Ask HTM - Are FSAs Worth The Hassle, Making Too Much for a Roth, & Mentally Shifting from Saver to Spender #745 - How to Money

Episode Transcript
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Speaker 1 (00:00):
Welcome to How the Money. I'm Joel and I am Matt,
and today we're answering your listener questions.

Speaker 2 (00:25):
You know what, buddy, it is a Monday. Had a
money episode, which means we are answering listener questions. We've
got some awesome ones to get to today, including one
from a listener. She's wondering whether or not's FSA accounts.
First of all, what our FSA accounts? We'll talk about that,
but we want to a lot of people are wondering
right now. We're gonna talk about whether or not they're
worth a hassle. Basically, we're gonna talk about what you

(00:46):
can do if you don't qualify for a roth Ira
and another listener, she's trying to figure out how to
mentally make the shift from being a saver to maybe
a little bit more of a spender. Oh, first rings,
We've got those plus others during this episode today. Man,
but first man, So my in loss. They've been looking

(01:08):
at houses recently. They're considering making a move, which in
turn means I think I've been looking at houses. Let's
be honest. Everyone likes to just stop on Zillow peruse
see what's see what's out there.

Speaker 1 (01:19):
Once you become a person of a certain age, that's
like your your past time, that's your Instead of scrolling TikTok,
we scrolled Zillow.

Speaker 2 (01:27):
Even given the current mortgage rate environment. Well, I guess
with us being investors, I feel like there's a part
of that that there's a sirens call to be like
is there a deal or is there.

Speaker 1 (01:35):
I would like to keep my fingers on the pulse
right so I know what's going on and so I
can see one because what we do here need to
be familiar, well the advice we get from a community standpoint.
I want to know what's out there for me personally.
I think that's why I look at it. I totally
know what's going on around me for sure, keep my
head on a swivel when it comes to the real
estate moment.

Speaker 2 (01:51):
But what I wanted to ask is I saw a
listing where there was a pool that was virtually staged.
So you've heard of furniture. Of course, you've seen listings
where there's furniture that's virtually staged. What are your thoughts
when you virtually staged a pool? And in tiny letters
in tiny type below it said pool is virtually staged thoughts.

(02:14):
All right, so I've got a couple thoughts on homestaging. One,
all the stats show host staging in general.

Speaker 1 (02:20):
Yeah, okay, then when you stage at home, it sells
for a lot more money. And I do think you
are probably cheap, not frugal if you take pictures with
if you've already moved out and you take pictures of
the rooms being empty, it seems like it's a high
price to pay to get that home stage. But the
numbers don't lie, and they reveal that it's probably gonna
be worth it. You're going to have you're going to
sell your home more quickly, You're gonna more interested buyers

(02:41):
if you have a stage.

Speaker 2 (02:42):
Well, it makes sense because people have a hard time
visualizing what it would look, right, like, what are you
supposed to do with this space? I don't know. But
then when you see it all staged professionally exactly, Oh,
I could totally see myself hanging.

Speaker 1 (02:51):
Out there, even if you end up using that room differently,
provides you at least like a frame of reference. So
when it comes to virtual staging, I think it's a
far cheaper option, and at least in the pictures it
gives people something to grab onto, so that is.

Speaker 2 (03:06):
I mean, it accomplishes the same thing. Obviously if you're
going in person, it's not going to be staged, right right,
because it's all done virtually.

Speaker 1 (03:14):
But the pool part of the pool that takes it
to a whole.

Speaker 2 (03:18):
Are you really like why not? It's dishonest, that's why.

Speaker 1 (03:22):
Oh I thought you don't mean that they're just putting
in chairs and stuff. They're putting in a fake pool.

Speaker 2 (03:26):
Yes, oh okay, but no, no, no, they're not staging the
deck so that like with a patio furniture, they're literally
putting in a fake pool. Okay, that's weird. Yeah, no,
that's lying. I think, yes.

Speaker 1 (03:35):
Exactly, I thought you meant they were like literally just
putting deck chairs.

Speaker 2 (03:38):
Around the No, like there's a fake pool where it's
just like, this is what it could look like if
you decided to put a pool in, which seems completely
dishonestally messed up. I am not okay, good, I'm glad
you glad you agree, because nobody, like with furniture, no
one's thinking where's the furniture, Like, where's that cozy king
sized bed that I thought I purchased? No one is
actually thinking that as opposed to a pool that's a permanent.

Speaker 1 (04:00):
Fixture, and that's part of the reason you go to
visit the house in the first place. Yeah, exactly, that's
thirty completely.

Speaker 2 (04:07):
Yeah yeah, why not virtually stage Here's what an entirely
new addition to the home would look like, were you
to add onto the house, right, that's just yeah, not
cool or an adu if you built it, Yeah, all
that kind of stuff. Let's go ahead, stage it at
the beach. This is what it would look like if
your home was at the beach instead of in that
crappy neighborhood.

Speaker 1 (04:23):
If our home was like a two thousand square feet
bigger this is what it would look like.

Speaker 2 (04:26):
Yeah, no, that's exactly. It's really awkward, not cool. I
don't think that's going to catch on. It was a
singular instance.

Speaker 1 (04:32):
Again, if you've moved all of your your pool lounge
stuff to your new house, to your new pool, virtual stage,
virtual staging.

Speaker 2 (04:39):
Makes for it. Yeah yeah, because nobody expect that's still
going to be there when you move it. That's right,
that's I think that's kind of how you determine whether
or not you're being fru or cheap. Or dishonest or
crook or whatever. All right, that's weird.

Speaker 1 (04:50):
Never even heard of this happening before, but glad to
know that it exists. I'll be on the lookout, all right, Matt.

Speaker 2 (04:54):
Let's move on.

Speaker 1 (04:55):
Let's mention the beer we're having on this episode. This
one's a blood orange double Wit by ponder Rosa Brewing.
Big thanks to our friend Bob from New Mexico for
tossing this beer our way.

Speaker 2 (05:04):
Looking forward to enjoying this one, and we'll share our
thoughts on what we think of it at the end
of the episode, for sure.

Speaker 1 (05:09):
But let's get on to listener questions. If you have
a money question, you can send yours our way how
to money dot com. Slash ask is the place where
you can go for simple instructions to record a voice
memo and email it to us. That's basically all it takes.
But the first listener question of today, Matt, this one
comes from someone who's after our own heart. Not only
do they drink beer, but they want to invest in it.

Speaker 3 (05:30):
Hey guys, this is br from Mississippi. I bought some
beer stock a few months back. Am I wrath Ara,
And it's curious when I sell it what my tax
implications will be if I'm keeping the money on that
account and buying some more stock with it.

