Speaker 1: Welcome to How the Money. I'm Joel and I and Matt.
Speaker 1: Today we're discussing retirement account rule changes in stimulus check details.
Speaker 1: Chedel it's write some things have changed when it comes
Speaker 1: to taking money out of our four owing case when
Speaker 1: it comes to tapping those retirement accounts. We'll get to
Speaker 1: that's We're gonna answer some coronavirus related questions, and we're
Speaker 1: gonna get to some of the details regarding the stimulus checks,
Speaker 1: which should be coming out really soon, man, like next week.
Speaker 1: I think that's the hope, right that, Yeah, that is
Speaker 1: the hope because so many of the things in this
Speaker 1: Care's Act have been delayed to people when it comes
Speaker 1: to unemployment benefits, when it comes to the p p
Speaker 1: P and small businesses being able to get funding to
Speaker 1: sustain to sustain themselves and to sustain that payroll. Right now,
Speaker 1: those things have in time and um and yes, so
Speaker 1: I'm hoping the stimulus checks are delivered as promised, whereas
Speaker 1: some of those other things just haven't been I was right, man.
Speaker 1: So it's week four the quarantine. How are you guys doing,
Speaker 1: By the way, I wanted to check in, We're doing
Speaker 1: pretty good. Yeah, I think our families holding up reasonably
Speaker 1: well overall. How about you guys. Yeah, same here, man,
Speaker 1: We're doing pretty good. Obviously, we're spending way more time
Speaker 1: at home, way more time kind of out in our
Speaker 1: front yard, working in the garden, that kind of stuff,
Speaker 1: waving at people from a distance. Yeah. Well, on that note, man,
Speaker 1: I installed a ceiling fan actually on our front porch
Speaker 1: because Kate and I kind of looked ahead and into
Speaker 1: the next few months and we realized we're going to
Speaker 1: spend a lot of time on this front porch, probably
Speaker 1: many as will make it super comfortable. Keep the bugs
Speaker 1: away with that exactly. Yes, So we got one of
Speaker 1: those ones with like all the fan blades. They can
Speaker 1: kind of really whip up some mare. But actually, while
Speaker 1: I was out there the other day putting that up,
Speaker 1: some friends of us walked by, and so we were
Speaker 1: kind of out there having one of those six ft
Speaker 1: front yard conversations, and I was looking at our friend David,
Speaker 1: and I didn't realize that he had gray hair. Since
Speaker 1: he hasn't been getting his haircut regularly, it was getting
Speaker 1: a little bit bushy around the ears, and so you
Speaker 1: started to rag him about it. Of course, with that
Speaker 1: gray hair comes lots of wisdom. I'm all about gray hair.
Speaker 1: By the way, I would much rather have any hair
Speaker 1: at all and how to be gray or white than
Speaker 1: have no hair. You know, what about you? Yeah, you know,
Speaker 1: I think I prefer grays well like Evans, some hair,
Speaker 1: even if it is gray. But you know, with a
Speaker 1: lot of us working from home, I think now is
Speaker 1: is like the perfect time to figure out how to
Speaker 1: maybe cut your own hair. This is something you and
Speaker 1: I've talked about before. A lot of people have that
Speaker 1: question now and they're starting to get a little shaggy
Speaker 1: and there because I gotta, I gotta, I gotta be
Speaker 1: honest with you. In a couple of weeks, I'm gonna
Speaker 1: get too close to a wearing a ball cap every day.
Speaker 1: But I don't get my hair cut. That's kind of
Speaker 1: why I've been wearing I had recently since weddings have
Speaker 1: slowed down. I don't really have a need to cut
Speaker 1: my hair, except that, you know, I don't know when
Speaker 1: I hang out with other people, a kind of feeling
Speaker 1: the need to tame it down a little bit. But
Speaker 1: but seriously, with a lot of folks not going to
Speaker 1: get their hair cut, I think folks should look to Amazon,
Speaker 1: maybe getting up here of hair clippers investing a little
Speaker 1: bit of money into something like that. There are lots
Speaker 1: of different tutorials as well online like YouTube is definitely
Speaker 1: gonna be your friend if you've never cut your hair before.
Speaker 1: Are But I think that, like I was saying, though,
Speaker 1: this is a perfect time to experiment a little bit.
Speaker 1: And you know what, if you bought it a little bit,
Speaker 1: no big deal, Like it'll grow out in two three
Speaker 1: weeks and nobody's gonna see you. You can try again,
Speaker 1: or even this might even be a great time to
Speaker 1: try out buzzing your hair. I don't know if you've
Speaker 1: ever Did you ever buzz your hair? Like while you're
Speaker 1: in high school? No? Middle school? It was bad. Why
Speaker 1: did every guy in middle school decided to buzz their hair?
