Episode Transcript
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Speaker 1 (00:00):
The phone line's been hot the past few weeks. I
love to keep that straight going. If you've got a question,
love to hear from you. This morning, we've got a
retirement planning professionals from Class Financial CJ Closs and Eric Schwartz.
Telephone number to get on the air six soh eight
three two one thirteen ten. That's six oh eight three
two one thirteen ten. Loved you, have you join us?
Speaker 2 (00:17):
Don't forget.
Speaker 1 (00:17):
You can learn more about Class Financial on their website.
It's great website. It's called Cossfinancial dot com. That's Coss
klaas Financial dot com. They're telephone number six so oh
eight four four two five six three seven. No charge
for that initial get to know you appointment tech Coss Financial.
It will be complementary to you again. Their number six
oh eight four four two five six three seven and
(00:38):
the telephon number to get on the air six so
eight three two one thirteen ten. That's six so eight
three two one thirteen ten. Now, last week I said
we'd be introducing Eric first this week, CJ.
Speaker 2 (00:48):
Is that okay? If we introduce Eric first this week? Sure?
Speaker 3 (00:51):
Right ahead?
Speaker 1 (00:52):
Joining us this morning our CERTI find final a little
bit of everything.
Speaker 2 (00:57):
So one of those days.
Speaker 1 (00:58):
Eric, how you doing, man, I'm getting great, Sean start,
I'm doing great.
Speaker 2 (01:03):
I want to start giving you guys his titles and everything. CJ,
how have you been.
Speaker 3 (01:07):
Man, I've been doing good.
Speaker 2 (01:09):
Thanks Chan, It's good to talk with both of you.
In goodness. We've got an important show, a big show
I had.
Speaker 1 (01:14):
We're going to talk about something that that is for
a lot of folks becomes the facts of fact of life,
which is debt. And it's something that's important to be uh,
to be always aware of and certainly something as.
Speaker 2 (01:26):
You near retirement.
Speaker 1 (01:27):
To get into retirement you definitely want to have squared
away and have a plan for it. So we're gonna
be talking about that with CJ and Eric this morning.
Don't forget it. Phone lines are open whether you want
to talk about debt or any type of retirement related question.
Our retirement planning professionals are here for you. Tell forh
number six O eight three two one thirteen ten. That's
six oh eight three two one thirteen ten. A lot
of great stuff on the program. Also, we'll be getting
(01:49):
to the money and motion listener question corner. Also another
cool thing is the class Quiz Question the Week your
chance to win a fantastic prize. This week our friends
from Class Financial I provided a twenty five dog gift
card to best by. Tell you a little bit later
on in the program how you can win the Class
Quiz Question the week. Just a little tip listen closer
to the program. Not only rely get some great information,
you will also have a leg up on everybody else
(02:11):
because oftentimes about every show the question and answer come
up during the program. And speaking of the Class Quiz
Question the League, let's actually take a look back at
last week's program get the question and answer there as well.
Speaker 4 (02:24):
Sure, so, thank you everybody for listening last week, and
especially to our winner Scott from Belleville. The question was
true or false? As you plan for retirement, should you
regularly review your needs for health insurance, life insurance, long
term care insurance, and property and casualty insurance? And Scott
knew that the correct answer was, of course true.
Speaker 1 (02:45):
Fantastic stuff. As of course, we did a great show
last week on that imant important topic of course, insurance
and forms of insurance and all the different things. You
can always listen back at classfinancial dot com. That's Coloss
k aasfinancial dot com this week thought be talking about
a debt, and of course folks are preparing for retirement debt,
(03:08):
of course it becomes a major topic. How common is
it for folks to carry debt CJ.
Speaker 3 (03:14):
Yeah, it's probably more common than people realize, and it
can create some real challenges. So retirees are living on
obviously more fixed incomes when they get to get into retirement,
and obviously debt payments then can quickly eat into their savings.
According to the Federal Reserve Bank of New York, total
US household debt hit a record eighteen trillion dollars in
(03:39):
the fourth quarter of last year, so fourth quarter of
twenty twenty four. Now that includes mortgages, credit cards, car loans,
and student loans. But here's the key, everybody, I mean debt.
