Good evening. You've got More Than Money. You've got Gene Dickison, your host, your personal financial adviser, offering you all of my 780 years of experience at your service. And happy to be so! It's always a pleasure to share some time with this audience. This audience is the best. Folks who love PBS, folks who love our show - they are so generous, so giving, so willing to share, whether it's questions... We'll talk about that here in a second. ..but also suggestions and insights and just warm feelings and attaboys! Attaboys are very nice. Just letting folks know that they appreciate the hard work that goes into producing a show of this caliber. And gosh, we appreciate you so very, very much. Without you, we are just another financial talking head. 24/7 of, Oh, my head hurts because every other question is answered by somebody who says something different, and it's all just general blah, blah, blah. I sorry, that's a technical term we often use in the professional era. Bottom line for us is we don't suffer from that challenge. We are blessed. We are blessed, because you are the audience. We are blessed, because you are sending us your emails and allowing us to be so relevant, so fresh, so current, because we are answering the questions that you're asking right now. You are the person setting the agenda. So, the email address is simple. We have an entire team at our More Than Money world headquarters that answers questions - financial advisors, certified financial planners, CPAs and EAs, and all manner of specialists as well. And we bring as many people together as we need to answer your questions, because many of your questions are not generic, thankfully. Oh, my goodness. The generic "I'd like to retire. How do I do it?" That's generic. "What's a mutual fund?" That's generic. "Are stocks going up or down?" That's insane. It does require a crystal ball that most folks don't possess. So that is insane. But generic questions are... They produce generic answers. And even I get bored. I'd just kind of drift off halfway through a show. But that's never a risk here, because Megan always brings me some really, really challenging stuff. And hopefully the answers that we give to your friends, your family, the folks that your neighbors, perhaps, that they are sharing with us, maybe they answer your questions as well. And if not, you send us your questions. Gene@askmtm.com. So, without further ado, Megan, where do we start this evening? - Hi, Gene. Our first question has a couple of parts, so I would get your pen ready. It says, My father is 90 years old. He will retire from an organization in October of this year. He does not have a spouse, but he has three sons and a daughter. He is asking for opinions on how to take the pension pay-out. His options are as follows. First, the single lump sum payment, one cash payment of $82,000 with 20% withheld for taxes, equaling $65,000. Second option, life annuity. A monthly income of $2,131 would be paid as long as he lives. And the third option, a life annuity guaranteed for ten years, a monthly payment of $858. Should you die before you have received your monthly benefit for ten years, benefit payments will be made to your beneficiary for the remainder of that certain period. It appears that he currently has enough income on a monthly basis. Thank you for taking the time to respond to this question. - It is absolutely my pleasure and honor. 90. Did you hear that? 90 years old. And now he's going to retire. I think that's fantastic. I have no idea what his occupation was, what kept him active, employed all these years. I think it's fantastic. In my opinion - this is a side bar... I apologize in advance. This is unsolicited personal opinion. It is not endorsed by PBS or anybody else. I think retirement's just a terrible thing. I think it's a terrible thing. Semi-retirement I think is fabulous. I have so many friends, so many clients who are semi-retired now. I'm very blessed. Very, very blessed. And it's 780 years of experience. You can't even imagine how really old I am. That's crazy. But I own the company. What are they going to do? They can't fire me, so I can not retire. I can just continue to serve clients forever and ever and ever. But some folks kind of feel like it's almost expected. And retirement in many ways, not what it's cracked up to be. Now, for a lot of folks, it is, and travel is fantastic. And they shift gears. They leave a job that maybe they didn't like that much and they're doing something they love. That's fantastic. Tip of the hat. But for a lot of folks, retirement is just, Wow, now what? This gentleman made the choice. 90 years old. Wow. Wow. Fantastic. Now, we're going to talk about two things, one of which, pretty straightforward, already answered. This gentleman has enough income, Social Security and otherwise. He doesn't need the income. That's important. The second is a little more pointed and a little less comfortable. And the question I would have is, How is his health? How is his health? Part of being a financial adviser, part of being a fiduciary, is to talk not just about the fun things - Hey, your money's up. Hey, Social Security. You got a big 8% bump. Hey, everything's taken care of. But it's also to address the things that are less comfortable to talk about. In this case, How's your health is critical to what choice we make. How's your health says... It's really good. I expect I'll live another 10 or 15 more