High Income Tax Strategies, Selling a House to Invest in the S&P 500, and Converting $100K to a Roth IRA (Money Q&A)

22:49but also think through your lifestyle as well. Because anything that has to do with a home or selling your home, sure, it needs to be an emotionless decision, but also needs to be somewhat of a lifestyle decision because the way that we have to think about our homes is what lifestyle do we want to live? Money is just a tool to be utilized to get the lifestyle that you actually want to live. And so as we go through this, I want you to think through the math and how complicated this can get if you go way too deep in the weeds. And I don't want to overcomplicate this at all. So my goal is to give you the steps on how to think through this.

23:20First, we need to run the real numbers. So we need to understand what it's going to cost if we sell our home. So let's say, for example, you have some equity in that home currently. But in reality, what is the true equity of that home? What has the total cost of ownership been over the course of the last couple of years? Now, we can look at this and say to ourselves, okay, well, sure, we have$400 ,000 or$500 ,000 worth of equity in the home. But also, at the same time, how much have we put into the property to get to this point in time and how much have we invested there. And sure, the equity is great, but that is the opportunity cost of that equity, which is why I think you're thinking through it this way.

23:56So a home sale is going to roughly cost us right around six to 10 % overall, depending on what we have to do. So if we sell a home and we put it on the market with an agent, we have those agent fees that are going to be in place. I'm not sure how much more agents are going to come down over the course of the next couple of years, but I know they are much lower than they have been over the last decade. But here's the thing. Let's say you sell your house for$500 ,000. If you do, you're losing anywhere from 30 to$60 ,000 right off the top before any equity kind of hits you at closing. So that's one thing you just want to think through is some of that equity will come down based on just some of those closing costs.

24:32But the second one, and this is the really big one, is if you did do this, where would you live after? Where would you live after this? Would you decide to rent? Because that number, that rental number needs to come into play when it comes to thinking through selling a home. So let's say, for example, that you sold a home and now you have to rent and your home's mortgage was$2 ,000 per month and your rent is going to be$3 ,500 per month. Well, that$1 ,500 delta needs to be considered when we are thinking about investment returns. Because if you start to invest these dollars and that$1 ,500 is eating into your overall cost, we just need to make sure that we are thinking about what we're going to do with that money.

25:11Now, if rent in your area is comparable to your mortgage, and this isn't a calculation you have to worry about, but you do need to worry about the lifestyle side of that. Meaning if you are going to live somewhere else, is it somewhere you actually want to live? Is this something that you feel as though, okay, well, if I rent somewhere else, I'm actually happier or it is going to improve my life significantly. Well, that would be a reason to do it. But if you feel as though like, I like being a homeowner, I just want this equity to be able to invest these dollars to retire faster, then that could be another reason to do it as well, but you just got to weigh these pros and cons.

25:40As we think about this, what I don't want you to do is go out and sell a home and then make your lifestyle worse. Meaning that you're going to go about and you are going to, you know, live on rice and beans because you're increasing the amount that you're paying in rent. And it's going to eat into the overall cost and the thought process there. Because if rent is going to take you above 30 % of your income, then you definitely don't want to be doing that because that is going to put you into a house poor situation. So we just want to weigh out lifestyle. Make sure it's something you want to do.

26:06Make sure it's a place you want to live if you did do this, because that is a big, big deal for most people. Now, third thing, though, is to consider the tax shelter, because if you do sell a home, there is a great tax shelter if you've lived in the home over the course of the last couple of years, because married couples get a$500 ,000 capital gains exclusion on their primary residence. And if you're single, you get a$250 ,000 exclusion on your primary residence. And so these are really great options for a lot of folks out there. we're selling the home. You don't have to pay taxes on up to$500 ,000 if you're married and $250 ,000 if you are single.

26:43Now that gain is tax-free and it is a huge tax break out there. That's a huge one for the pro side. So here is the last one is that your home is already leveraged. So if you're utilizing a mortgage or something like that, you are able to kind of build wealth with a little bit of leverage there. And so that is also a helpful thing. Now here is my answer overall and the way that I would think about this is I get it. If I was a single guy and I was in my twenties or thirties, this would be something I'd seriously consider if I did build up a lot of equity in a home. Why? Because the price of homes have increased over the course of the last 50, 60 years, right around 4 % when you factor in total cost of ownership.

27:17In some situations, it's two to 3 % when you factor in total cost of ownership because maintenance costs are so high, because the cost to repair a home is much higher than it used to be. It is going down more and more and more. That said, homes are lifestyle decisions. They're not financial decisions. They are not optimal for financial decisions. They are more so lifestyle decisions. If you're going to go buy a home, you need to make sure that you run total cost of ownership. If you go to mastermoney.co slash resources, we have a free calculator that shows you step by step how to do this, and it'll take you through that process.

27:46But what you need to be doing is running total cost of ownership on your home. Now, if you get to the point in time, Nick, where you're saying to yourself, okay, well, I feel as though this is really not bringing me value. It is really not bringing me joy. And I'd rather just go rent and invest the difference. That's a great reason to do it. if it's not bringing you value or joy to own a home and you hate doing yard work on the weekends and you feel as though it's just a money pit and it's something you really don't want to be doing anymore and it's in a location that you don't like as much as you used to then great reason but if this is something where you're just trying to optimize for finances and you feel as though if you started to rent you would be miserable then it may not be the most optimal thing for your lifestyle or if you have a family in place or if you're married and your spouse really likes that location and really likes the home, then that may not be the optimal choice to make.