While while not all forms of debt are necessarily evil,
debt equals risk. It leverages you and requires you to
(03:59):
bring us certain amount to the table and pay the
bank first or the lender first, before you can pay yourself.
And so therefore, when you think about debt, this is
kind of a modern marvel. Most of us who are
listening to this show, this is a modern marvel we
have lived with our entire lives. But if you talk
to great grandparents, you know, during the early nineteen twenties,
(04:21):
nineteen thirties, maybe even before then, debt wasn't really much
of a thing. It was almost like a thing for
the wealthy people like that. You just if you made money,
you bought stuff. If you didn't have money, you didn't
buy anything. And so the reason I say this too
is because you actually have to realize that debt is
a modern marvel that doesn't delay gratification. It actually gives
(04:42):
you gratification now, right, So, because why am I using
debt well to buy something I can't afford? That's why, right, Like,
let that sink in. Why am I using debt to
buy something I can't afford today but hope to be
able to afford over a long period of time. Now,
some of you are panic right now, going is he
saying we shouldn't buy homes with mortgages? Now I'm not
(05:04):
saying that, but let's be clear. You are buying a
home with a mortgage because you can't afford it today,
that's what you're doing. Now. Why am I emphasizing this
right now? Well, because if you don't eventually get that
behavior under control or don't eventually understand what you're doing
by saying I'm going to use a mortgage to buy
(05:25):
a home, and you don't ever kind of like corral
that risk profiling. When you get into retirement, it becomes
really dangerous because you can't work your way out of
the problem. You can't just get raises and bonuses or
move to new employers to suddenly take care of that problem.
So my encouragement to you all is to recognize certain
(05:46):
types of debts while you're young and working and more
risk tolerant. Fine, but when you get older, you need
to really, in our humble opinion, pivot that mindset to say,
I need to do my best to eliminate that debt
so that when I am in retirement on a fixed income,
I won't feel the scarcity of the debt or of
(06:06):
the bank taking all of my cash flow. Now, specifically,
studies have revealed that credit card debt is more common
than mortgage debt, believe it or not, with almost forty
one percent of US families having a mortgage or home
equity loan, whereas forty five point two percent are carrying
credit card balances. Twenty percent are carrying education loans, which
(06:27):
is a little bit separate. So because as you approach
retirement and are now creating income streams, the last place
you want to be diverting your cash flow is towards debt.
So listen, we don't live in utopia. We live on
planet Earth here, so we recognize that sometimes even people
who want to have their debt paid off are not
able to or or you know, life throws them some curveballs.
(06:49):
We get it, we get it, we get it. What
we really don't like seeing, though, is an attitude that
says debt doesn't matter, and debt doesn't equal risk, and
so as I enter into retirement debt, you know, I'm
just going to carry all the debt. We would say
good luck, good luck. We don't see that having high
high probabilities of success.
Speaker 2 (07:09):
Talking this morning with CJ.
Speaker 1 (07:10):
Closs and of course Eric Schwartz, they are our retirement
planning professionals, and they come to us from Class Financial,
the website class financial dot com. That's coss k l
aa ns financial dot com. They're tell for number six
oh eight four four two five six three seven No
charge for the initial get to know your appointment Tech
Loss Financial, it will be complimentary to you again. Their
numbers six oh eight four four two five six three seven.
(07:32):
So Eric, obviously we talk about, you know, kind of
those big implications and really why this is a big deal.
What kinds of debt then should folks be most focused
on when it comes to ridding themselves of as they
as they approach and get into retirement.
Speaker 4 (07:46):
That is a great question, Sean. And before I jump
into that, I just got to give some props to
CJ for going through that whole first section, because nobody
hates debt more than CJ, let me tell you. And
he just had to read all of those stats about
carrying credit card and he did it wonderfully.
Speaker 1 (08:04):
Yeah, like you make Dave Ramsey seem like a softy sometimes.
Oh wow, wow, oh my gosh.