Speaker 1: I did that in middle school as well. Can I
Speaker 1: admit this too? I wore a headgear in middle school? Uh,
Speaker 1: really cool. I was really really cool, obviously, And then
Speaker 1: we're making indentions in my head and so you could
Speaker 1: see the lines where the headgear had been at night,
Speaker 1: where it sit there all night long. I should not
Speaker 1: have just admitted that, but I did. Oh you're such
Speaker 1: a nerd. Oh man, I would have left to know
Speaker 1: middle school Joel that middle school Joel in middle school,
Speaker 1: mat would have totally gotten along, or we would have
Speaker 1: been just so embarrassed of each other that would have
Speaker 1: just like gone to our separate rooms like at our
Speaker 1: parents house exactly. Anyway, I wanted to mention that because
Speaker 1: I think a lot of people don't consider cutting their
Speaker 1: own hair, and I think that's something that you and
Speaker 1: I were definitely not afraid to do that ourselves, but
Speaker 1: a lot of people are. Yeah, I'm definitely not afraid
Speaker 1: to look in like an We take a lot of
Speaker 1: stuff seriously, but you know, luckily we don't take ourselves
Speaker 1: all that seriously. Also, I'll put a little YouTube video
Speaker 1: that I came across that I think might help some
Speaker 1: folks out there who have never done this before. It
Speaker 1: might give you a little bit of confidence. Nice, all right,
Speaker 1: that sounds perfect. All right, Matt, let's get onto the
Speaker 1: subjective hand. We're talking about the retirement account rule changes
Speaker 1: in stimulus check details. But first let's talk about some
Speaker 1: of the good news. It's happening this time, the good news,
Speaker 1: the good news. We're trying to hit that first thing
Speaker 1: on these Friday episodes and kind of tout some of
Speaker 1: the good things that are happening in our communities around
Speaker 1: our nation during a time where there's just a lot
Speaker 1: of difficulty going on. So, yeah, the first thing we
Speaker 1: want to mention is that BP is offering fifty cents
Speaker 1: a gallon discounts to first responders, nurses, doctors, and hospital
Speaker 1: workers on their next trip to the gas station. So
Speaker 1: if that's you, you'll have until the end of April
Speaker 1: to get your discount code. For more info, go to
Speaker 1: BP dot com slash Local Heroes. You're gonna have to
Speaker 1: identify yourself through that through a website the VP has
Speaker 1: set up. But then you can get fifty cents off
Speaker 1: a gallon of gas. That's pretty sweet, yea, And with
Speaker 1: gas prices as low as they already are, this might
Speaker 1: be able to take you back to those middle school days. Seriously,
Speaker 1: I think in some states it might get you under
Speaker 1: a dollar per gallon, depending on where you live, So
Speaker 1: there's not applying in California, yeah, seriously, but that's definitely
Speaker 1: something worth checking out. And all the note of car expenses.
Speaker 1: On this past Wednesday's episode, we talked about going to
Speaker 1: your insurer seeing if you can get a discount when
Speaker 1: it comes to your auto insurance. Well, some auto insurers
Speaker 1: are offering rebates proactively. American Family Insurance, they are returning
Speaker 1: about fifty dollars per insured vehicle as they estimate that
Speaker 1: policy holders drove about fewer miles during the last three
Speaker 1: weeks in March, and all state they say that they'll
Speaker 1: be sending out around six hundred million dollars in shelter
Speaker 1: in place payback checks and so claims are oftentimes correlated
Speaker 1: directly with the number of miles driven. So obviously when
Speaker 1: less people are driving, there are going to be fewer
Speaker 1: fender benders, which you know, obviously saves us money in
Speaker 1: the short term. It saves the insurer money because they're
Speaker 1: not having to meet those claims. But in this case,
Speaker 1: it's also saving us even more money because we're you know,
Speaker 1: we're getting some of that money back ourselves, you know,
Speaker 1: we're kind of sharing in the profit. So I think
Speaker 1: that's really cool that some of these bigger insurers are
Speaker 1: doing that. Yeah, I sent an email earlier this week
Speaker 1: to my insurance company to see if they were doing
Speaker 1: the same, and at first the reply for my agent
Speaker 1: was kind of like, uh, no, not yet at least,
Speaker 1: but thanks for checking. And then the very next day,
Speaker 1: my agent sent me a link to the presser from
Speaker 1: from Liberty Mutual that's who I'm with, and she said,
Speaker 1: you know what, we're rebating people, you know fifteen I
Speaker 1: think of their March and April bills. So that's good
Speaker 1: to see. I love seeing that more insurers are following suit.
Speaker 1: On another good note, Matt, we've been talking about all
Speaker 1: the good news, all the good news we know, of
Speaker 1: course due to the Cares Act, and we've talked about
Speaker 1: this that if you have federal student loans, well you
Speaker 1: don't have to pay your monthly pay it for six months.
Speaker 1: But we didn't have great news to share for people
Speaker 1: who have a private student loan, and so we wanted
Speaker 1: to let you know that that seems to be changing.
Speaker 1: A lot of the private student lenders are also offering
Speaker 1: at least a ninety day UH forbearance time limit for you.