Speaker 2 (05:44):
Thanks all right, b R. First of all, I love
that you bought beer stock. I mean, of course, I'm
gonna make it clear we are not fans of single
stock investing for the vast majority of folks, because the
truth is, most folks don't have the time. Even if
you did have the time, do you have the expertise,
do you have the knowledge in order to take that

(06:04):
route and to do it successfully where you're investing in
an underlying company, not buying because it's something that you
heard of or that you think might be fun. But
at least you bought stock of companies who make beer.
We're bringing joy to the masses. That's something that we
can get behind. Even though personally, I feel like Joel,
you and I have invested in breweries and beer companies
just via our consumption, Via our own consumption, it the

(06:27):
I don't know, I feel like there's that's the right
way to invest. A small, tiny dent that we've made
in the craft beer scene, I don't know, it does
not even register on the Richter scale. One of these
craft breweries and the impact that we've had on the industry.

Speaker 1 (06:39):
One of these days will open up our own brewery
and then we'll it'll be like beer Mecca for how
to money. Listeners come hang out with us and they
have to make a trip to the southeast.

Speaker 2 (06:47):
Did you see someone comment on something a few weeks
ago about there's a local brewery here in Atlanta and
they were selling and they're like, hey, boys, maybe I'll
look into this. Yeah, I did see that.

Speaker 1 (06:57):
One of these something that can say it's on, it's
on my two consider this for sure, But no, I
agree with you and our friend Brian Ferraldi. Actually this
is something he talks about a lot, is investing in
individual stocks. And I tell you what, he wrote a
whole book. But we should have him on at some
point in the show to talk about this. But single
stock investing requires a whole lot of your time, attention,
and a lot of discipline. It requires so many different things.

(07:20):
That's why for most people were not big fans of it.

Speaker 4 (07:22):
Right.

Speaker 1 (07:23):
One of the reasons people tend to buy single stocks
is company familiarity, like buying it because you like their
beer or something, right, or I like watching Netflix, so
maybe I'll buy some Netflix stock.

Speaker 2 (07:31):
This is the tasty beer. I want to invest in
this company, yeah, or which is obviously something that you
would definitely say after enjoying a very nice beer, to
be like, oh, well, help these guys out.

Speaker 1 (07:40):
Or people invest in Apple because they like the iPhone
or the MacBook or whatever. And so even though those
companies make compelling products, you got to weigh so many
more factors before you opt to buy each of the
stocks on their own. So, for example, you got to
ask questions like, what's the competitive landscape like in those industries?
What's the current pe ratio price to earnings ratio that
the stock is trading at? How will I know when

(08:01):
to sell? Like at what point does the stock go
up enough? And now maybe it's not it's that company's
not in as favorable of a position, and so it's
time to get out. There are just so many unknowns
in the single stock investing sphere. And it's not that
it can't be done well. It's just that there are
hundreds of potential pitfalls, and most folks don't have the

(08:21):
time to accumulate that knowledge. Like we said, to do
single stock investing well, So I get why people are intrigued.
Why they're like, oh, this sounds kind of fun because
again going back to like sixth grade, when we did
that the stock investing thing, Matt, like we did in
middle school, like so many people did.

Speaker 2 (08:38):
It's the exact stock investing game.

Speaker 1 (08:40):
Yeah, the wrong way to learn about the market. But
for so many people it's intriguing, but it's not great
for building wealth.

Speaker 2 (08:46):
And well, one of the considerations is what would you
otherwise do with that money? That's something that we offer.
That's a question we often raise because if the alternative
is to just drink it away, to literally spend it
all on the actual beer as opposed to the company,
then I would say, from a financial standpoint, you are
most likely going to come out further ahead by investing
in the actual company, right. I wish I had the

(09:08):
numbers on hand, But like, had you instead of purchasing
the first Macintosh three or whatever, had you instead taken
that money and invested within the Apple company in and
of itself. I don't know the specifics, but I'm pretty
sure you'd be a million a millionaire multiple times out
here for sure. No, that's true if you I'm the
iPod or not even the first Tesla that came out
if you had suck but instead purchase Tesla stock. So

(09:30):
it comes down to whether or not you're going to
consume those dollars. And if that's the alternative and you're like, well,
the only way I'm actually going to invest is by
doing this, I would say, well, chances are you probably
probably are going to come out ahead. Even though it's
not the most optimal way, I do like it better
than not investing at all. But that being said, vr
you said that you're going to sell that specific stock

(09:50):
or those stocks, maybe buy something different. What we would
encourage you to do then is to just get out
of the single stock investing game, get out of that sphere. Instead,
use the funds from that sale to go in on
just low cost total stock market index funds or a
target date fund. And the great thing about taking this
far simpler approach is that you're likely going to score

(10:13):
even higher returns over the years. And of course you're
also going to be able to declutter your brain at
the same time, right where you're not going to have
to think about the specific movements and what is going
on with the specific company, as opposed to just saying
you know what I'm going to invest basically in the
entire United States as a whole. Will we progress, Will
we continue to create goods and services that the not

(10:35):
only US citizens but people globally that they're willing to
invest in, And so kind of going back to what
I was saying before, even though it may be, investing
in anything is better than investing and nothing if truly
the easy button to hit is in index fund where
A you're not having to think about it, but B
you are going to be more optimally invested across many,

(10:55):
many different industries. You are going to be diversified. YEA.

Speaker 1 (10:57):
Hopefully there aren't two options on the table, either consume
more beer or invest in beer stock. Hopefully there are
other directions you'd be willing to funnel those dollars. And
if that's the case, I agree, Matt. Like we talk
about here all the time, the simple route, the simple, diversified,
low cost route, is the best way to go. A
total stock market fund or a target day fund are
great places to stick money inside of that, roth Ira,

(11:19):
And let's get to the heart of BR's question here too,
because he's asking about the tax consequences of buying and
selling stock within his WROTH. And so it sounds like
you and I am Matt, we both agree that selling
this beer stock makes the most sense. But what are
the tax consequences for actually pulling the trigger on that? Well,
fortunately he made this investment inside of a tax advantage accountant,

(11:40):
one of our favorites, which is the ROTH IRA. And so,
not that you want to be trading regularly, but if
you are day trading like a crazy person, well, doing
it inside of a WROTH is going to prevent some
of the adverse tax impacts you're likely to encounter. Let's
say you were doing that instead a taxable brokerage account. Mm, yeah,
you have a potentially hefty tax bill at the end
of the year. And so again we're not suggesting you

(12:02):
take this route. We don't want you day trading like
a maniac. But slow and steady index investing inside of
that ROTH is the best move for most individuals. But
if you sell this stock inside of the ROTH and
you then purchase an index fund with the money that
you cash out of the beer stock, you won't have
any sort of tax consequences because you're in that tax
sheltered status essentially inside of that ROTH.

Speaker 4 (12:23):
Yeah.

Speaker 2 (12:24):
Yeah, So that's the good news of having invested within
a retirement account, even within a traditional as well, because
you could also buy and sell as much as you
want within a traditional irate, not just the WROTH, and
you are still not going to have to pay taxes
on any potential gains until you actually make any take
any distributions from that account.

Speaker 1 (12:42):
Whereas if it was inside of a tax bill broker
you can't realize that every single time.

Speaker 2 (12:47):
Yeah, one of the.

Speaker 1 (12:48):
And it depends what your tax rate is on the gains,
depends on how long you've owned it, because if it's
less than a year, you're talking about ordinary income tax rates.
If you vote it that holding that position for more
than a year, you're talking to cap gains tax ring exactly.

