rates. It's not that you're gonna get a better rate than high yield savings, it's just that you're gonna lock it in. And that's in case rates fall. Now, who knows what rates are gonna do? They could go up. I think the best option probably is just high yield savings, though, with all those other things not taken into account. Just keep it in high yield savings because basically it is an emergency fund, and that's where emergency money should go because you never know when you're gonna need it, the car or the roof, or whatever other expense might crop up that you didn't even anticipate. So I think high yield savings, look for the best rates out there, and that would be my choice. Now we go
Roth Conversion Fees
SPEAKER_01to the next one.
SPEAKER_00Hi, Tom and Don. I am 59 years old with $2 million in traditional IRA and $200,000 in Roth. I had a call with a company that specializes in Roth conversions for a one-time fee of $11,000. Company is called Q3 Advisors and have a program called Rothhology to create a detailed specialized conversion plan with yearly updates and support. They claim to specialize in conversions to save substantial amounts of taxes. Is this a beneficial service or something that can be done on my own? Thank you.
SPEAKER_01That's a lot of money for what isn't a very complicated process. It's really not that complicated. I mean, you could literally sit down and do it yourself with the current tax tables and some guesswork for the future, because that's even for them, their program is just going to do guessing. And this is probably uh a pretty simple computer program for which they're charging a lot of money. I mean, you're not getting full account management for that $11,000. I went and looked it up on their ADV Part 2, and you're getting a 90-day deal. You're you're basically buying access to their program for 90 days to help you create a plan, and that's it. You you can hire them for other services, but from the ADV Part 2, it specifically says that this $11,000 plan expires after 90 days. Uh you could hire an accountant to do this for probably a whole lot less. You could get a fee-only advisor for, you know, a similar kind of fee and get a lot of other services, too. So it seems like a lot to me, doesn't it to you? Yeah. 11,000 bucks, that's a lot of money. For something that really is not that complicated. It's it's the guesswork that makes most people a little crazy, but everybody's going to be guessing because we don't know what tax rates are going to be in the future. So you extrapolate a little bit. And again, a CPA could help you do that that extrapolation. And, you know, knows the tax tables. Uh it's just a matter of doing it slowly so that you don't get up in the next bracket more than anything else.
Roths for Kids
SPEAKER_01Thanks for your question.
SPEAKER_03And I just had some questions regarding Roth funds for newborns. I am 65, I have three children, all of whom have relatively large amounts of money in their standard 529 plan.
SPEAKER_01And there it cut off. I don't know why, but that's okay, because I think I can extrapolate an answer. See? Talk about extrapolation. Uh if your kids have great 529s and they're gonna have potentially have more than the the 35,000 or the 35,000 that can be converted to a Roth over and above their school expenses, then you know, if they have earned income. This only works for kids with earned income. If they have earned income, contribute to their Roth for them. But they've got to have earned income and it's got to be legitimate earned income. Your best bet is, you know, W 2 or 1099 work. Now a newborn is a totally different story. No, you can't do a Roth IRA for a newborn. They have to have earned income. And I guess you could. I guess if they have a social security number and they're doing baby model, but I don't know that there's much else a newborn can do and get paid for. So um, yeah, I mean I I mean I love Roth IRAs for kids, not for newborns, but for kids, sure, as long as they have a job. And if that wasn't your question, well, please let me know what it was. Thanks so much. Let's do
Bonds in a Roth
SPEAKER_01the next one.
SPEAKER_07So here's my question. I'm currently a 6040 equity to bond asset allocation, and I'm gonna have to collect RMDs in the next 10 years. In my IRA, I have pretty much the Paul Merriman fixed income uh ETF funds, short-term bond, intermediate bond, and short-term tips. And there's a significant amount in there, and I'm planning on doing some aggressive Roth conversions with that IRA account into my Roth. The question I have is they're all bond ETF funds. Um and when I convert and I want to keep my same asset allocation, those funds are gonna go into my Roth. And I've always basically done my research and studied it up on it. And within the Roth, there should be the more aggressive funds, funds that are gonna have an opportunity to grow a lot more than a bond fund. So I'm just questioning, I don't know if you guys ever address this or not, but what what do you do if you have bonds slash TIP funds in an IRA and you're converting those over to the Roth and you want to maintain your same asset allocation? I guess that's what you do. Throw them all over into the Roth, but it definitely puts the brakes on the growth for that. I appreciate everything you guys do. Have a great day.
SPEAKER_01All right. In a perfect world, yes, you would have accounts with your bonds in them that are taxable or or regular IRAs, then you would have your stocks, your more aggressive stuff in your Roth, but it's not absolute. Nothing is absolute, really. Nothing is absolutely absolute. Uh there's nothing wrong, particularly when you're getting to the retirement phase of life with having bonds in your Roth. Because you're going to tend to be a little more conservative, and if you have a lot of assets in a Roth, some of them are going to have to be bonds. They'll have to be fixed income. So this is, I get it because you've been trained to believe that it should all be aggressive, and that's great during the accumulation phase. Uh, but when you get to the decumulation phase, it's okay to have bonds in there. Really, it's fine. Don't worry about it. Everybody, uh if you're if you've got a lot of Roths, hey, remember, tax-free. Uh if you've got a lot of Roths, then you're going to eventually have bonds in there. Thanks for the question and thanks for being a continual part of this. And now, here's
Growing HSA Questions
SPEAKER_01our next one.