years. Then he should take the life... ..payment over 2,000 a month. It's 24,000 a year. Lives ten more years. He's going to pull 250 grand out. If he takes the lump sum, he's going to get 82. The email asks about less 20%. That's not true. We'll talk about that in a moment. But if health is fantastic, every expectation I'm going to be here until I'm 100... My dad was 99. My mom was 101. I'm here. Then the lifetime, the 2,131, is fabulous. It's 25 grand a year. If the answer is, My health is not good... ..then the lump sum is the only reasonable choice to make, and not lump sum. pay the tax and take it out. Lump sum, roll it to an IRA. Roll it to an IRA. Avoid that 20% of tax. Avoid that $16,000, $17,000 of tax. And name your four children as the beneficiaries. My health is not good - maybe a year or two from now, the bulk of that money will go to them. The bulk, because, of course, he'll have to take RMDs along the way. So that preserves legacy money. The first one we discussed, the lifetime maximizes lifetime income. And what if the answer is, I don't know? I'm 90. I don't know. Then the middle one is kind of the middle one. A little over 800 bucks. about 10,000 bucks a year. Guaranteed for ten years. Guaranteed for ten years. If, sadly, we lose this gentleman a month after he takes his first check, his beneficiaries will receive the balance of ten years' worth of payments. That's a midpoint. So, strong health - I want to maximize the money I get out of this thing - You take the maximum life benefit, about 2,100 a month. Not such great health, not really sure, don't really care about the income - take the lump sum, but roll it into an IRA. And you're somewhere in the middle, you take the somewhere in the middle - the income that is guaranteed for life, but it's much reduced, because it's also guaranteed for at least ten years. And in this case, it would turn 81,000 into approximately $100,000 over the next ten years. And that's guaranteed. Congratulations again. Well done. And hopefully, hopefully, in ten years or so, you'll shoot me another email, let me know what's going on. That'd be cool. Speaking of cool, Megan, you are very, very cool with your next question. - Thank you, Gene. You're very cool with your answers. This one says, We are interested in moving some money from a passbook savings account to a safe investment. Plus, we have a few small pre-tax IRAs we need some advice on. We're wondering if you can help us. - Oh, goodness. Yes. Safe... What does that mean? Yeah, it means different things to different people. So, in this current environment, and I caution you, when I talk about current environment, I don't know when you're watching the show. It could be the year 2525. No, that's a song. Could be a long ways from now. So these numbers may not be accurate today, but I'll give you a rough sense. And then, of course, if you're watching our show really far in the future, you're going to have to make some adjustments, do a little bit of homework. But really, safe, for most people, is I can't lose my money. That's really safe. That's the definition of safe. I can't lose my money. Whether it's, in their mind, it's FDIC insured. I can't lose my money there. Or...I lent it to a company I think is never going to go out of business - I bought an Apple bond. I feel really safe there. I bought Treasuries - full faith and credit, federal government... OK. But for a lot of people, that's safe. Super safe. Can't lose my money. Annuity, for example, depending on the company - I really trust that that company is going to be no worries whatsoever. I'll get my money back. So the definition of safe for most people is I can't lose my money. I have tremendous assurances. Could FDIC go out of business? Sure. Could the government default? Of course. But the likelihoods are so small that the investor has a lot of confidence. So let's talk kind of the spectrum of safe money. Currently, money market accounts, half a percent or plus or minus. If you go short term money markets, currently mutual fund ~money markets, or some variation on that theme, between 2.5% and 3% is pretty common. Very, very safe. Again, 2.5%, 3%. Liquid, available, decent rate of return and safe. CDs - FDIC insured - up to the appropriate limits, of course, short term, six month, 4.75. Really, really good. Much better than perhaps they're currently experiencing. Annuities, for example - again, based on the ability of the company, the financial ability of the company, to pay their claims - that's the guarantee - currently 5%, 5.25% for a three year fixed annuity. So you've got a spectrum from very, very low to pretty decent, 5% plus. And how do you pick? You pick based on your own individual needs. Do I need easy access to the money? You need to walk away from the annuities that tie you up for three years, etc, and get down to either completely liquid or very short term, six months or so. Hey, I don't need access to my money, and I'm not that excited about paying taxes - oh, that would be the annuity, because it's tax deferred. You don't pay any tax until you actually take the profit out of the annuity. And that may be three years, or it may be much longer. That's up to you. You've got that control. So lots of different kind of flavors. And there's no reason you couldn't mix and match, you couldn't go from, Gosh, I've got a chunk of money altogether. Let's pick a number, say 100,000. Could I do 25,000 earning 3%? 25,000 earning 4%? 