Speaker 2 (13:01):
And this this is sort of a nod to twenty
twenty and just the meme stock trading day trading frenzy
that was taking place back then. And I think this
has a lot to do with why we had a
more negative view of Robinhood because at that point in time,
they didn't have retirement accounts, they didn't have rough irays
or traditional I rays. All they had were brokerage accounts,
and so the assumption was was that they were siphoning

(13:22):
off all these potential investors who could be pouring money
into their actual retirement accounts that are far superior from
a tax standpoint, and instead they were getting tempted into
meme songs basically, And so that was whereas and then
they were righted that ship somewhat because now they offer
retirement accounts, but still it kind of has some of
that twenty twenty residue on it from all of the

(13:42):
trading that they were encouraging back then.

Speaker 1 (13:44):
And so many of those traders were shocked at the
beginning of the next year. Oh yeah, and they saw
all the tax information and they were like, huh wait,
this is like this is like as thick as Ley
miz or something like that.

Speaker 2 (13:53):
Like pages ten ninety nine B where they get all
their trade confirmations that they have to report to the IRS.
A lot of those folks were shocked.

Speaker 1 (14:00):
It can be a tax assle but also a paperwork
castle when we're talking about filing your taxes if you
trade frequently inside of a brokerage account. But br keep
up the good work man. Do not worry about the
tax consequences of this sale because it's in the proper account.

Speaker 2 (14:11):
You're good. It's you're good. You're set.

Speaker 1 (14:13):
Yeah, and really, the only way you pay any sort
of penalty in regards to your roth ira. You can
even pull off those contributions whenever you want. We wouldn't
suggest it. We'd advise you to keep that money locked
inside of that roth for as many years as you can.
But the only way in which you're going to pay
any sort of penalty is if you take out the

(14:33):
earnings in that roth ira too early before you reach
retirement age. If that's the case, you are going to
pay that ten percent penalty to the federal government, which
is another reason to wait and not tap those funds
until you reset age fifty nine and a half threshold.
But yeah, we hope that advice steers you away from
attempting to pick stocks moving forward, and that you just
kind of take the average gains of the market, take

(14:54):
it in stride, and it's just going to kind of
keep your mind at ease to it, I think.

Speaker 2 (14:58):
At the same time, that's right, Matt.

Speaker 1 (15:00):
We've got more questions to get to, including one from
a listener who says, I think I make too much
to contribute to a roth What.

Speaker 2 (15:07):
Do I do. Then we'll talk about that and more
right after this. Oh right, we are back and we
will get to a question soon about a couple who
may be on the path to fire. But first let's
hear from a listener who is trying to change her

(15:28):
money mindset.

Speaker 3 (15:30):
Hi.

Speaker 5 (15:30):
My name's Jenny, and I live in pickin South Carolina.
I've been a saveror my whole life. How do you
shift the mindset of a saver to a spender when
you're near or in retirement. I've got the funds, I
just cringe to use them, especially if there are tax implications.

(15:50):
Your guidance will be helpful.

Speaker 2 (15:52):
Thanks so much, Rgel Jenny's cringing, can you relate I
come to spending some money?

Speaker 1 (15:58):
No, I hear this, and I especially from five eight
years ago, Joel, I see myself in Jenny when she's
asking this question. She's certainly not alone in this, and
I think, well, the vast majority of Americans struggle with
the exact opposite problem. Right, So when people are like, true,
how do I actually start to save? Because I spent
too much? That is, I mean, when you look at
all the data, that is the majority average American, right,

(16:21):
who's just like out spending their paycheck. They're living on
the financial precipice. But actually there are a decent chunk
of folks in the how to Money audience who do
find it hard to spend their money, even if they've
got plenty of it.

Speaker 2 (16:33):
It's funny, Matt.

Speaker 1 (16:33):
When we were in New Orleans for FINCN, we met
a listener Dylan. I was talking to him and his wife, Danielle,
and she was talking about how he won't ever spend
on things, even if he's like loves the thing, and
it's like, we're such good savers, but he won't ever
pull the trigger. And I was like, I get it.
I've been there, that has been me, And so maybe
we should offer a few tips for Jenny and then
by proxy our friend Dylan too.

Speaker 2 (16:54):
Yeah, totally, so, Jenny, I think it might be worth
asking yourself some questions. So first of all, I want
you to think through why is it that you've been
saving money in the first place. Truly A great way
to think about money, regardless of whether you're not you're
saving and investing it or spending it now, is that
at some point the ultimate goal of these dollars is
to actually spend it is that largely because you can't

(17:15):
take it with your matt. It's you're either spending it
now or you're spending it later.

Speaker 1 (17:18):
Put it in the Costco casket with me, right, I
mean when you think about it like that, it puts
it in perspective. You're like, oh, yeah, no, I don't
want like hundreds of thousands of dollars tossed in the
casket metivarian and you realize that there are things that
can live on to do, but.

Speaker 2 (17:30):
You're just confined by time. And so it's just it's
just a matter of when do you want to a
lot for yourself to actually spend these dollars. And so
if saving is just deferred spending, then what you need
to ask yourself is what were you hoping to accomplish
with the dollars that you opt to instead push into
the future. What we want you to do here is
to focus on some of the different spending goals. And
maybe I don't know that might even sound weird, like

(17:51):
don't you don't even say spending goals? Just think through
what do I want to accomplish in my life with
the people I love, with my friends. It can be
within my community lifestyle goals too, right, because for so many, well,
it's buying back their time. Yeah. Absolutely, And as you
start to explore and think through what you might want
to do, like just consider whether or not you want
to travel right or like maybe you want to spend
more time at the beach, or maybe you even want
to buy a beach home. What we want you to

(18:12):
ask yourself is what is your actual craft beer equivalent.
There's a reason that we ask that at the beginning
of all of our interviews because it's just such a
good insight into that specific individual and what it is
that they value and what it is that they prioritize.
And what's fun is that those things kind of they
change over time, But truly we want you to focus
on that and kind of find a way to ramp

(18:35):
up your spending on the things that are going to
be able to bring you happiness. Like, honestly, just take
a page out of ramit Seti's book and even think
about how you can take it up to eleven on
the things that you truly care about. We don't want
you to buy things that you don't care about. Don't
buy crap just because you can. We want you to
align your spending with your values, and then once you're
able to identify that, don't be afraid to funnel more

(18:56):
dollars in that direction. And if this is something maybe
that you haven't done, we would recommend for you to
check out our Money Mission Statement. The whole, the entire
reason that we created this worksheet was to help folks
to spend some time thinking through what is it that
I want to accomplish within my life? And that's going
to allow you to prioritize the dollars that you have
towards things that mean the most to you. I still

(19:18):
remember when we had wellingk to that, by the way,
the Money Mission Statement and within the show notes for
this episode, I remember when we had remat on the
show Matt and he was kind of pushing us in
that direction. And it's funny because I think most people,
like I said earlier, they don't have that problem. But
there are some people in the How of Money audience,
and you and I included at times, who focused so
much on saving and investing that we're not as focused

(19:39):
on living for the day and those dollars, if they
can fuel added joy in your life in the here
and now, while you're also being intentional for the future.
Don't be afraid to use them. Right, Let's talk about
another question you need to ask yourself. Is this money
actually for spending or are you hoping to be either
like incredibly philanthropic or you're wanting to give money away
to the next generation. Yeah, kids, grand kids, that kind

(19:59):
of stuff. Those are important questions to ask, important things
to think through as well, because some people are all
about that generational wealth, right. They want to help give
their kids and their kids' kids that the next generation.
They want to give their their family a leg up
from a financial perspective. They don't Maybe they start started
behind the eight ball and they want their their family
to start in front of the eight ball. I guess,

(20:20):
I don't know. But other people want to start on
top of it. The whole idea that the cue ball
is like if you're stuck behind the a ball because
you can't hit it right right, you have to go
around it, that kind of thing. So you want to
be in front of it. You want to just be
out in the open, yeah, nowhere near the wide open spaces.