28:31Really, it comes down to deciding, A, do you like where you live? If the answer is no, then nothing wrong with making that choice of selling and investing in equity. The other option is to say, okay, well, if you do like where you live, how do you weigh out the pros and cons? Well, if you invest the difference and you look at, how much that would compound over the course of the next couple of years, and you take in and factor in the new rental costs, and if it's either comparable or if it's a little bit higher, you just figure out what that number is, well, then maybe you want to consider making the move.

29:00But if not, you don't have to make this move just for financial reasons. Sometimes the best decisions we can make are not the most financially optimal decisions out there. And so I want you to just think through that as you go through this process. I know me when I was younger, before I had a family, would I do something like this? Probably because I think that there are a lot of instances where you can't really get equity like that back, where you're not going to taxes on some of that equity. And so it could be a really great thing. But me now as being married and having kids and planting roots in a location, would I do this?

29:29Sure. I've dreamed about it a couple of times with my personal residents already, but it's not something I would do because I have those roots planted. So I hope that helps because it's going to really come down to your specific lifestyle and what is going on in the home currently. And congrats on even thinking through this and running these numbers. It is always good for everybody to actually think through this stuff. But again, I wouldn't just move for money. I would always think through the lifestyle decisions as well. All right, the next one is from Landon. Can you explain the tax scenarios for the$250 ,000 and up example sometime?

30:00You make it sound like the amount of taxes are somehow more debilitating than previous tiers. I would have thought that even if you are spending more in taxes due to scale, you are still netting more money total. So what makes it so much more critical outside of just passionately min and maxing? So really good question. And I think this is one of those things that you are right. You still net more money. The issue is not just absolute dollars is what is we call the tax efficiency cliff. So this is one of those scenarios where there are a couple of things that stack up at$250 ,000 and beyond. Okay.

30:31So first you're obviously paying more out of pocket than someone, but you're also netting more than someone specifically as we start to think through this. But one is that marginal rates can climb fast. So federal marginal rates jump to 32%, 35%, and 37%. Plus, if you add in state income tax, places like California or New York or New Jersey, then your top marginal rate is closer to 50 % in some of those states. So folks who are high earners who also live in a state that is not tax efficient are really getting nailed because of this. Because a lot of the high earners live in those states. And so there are a huge percentage of high earners when you look at some of the statistics and the metrics that show that high earners live in those extra states.

31:17So in some of those states, every extra dollar earned keeps less than 50 cents on that. So if we think about this for a second, for someone making$250 ,000 per year, every dollar earned, they're keeping around$125 ,000. This is why it is difficult in some of those higher taxed states to be able to even make higher income sustainable and why some people live paycheck to paycheck in those states. So we want to make sure that we are tax efficient when we are thinking about some of those higher taxed states. Secondly, though, is tax shelters begin to disappear. So a lot of folks who make less than$100 ,000, make less than$150 ,000 per year, have some additional tax shelters available to them that maybe higher earners do not have.

32:00So things like just being able to contribute to a Roth IRA, for example. Obviously, you've already been taxed on those dollars, but it can grow tax-free and you can pull the money out tax-free. That phases out at$168 ,000 per year at the time I'm recording this for single folks and $252 ,000 per year at that time I'm recording this for married folks. In addition, traditional IRA deductibility goes away and many deductions and credits phase out based on your income. So credits are obviously one of the best overall things for your tax situation. but if you make too much, some of those credits start to get phased out because credits are dollar for dollar tax savings that most people would or need to look for.

32:39And you lose out on just some of those tools that the middle class uses to lower your tax bill. And for some folks out there, depending on where you live, $250 ,000 could still be middle class depending on how you are taxed in your specific state. Number three is there are things like surtaxes that can activate. And this is something that a lot of people don't know about. but things like net investment income. So when you look at net investment income tax, this adds 3.8 % on investment income above$200 ,000 if you're single and$250 ,000 if you're married. The additional Medicare tax adds a 0.9 % on wages above the same threshold.

33:18So for folks who are retirees who have higher incomes, this can also be something that are quiet taxes that really can come down and net on their pay stub. And so here's the thing is that you are netting more, But every dollar of tax planning is now worth two to three times more what it was at lower income levels. So doing a backdoor Roth, a mega backdoor Roth, doing a cash balance plan, all of these can make a huge deal. And at$80 ,000, it barely moves the needle. But this is why min-maxing matters more as you begin to climb here. This is a really, really important note to make and really important to understand.

33:53because every dollar that you save is going to matter so much more for you specifically as time goes on. And so when we think about why taxes matter as your income goes up, this is why. And so in reality, you may be saying to yourself, well, what do I do about this? Finding a good CPA when you have a good income is great. And sure, CPAs are expensive. You know, expect to pay a couple thousand dollars per year to have a good one when it comes to tax strategy and some of that stuff. They can give you some ideas on how you can maximize some of your tax efficiency so you can get to the right place in time.

34:23So that is something else that I just want you to think through is some of those different things there. And every dollar that you save is going to make a big, big difference. So hope that helps. And thank you so much for the question. I truly appreciate it. all right the next question is from Thane so Thane says I want to start an ice machine business and I am almost out of debt but I don't know whether to change my thrift savings plan contributions to 15 % to maximize compound interest or go to 10 % and use that extra 5 % towards the business venture thanks so much for all you do so there's a couple of things that I would think through Thane as we start to do this for those of you out there who don't know what an ice machine business is, this is where you put up one of those side of the road ice machines where you can go and get ice, you know, in your cooler, or you can fill up ice for, you know, whatever specific events you got going on.