25 earning 5%? And 25 earning 5.25%? Sure, you could absolutely do all of those. Now, question you did not ask, but we are getting often. and it's an interesting one, so I'll throw it in. It's a freebie. It's a freebie. The question we get often is, I got all this money at the bank, a couple of 100,000 bucks. I got my monthly statement. I made $11. This is rude. Why are the banks not paying higher interest rates? And the answer is twofold. Number one, some are. Most or not. Most are not. Some are, most are not. So most of you are saying, why are they not? They don't have to. The interest that a bank pays you is their cost of doing business. That's their cost of acquiring their inventory. In a bank, cash, money, is inventory. They must rent that from you and that's the interest rate. They lend it out to their customers. And what would you...? Oh, yeah, significantly higher interest rates, even if you're just talking about a short term auto loan at 6%, then you go up to perhaps a longer term auto loan or a higher risk auto loan at 8 or 10 or 12. How about credit cards? Lending out on credit cards? Gosh, you don't even want to think about that. It's crazy. So why are they paying so low? They don't have to pay any higher. So many people... Millions, tens of millions, hundreds of millions perhaps. have left so much money in their bank... ..they don't need to pay higher rates to attract deposits. And they will. Eventually, they will. Eventually, enough people will say, This is goofy. $11 on 200,000? I'm out of here. Eventually enough people will. They will start raising their rates in order to attract more of your money. Just a little something extra. Little, little icing on the cake. Excuse me for answering that question. Megan, can I add icing to anybody else's cake? - I don't know. This question... I'm very curious to know the answer to it as well. It just says, What the heck is the ALAR rule? - How am I supposed to know? No, I'm kidding. Gosh, for most folks reading that, most folks seeing that, they're going to go, What the heck is that? ALAR - what is ALAR? Sounds like something that when you go to the dentist they're going to try to remove. You've got a big buildup of ALAR in there. We got to fix that. No, ALAR - At Least As Rapidly. At Least As Rapidly. Ridiculous phrase. You'll understand here in a moment, but still, it's a ridiculous phrase. Inherited IRAs - that's the real topic. Inherited IRAs. The recent tax law clarified - so they say - clarified... Everybody else says changed - the rules... ..on inherited IRAs. Prior to the recent tax law, which took effect January 1st, 2023, when you inherited an IRA, the IRS code said you had ten years to take the money out. It left it open that you could take nothing out until the last day of the tenth year. And it would stay tax sheltered that entire time. And you... I don't need it. I don't want to add it to my income. Maybe I'm still working. In five years I won't be. I'll be in a lower tax bracket. I'm just going to push it off. And that's what folks did. They took nothing out. Lots of folks, like way more than half. And the IRS looked at that, and went, This is no fun. We wanted a lot more tax. So let's change the rules. And the rules now say, with some exceptions... There are some beneficiaries that don't need to follow the ten year rule. If you are a spouse, you don't need to. You might. You could. But you don't need to follow the ten year rule. If you're disabled, you could, but you don't... ..you're not required to follow the ten year rule. If you're a minor child, you're not required to. Certain exceptions. But for the vast majority of inherited IRAs, children, grandchildren, friends, etc, the ten year rule applies. And the new requirement is you must take... In all likelihood, you must take a certain amount per month, a required minimum distribution, from the inherited IRA, even though you have a ten year window. And how much do you take out? It must be an amount... Are you ready? ...At Least As Rapidly as the person who left it to you. So, let me give a demonstration. You have 100,000 IRA that was bequeathed to you by your father. He was 75. He was taking his RMDs, and he was taking about, excuse me, 4,500 bucks a year. You inherit the IRA, you must take out the required minimum distribution year by year that he was taking out. So do you have to take the whole 100,000 out this year? No, you have to take out $4,500, maybe $5,000. Next year, a little more. Next year, a little more. By the end of the tenth year, the 100,000 is no longer 100,000. Depending on how it was invested, it might be more, if you're really lucky, could be way less - likely... Or at least... Not likely. Yeah, no. Likely, even though it may not be very much less. If your 100,000 makes a 5% return and you must take out 4,500, it goes up. The next year, you have to take out 4,700 and it makes five. It goes up. So it is very possible it holds on or goes up a little bit or goes down. It doesn't matter. Whatever the results are, at the end of the tenth year, you have to take it all out. So for folks that are saying, I don't really want to, that's the required part of the RMD - required minimum distribution. You're required to. I don't care if you want to or not. And you're required to pay tax on it. Can you roll it to an IRA? No. Can you put it in a Roth? No. Can you take it out and pay taxes on it? Yeah. That's the whole idea. That's what the IRS needs you, requires