Speaker 1 (20:35):
But other people want to be able to give away
big chunks of their nest egg to charities that they
care about, which is admirable and a totally legit awesome
way to funnel those dollars you've been able to build
up over the years. You know, frugal folks who have
a hard time spending on personal consumption, they might find
it easier to give away money to a worthy cost.
So ask yourself those questions because that can dictate what

(20:56):
you do with some of those dollars now as well.
Maybe you're saying, listen, I have all that I need.
I'm not trying to move the goalpost. I don't want
a yacht or a beach house like, but I would
love to see to be able to donate five figures
or six figures to these two or three charities that
mean so much to me, that do great work where
I live or across the ocean. Those are great questions

(21:16):
to ask because I think they'll help bring out maybe
ways that you can funnel the money not instead of
just hoarding it.

Speaker 2 (21:22):
Absolutely, because I think oftentimes, like when you say, oh,
you should travel more, somebody who's maybe in traditional retirement
years are thinking, man, I don't want to travel, like
that's for my kids to do, or that's what the
grand kids are doing. The ability to instead channel your
dollars and your efforts towards something that is meaningful to you,
I think can be incredibly worthwhile and it can sort

(21:44):
of remove this self absorbed, consumption based mentality that I
think some folks might feel when we say what's your
craft beer equivalent? Like what do you want to spend
a ton of money on? And instead I think if
you can focus on like the happiness of other people,
I think ultimately that can bring a lot of those
folks actual happiness, right instead of trying to actively pursue

(22:04):
the things like what is it out there that's going
to make me happy? I think if you can live
your life in a way that is able to be
a service to others, I think for a lot of
those folks, maybe that's the ticket. Like that's the answer.
And it's funny that you mentioned remat because one of
the things that I remember, like you said, he kind
of challenged us that he talked about when it came
to craft beer, but he said, well, how can you

(22:24):
how can you crank that up to eleven? And we're like, well,
we drink like the best beers in the world. I
don't know how else we could ramp that up. He
kept asking a few questions, but then one of the
things he said was, well, what about if you like
took a bunch of your friends along with you and
they were able to and you're and you're paying for
their tickets or you're you're paying for their beers. And
it's funny because you just mentioned like the listener beer

(22:44):
hang when we're in New Orleans, Like that's something that
we were able to do there is cover everybody's beer.
The ability for us to be generous in that way
is I know, something that brings us both a tremendous
amount of joy because that's the kind of environment in
the community. Not only do we want to see at
my nice, awesome, delicious craft breweries, but just within the
how to money community and the world at large, right,

(23:04):
the ability to be generous with what it is that
you've been blessed with and using that to help other
folks out too.

Speaker 1 (23:10):
Yeah, I think picking up the tab of dinner buying
beers for a friend like that is the kind of thing.

Speaker 2 (23:13):
That I never regret it. Yeah, ever, Like it makes
me so happy just.

Speaker 1 (23:18):
To think back to that event, think about the smiles
on people's faces and be like, we got to play
a role in that. So yeah, and I'll say this too,
I think it's tough to change.

Speaker 2 (23:25):
Your mindset on this.

Speaker 1 (23:26):
If you have been kind of a frugal lighte and
adherent to frugal mantras for most of your life, it's
really tough to kind of turn on a dime. And
I think it takes a little bit a little while
to actually kind of move into spend or territory, even
if it's somewhat reluctant. And so I think it's important
to realize that the tool that got you to where

(23:46):
you are is not the one that's going to help
you enjoy the most meaningful retirements. And the saddest stories
to me actually from a money perspective are the ones
where it's someone who had a very low income and
retired with millions and millions and millions. In the there's
the one of the janitor who retired with eight million dollars,
but nobody knew that he had any money because of
the way he lived. He lived so such a spartan existence,

(24:08):
and in some ways that's kind of cool, right. It
proves the power of compounding returns and that almost anybody,
even on a low income, can amass millions. But on
the other side of the equation, right, it makes makes
me realize at least that I'd like to see my
money bring my family joy and do good in the
world while I'm alive and cacking. I don't necessarily want
to build up millions and millions and millions to be

(24:29):
dispersed after I'm gone.

Speaker 2 (24:31):
Yeah, and this isn't to say that someone who works
like a minimum wage job for their entire life and
never takes a break, that there's anything to be looked
down upon if that's the path that they've chosen, right,
as long as they're doing it intentionally, because I think
there's a lesson that a lot of folks can learn
where it's just like, oh man, that individual was able
to find happiness doing something in service of others, right, Like,

(24:52):
it's an incredibly humble job, and what better way to
basically love other people than doing that. As long as
you're doing it intentionally and you're aware and your eyes
are open to what's out there that you could be doing,
I think that that's totally fun.

Speaker 1 (25:06):
It's not even about getting a different job, it's just
about not pushing all those dollars to such an extreme
future that you don't ever get to enjoy or see
them do good. Sure, if you think for a lot
of people it's done out of a scarcity mindset.

Speaker 2 (25:19):
And if that's the case, then that's what we're pushing
back against the fact that, hey, at some point it's
worth considering what you could do with these dollars. I
don't know if thinking about the same story or whatever.
But the guy, I think he left most of the
money to like a local library, which is awesome. And
if that's because he was a patron there and he
knew the folks there and knew that they needed the funding,
or that's just something that he wanted to further within

(25:42):
his community. If that's something that was done intentionally, I
am totally for that. But I do agree that there's like,
I like what you said about the tools I got
you to where you are now are not necessarily the
same tools that you're gonna need to put to use
moving forward. There is so much of our own identity
that's tied up in how it is that we got
to where we are right And so for the person

(26:03):
out there who's an ultra frugal light. It's gonna be
really hard for them to kind of break free of
that mindset that got them to the point to where
they have that money. Like literally, I was talking to
a buddy this morning and we're talking about Tesla's and
he's also a fan of Tesla's. But then he thought through,
He's like, well, I don't necessarily need one right now,
but maybe if the car broke down and you know,

(26:24):
we had the money saved up. But he said, but
even still, it would be hard for me to accept
the fact that I'm the guy driving the Tesla. He's like,
you know, he drives an old Honda's Hannah Accord, And
for him, it's like, you know, he associates the person
that drives a Tesla as a certain type of person,
and he doesn't want to be that person. It's just
that he thinks of the car is super cool. So

(26:44):
it's hard for us to break free of that identity.
And sometimes it means saying, you know what, just because
I have in the past perceived someone that spends in
this way or uses their money to do x YZ,
whatever it is, that doesn't necessarily mean that you can't
sort of change that narrative and own how it is
that you want to spend that money and still be
the person that you are, not this sort of stereotypical

(27:05):
person who's gonna, you know, flash money.