Speaker 1: So if you do have a private student loan and
Speaker 1: you do find yourself unable to pay right now, well
Speaker 1: there's a good chance to your private student lender is
Speaker 1: willing to work something out. You're not going to get
Speaker 1: the interest holiday that federal student loans have in all likelihood,
Speaker 1: but at least you want to pay your bill for
Speaker 1: ninety days and you won't go into delinquency. So yeah,
Speaker 1: we would encourage you to go to your private lenders
Speaker 1: and website and see what briefing they have available. If
Speaker 1: they don't have anything listed up there, they give him
Speaker 1: a call and see what they can offer you. Nice man.
Speaker 1: You know. One of the other changes we've seen since
Speaker 1: our last Friday episode is that the CDC has announced
Speaker 1: that they recommend that we all wear face coverings when
Speaker 1: we go out in public, especially when we go to
Speaker 1: places like grocery stores, pharmacies, things like that. And so
Speaker 1: we're starting to see local small businesses making like good
Speaker 1: looking face masks, and not surprisingly we've seen Etsy. They've
Speaker 1: become a hub for small businesses to sell the different masks.
Speaker 1: I have a feeling that these, you know, these masks
Speaker 1: will look more and more like accessories for us, not
Speaker 1: necessarily a health precaution, as they even become more and
Speaker 1: more a part of our life, you know, in our
Speaker 1: day to day. So, oh, you've got that dope new
Speaker 1: Tommy Hill Figer mask. I don't know if Tommy Hill
Speaker 1: fagre stoke cool or not. Probably not. Again, you're you're
Speaker 1: really throwing it back to the middle school days. So
Speaker 1: we would recommend that you follow the CDC's guidelines, take
Speaker 1: those health precautions, wear a mask, and at the same time,
Speaker 1: you can support a local business. So there's a local
Speaker 1: bike shot that we have here in town, Spindle and
Speaker 1: they normally, you know, they sell bike parts and accessories
Speaker 1: and stuff, but they also make their own bike bags
Speaker 1: that kind of attached to the frame of your bike.
Speaker 1: Maybe if you're listening, you've seen these before, but they
Speaker 1: have transitioned to making these masks themselves, uh and selling
Speaker 1: those along with what they normally sell. Some other friends
Speaker 1: of ours as well, Three Toes Thread Works, they're actually
Speaker 1: up in Grand Rappings. They're friends of the show and
Speaker 1: they're doing something similar. I think it's cool that we're
Speaker 1: starting to see these smaller businesses switch things up a
Speaker 1: little bit and catered to some of the health needs
Speaker 1: that have come up. Yeah, totally, Pivoting is huge for
Speaker 1: small businesses right now because of slowdown in business has
Speaker 1: kind of hit almost everybody across the board. Almost every
Speaker 1: business has seen at least a slow down, and so
Speaker 1: pivoting is crucial in a time like this. Man, I
Speaker 1: saw this article just the other day in CNBC. They
Speaker 1: talked about a swag company and obviously swag in this
Speaker 1: economy just way less of a need and there's no
Speaker 1: conferences going on. There's no pins to give out a
Speaker 1: conference slag. Okay, like like the pins and stuff, Yeah exactly. Yeah, Like,
Speaker 1: how do you sell swag? If you make out the swagger,
Speaker 1: you can't buy it. You sell swag in a bottle,
Speaker 1: like you just like you take that and apply it
Speaker 1: to your neck and on your wrists and something like that.
Speaker 1: It's like a potion you take something like that. Yeah,
Speaker 1: but no, but this company has completely changed gears and
Speaker 1: they started using their existing contacts and resources, and they
Speaker 1: launched a website selling medical necessities. And they could have
Speaker 1: kind of stayed put and said, woe is me, and
Speaker 1: you know what, our swag business is going to go
Speaker 1: under or we're at least going to have just a
Speaker 1: really hard time at a minimum for the next three
Speaker 1: to six months. But no, they said, we're gonna proactively
Speaker 1: make a decision to do something different. And I know
Speaker 1: not every business can do that, but there's a lesson
Speaker 1: to be learned. In that and the more we can
Speaker 1: pivot in this time as individuals and as businesses, it's
Speaker 1: gonna help us out. And it was really cool to
Speaker 1: see that conference swag company doing something proactively to actually
Speaker 1: kind of pivot and create a new business for themselves. Yeah,
Speaker 1: resilient businesses look for opportunities. Right, Let's go ahead now
Speaker 1: and kind of dive into retirement accounts that we mentioned
Speaker 1: this at the top of the episode, but the details
Speaker 1: and some of the rules surrounding retirement accounts has changed
Speaker 1: due to the CARES Act. We mentioned this briefly a
Speaker 1: couple of weeks ago in response to a listener question
Speaker 1: who was interested in tapping a four own K to
Speaker 1: use that money for other investments. But the CARES Act
Speaker 1: has a provision that allows people to tap their traditional
Speaker 1: I ras or their four O one case early and
Speaker 1: you can make a withdrawal of up to one hundred
Speaker 1: thousand dollars and avoid the normal ten percent penalty. However,
Speaker 1: you'll still pay tax on the amount that you've taken
Speaker 1: out though, but of course that's going to be at
Speaker 1: your ordinary income tax rate. However, you can choose to
Speaker 1: pay that tax over the next three years instead of
Speaker 1: being forced to pay that all in one single year
Speaker 1: as you typically would. Yeah, so that's an interesting provision
Speaker 1: mat As people have heard more and more about it,
Speaker 1: there's more and more questions. But I think the ultimate
Speaker 1: question is should you do it, And we would say
Speaker 1: the answer is in almost every situation no, mostly due
Speaker 1: to the fact that you'll be locking in your losses.