you to do. It will still allow you to push off a tremendous amount of it, in all likelihood. Exception will be the age of the decedent will have an impact. If an individual is 90 years old, their RMD is probably 15%, and next year it'll be 18 and the year after it'll be 20. It goes up very, very rapidly as we age. So that could be... That will have a significant factor. But At Least As Rapidly - translation - if you have an inherited IRA, you do have a ten year window, but you still have to take money out year by year. Megs, how did I do? - I thought that was a very good answer. This next question, as you can see, is a little ominous. It says, Gene, you stated that the government would probably not default on its debt ever since the corporate Federal Reserve was established over 100 years ago by foreign bank families to create money out of thin air. Has the government not defaulted on their debt year by year through what they call inflation, which amounts to default by the devaluation of the fake money they continue to pour into the economy at evil usury rates? Just another disastrous tax on the poor? - I'm just this much disappointed that the word boogeyman wasn't in there. I... I... I am not saying that this individual's email is without merit. There is some merit there. There is some accuracy. There are some facts in there. Sadly... ..It's not completely factual, but I wanted to share this with you for a reason. There has occurred in my lifetime a shift from a serious respect for the government, in the sense that we believed we, the citizens, believed they were acting in our best interest. The shift has become rather prominent in a different direction, to where many people are very cynical. Many people believe the government is evil. Now, the word many is interesting. The word many is interesting. I would suggest to you that there are millions of people who agree with him. Millions of people that think the government is evil. Millions. OK, now, what I need you to do is take a breath, because the next part is a little math, and people are not always happy with math. But you'll be all right. If I'm going by memory, and, Megan, if I'm totally wrong, make sure you correct me, I think we currently have about 350 million people in the United States. I think there's about 350 million citizens, I think. So, millions of them think the government is evil. Let's say, just for fun, it's 3.5 million. That's a lot of people. It's 1%. It's 1%. And do I have just never-ending respect for everything the government does? Don't be ridiculous. Don't you be so foolish, now. Don't be naive. I have eyes. I have ears. I can see. And yes, there's lots going on that I think is horrendous and needs to be changed. That's not equivalent to evil. And I am not looking for the boogeyman behind every door, even though lots of folks are - lots, millions, 1%. Now, I have no academic study to cite that it's only 1% that think evil and that the people that disagree with them are terrible human beings and they should be thrown out of the country. I don't have academic studies. What I have is a good gut, a bigger gut, but a good gut. And I get to meet tons of people, through my business, through PBS39, through folks who interact with us from around the country, gosh, from around the world, through my friends and my church, etc... You get the idea. I get a lot of contact with people. The vast majority... ..I'm talking about 98%... ..are wonderful. They're fantastic. They're real Americans. And when I say real Americans, what I mean is we can disagree and still go bowling. We can disagree and still raise a glass. We can disagree and go to church together. We can disagree and show up at the school football game, cheer on our teams together. We can disagree. That's what real Americans can do and always have. Real Americans have never been happy about paying taxes because we're real Americans. We're never happy about rules and regulations that are put on us, especially the ones we think are stupid, cos we're real Americans, but real Americans... ..not the 2%, not those millions... ..the hundreds of millions... They're kind, they're considerate, they're wonderful, they're caring, they're compassionate, they're loving. And once they figure out that there's something that you and I disagree about... "You think that? "Tell you what, let's not talk about it. "Let's just be friends." And 98% of the time the answer is, "Sounds good to me." People are wonderful. The vast majority. 98%. Wonderful. Kind. Caring. Compassionate. Giving. Loving. So when you hear this kind of stuff... Hmm. What is that? Just... Is that? Am I doing it right? Just let it go. Let it go. And remember, 98% of all the people you bump into, they're wonderful. Speaking of wonderful, wonderful of you to spend the evening with us. I hope that in the last half hour or so, you picked up a couple of ideas that really do fit for you. If you didn't, help us, help yourself - send us your emails. Allow us to serve you. We answer every single question back to you, so you'll learn a lot, even if it doesn't appear on a future show, but maybe it will. And maybe it'll help a whole lot of other folks who get to watch the show as well. Help us be the most relevant, freshest, most current show on TV answering your financial questions. Hopefully that'll be enough to encourage you to come back next week, spend another half an hour with us on our next edition of More Than Money.