Speaker 1 (27:07):
I think probably things that you and I said on
the podcast in that first year, in particular when we
have much younger kids. Yeah, we were all about, like, well,
throw all every kid you have in the same bedroom,
and like we would we would say things like that,
and I think there's like a small amount of wisdom
in that. But it's not for everybody, and it's not
for us anymore. That was for younger us. Your priorities change,
Oh yeah, and so I think it's okay to let

(27:27):
your priorities change, and it's okay to redefine expectations. Obviously
spend less than you are and make sure you know
it's but finding those things that you are willing to
happily spend money on is part of the joy of
having money too, So yeah, don't lean into that a
little bit. And by the way, totally Jenny mentioned tax
implications and definitely do not throw caution in the wind

(27:48):
when it comes to taxes. But if you've been saving
in tax advantage, accounts for decades, you've been able to
avoid a whole lot of tax right that you would
have otherwise had to pay. And you can't avoid it
forever because you're likely going to encounter R and d's
required men distributions in your early seventies, and so if
you haven't started tapping into some of those funds in
the coming years, your overall tax liability could be even

(28:08):
larger because you're gonna have higher forced distributions every single year.
So it might even make sense from a financial from
a tax perspective, to tap some of those funds.

Speaker 2 (28:18):
Opposed to getting penalized. Yes, exactly. In this way, the
IRS is actually kind of helpful because they're helping you
to spend your money. I think it used to be
if you skipped out on your rmds, I think it
was fifty percent, but then that got bummed down to
twenty five percent with secure two point zero, which is
still a lot higher than the vast majority of folks
given the tax bracket that the majority of Americans are in.

(28:40):
So even that being said, twenty five percent, you're like, oh,
that's not too bad. No, that's still a lot more
than your actual tax bracket. And what it is that
you're paying, and so Jenny hopefully doesn't take the irs
basically getting ready to siphon off a big old take
a big old bite out of your retirement dollars to
actually get you to spend some of your money. But hey,
it's sort of like, I don't know, it's like a

(29:02):
cliff and you know you're getting close to it and
you don't want to turn the wheel, but at some
point you're going to be forced to otherwise you're going
to lose even more of your mind. I'm driving to
the air if I always want to turn the wheel.
But Jenny, we hope that that gets you pointed in
the right direction. Joel, let's hear from our next listener
who is totally crushing it when it comes to her investments,
but she has found herself in a pickle.

Speaker 6 (29:21):
Hey, Matt and Joel, this is Rihanna from Lancaster, PA.
And no we're not all amish here. So I love
the podcast and the newsletter Straight Fire. Thanks for all
you guys do. So here's my question. When discussing our
twenty twenty three tax return with our financial advisor recently,
he pointed out that our adjusted gross income AGI is

(29:43):
getting close to the threshold that would lower the maximum
amount we can contribute to our roth iras this year.
For context, my husband and I both maxed out are
roth iras last year and have also already paid sixty
five hundred dollars each to max them out this year.
So since we're expecting to make more than the max
AGI next year, I have two concerns. One, is I

(30:07):
already have that money for my twenty twenty three roth
ira invest it into a target date fund with Vanguard.
How do I avoid being penalized for over contributing if
we cross the AGI threshold. Secondly, I'd love to hear
your thoughts on whether it would be better for us
to avoid crossing the threshold by lowering our AGI, maybe

(30:28):
through increasing our four oh one K contributions or HSA
contributions which I just signed up for by the way,
thanks for that tip, or is it better to take
advantage of something like a backdoor roth ira. I highly
value your guys's opinions, so I'm really looking forward to
hearing your take. Thanks for all you guys do. It's
truly life changing. And by the way, if you ever

(30:49):
come across Beers from Evergrain or Hidden River. Those are
by far the best two breweries in our area, especially
for hazy IPAs.

Speaker 2 (30:58):
Cheers all right, Rihanna, thank you so much for the
kind words.

Speaker 1 (31:00):
And and by the way, if you're listening and you
haven't signed up for the how to Money newsletter, the
best newsletter in the history of personal finance newsletters, what's
your problem?

Speaker 2 (31:08):
What are you doing? You go to a hotta money
dot com slash newsletter? That happens. Thanks for those brewery
recommendations as well. Yeah, or Grain, We'll always take that
Hidden River. And by the way, do you think they've
got a ranch next to Hidden Valley? Hidden Mealley Ranch?
I pa? Or well? I mean if they don't, they
are totally missing out on a great marketing opportunity.

Speaker 1 (31:28):
I don't think by the way, Rhanna was trying to
make a dig on the Amish. But there's lots of
love about the Amish, So I just want to state
that clearly right now. There's a lot for like, there's
a lot of lessons we could learn and how they live.

Speaker 2 (31:38):
Why are you hating? No? I mean kind of like
what we're talking about going back to like the custodian
or the janitor who works their entire life. There's something
to be said about finding contentment and happiness when in
a simpler life as opposed to all the pop culture
and new technology and the things that we think we
need like Tesla's electric vehicles tum iPhone of the things

(32:00):
I think I need that are going to make me happy.

Speaker 1 (32:01):
I know, yeah no, and oftentimes they make us more miserable.
But onto the money question, what's the best way forward
when you get close to that roth ira income threshold?
That's kind of the basic of what Brihanna is asking about,
and so let's talk about how that works. And honestly,
it's just a bad setup in our opinion. There are
already strict income limits when it comes to being able
to contribute to a roth at all, and plus a

(32:24):
massive number of folks have access to a roth ORL
and K at work, So why not just give everyone
access to a roth ira no matter how much they make? Like,
why does this have to be as complex?

Speaker 4 (32:35):
Right? Four?

Speaker 1 (32:35):
Okay, with no income limitations regardless, So why does the
roth ira have to have one? Especially when the income limit,
the contribution limit is is so much smaller. Just let
anybody contribute like irs, Come on, Congress, let's do something
about this. But the roth IRA income limits are two
hundred and twenty eight thousand dollars for married folks filing
jointly this year and one hundred and fifty three thousand

(32:57):
and four single filers in twenty twenty three.

Speaker 2 (33:00):
More than that.

Speaker 1 (33:01):
You probably shouldn't be mad about missing out on the
roth You should be pumped that you're crushing it in
your career. But it's important to know those limits because
then it means you're no longer eligible.