Speaker 1: Right the market is down currently about from its peak
Speaker 1: right now. Depending on your asset allocation, whether you're heavily
Speaker 1: invested in stocks or whether you have a more balanced portfolio,
Speaker 1: you'll be taking that money out while the economy is
Speaker 1: in recession territory, and those shares that you sell well,
Speaker 1: they will never be able to experience that inevitable recovery
Speaker 1: inside of that retirement account. So we would say the
Speaker 1: only reason to take that early withdrawal is if you
Speaker 1: need that money to put food on the table or
Speaker 1: to keep the lights on, or if you need even
Speaker 1: more than the current loan amounts that you have available
Speaker 1: to you through the paycheck protection plan to be able
Speaker 1: to keep your small business afloat. If it means folding
Speaker 1: altogether or tapping your retirement account, I mean, I think
Speaker 1: then it might make sense to tap your retirement account
Speaker 1: to to keep your business going. But for the most part,
Speaker 1: this is not something to be done flippantly, to start
Speaker 1: tapping your retirement accounts, pulling money out while the market's
Speaker 1: down just because you can and you're not gonna have
Speaker 1: to pay the penalty. Yeah, it's so important for us
Speaker 1: to not lock in those losses. And on a related note,
Speaker 1: let's talk about required minimum distributions. Individuals of retirement age
Speaker 1: are not required this year to take the minimum required distribution.
Speaker 1: By not requiring these distributions, retirees are not forced to
Speaker 1: sell investments that have declined significantly. Again, if they did,
Speaker 1: they'd be locking in those losses. So I think you know,
Speaker 1: luckily most of our listeners are under the age of
Speaker 1: seventy two and are hopefully in a position to continue
Speaker 1: investing while the market is on sale. But if you
Speaker 1: do happen to be an older listener, or maybe you're
Speaker 1: talking to a parent who doesn't need that retirement money
Speaker 1: this year, tell them to forego the required minimum distributions
Speaker 1: this year so that they don't take those losses. Especially
Speaker 1: for new retirees. Matt, a big down swing in the
Speaker 1: amount of money you have overall invested. Starting to pull
Speaker 1: that money out has long term effects over your withdraw
Speaker 1: strategy in retirement. And so yeah, if you can leave
Speaker 1: that money in not have to pull it out, that's
Speaker 1: the best case scenario for you. So yeah, I would
Speaker 1: say to anybody who can afford to not take their
Speaker 1: rm D, you're not forced to, so leave it in.
Speaker 1: And Matt on one of the note before we get
Speaker 1: to some listener questions, We've been sent a few emails
Speaker 1: and I've seen some people having questions about F S
Speaker 1: A S and h S A S and they're wondering
Speaker 1: whether the Cares Act addresses this because things have changed,
Speaker 1: and they're wondering if there have been any provisions in
Speaker 1: the Cares Act for F S A and h s
Speaker 1: AS in particular. And what we can tell you is
Speaker 1: that not much has changed legally yet on these accounts.
Speaker 1: There was a provision in the Cares Act that made
Speaker 1: feminine hygiene products and h S A eligible expense. So
Speaker 1: that's an upside for our female listeners. But what about
Speaker 1: f says, These are of course the accounts that you
Speaker 1: can put money aside and shelter from taxes, but it's
Speaker 1: a use it or lose it situation, you have to
Speaker 1: use it this year or at the very latest by
Speaker 1: early next year. And there is talk of another stimulus bill,
Speaker 1: and we're hoping that Congress at a minimum extends a
Speaker 1: deadline for us to use these funds to still get
Speaker 1: that tax benefit. Because let's say, Matt, somebody has a
Speaker 1: dependent care f s A for daycare for the kids,
Speaker 1: but that daycare is shut down. Well, they're not spending
Speaker 1: the money that they had allocated in their f s A,
Speaker 1: and in all likelihood it looks like they're gonna be
Speaker 1: taxed on that due to no fault of their own.