35:12Well, those can be very profitable if you have in the right location. So Thane wants to start one of those and have the ability to be able to make some passive income or some cashflow that he can probably use in retirement and, or have the ability to use that cashflow to fund his lifestyle. And so as we start to think through this, there's a couple of non-negotiables thing that I would make sure that I consider first. One is I want you to capture that full TSP match. So whatever your TSP match is, you want to make sure that you are getting that match. So a lot of matches are around 5%. Do not leave that on the table because that could be a 100 % rate of return when it comes to the dollars that are going to be hitting your bank account.

35:49But number two is finish the debt, making sure that you get rid of all of the debt. You said you're almost out of debt. I would make sure I get rid of all of the debt and make sure I have that fully funded emergency fund first, because I think that is really, really important before you begin and start a business, especially if the ice machine has issues or there are things that you need to fix. You want to make sure you get out of debt, especially if it's credit card debt or any consumer debt like that, so that you're not dipping back into the credit card or going back to some of these locations to fix the machine.

36:18A lot of times when you own a business that has machines, those machines are going to need repair. They're going to need maintenance. They're going to need a lot more going on. And sure, you hope that the ice machine is cash flowing enough, but upfront, you want to make sure that you have enough cash on hand in your own personal finances. So nothing derails your progress when it comes to your personal finances. Now, a couple of things to think through is, are you going to consider buying an ice machine on an existing business? Or are you considering building one with one of the suppliers that are out there?

36:46Because if you're going to buy an existing one, that is one where you can go out and get a loan. And obviously you could do it alone with either of these instances, but you could go out and get a loan and figure out, okay, well, what are those number is going to be, how much can this cashflow and how much does it currently cashflow? So buying an existing one, I usually like that option because you know what the cashflow is going to be. If you're building one, you're trying to project how much cashflow is going to be coming in. So it's much harder to figure out if those numbers actually work specifically when it comes to this ice machine businesses, because you could put it in a location and maybe if that location isn't what you thought it was, it would end up not cash flowing enough.

37:19So I like the existing ones. If you can find some for sale. There's a biz buy sell has some for sale. Sometimes Facebook marketplace, I have seen them for sale. There's a bunch of other options out there of businesses that probably sell some of these ice machines. And you can go through the manufacturers because sometimes the manufacturers will have relationships with their owners who are looking to sell and they know they're looking to sell and they can help you kind of broker that deal. So that's one thing I would look into first and figure out if you want to go that route. But if you want to reduce your overall TSP contributions to start a business and you feel as though, no, this is going to cashflow.

37:52I know this is going to cashflow. I've done my research and I have run the numbers. Then putting 5 % towards that business, nothing wrong with that whatsoever. If you want to go that route, and if you have any other cash anywhere else that you can put towards it, that is also great. So you don't dip into your retirement. I would dip into the retirement contributions last, meaning the 5 % that you are contributing towards that. I would probably do that last if you could, but if it's the only extra dollars that you have, then moving them towards this business, there's nothing wrong with that whatsoever as a small percentage.

38:21As long as you have your financial foundation set up that we talk about in the portfolio pyramid, I think this is a great starting point and something that you can look into. I think ice machines are very interesting businesses. I think they can cashflow. Some people make$80 ,000 per year on some of these. You gotta have them in the right locations and you gotta have them in the right spot. But one of the things that I would also consider is again, buying an existing location so you know what that cashflow is gonna be. Really great question, Thane, and congrats on thinking about this and looking into this.

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43:23the next question is from chintav so hi andrew thank you for this amazing podcast you provide so much valuable information well thank you so much for the kind words i truly truly appreciate it i discovered your podcast about five months ago and have backtracked and listened to most of the episodes till 2023 that's incredible i am a 35 year old physician maxing my 401k doing backdoor Roth and using Fidelity Go RoboAdvisor at 0.35 % for my taxable brokerage. I also have a profit sharing plan with$70 ,000 to$90 ,000 in passive income. Should I keep paying the 0.35 % RoboAdvisor fee? And what tax advantages do you recommend for someone in a very high tax bracket?

44:03Really great question. And these are some things that you definitely should be thinking through. So I'm glad you are thinking about this stuff. When it comes to the RoboAdvisor fee, one of the things comes down to is if you feel as though you're getting a value out of a robo advisor, I have no problem with them at 0.35%. Sure. You need to run the math to understand what the impact of this would be. But if they do feel as though they are helping you, I think it could be, you know, very, very helpful. So overall, if you think about this on a$500 ,000 portfolio, that is about $1 ,750 every year that you were paying growing with the balance.

44:35So this is something just to consider if you are okay with that number and you're saying to yourself, okay, well, let's say I have a million dollar portfolio. I'm paying roughly a little under four grand for that million dollar portfolio and every million dollars going forward. That is what I am paying. It is a lower cost as long as it's automatically rebalancing. And if you feel as though a lot of robo advisors claim this, that they are going to do things like tax loss harvesting for you and do it automatically. Well, that could save you more than the 1750 per half a million dollars. if that is the case.

45:04Now, we want to make sure that it is saving us enough. And so we want to run the numbers to make sure that it gets us close enough, at least to saving us a little bit of money. And so that is one of the reasons why you could do that. Now, another thing you could consider is looking into something like a DIY three fund portfolio. If you're not getting enough value out of the robo advisor, that is something where you can do something like a, something like a VTI, a VXUS and a BND. That is something to consider or do some research on and see if that is the route that you want to go. because your costs would drop to roughly 0.05 % and you save something like 0.30 % over that timeframe.