Speaker 2 (33:11):
That's true, right, Yeah, I love too how it sounds
like that they like they might be taking my approach
where they're saving the previous year for next year's contributions. Right,
so instead of setting aside monthly amounts for investing where
your dollar cost averaging, setting aside that month that money,
storing it up, creating a little stockpile, a little treasure chest,
like a little war chest, and then when January hits boom,

(33:32):
you have the ability to deploy it. That's what it
sounds like, which I love Vianna and her husband are doing.
You are making that a priority. Future you will be thankful,
but you might have some more time to funnel at
least some of those dollars into a roth IRA if
you are strategic about it, and you mentioned some great
possible solutions, and our favorite of the ones that you
mentioned is to lower your overall AGI by contributing more

(33:56):
money to those other tax advantage retirement accounts. Where you
to do that, you're going to come out ahead. It's
a win win sort of situation because you get to
continue putting dollars within that roth IRA that gives you
that ultimate maximum flexibility, but you're also investing more overall,
and you're able to do it in two of our
other favorite tax advantage accounts you mentioned the four one K,

(34:17):
you mentioned the HSA, which is the ultimate tax advantaged account,
And so as long as your income is within spitting distance,
those minor tweaks, those manipulations can keep you on the
good side of being able to access a ROTH. Yep.

Speaker 1 (34:31):
I love that too, because it's like, hey, what if
I just invest more that allows me to then invest
more in the ROTH. It's like uh huh, yep, Okay,
you have our attend that sounds good. That sounds good
us and it's not just sixty nie hundred bucks, but
it's sixty five hundred bucks times too. Because Rihanna is
married and her husband, it's two roth accounts then that
are able to be maxed out, which and the reality is,

(34:53):
given the trajectory of their income, they might not be
able to do it for a ton more years. So
trying to max those out while the sun shining, while
making hay while the sunshines make sense.

Speaker 2 (35:04):
And so although there's a lot of leeway, there's a
lot more room within a four to one K. True,
just to say how much money that they're salking away
towards their four owing k is but I mean there
could be an additional twenty five thousand dollars easily that
they can suck into their four one k.

Speaker 1 (35:16):
Which could mean that maybe there's a number of years
they have left to contribute to a roth hiray.

Speaker 2 (35:19):
It it just depends, yes, And let's.

Speaker 1 (35:21):
Mention this that unwinding contributions to a roth iray it's
not a terribly fun procedure. So it's best not to
contribute too much to begin with, if you can help it.
And so if it looks like you're definitely gonna make
quite a bit more, which is not a bad thing. Again,
but let's say, oh, man, instantaneous fifteen percent rays in
the beginning of twenty twenty four, which is going to
kick you out of roth IRA contribution eligibility even with

(35:43):
those additional pretax contributions you're considering making. Take a different route.
And by the way, you can always wait until you
get your income statements the following year, your W two's
or whatever to contribute if you aren't sure if you
qualify but don't want to unwind. So, Matt, you were saying,
do it you know, day one in the new year,
which I love that approach if you know you're going
to qualify, but if you instead keep that cash on

(36:06):
hand in savings and sticking in the following year once
you know you qualify, if you're concerned about whether or
not you're going to that can make sense too. That
can be a good way to do it, just so
you're not.

Speaker 2 (36:15):
It's the way to keep things simple, exactly sure, and yeah,
it keeps things from getting super hairy, and it allows
you to know without a doubt that what you're doing
isn't something that you're going to have to recharacterize, which
involves a whole lot of math where you're trying to
figure out the taxes on what it is that you earned,
but not the amount that Yeah, it just gets a
little bit hairy. It's annoying. But like, what I don't
like about sitting on that money is the fact that

(36:36):
you're missing out on the potential gains for that entire
year because on average, the stock market goes up more
often than it goes down, basically three out of four years, right, Yeah,
which means that you could be missing out or like
you know, the S and P, Like you're looking at
eight ten percent if you're not counting inflation, but at
least you're in a five percent highld tavy's account now,
and that, honestly, that's the biggest It softens the blow

(36:57):
a little bit. It saves the day because instead of thinking, oh,
on this is not on six hundred plus dollars on
maxing out my wroth IRA, if you're thinking about ten percent,
it's like, well, actually it's you can kind of have
that because you're guaranteed at least five percent because that
money is sitting there within a HIGHYI old savings account.
And plus you've got the flexibility too off having that

(37:18):
money there and if something comes along it's pretty nice
to know that that's not money that you have to
then with take out of a wroth. We talk about
the contributions you make to a roth in the ability
that you can draw on those contributions, but were you
to do that, you can't put that money back in
that same year, right, Like, let's say you've got a
very dynamic financial situation. But if that money is just

(37:39):
sitting there in cash, well you've never made a contribution,
which means, oh, well you've never withdrawn this contributions, meaning
that or you to save that money back up again. Yes,
in fact, you would be able to contribute to your
wrath for that year. And is that confusing? Okay? And
I would say this cash equals of flexibility is what
I'm saying.

Speaker 1 (37:57):
And you just have to make sure that you don't
just hiw to spend it instead of invest it. But
that doesn't sound like that's a problem, not for them,
for Brienna, and yeah, for their family. So the other
I think you can get into the weeds. There's a
whole lot we could talk about when it comes to
different ways to get to get access to wrath money,
ways to even enhance your ability to funnel money into

(38:19):
a WROTH account. But when we're talking again, I go
back to that basic solution, simplest is almost always best,
is Yeah, just funnel more into the pre tax accounts
like the HSA and the traditional formal one K, leaving
you open to continue to contribute to those roth iras
for hopefully years to come, or maybe not hopefully years

(38:39):
to come because maybe your income gross signima. That's what
I'm rooting for, actually, Matt, But at least for the
time being, that's what you can do.

Speaker 2 (38:45):
Absolutely, and if you overly obsessed, I think with some
of these different maximizing strategies, I think it can keep
your sites from focusing on the things that are truly
going to be able to move the needle in a
much bigger way, whether that's, oh, man, we can use
this money now to improve our community, or oh we
could use this the start of business just some of
the different other goals that you might have, or.

Speaker 1 (39:06):
Build nay you in the backyard and start being a
real semester.

Speaker 2 (39:09):
Yes, Like, there are so many different paths you can take,
and that's what's it's kind of going back to what
we're saying about the advice that maybe more of our
mindset and how it is we thought about being frugal
in the early years of the show, but your priority
is and your goals change over time. And just because
right now, Rihanna, or maybe over the past few years
you have been investing at a particular clip, that doesn't

(39:30):
necessarily mean that that's what you're going to continue to
do moving forward, because you might have an awakening. Maybe yeah,
you and your husband become enlightened and all of a
sudden you're you're like, oh, we're gonna give all of
our money away. I don't know what it is. If
that happens, please reach back out and tell us how
to get there. Uh, but Rihanna, we hope that gets
y'all pointed in the right direction. And yes, do let it.

(39:51):
I thought you were gonna tell her to reach out
and send her have her send money or a way. Hey,
she does that enlightenment too, Matt. She does that. We'll
start some sort of foundation she can further the how
the money calls. That's good, but we've got more to
get to, including we're going to discuss whether or not FSAs,
whether they make a ton of sense, whether or not
they're worth it. We'll get to that plus more right
after this.