Speaker 1: So there's not much that we can share at this point,
Speaker 1: but do know that we'll keep our ears open, we'll
Speaker 1: keep looking and hopefully some sort of changes made to
Speaker 1: help people with an v s A that can't use
Speaker 1: it all this year. Now, that's right, man, So we're
Speaker 1: gonna take a few coronavirus related listener questions as well
Speaker 1: as cover some of those stimulus check details. We're gonna
Speaker 1: get to that right after the break. All right, we're
Speaker 1: back from the break. We just covered some of the
Speaker 1: retirement account rule changes that are in effect now because
Speaker 1: of the cares act, and it's time to get into
Speaker 1: some listener questions and then we'll talk about stimulus checks
Speaker 1: in a second. To David and the Facebook group had
Speaker 1: a question Matt that I thought we should cover because
Speaker 1: it's probably one that other people have thought. He said,
Speaker 1: in this recent economic downturn, would it be wise to
Speaker 1: take out a personal loan and invest that money? Because
Speaker 1: I think I might be able to make more? And Matt,
Speaker 1: you and I not risk averse, but this is pretty risky.
Speaker 1: Like we think a certain amount of risk is healthy
Speaker 1: and necessary to be a good investor, but taking on
Speaker 1: debt to invest, it's not typically a great move, right man. Yeah, man,
Speaker 1: When you look at the historic returns of the stock market,
Speaker 1: like from a number standpoint, it seems like it would
Speaker 1: make sense in our brain that taking on a lower
Speaker 1: interest rate debt in order to invest and now a
Speaker 1: higher return like that seems smart. That seems really intelligent.
Speaker 1: But borrowing costs are certain and investment results are not certain.
Speaker 1: And the other thing is that personal loans are going
Speaker 1: to have higher rates, and so we're not fans of
Speaker 1: those at all. The best rate possible that we're seeing
Speaker 1: right now is like five to six percent and that's
Speaker 1: on a site like so FI or credible, and you know,
Speaker 1: there's no guarantee that you're gonna get anything close to that.
Speaker 1: In the stock market. You might, you might get a
Speaker 1: lot higher than that. But the fact is is we
Speaker 1: just don't know. We don't know that the state of
Speaker 1: our economy, we don't know where things are gonna be
Speaker 1: later this year, all right, man. So that brings up
Speaker 1: the question should you ever borrow money to invest? Are
Speaker 1: you thinking about housing? Well, yeah, real estate. If you're
Speaker 1: if you're gonna invest in real estate, that's something you
Speaker 1: and I've done. We have become leveraged real estate buyers.
Speaker 1: We put money down, typically on an investment property. That's
Speaker 1: how you get the best terms. But we have done that, right,
Speaker 1: We have taken on debt in order to invest. So
Speaker 1: we would say that, yeah, there are some times where
Speaker 1: it makes sense to take on debt for investment purposes.
Speaker 1: But I think there are a couple of things that
Speaker 1: you need to note before you do take on debt
Speaker 1: for investment purposes. And one is the reason it is
Speaker 1: different for real estate than for just investing in the
Speaker 1: stock market is because your cash flow increases every month.
Speaker 1: When you're a landlord, right, You're getting an actual return
Speaker 1: on your investment every single month while you're paying down
Speaker 1: your mortgage. And also housing is just a more stable investment.
Speaker 1: It just doesn't fluctuate nearly as much as the stock
Speaker 1: market does. With the stock market, borrowed money could increase
Speaker 1: your net worth over time, right, but it's this far
Speaker 1: riskier endeavor because you don't have any sort of assurance
Speaker 1: of cash flow to pay on the debt like right now.
Speaker 1: And so, yeah, borrowing to invest when it comes to
Speaker 1: putting more of your money in the stock market in
Speaker 1: hopes that it will go up in the next three
Speaker 1: five years, that's an incredibly, incredibly risky move. While buying
Speaker 1: investment properties and doing it well with proper leverage and
Speaker 1: proper underlying you know, personal finance habits in your own life,
Speaker 1: you're investing with borrowed money, but you're doing it wisely
Speaker 1: and judiciously. Yeah. So, in another way to kind of
Speaker 1: look at this problem is if you already own a property,
Speaker 1: right like, so, say you have extra cash on hand,
Speaker 1: and so the question then comes up, you know, should
Speaker 1: I pay off that mortgage or should I take that
Speaker 1: money and invest it more into the markets, and when
Speaker 1: it comes to the numbers, we are going to tend
Speaker 1: to side with investing more. And so someone listening might
Speaker 1: ask the question like, like, what is the difference here, Well,
Speaker 1: personal loans are different from mortgages because a mortgage it's
Speaker 1: lower risk. It's also a lower interest rate loan. UH,
Speaker 1: that is also giving you somewhere to sleep at night
Speaker 1: because there is a tangible property there. It's not just