45:40Now, another thing you could consider is something like direct indexing. Now, there are companies out there like Wealthfront or Freck or Fidelity that offer things like direct indexing, but the one big deal that I want you to consider is that it does really make your portfolio complicated and it does really offer something that could just make it a little more difficult to kind of go through this, but there's more tax loss harvesting, especially if you have a really large portfolio, you could have some great tax loss harvesting benefits that could help you when you're thinking through this. And so if you're thinking through, well, is the 0.35 % too high?

46:12I don't think it is something where you have to just rush to get out of that as fast as you possibly can. If somebody was charging you two and a half percent, sure, that would be a big, huge deal. But anything below, you know, 1 % isn't as big of a deal as something would be above, you know, 1.5, 2%, because that's really going to make a huge dent in your portfolio. Now, 1 % is a lot. And I'm not saying it's not a lot, but it is one of those areas where we just want to make sure that we kind of think through that. So if you feel as though you're getting good benefit out of this, you feel as though they're giving you a good service and they're building a portfolio that you're happy with, you're happy with those returns.

46:45Those are reasons to stay. But if you feel as though you're not really getting any service whatsoever and they're not building a portfolio that makes a ton of sense for you, well, that would be an instance where I would consider, you know, other options that are out there. Okay. So that's what I would look at when it comes to thinking through some of your robo advisors. Now, what are some of the higher tax bracket priorities in order? So for me specifically, I'm going to give you my order or the list that I think through when you get to these higher tax brackets, because it actually shifts. It changes from just doing the standard, Hey, let's do a Roth IRA and an HSA and go in that order.

47:17No, it's going to change dramatically for someone who is higher income, especially if you have a really high income, like if you're a physician or a really successful attorney, or you're someone out there who just makes a lot of money, you're a business owner or someone who makes a lot of money in their corporate job, you're an executive, those types of things. You want to make sure that you have an order that makes a ton of sense for you. So let me give you a couple of things to think through. One is the 401k. 401k is going to move ahead of a lot of things when you start to make a lot more money.

47:43Why? Because it gives you a tax deduction in this given year. And for those of you who are high earners, you most likely need to make sure that you are reducing your taxable income in this given year because you're probably getting slammed with taxes. So maxing out the 401k $24 ,500 pre-tax is what you can do at the time of recording this. So that is one to look into. The backdoor Roth IRA is the second thing. So getting dollars into a traditional IRA and then converting it to a Roth IRA. That's how you get money into a Roth and something I would consider if you want to get more dollars into a Roth.

48:13Now that's a quick, easy thing for someone who is a really high earner. $7 ,500 per year is not something you have to really work as hard towards. You could just kind of do a backdoor Roth IRA, do it in January every single year and make it work. Three is the mega backdoor Roth. So this is something that we have done an episode on, but we're going to probably do a deep dive episode coming up, or we're going to be talking through the mega backdoor Roth. And if your plan offers or allows you to have after tax contributions, you got to ask and see if your plan allows you to do this. But if they do, and they allow you to do in-service contributions, then you can get another 47 ,000 bucks into a Roth IRA by doing a mega backdoor Roth.

48:52Well, this is a huge, huge benefit for high earners when they have this extra money available because they can get more stuffed into a Roth where they don't ever have to pay taxes again, except for in this given year. Now, next is if you have a high deductible health plan, doing an HSA is fantastic. It's$4 ,400 per year if you're single, and then it is going to be 87.50 for a family. and you can treat this as your stealth retirement account. It is your account where it is going to go in tax-free, grow tax-free, and you can pull it out tax-free as long as you have that qualified medical expense.

49:19But make sure you invest your dollars in an HSA if you're going to use it as a stealth retirement account. Now, there's a secret weapon for physicians that I want you to look into. And this is called the Cash Balance Pension Plan. Okay? So the Cash Balance Plan is a secret weapon, especially for physicians, because you can shelter$100 ,000 to$300 ,000 per year on top of all of your 401k and pre-tax stuff. And so you want to look into a cash balance pension plan, see if that's going to fit your situation because you can shelter a lot more in taxes and save a lot more in taxes based on that. Then we have the 529 plan.

49:52So this is going to be something that is going to help you save for kids. If you do have kids in place or you plan on having kids one day, you can shelter some money from taxes there. And then your asset allocation is really going to matter, which is why having your robo-advisor is very helpful. But having bonds or REITs in tax-deferred accounts are going to be very important because broad index funds can be more so in your taxable. And then also thinking through things like donor advised funds. So if you are someone out there who is charitably inclined and you already give to charity, using something like a DAF or a donor advised fund can really, really help you for charitable giving because you can front load a bunch of gifts for three to five years.

50:25And then you can start to give it over the course of the next couple of years if you want to, but you force extra dollars into these accounts so that you can save money on your really high income years. Maybe you made a lot of money in one specific given year. If that ever happens, then you could use a donor advised fund to really, really do it. So a cash balance plan is something that could save you anywhere from 40 to$100 ,000 in a given year. So that is something that I think could be really, really important. And I would talk to a CPA who specializes in physicians if you can, because they're going to help you step by step through this process.

50:56Now, as you start to think about this, those are some of the things that I just listed that could save you over six figures in taxes alone. And so if you look at each and every single one of those things, you just literally could make yourself six figures if it works for your financial situation. So really, really important stuff. Congrats on becoming a physician and congrats on some of the stuff that you are doing. We appreciate the work that you are doing for sure and wanna thank you for sending this question because that is absolutely fantastic. And one of the things that I think can be very, very powerful for a lot of folks out there.