Speaker 1 (40:19):
Hard man let's keep going in his open enrollment season.
So we do need to talk about FSAs because it's
how much do I contribute to my FSA is a
question on a lot of people's mind. We'll get to
that in one second, but first, let's take one about closing.

Speaker 2 (40:30):
A bank account.

Speaker 4 (40:31):
Hello, this is Molly from Indianapolis, Indiana, a long time listener.
I've taken your advice to dump the big bank in
favor of an online bank. I was planning to close
my big bank account and then I sell my credit report.
It's the banks that I've had since I was a teenager.
If I close my twenty year longest open account, will
that damage my credit score?

Speaker 2 (40:51):
All right, Molly's talking about dishing her big old bank.
This is something we are all about. Molly. Of course,
not only do the big banks not their customer as well,
but they also don't offer competitive products and rates, despite
basically every other financial institution out there raising rates on
their savings and their CDs pretty significantly over the past year.

(41:12):
So the big banks they've opted to largely stay put,
and in an era of higher inflation, none of us
can afford to have our savings sitting completely idle like that,
going from what it is a big bank is offering,
like typically you're looking at like I think point one
two point oh four percent to the five plus range
is going to be a massive one, especially if you're

(41:34):
the amount that you've got set aside in your emergency
fund is pretty large. If you're sitting on three to
six months worth of living expenses. The ability for you
to earn a solid five percent on that is what
we want to see folks doing.

Speaker 1 (41:45):
Matt, you remember that song, I don't want no scrubs.
I don't want no big banks. Okay, that's what I
don't want. And so I just like that Molly's asking
this question. I don't want her to have any big
banks in her life either. No scrubs, no big banks.
So when it comes to your question, the long and
the the short of it is, basically the answer is no.
We talked about some of the annoyances of the credit
score industry in the past Friday Flight. Actually we talked

(42:07):
about the big banks sucking too, because that's a repeat
leame here on how to money, But your bank account
and how long you've had it has nothing to do
with that all important three digit score. You mentioned that
you looked at your credit reports, and I wonder if
you also have maybe a credit card from your big
bank or something like that, because your actual savings or
checking account, right, you know, maybe one that you've had

(42:28):
even for decades, it doesn't get reported to the credit bureaus.
So I would say, look over that credit report again
and see. But typically those accounts don't get reported to
the bureaus because they don't really have anything to do
with the makeup of your credit score.

Speaker 2 (42:44):
Yeah, that's right. The length of your credit history that
has a real impact on your overall credit score. That
is why we typically don't advise that folks close a
credit card that they've had for a long time. It's
better to just use it rarely, hang on to that thing,
use it rarely, and then pay off the balance on time,
and there's just rarely a need to ditch it all together.
I would I guess if it's a card that you're

(43:06):
not taking full advantage of and they have an annual fee,
that's a good reason actually to ditch it.

Speaker 1 (43:09):
Well, but even then you can call up the credit
card issuer and maybe get them to engage you to
a card that doesn't have an annual fee, and you
get to keep the credit history, and the same time you.

Speaker 2 (43:16):
Can get away. Perhaps, but you should feel free to
move on and open a superior bank account with another bank,
because there's no connection between that savings account, that bank account,
and your credit score. And it's easier to switch banks
than the most Most folks actually think it's not easy necessarily,
but we do think it's worth it, and like we've
mentioned recently, hopefully it'll get even easier in the future,

(43:38):
where there are some standards that allow for folks to
quickly migrate from one bank to the other. Woun't be nice,
even though the banks they've got zero reason to actually
want to be able to provide that service for their customers.
They want to.

Speaker 1 (43:49):
They just want to make it just a little more annoying,
a little more painstaking. And if we can, if we
can just implement some rules that make it simpler for
individuals to do that so they don't have to spend
like a weekend and and the subsequent weeks ensuring that
everything gets transferred properly, that would be a big help.
I think people would be more likely it would grease
the wheels of that decision. And it's probably important to

(44:09):
mention that the only way switching banks can negatively impact
your credit is if you were to close the account
your bank account with a negative balance, right, or if
you don't maybe switch over any of those auto payments,
then one of the payments doesn't get made and so boom.
Then that non payment or late payment impacts your credit score.
So like that is what's going to get reported to
the bureaus, not the actual closure of the account itself.

(44:32):
So that's the biggest risk here. Make sure to switch
those automatic transactions like a credit card payment or a
mortgage payment from the old bank to the new one
before you close the account all the way. But other
than that should be no harm, no foul, no problem,
and your credit score should be none the wiser.

Speaker 2 (44:47):
That's right. And Molly didn't say specifically where it was
that she was getting her credit report, but make sure
that you are going to annual credit report dot com,
not like free credit report dot Com, which I'm pretty
sure it sounds like something that you should be hitting
up right. No, I think they're associated with experience. Yeah,
I was gonna probably run by one of the bureaus.

(45:08):
One of the bureaus. They're probably trying to charge you,
charge you, but you can get for free. So Annual
Credit Report dot Com is where you can go not
only annually but weekly right now, yeah, ever since the pandemic.

Speaker 1 (45:18):
And that is a federally guaranteed free credit report. So
a lot of people might say, oh, I'll just go
to the bureaus themselves. No, no, no, go to the website.
It's been set up by the federal government to give
you access to your credit report for free.

Speaker 2 (45:28):
They should change it to weekly Credit Report dot com.
But I don't actually know who's on who has that R.
We should buy it, and we should just forge people
to Annual Credit report dot com if it's available. We'll
do that for ten dollars or less. I will do
that's right after we finished recording and check out Go
Daddy or wherever you buy fine domain names. All right,
it is time for our Facebook question of the Week.
This one's from Katie and she says it's open enrollment

(45:52):
time and my employer offers a flexible spending account for healthcare.
Well it sounds well, it sounds similar to a hell
savings account. It is very different in that there's a
limited rollover and no investment option. That's right. I can
contribute up to thirty five hundred dollars a year, but
those funds can only be used for health care costs
incurred in the calendar year and claims must be submitted

(46:13):
by April fifteenth the following year. There's a small amount
six hundred dollars that can be rolled over, but other
than that, any funds not used are forfeited. The only
benefits I see to this type of account are that
the funds come out of my paycheck pre tax and
when to lower my AGI. That is true, yep. The
downside is having to keep track of the expenses and

(46:33):
submit the claims and forfeiting money if we don't use
it all. We had a bad medical year this year
and we spent far more than thirty five hundred dollars
out of pocket. My son had an unexpected surgery, but
I'm not sure that would happen in a quote unquote
normal year. Thoughts on this type of account. Let's talk
about the flexible spending account well.