Speaker 1: money that's invested in the market. However, Man, I want
Speaker 1: to couch that even just a little bit, because like
Speaker 1: I used to be by the numbers total money nerd, Right,
Speaker 1: But like the more more, like the older I get,
Speaker 1: the more I realized how much UH, emotions play into
Speaker 1: our personal finances. And you know, dude, like down the road,
Speaker 1: I might be someone who is going to lean in
Speaker 1: favor of even paying off a property because of the
Speaker 1: emotional benefits that you would receive from that. Even though
Speaker 1: I know that, yeah, I'm only paying three and a
Speaker 1: half percent, or I've got this property it's only at
Speaker 1: four percent, it makes sense from a number standpoint to
Speaker 1: keep that mortgage and continue to invest extra money into
Speaker 1: the market. Right. However, there's something that my brain is
Speaker 1: striving for which is like whether it be simplicity or
Speaker 1: just to have less on my plate. And I am
Speaker 1: seriously going to consider down the road if I do
Speaker 1: have extra money to invest to maybe look at paying
Speaker 1: off a mortgage instead of taking that money and investing
Speaker 1: it in the market. Remember when we had our friend
Speaker 1: Andy Hill on the show. Yeah, I'm totally thinking about
Speaker 1: him because he's one on board with the you know,
Speaker 1: the paying off your house train. He loves that clarity,
Speaker 1: and I kind of envy that a little bit. I think, man,
Speaker 1: he's got way less on his mind, even though in reality,
Speaker 1: like what changes all that much? You know, like you've
Speaker 1: got s road, the payments are automatic, I don't have
Speaker 1: to think about it. But I think there's something different,
Speaker 1: Like there's there's something like something clicks, and it feels
Speaker 1: different when you know that you own a house compared
Speaker 1: to having a mortgage on it versus being leveraged. Yeah
Speaker 1: for sure. Yeah. So I think taking out debt to invest, Uh,
Speaker 1: it's something you should be incredibly wary of. And taking
Speaker 1: out a personal loan in order to invest is something
Speaker 1: that you should definitely stay away from. All right, Matt,
Speaker 1: let's get onto a voice question. This one came from
Speaker 1: a listener in Minnesota about investing right Now. Hello Matt
Speaker 1: and Joel. Terry here from St. Paul, Minnesota. Thank you
Speaker 1: for your podcast. My husband and I listen on a
Speaker 1: regular basis and find the information you provide to be
Speaker 1: quite helpful. With the way the markets have been, we
Speaker 1: found ourselves in a debate on whether or not you
Speaker 1: could lose all the money in a four oh one K,
Speaker 1: and since we're unable to find a solid answer, we
Speaker 1: were hoping you guys could help. So can you lose everything,
Speaker 1: including the contributions you and your employer have made or
Speaker 1: would you just lose the gains in that account? Also,
Speaker 1: should we cut back on our contributions if our employer
Speaker 1: cuts back on their match? Thank you so much, guys.
Speaker 1: Hey Terry, thanks so much for listening. We appreciate your question.
Speaker 1: We appreciate your husband listening to both of you. Let's
Speaker 1: go ahead and get your question. You're asking if you
Speaker 1: can lose all of your money that you have in
Speaker 1: your four oh one K. The short answer is it's possible,
Speaker 1: for sure. But if that's the case, we've all got
Speaker 1: bigger issues to worry about. Take your fish to Fry. Yeah,
Speaker 1: and the reason for that is because hopefully you aren't
Speaker 1: invested in widely diversified index funds like US Total Stock
Speaker 1: Market Fund that has made up of thousands of different
Speaker 1: American companies, or even the SMP five index fund, which
Speaker 1: is made up of you can guess it maybe around
Speaker 1: five hundred, not four nine different companies. I'm pretty sure
Speaker 1: actually there's not exactly five hundred funds. I think it's
Speaker 1: like was taken off recently. I think they were in
Speaker 1: the SP hundred no longer. They didn't make the cut.
Speaker 1: And so Terry though that you know, the chance though,
Speaker 1: of every single one of these different companies tanking and
Speaker 1: going bankrupt at the same time, it's highly unlikely. But
Speaker 1: if that does happen, that's when we have bigger things
Speaker 1: to worry about. Yeah, that's the end of our society
Speaker 1: as we know it. And the end of your four
Speaker 1: own K doesn't really matter very much when it's the
Speaker 1: end of society, right, And and Terry to your question too,
Speaker 1: So much of it does depend on what you're invested
Speaker 1: in inside of your four oh one K. This has
Speaker 1: happened before with individual stocks, right, and it could happen again.
Speaker 1: Certain companies do go bankrupt from time to time. They
Speaker 1: experienced a lot of difficulties in their stock plummets to zero.
Speaker 1: Matt HBO just made some of their shows free right now,
Speaker 1: And Emily and I are watching a documentary about the
Speaker 1: monopoly game from McDonald's, like the fraud that was involved
Speaker 1: over years and years. I remember that. Yeah, it's really interesting.