51:26The next question is from Michelle. So what is the easiest and simplest way to convert about$100 ,000 from a traditional IRA to a Roth IRA? Ray. So Michelle, this is a really, really great question and something that the mechanics are actually pretty simple to do this. And so once you start to think through this, what you'll realize is that the timing is what matters most. And so step one is if you're going to convert the whole amount is picking the right year is going to be one of the biggest things that you can do. A Roth conversion adds about a hundred thousand dollars to your taxable income.

51:57So the year you do this matters more than how you do it. When we think about Roth conversions and we think about converting larger amounts to a Roth IRA. We want to do this in lower income years. We want to make sure that the year that we do this is a year that makes sense for our finances. So let's say you have a sabbatical year, you have a gap year and you decide, okay, well, during this given year, I am going to take a half a year off or a year off and I'm not going to make as much money. Well, that is a great time to do it. Or maybe you do a career transition and your income drops over that timeframe.

52:29Well, that's another great way to do it. Maybe you're a business owner and you have a specific year where you're taking a loss in that given year because you just didn't have a great year in the business or you just had to invest a bunch of money into the business and you are doing a bunch of infrastructure stuff and it makes sense for you to do it that year. If there's a market downturn year and you really didn't make much or you are doing some tax loss harvesting or things like that, it may make sense to to go out and do it in that given year. But you're going to have to look at your specific situation and look for a lower income year in order to do this.

52:59Or if you're just okay with adding a hundred thousand dollars of taxable income, you know, overall, then you can actually, you can look at that too. That's the easiest route, obviously. But at the same time, we just want to make sure we do this in the right year. I would hate for you to pay tens of thousands of dollars in taxes when you don't have to. So just making sure that's step one. Two is making sure you open a Roth IRA at the same brokerage. So if you have your money at Vanguard, open it at Vanguard and be able to just convert that money over because it's a very simple thing. If you have it at Schwab, do it at Schwab.

53:26If you have it at Fidelity, do it at Fidelity, but make this easy because those three places that I just mentioned right there allow you to do this in like five minutes online. They allow you to make this super simple. They allow you to do this in a way that really works overall. Now, step three is when you are converting to a Roth IRA, a lot of these different brokerages now have a tool basically that just says, hey, convert it to a Roth IRA. So like at Vanguard, if you were looking at your account, you could see, okay, if I have a traditional IRA, they actually have a button on top that says convert to a Roth IRA because so many people do this.

53:55And so when we think about this, We just want to make sure that we are, you know, finding that button. So you can just kind of do this simply. If they don't have that button, you can call them up and they will be able to help you through the process to find it if it's not there in a specific location. So when you do Roth conversions, it's going to be anywhere from 22 to 30 percent that you have to pay in a tax bill. So the next step is going to pay the tax bill in cash outside of the conversion. So one of the things that I like to do is if you do do a big conversion like this and you know what the tax bill is going to be, you can have your CPA calculate it, but you can go through and make sure that you understand what that number is going to be.

54:28And then you just park it in a high yield savings account when you do this conversion so that next year you're ready come tax time and you have the cash available for it. So that's another big one to do. And then another thing you could do is you can convert it in chunks. So if you don't want to do the entire thing, you can start to convert money over in chunks like 20 ,000 at a time or 25 ,000 at a time. If you don't want to get this hit big tax bill hit, that is another consideration is to do it over the course of the next couple of years. So it doesn't take you into a different tax bracket or make you have to pay a lot more in taxes.

54:56That's gonna be a bigger deal than most people realize. So those are just some of the simple things that I would consider when converting money over that could be helpful for you as you start to think through this process because I think for most people, it is gonna make sure that you do it at the right time. Timing matters always when we are talking about Roth conversions. And so this is one of those things that definitely wanna make sure you look deeper into. Thank you so much for the question and I truly appreciate you sending it in. If you have any additional questions on that, please let me know.

55:25All right, so now we're going to dive into one of the biggest scams that are going on right now for most people out there, because there has been an AI voice scam that has been going around that has now targeted over one in four Americans. And if you haven't heard about this yet, it is one of the wildest thing that is happening right now. And for your grandparents or even your parents, you need to have the conversation that this is happening more and more out there, because this is one of those things that the FTC has actually put out reports saying that more people need to get informed about this because it is one of those areas that I think a lot of people can get tricked pretty easily.

55:59So the way that it works is that some of these scammers out there, they will put out or they will try to call you with a voice of someone you know. And so all they need is about three seconds of someone's voice, whether it's on social media, whether it's on a reel, whether it's on Instagram, where they can find your voice and they can use your voice against you, meaning that you can find a voice of someone's child, for example, and they can record that voice and have your child literally call you and it sounds just like them and they're gonna say they're in trouble, they need money, something along those lines.

56:31And so I wanted to look at how easy this actually was. So I used a tool called 11laps and I went in and gave it some audio of my voice and went through the process of kind of seeing, okay, well, how accurate is this? Does it actually sound like a real person or this is something that you could kind of tell us AI and you just need to listen to a couple of things. No, I went through the process and kind of listened back to my own personal voice. And it was unbelievable how accurate it sounded. It was one of those things that I was like shocked. My mouth was wide open when I listened to how accurate it was.

57:01Now, was it perfect? No, it wasn't a hundred percent perfect, but it was like 90 to 95 % there where I could probably get tricked pretty easily if somebody utilized something like that. And so when you start to think through this, there are a number of different scams that are out there when it comes to some of this voice cloning that I want you to understand is happening, okay? One is the grandparents bail call. So if your grandparents are getting this call from their grandchild saying they need money for bail and they need it sent to this address, this is the one that is happening a ton right now.