SPEAKER_04Hi, Don. I got a nice first world problem. My HSA has worked too well. Mid-60s, married family HSA balance in 100% equity is right at $500,000. And that's even with taking $50,000 out in the last two years, which was kind of a retroactive reimbursement of all of my accumulated receipts of out-of-pocket medical. So I'm kind of viewing this as a long-term care pool long-term, knowing that maybe not every expense can be covered. And I'm also starting now to throw in Medicare and Part D premiums for reimbursement. But with that, at a utilization rate of, say, $10,000 a year for the next few years, if we have just modest returns in the market of, say, 8%, it's just going to keep growing. So what then? I get the fact upon first death, the surviving spouse retains it as an HSA. Upon the second death, it becomes taxable to heirs. Is that correct? Maybe you can clarify that and offer any suggestions. We obviously can't add to it now that I'm retired. Can we also use it as a traditional IRA? I think we can. And then if there are funds remaining, what becomes of those funds, assuming we've named our heirs as secondary beneficiaries?
SPEAKER_01Aaron Powell Well, first, I I I I think eight I wouldn't call 8% a modest return. That's a that's a really good return, really. Historically, that's a great return. Um because it means you you've got to get 8%, you still have to have a lot in equities. But 8%, that's great. That continues to grow nicely. Uh yeah, and you've got the inheritance rules right. Uh if your wife is named as the beneficiary, the account becomes her HSA, no tax. When the surviving spouse dies, then the account stops being an HSA, and its whole value generally becomes taxable to the beneficiaries in that year. Um so yeah, if it's if the estate's the beneficiary, the value generally goes on that final income tax return. So it's not very inheritance friendly, but it's friendly up until that point, which is great. Um trying to think if there's anything else you can do. I mean, yeah, after 65, it's a great tool. You might want to try to use that during your lives, uh, because you can use it for anything without the penalty. And uh it's any non-medical expenses subject to ordinary income tax, or you know, every time you have a medical expense, certainly use this money. Thanks so much. And I think we're on to our last one for this Friday.
Survivor Benefit Rules
SPEAKER_06Hello, Don. John from Cleveland, rock and roll, capital of the world, Ohio. Question Social Security. I'm at full retirement age to where I collect more than my wife would when she reaches 62. My question is: if I go and die and she's at 62, does she get my full retirement benefit? Or does she have to wait until she's full retirement age before she can start collecting my full benefit? Thanks.
SPEAKER_01Well, if she collects your survivor benefit at age 62, it's gonna be a reduced benefit. To get your full survivor benefit, she has to wait until her full retirement age. But she can get an enhanced benefit at 62. It's just gonna be reduced because she claimed early. So it's just pretty simple. It's the same thing with taking it early. You're gonna get less because you took it early. You don't get the full amount until full retirement age. And uh so at least thankfully you you waited until full retirement age so that she gets a slightly larger benefit than she would have if you took it early. But yep, you gotta wait till full retirement age to get the whole benefit. Thanks so much for your question. Thank you all for being a part of the program every week, every day, really. And uh please tell friends, go to talkingreal money.com and ask your questions. If you want to meet with one of our appella advisors for free for nothing, without any obligation or high pressure sales pitch, I swear that's the truth. Go to talkingrealmoney.com, click on meet an advisor, and please be sure to join us every day on this podcast because we are Talking Real Money.
SPEAKER_08The opinions and views expressed on this podcast were current on the date recorded. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and our subjects change without notice, including any forward-looking estimates or statements which are based on certain expectations and assumptions. Although information and opinions given have been obtained from or based on sources believed to be reliable, no warranty or representation is made as to their correctness, completeness, or accuracy. Information presented on the podcast is not personalized investment advice from Apellow Well. The views and strategies described may not be suitable for everyone. This podcast does not identify all the risks, direct or indirect, or other considerations which might be material to you when entering any financial transaction. We hope you realize that the information provided on Talking Rail Money is for informational, educational, and hopefully enjoyable purposes only. The podcast is not trying to get you to buy yourself any financial products or securities. Instead, the program is provided as a public service by Apello Wealth, a fee-only registered investment advisor. Please see Apello Wealth ADB Part 2 edit on our website for information regarding Apellos, fees, and services. A public capital LLC D B A Apello Wealth is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in the states where it is properly registered, or excluded or exempt from registration requirements. Registration with the FCC or any state securities authority does not imply a certain level of skill or training. Apello does not provide tax or legal advice, and nothing either stated or implied here should be inferred as providing such advice. Thanks for listening, and please visit talkingrealmoney.com for more information and important disclosure related to performance of any specific index or fund quoted in this podcast. The lawyers get richer.