Speaker 1: But one company, the marketing company that worked with McDonald's,
Speaker 1: their stock, unbeknownst to basically any investor, went from a
Speaker 1: hundred dollars to fifty cents in a day once it
Speaker 1: was found out what happened. So this is the kind
Speaker 1: of thing that can happen if you're narrowly invested in
Speaker 1: just one company. Yes, you can lose it all. And
Speaker 1: that's a terrifying situation. Let's say you put ten thousand
Speaker 1: bucks in Cruise Line stock right now. Well, it could
Speaker 1: recover handsomely and you might look like a genius. But
Speaker 1: if that company ceases to exist, your investment could be
Speaker 1: wiped out altogether. Yeah. Man, Another maybe more distant but
Speaker 1: very real example, like look back to the early two
Speaker 1: thousands with the Enron scandal. They had falsified their corporate
Speaker 1: earnings reports like for years, and in the end they
Speaker 1: closed their doors after a bankruptcy, and so the Enron
Speaker 1: stock shareholders at the end of the all of that, like,
Speaker 1: they were left with nothing. And this is another reason too, Matt,
Speaker 1: that we suggest that people not put any of their
Speaker 1: retirement funds into company stock because a lot of the
Speaker 1: Enron employees not only did they lose their employment that day,
Speaker 1: but they had a lot of Enron stock inside of
Speaker 1: their retirement accounts that was wiped out. Too bad day
Speaker 1: for Enron employees. Yeah, so that's why we're all about
Speaker 1: diversifying your portfolio to reflect the overall American or potentially
Speaker 1: world economy. So yeah, even then, you could lose your
Speaker 1: original capital in the short term, right in months or
Speaker 1: potentially even uh years, but in the long term, the
Speaker 1: potential for that is almost non existent. And again, if
Speaker 1: you were to invest in the overall economy in hundreds
Speaker 1: and hundreds and hundreds of companies and your four oh
Speaker 1: one K did collapse to zero, not just your contributions,
Speaker 1: but your employers contributions as well, then we have bigger
Speaker 1: fish to fry than It's a real nightmare situation on
Speaker 1: our hands. So could your four one K come to zero. Yes,
Speaker 1: is it likely to happen if you're widely diversified and
Speaker 1: well invested. No, it's highly unlikely. And Terry, the last
Speaker 1: little bit of your question there, you're asking about cutting
Speaker 1: back on your contributions. If your employer was cutting back
Speaker 1: on their contributions and the shortagewer there is, I would say, yes,
Speaker 1: still contribute up to the company match if they are
Speaker 1: offering a match. But if they're not. Beyond that, looks
Speaker 1: open your own retirement account, preferably something like a roth
Speaker 1: IRA with one of our favorite low cost brokerages like
Speaker 1: Fidelity or Vanguard specifically, look at opening a roth IRA
Speaker 1: if you meet the eligibility requirements. Yeah, Terry. Overall, if
Speaker 1: your job is secure, you've got a decent emergency fund,
Speaker 1: do not up investing. Just deviate away from that four
Speaker 1: oh one K into a roth if that company match
Speaker 1: does subside. And I know, Matt, we talked about this
Speaker 1: last week. More and more employers are doing it. It's
Speaker 1: a bummer, but that's the facts on the ground. Better
Speaker 1: to lose that match than to lose your job, that's
Speaker 1: for sure. All right, man, We've got another listener question.
Speaker 1: My name is John. I'm from Conklin, Michigan. In I
Speaker 1: inherited a sizeable amount of money. Does this disqualify me
Speaker 1: from the stimulus checks? John, that's the shortest listener question
Speaker 1: and how to money history. But this is a really
Speaker 1: good question, and this will also allow us to dive
Speaker 1: more into the details of the stimulus checks. What if
Speaker 1: we answer the question the way John asked it, this
Speaker 1: would be a lot shorter of a show. No, you're
Speaker 1: not just qualified, goodbye. But John, you're asking about that
Speaker 1: inheritance that does not count as income. So whatever dollar
Speaker 1: amount that you did inherit back in that won't count
Speaker 1: towards your adjusted gross income, which is what the federal
Speaker 1: government is using to determine your eligibility on the stimulus checks.
Speaker 1: You likely paid some taxes on that inheritance, like a
Speaker 1: capital gains tax maybe or an inheritance tax, but I
Speaker 1: guarantee you did not pay an income tax because it's
Speaker 1: not income. Yeah. That's great information and good news for
Speaker 1: John right that he's still eligible for that stimulus check.
Speaker 1: Let's get into kind of some of the other specifics
Speaker 1: about the stimulus checks. So people don't know about whether
Speaker 1: they qualify or not So there are income requirements. Right,
Speaker 1: Single adults with an adjusted gross income of seventy five
Speaker 1: dollars or less is are going to get the full
Speaker 1: amount in the twelve bucks, and married couples earning a
Speaker 1: hundred and fifty thousand dollars or less will receive a
Speaker 1: total of two hundred above those income limits to pay
Speaker 1: out decreases until it stops altogether, similar to kind of
Speaker 1: a ROTH contribution and how that works. How there are
Speaker 1: limits to your income and whether you are allowed to
Speaker 1: contribute to a roth. Right, So the cutoff for single
Speaker 1: individuals is if you're earning ninety nine dollars in a year,
Speaker 1: and they cut off for married couples is a thousand
Speaker 1: in a year. Also, each qualifying kid under the age
Speaker 1: of seventeen gets an additional five bucks added on to
Speaker 1: that check. Yeah, so those are the cutoffs. Let's talk
Speaker 1: about that phase out sort of section. Right, the benefits
Speaker 1: are going to start increasing at a rate of five
Speaker 1: dollars for every additional one d dollars an income, or
Speaker 1: maybe another way to look at it is the amount
Speaker 1: that you receive will be decreased by five percent of
Speaker 1: the amount your income exceeds that seventy five. And this
Speaker 1: is an example for for single individuals. Right. Uh. And
Speaker 1: so a single person, say, for example, that has an
Speaker 1: eighty five tho dollars salary, they would get a seven
Speaker 1: dollar check because they would subtract the five percent of
Speaker 1: that additional ten thousand dollars, which is five hundred bucks. Yeah.