57:32And it's anywhere from 2000 to$15 ,000. And the FTC has warned that so many people are falling for this. It is absolutely incredible. So what a lot of these scammers do is they go on Facebook and they look at grandparents, for example, and they figure out, okay, what is their information? Then they go look up their personal information, find that information on some of these data broker sites, and then they go out and they start calling them based on who their family tree is on Facebook. So they use Facebook as a place where they can start to fish out some of the information that they need, but then they go to data broker sites to find their information, like their phone numbers and things like that.

58:04The second one is the virtual kidnapping one. Now, this is probably one of the most cruel ones, but they use someone's voice to basically say, hey, I've been kidnapped and I need you to send money to the folks who have kidnapped me because I am held hostage. There's another one called a spouse emergency one, or it's a clone voice that sounds exactly like your spouse. This is the one that could get me. And it basically sounds like they're in trouble in some way, shape or form. You need to send them money. You need to send them a Venmo request or something like that. And they have a way to make this work.

58:33Another one is a CEO or boss wire request. So I just had a friend who said this happened within their company. Someone came and it sounded like exactly like their CEO or their boss who called the specific individual up and asked them for money to be sent to this specific location. Just sounded like a normal business transaction. And one of the employees at this company actually fell for it and sent a significant sum of money to one of these fraudsters. There's also like the bank fraud ones, which I think a lot of people have seen in the past or medical emergency ones. Those are another one that I think we've seen happen over and over again.

59:06Now, if you come across these. I want to give you a couple of red flags on what you need to make sure you're looking for. Urgency is always the big one when it comes to financial scams or any scams just like this, because urgency is what they try to make you do. They try to make you pay right now. Otherwise, it's not going to happen. You want to make sure that you are looking out for that. The payment method is number two. Are they asking for a global wire transfer or something like that? You want to make sure that you have your red flags up. And a second person takes the call to help or verify you.

59:33That is going to be one where your red flags also need to go up or you're told to keep it secret from family members. That's a big one that I think most people don't realize is a huge red flag. If someone's calling, that's why the bail one works so well on grandparents. They say, hey, can you keep this a secret from mom and dad? I just need to make sure that I get bailed out of jail. You know, it wasn't my fault. Those types of things. And so it's really, really important. And then hesitation or vagueness when you ask for family details, always try to ask for family details or details about the specific person.

1:00:03Ask them questions that nobody else would know besides that person and see what they respond with, see how they answer and think through that. Now, this is something that is happening more and more. If you haven't seen it or heard it in the past, I think it is one of those things that is scary. Even if you get this phone call, it's creepy. It's creepy to hear someone else's voice when it's supposed to sound like that individual. And I think it hasn't happened to me yet, but also I don't answer random phone call numbers. And I use things like Delete Me that help me through this. but I think it's one of those things that I think is really, really important.

1:00:33Now, if you want to get your personal information removed, or you want to get your grandparents' personal information removed from the internet, or you want to make sure that these data brokers are not available and just giving out your personal information, I think it is really important to make sure you remove it from the internet. This is one of the most important things that you could do when it comes to scams, because that's how they find your information. Sure. You should also have private social media accounts to make sure that that is covered. When you're doing this, you should be asking questions and have a list of questions in your head if this phone call situation were to ever happen to you, that you could ask that specific person with information they could give you back that only they would know.

1:01:07But in addition, removing your personal information online is very, very important. Now, the way that I do this is with a service called Delete Me. And Delete Me will go and remove your personal information from these data brokers. It is very difficult to get your information off of these websites unless you know what you're doing. Delete Me knows what they're doing. And so they go and remove your personal information. If you go Google your name or your phone number or your address and quotations, you're going to see your name and information pop up on all these random websites. And you're like, what the heck is this?

1:01:36Those are data brokers. And they're selling that information to anyone who is willing to pay for it. And so DeleteMe helps remove that information so that it is not easily accessible for people. Because if they get part of your information, they can go and find the rest. And so if you go to join deleteme.com slash PFP20, that is going to be a place where you're going to get 20 % off of delete me. And again, it is one of the best services that I use. I make sure I'm on it. My family's on it. I tell all my friends to join it because it is just one of those services that is a no brainer for me. If you want to protect your finances online, which is very important.

1:02:07And for those of you who don't know, who are newer to the podcast, I have my identity stolen. This is why this stuff is so important to me. Uh, then check out, delete me because it is one of those things that I think is one of the best services out there to get your personal information removed. Again, that's going to be the scam of this week. Make sure you are looking out for that kind of stuff. Make sure you're telling your family and friends about this. When we do these scams, I want you to tell or spread this information, which is why we do this so that none of you get scammed out of any specific dollar amount whatsoever.

1:02:35And I think that's why we want to make sure that we are doing this, especially on Q &A episodes to kind of help you through that process. So if you have any questions on that, or if you want to know any other ways to kind of help with privacy protection, feel free to shoot me an email and ask me questions on that. I would love to help you out in any way, shape or form. I can. All right. The next one is from Chris. Chris says, good morning. My wife and I are 40 years old with four older children. I receive 100 % VA disability payments monthly, and my wife works for the department of war and is vested in their pension.

1:03:05We have accumulated about$560 ,000 in retirement accounts, approximately 250 ,000 in Roth and the rest traditional. We fear that we are over saving. How do we plan for future strategies like Roth conversions when we know our current burn rate is significantly higher than what we will spend in retirement. And compound interest is likely to grow our portfolio higher than necessary, even with modest returns. So here's the situation, Chris, and I think this is something that you can feel okay with. I'm going to try to make you feel okay about this situation because overall, if you have VA disability, that is going to be 100 % tax-free for life.