Speaker 1 (46:54):
As always in the hod of money Facebook group, which
if you're not a member of you should join because
there's awesome folks in there helping each other out. It's
one of the only same places on the Internet. I
can vouch for that, And so there was a lot
of good advice from fellow listeners, fellow readers up on
that Facebook post, on Katie's post. But we talk about
HSA's pretty regularly. But but we don't talk as much

(47:17):
about fessas. The reason we talk about HSA's with regularity
is because there's such an underutilized resource when it comes
to saving for retirement and avoiding as much tax as possible.
They're actually quite flexible in a lot of ways too, Yeah,
because you can take those funds out two years later,
twenty years later.

Speaker 2 (47:31):
It's really up to you two hundred years later. Yeah,
if you're.

Speaker 1 (47:34):
Playing on living that long, you feel like one of
those Silicon Valley You've been hacking your body type folks.
You can do that. The most annoying part, though, is
probably the receipt keeping that you got to do in
order to maximize the value of that account. But Matt,
we don't talk about fessays as much, and especially this
time of year, we really should because they're an account
that so many people have access to. They don't have
the same long term retirement investment upside, but they do

(47:58):
have some tax saving ability for a lot of people
in basically the upcoming year.

Speaker 2 (48:03):
That's right. Yeah, So there are two types of fssays
flexible spending accounts. There are the dependent care fessays and
then the healthcare fessays. And the dependent care one is
it's more of a slam dunk, even though you're avoiding
income tax on the money that you funnel into either
of these accounts. The reason we like the dependent care
version more is because those expenses are honestly, they're just

(48:25):
so much easier to predict, right, Like, you know that,
all right, this is how much daycare is going to cost.

Speaker 1 (48:30):
You're not like, wait a second, I randomly we grab
a four year old and now have to pay for
their childcare costs.

Speaker 2 (48:34):
Usually you know that going into the year. Yeah, you're
looking at the year. You know what your month monthly
amount is going to be as opposed to some of
the different medical needs. I guess that might arise during
the year. Obviously, you can't do this like with one
hundred percent accuracy, but if you got young kids, if
you work full time, chances are you can max that
out pretty easily given the cost of childcare these days.
But with a healthcare fessay, if you have significant ongoing

(48:57):
health care needs, then yes, you likely will be able
to max out that FSA as well without having to
fear that you're going to lose any of those dollars.
But the problem that I think Katie finds herself in
is that her and her family there's not a slam
dunk on one side or the other, right, Like you're
You're kind of in that messy middle where you kind
of have to got to predict the future. Essentially, you

(49:18):
got to forecast a little bit and try to determine
whether or not this is going to make sense for you.

Speaker 1 (49:21):
Sure, and I would go to a palm reader, yeah,
is what I would say, and say what I prefer,
Tarot cards? Yeah, yeah, yeah, either way, whatever your preference.
Bring all your family members and have them read your
future so that they can determine what your health care
costs are going to be next year. But it's really
hard to figure out how much to contribute. Matt, you
mentioned messi middle, and I think that's a good way
to describe it. And Katie highlighted a lot of the
problems with FSA accounts in general in her post, right,

(49:44):
they use it or lose it nature can cause people
to avoid these accounts altogether because they're like, I don't
want to stick money in that. I'm actually just funneling
down the toilet. Because there's a certain amount six hundred
bucks ish that you can roll over every single year,
which which means that putting in it that amount makes
a lot of sense, especially especially given the list of
items that qualify as FSA expenses, which is an important

(50:06):
thing to mention, tampon, sunscreen, vitamins, over the counter medications.
Look at the list of things that qualify because it
is a wide list, and so make sure that you're
filing those reimbursements to get essentially those purchases tax free.
And Katie highlighted the annoyance also of tracking and submitting.
She's not wrong, but that part is also true of hsas.

Speaker 2 (50:26):
But I guess the.

Speaker 1 (50:27):
Reality is that to get the tax benefit, you got
to follow the arcane rules. And some employers though even
offer like an FSA specific debit card, so instead of
having to submit for all that stuff too, you just
make the purchase, whether you're paying at the doctor's office,
or whether you're at FSA store dot Com or Amazon's
FSA store, or you're literally at Walgreens or whatever, using
that debit card to make the purchase is one way

(50:48):
that it at least takes some of the paperworkout. I'm
sure if your employer offers that, but it's worth asking.

Speaker 2 (50:52):
Totally, Katie. I think our ultimate advice would be the
tread Ford conservatively, because it sounds like the major reason
that you had higher medical expenses last year was to
be more of a fluke accident, and so avoiding tax
for healthcare expenses is a great thing to shoot for.
But we don't want you to be so focused on
avoiding taxation on your income that you potentially lose those
dollars or have to buy a bunch of some of

(51:14):
you know, those raindom items at the end of the
year to ensure that it doesn't just vanish. Well, I
guess then you could give away sunscreen for Halloween next year.
You can always do that. But by the way, this
is a good reminder though, for folks who do have
a healthcare FSA to go ahead and look at their
accounts right now. Maybe this is something that you forgot
was accruing dollars that this is something that you were
applying money towards, and you've got to balance there. And

(51:36):
if you've got money that's not going to roll over
for next year, make sure you get your hands on
actual goods that you can roll over, yeah, physically to
next year. Good for you for being healthy as an ox,
but find a way to utilize those dollars. Know that
you can roll over some of them, or at least
check your employers' guidelines. But then do something, you know,
use use those FSA dollars so you don't lose them.
Absolutely right, Let's get back to the beer. Yeah, the

(51:58):
blood orange double wit biponder donated to the show by Bob.
What we your thoughts on this one? All right?

Speaker 1 (52:03):
So this was a healthy dose of blood orange, and
this is a double wit, not just a wit. So
it felt extra intense. I almost like could taste the
alcohol in it.

Speaker 2 (52:12):
I don't know if you really that same thing. Yeah,
normally isn't a great thing.

Speaker 1 (52:16):
Yeah, And honestly it felt a bit abrasive to me,
it felt, but I at least it had a strong
blood orange presence, which is actually one one of my
favorite fruits.

Speaker 2 (52:24):
To put in a beer.

Speaker 1 (52:25):
I second probably to raspberries and strawberries, but blood orange.

Speaker 2 (52:29):
Is always a good addition to beer. When it comes
to blood orange, I think I just have a hard
time not thinking that I'm tasting my busted lip, you know,
just because it says blood orange in it. It's hard
to get past the marketing and the language of hey,
blood orange, and it tastes like I'm sucking on pennies
or nickels. But I totally agree with what you're saying.
With this being a double wit. It packed a little

(52:52):
more punch and it kind of had like a like
Belgian strong ale sort of vibes going on. But it
certainly you had some fruity notes in a dish to
the blood orange, Like I felt like I was picking
up on some of those banana esters as well. But
some fruity this going on certainly was enjoyable. And we
are incredibly thankful for you, Bob for sending this one
our way.

Speaker 1 (53:10):
Appreciate you, Bob. Yeah, all right, Math, that's gonna do
it for this episode. We'll have show notes and links
to some of the things we mentioned in this episode
up on our website at Howdymoney dot com.

Speaker 2 (53:20):
Yes, right buddy, So until next time, best friends out,
Best friends out,

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Ask HTM - Are FSAs Worth The Hassle, Making Too Much for a Roth, & Mentally Shifting from Saver to Spender #745

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