Speaker 1: Another question people have, Matt is about the eighteen or
Speaker 1: twenty nineteen returns, And it's confusing because some people had
Speaker 1: already filed a return for this year, other people haven't,
Speaker 1: and then the tax deadline was extended. So do I
Speaker 1: need to file? Don't I need to file? Do I
Speaker 1: qualify with my twenty eighteen return? Do I need to
Speaker 1: file my twenty nineteen in order to get this stimulus check?
Speaker 1: So no, you don't need to file tax return for
Speaker 1: twenty nineteen in order to get a stimulus check. The
Speaker 1: I R S will look at your twenty eighteen return,
Speaker 1: and if you have filed your twenty nineteen tax return,
Speaker 1: your most recent adjusted gross income is what will do
Speaker 1: Herman whether you'll steve the stimulus payment or not. You
Speaker 1: can easily find your a g I online eight B
Speaker 1: of your twenty nineteen tax return. So if you haven't
Speaker 1: filed those twenty nineteen taxes yet. The government, the I
Speaker 1: R S, is going to look at teens A G
Speaker 1: I and that's how they're going to make a determination.
Speaker 1: And so as long as you filed taxes for eighteen
Speaker 1: or twenty nineteen, there's nothing else that you're gonna need
Speaker 1: to do. Uh, you're receiving these checks. It's gonna be automatic.
Speaker 1: Individuals or couples who opted for their previous year's tax
Speaker 1: refunds to be directly deposited will have their stimulus checks
Speaker 1: directly deposited as well. And we should expect those deposits
Speaker 1: around April fifteenth, is what they were projecting. And so
Speaker 1: that's next week. Man, that's pretty soon. And if you
Speaker 1: don't have a direct deposits set up with the I
Speaker 1: R S, then your check will likely be mailed to
Speaker 1: the address that your returns were mailed to. Yeah, they're
Speaker 1: saying that could take months and months longer than the
Speaker 1: direct payments that are they're hoping to send out next
Speaker 1: week exactly. Snail mail. Man, it takes a long time.
Speaker 1: It takes a really long time to process all those checks. So, yeah,
Speaker 1: it's a bummer. If if that's the US for you, because, yeah,
Speaker 1: the government wants to get the money into our hands
Speaker 1: right away to help stimulate economy. And Matt, we're going
Speaker 1: to talk next week about what to do with your
Speaker 1: tax refund money, with your stimulus check money. There are
Speaker 1: a lot of good financial moves you can make right
Speaker 1: now with an infusion of cash. And there's also a
Speaker 1: triage of sorts that some people in in tougher financial
Speaker 1: circumstances are really gonna have to consider. So yeah, we'll
Speaker 1: get into all that stuff next week on the show.
Speaker 1: That's right. So right now we're talking about how to
Speaker 1: get that money, and the next week we'll talk about
Speaker 1: how to spend it or what else to do with
Speaker 1: it that spend spend it all at least get a mask, right,
Speaker 1: that's right man. We need to play our part when
Speaker 1: it comes to protecting the health of those in our
Speaker 1: community while also allowing ourselves to support local businesses who
Speaker 1: happened to be making these masks. So it's a win win.
Speaker 1: I'm gonna look into those masks at the bike shop
Speaker 1: you mentioned there, you go, man, I love seeing that.
Speaker 1: Maybe I'll ride my bike over there and see what
Speaker 1: they've got in stock or right, I don't know. Maybe
Speaker 1: you have to order online and they ship it. I
Speaker 1: don't know. It's it's all jumbled, like trying to buy
Speaker 1: anything right now. It hasn't been so weird, like we're
Speaker 1: so used to stuff, you know, showing up a day
Speaker 1: later or two days tops, and you know I just
Speaker 1: ordered something like two weeks ago and it might show
Speaker 1: up tomorrow. I don't I don't know. Yes, some businesses
Speaker 1: are just saying we're not shipping right now because of
Speaker 1: the delays. I know. You know, one of my co
Speaker 1: workers was looking for a bike. There was this one
Speaker 1: bike company that was that was telling her that she
Speaker 1: would get delivery in a week's time, and another one
Speaker 1: could just couldn't give her delivery date. So yeah, it's
Speaker 1: just crazy, crazy times out there in the world of shipping.
Speaker 1: All right, Matt, that's gonna do it for this episode.
Speaker 1: For folks that want our shout outs, will just go
Speaker 1: to our website how to money dot com. All right, man,
Speaker 1: So that's it until next time. Best Friends Out, Best
Speaker 1: Friends Out,