1:03:40And if your wife's pension is guaranteed and it is a guaranteed income stream between those too, the likelihood of you having your four covered is most likely there. So I want you to shift your strategy. And I want to, I want you to shift your mindset here. If you feel as though you are way ahead in retirement, one is you can look at the situation and say to yourself, okay, well, if I am way ahead in retirement, because I've been disciplined in saving and investing my early years, I have these great benefits out there for me that currently are going to help me in retirement. Then if that's the case, you want to make sure that you're not over saving.

1:04:12Because the last thing I want you to do is over save and feel as though you really missed out on life. I know you have older children there. So one of the things that you could consider is what do you want to do or how do you want to spend more time with them? Well, if you reduce the amount that you're saving for retirement, because I don't think you're really going to need it long term. So I want you to think through how you can spend more time with them if you want to, as I go through some of these steps, because we want to shift the goal from aggressively funding retirement to making sure we optimize for lifestyle, but also making sure we just kind of land the plane and ensure that we have enough cash on hand.

1:04:42So the first thing you could think through is funding your Roth now, meaning I would prioritize the Roth because you could put money in there. And if you're not going to need the money upfront, you're not going to need it as much upfront, then you're not going to have things like required minimum distributions down the line. And you can allow that money to grow tax free. The second thing I would do is kind of front load. If you have a Roth 401k or something equivalent to that, I would front load that Roth 401k. If you can not traditional going forward and you could start to get kind of dollars into there.

1:05:10So you could, you could do your Roth conversions now, if you want to, if you feel as though, Hey, I wanted to just get money into a right now. I want to get those conversions going. And if you feel as though that's something you want to do, you could front load that right now. Just talk to a CPA to see what the tax implications for your specific situation will be, but you can do something like Roth conversions early in now, then front loading that Roth 401k can be really good. If you could do mega backdoor Roth conversions, that's also something you could consider because that is a great way to just get money in a Roth and have it grow tax-free over the course of the next couple of years.

1:05:38And then if you want flexibility, if you plan on retiring early and you and your wife just don't want to work until you're, you know, six, 59 and a half, then getting some money in a taxable is also a great place to, to, to look at this. Because that is going to be the bridge account that gets you across the finish line. That's something I would definitely consider. And then increase your standard of living and giving now. So like if you're a charitably inclined, you can give more or increase your standard of living in some of the things that you're currently doing and enjoy some of your money.

1:06:03because right now is a time where you're not going to get back being able to be 40 years old again. And so spending more time doing some of the things that you love right now is absolutely okay, especially if you're way ahead of the target. You've got a pension in place and you've got some of these other things going on right now. Do some of the things that you love. Take some of those great vacations you've always wanted to do. Do some of the bucket list items you want to do. Now is the time to do it because you don't want to wait until you're 60, 70, 80, 90. What are we even building wealth for anyway?

1:06:30Do some of it now. Increase some of your standard of living now. Now, I want to give you permission up front first to be the first person to tell you to do this, because there's nothing wrong with spending some of your money. And I think for most people, especially when they're great savers like you all are, and they have some of these great benefits, you know, these are some of those things that are hard to get over that hump. But once you do it, it is absolutely amazing. So you have permission. You know, if you feel as though you're way ahead on target or you your money is going to compound and you're going to coast right into retirement and having enough money, no matter what, then you can go ahead and spend a little bit more if you're comfortable with it.

1:07:02If it's something that you feel as though you can absolutely do. And sometimes if it's hard for you to do that, just increasing the dial a little bit every single year is going to help you get to that point in time. Maybe it's an extra$5 ,000 on a vacation this year. Maybe it's the next year. It's an extra six, then an extra seven. And you start to increase the dial a little bit more if that's something that you actually value. So I hope that's helpful and really great question. I think that's really, really powerful. And thank you so much for your service and absolutely incredible what you and your wife are doing.

1:07:32all right so last segment is health corner so i'm going to be talking through uh some of the things that i am doing for my health specifically and so many of you have emailed me about this that i'm actually bringing it back and we'll try to make it a little more regular on this show especially on these q a episodes so that we can go through some of the things that i'm doing because i'm doing a lot of things for health and i try to optimize for health a lot so one of the things that i have been struggling as of late is with sleep so i'm going to tell you some of the things that I'm shifting and some of the things that I am doing for sleep that I think is going to be really big.

1:08:02So one of the best books out there, if you've never read it, is a book called Why We Sleep. And I've read that book a couple of different times. And it is one that really shows the massive benefits of sleep. If you want to live longer, if you want to have the best cognitive ability, then you need to be sleeping more. If you want to have the best mood, you need to be sleeping more. If you want to have the best performance, whether that's physical or mental, you need to be sleeping more. It is the number one thing that you need to focus on for longevity. And when it comes to this, it is one of those areas that I have struggled with over the course of the last couple of months.

1:08:35Now, the reason why is that nine months, I was running about 30 miles every single week. And I was trying to increase my cardiovascular fitness by running a lot more. And when I was running a lot more, I was sleeping very well because I was really, you know, because I was doing a lot more cardio. I was doing a lot more volume of aerobic activity. And so when I was doing that, I was sleeping really well. Well, I have tendinitis in both of my knees right now. And so I'm not able to run and do as much as I would like to. And so because of that, my sleep has been disrupted, where I can fall asleep okay, but the problem is pretty much three to four times a week, I have been waking up between the hours of 1 and 4 p.m.

1:09:19and cannot fall back asleep. I'm not overly stressed. It's not like a crazy cortisol spike. I am just in a situation where when I wake up, I cannot fall back asleep. Now, what happens here? Well, then all of a sudden there's a domino effect because when I cannot sleep, all of a sudden I can't think as clearly. I have brain fog. I don't feel good. I'm not as good of a husband. I'm not as good of a father. I'm not as good to you, my audience, to make sure that you guys are getting the most out of me. And I want to serve you. I want to be able to give you as much value as I possibly can. And so when this happens, it is very difficult for me.

1:09:56So I have been working on some things on how to improve my sleep over time. Now I have been doing all this stuff for a long time and there's things that are not working and there's things that I think will help me a lot more. So a lot of times when I lift or I work out, I work out at night. So one of the things that I'm doing is I'm shifting that to the morning and giving my body a bunch more stress in the morning where then it can kind of lower cortisol throughout the rest of the day. I mean, obviously cortisol will spike it when you're working and when you're doing things and running business calls and those types of things.

1:10:25But at the same time, I want to make sure that I am doing the right things in that department. So I'm shifting my workouts from the evening to the morning. So that's one thing I'm doing. The second thing is I am going to, and I feel as though this hasn't worked for me in the past, but I am increasing the amount of glycine that I'm taking supplementally. But in addition, I'm also increasing the magnesium that I'm taking. So like I have these magnesium pills that I typically take. And, you know, in the past, I feel as though magnesium wasn't helping me that much. But looking back, you really need about 21 days of magnesium supplementation before you can kind of see the implementation or the effects of it.

1:11:03And so I am going to increase that supplementation and do it before bedtime between those two things and see if that helps me as well. third thing though, this is a big one is a lot of times I am doing research or I am watching things like, you know, YouTube videos or things right before bed. I'm looking at my screen right before bed, or I'm reading emails, doing that kind of stuff. And so when I do that, I've gotten so used to it that I can still fall asleep after doing it pretty quickly. But I think a lot of times just that screen exposure, that blue light exposure, those types of things, I am going to instead spend that time reading more throughout that time frame.

1:11:37So I'm going to read about an hour right before bed and I'm going to do it with physical paperbacks. I've been using my Kindle for years. I talk about my Kindle all the time. I love my Kindle. I'm going to see if that helps improve that situation because I think overall it could be a big difference. Number four is I am not going to work past 9 p.m. So a lot of times I will work, you know, all day, spend time with the family and the kids from, you know, in the evening. And then once my kids go to bed, I'll start working again because I am someone who works a lot. I run a lot of businesses and do a lot of different things.

1:12:07and so I am going to actually stop work and not do those evening sessions if I can um and see how I feel about that now if it increases my stress or my cortisol I may have to go back to at least a portion of it but hopefully uh that is something that I can shift in addition one of my goals is to go bed at the same time and wake up at the same time every day so I'm gonna go to bed same time right now I have identified 9 30 is the time I'm going to bed which is about 30 minutes to an hour earlier than when I normally get to bed and I'm going to try to wake up at the same exact time every single day to see how that works as well.

1:12:37That's going to be a big one. Again, I've also heard that getting the first 15 to 30 minutes of your day in sunlight. So the sunlight can get in your eyes actually signals to the body and signals to the brain that it's time to wake up and the day has started. And that has helped a lot of people significantly. Dr. Andrew Huberman talks about this a lot. Dr. Rhonda Rousey talks about this a lot and talking through, you know, getting sunlight into your eyes, the first 15 to 30 minutes can be important. So when I do my workouts in the morning, when I shift them to the morning, that's going to be the first thing I do is try to get outside and begin the workout outside and get some sunlight there as well.

1:13:10So I'm waking up earlier to get those workouts in because I want to get to my office at a certain point in time. But these are just some of the things that I am doing. Now, my goal with this is to try to get to the point in time where I can ensure that I am sleeping soundly and getting higher sleep scores over this time frame. So I'm going to be tracking this. I have a Garmin 970 and I'm going to be tracking because I have an Amex Platinum and you get like a credit for an Oura Ring. I have also ordered an Oura Ring where I'm gonna try to test the different sleep scores between the two. When I was running, I was getting sleep scores in the 90s consistently.

1:13:42And ever since then, I've been in the 80s, 70s, 60s, 50s, and I've even had a couple in the 40s because of my sleep is so disrupted and so poor over the course of the last couple of months. So I'm doing these things to try to get in a point in time where I can wind down properly. And so avoiding screens, making sure I go to bed at the same exact time every single day and wake up at the same time every single day, getting sunlight in my eyes, moving my workouts to the mornings are all things I'm gonna be doing in addition to supplementing. Now, the other stuff, if you talk to people who tell you all these other tips, I've done them all.

1:14:12I've done everything. I'm cooling down my room. It's very cold in my room. There's all these different things that I have done. And so I've tried pretty much everything. So these are the last things that I'm going to do before if it gets worse or it does not improve, I'm gonna go get a sleep study done and make sure that I can figure out exactly what's going on there. So that's the next thing is just thinking through some of this stuff and making sure I am sleeping properly. So if that helps any of you, please let me know. I would love for you to comment down below any of your sleep tips. You can leave a comment on Spotify or YouTube.

1:14:42Would love to hear more about how you feel as though you have mastered sleep because this is something that I think we all need to make sure that we are doing to be the best possible person that we can be. Thank you guys so much for listening to this episode of Q money Q and A. If you guys have any questions, you can either shoot us an email or join the master money newsletter by going to mastermoney.co slash newsletter. Thank you so much for being here on this episode and we will see you on the next episode. Some follow the noise. Bloomberg follows the money because behind every headline is a bottom line.

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