Speaker 4 (08:15):
All right, well, let's let's talk about some of those
common types of debt. CJ mentioned this earlier, the credit
card debt, and that is an incredible stat being more
common than mortgage debt. The average credit card interest rate
right now is hovering, you know, between twenty and twenty
four percent, some of them up to thirty percent and
even higher. We've we've talked before on the show about
(08:40):
the impact of the interest rate level on credit card
interest rates, and they tend to be very impacted by
by higher interest rates. And we are seeing that right
now with mortgages. Even if you're locked in at a
six to seven percent rate or even less, that's still
a monthly payment in retirement. That's still cash flow that
(09:01):
you have to put somewhere else other than towards expenses
of the things you want to do in retirement. So
even you know, we often say, well, mortgage is good debt,
and that's true if you're comparing it to the other
types of debt you can have. But if we can
prioritize paying that down before retirement, that is just all
the better for retirees. Last one I want to talk
(09:23):
about here is student loans, and surprisingly a lot of
retirees are still carrying these. Sometimes they're actually their own loans,
sometimes their loans of children. I would say probably more
commonly now we're seeing parents with loans for their children's college.
Federal undergrad loans are you know, around six and a
(09:45):
half percent graduate loans or even higher between eight and nine,
and then private loans they'll be there. This is a
huge range. They're anywhere from three point four to seven
up to seventeen point.
Speaker 5 (09:56):
Nine to nine.
Speaker 4 (09:57):
It really depends on the institution you're working with. But
if you're considering refinancing those those public loans to private loans,
just remember private loans don't offer the same protections like
deferment or income based repayments, So just make sure you're
you're well aware of what you're doing if you're thinking
about consolidating and refinancing.
Speaker 1 (10:19):
Talking this morning with every tirement Flying professionals Eric Schwartz
and CJ.
Speaker 2 (10:22):
Closs.
Speaker 1 (10:23):
Of course they come to us from Coss Financial their
website coss financial dot com. It is a great website
that's coss k l aa S Financial dot com. Great
chance to get to know the team at Coss Financial
also learn about their separate divisions.
Speaker 2 (10:35):
Another cool feature at.
Speaker 1 (10:36):
Cossfinancial dot com is the chance for you to sign
up for the weekly Market Pulse newsletter, so once a
week email gives you a snapshot of what's been going
on in the markets. Also a link to the most
recent podcast that available to you at Cossfinancial dot com.
Speaking of things available to you, the telephone number at
Coss Financial six oh eight four four two five six
three seven not going to cost you a think for
that initial get to know your appointment at Coss Financial.
(10:58):
It will be complementary to you again their number six
oh eight four four two five six three seven fold
lines are open also here at station. If you've got
a question for CJ and Eric, all you got to
do is give us call six oh eight three two
one thirteen ten. That's six eight three two one thirteen ten.
So we've established that that debt is is not good. Well,
we're going to talk with the guys about some strategies
to reduce and eliminate debt before retirement. We'll do that
(11:20):
next has Money in Motion with Coss Financial continues right
here on thirteen ten WIBA talking with our retirement planning
for professional CJ.
Speaker 2 (11:28):
Closs and Eric Schwartz.
Speaker 1 (11:29):
Of course they come to us from Class Financial to
website Coss financial dot com. That's Class klaasfinancial dot com.
Talking debt this week and of course, uh, really important
thing to get under control. And as we as we
think about that, I know a lot of folks start
to focus in and say, well, are there strategies?
Speaker 2 (11:47):
Are there techniques?
Speaker 1 (11:48):
What can folks be doing when it comes to working
towards reducing or eliminating their debt before retirement.
Speaker 3 (11:54):
Yeah, good question, Sean. It it does start with a plan.
You don't have to reinvent the wheel here. There are
a lot of tried and true strategies. But I would
say to you, you know, pay attention to like what
what banks and what the federal government does to make
sure that they get paid. So what does a bank
do well? They automatically draft out of your bank account
(12:15):
your debt service payment and if you go like more
than about thirty days, they're going to start foreclosing on you.
I mean it's quick and it's decisive. So said another way,
a bank is going to make sure that they get
paid first. What does federal government do well? They institute
is something called the payroll tax, So before you get paid,
they get paid. Think about that. Let that's settle in.
They actually say no, no, no, no, no, Actually we're going
(12:37):
to work with companies and with you know, accounting firms
and all that to make sure that we get paid
before you get paid. So now that kind of freaks
people out. The point here is like, oh, these are large,
mega institutions that have figured out. If you want something
to be done, do it immediately. Okay, So we can
use that technique to our advantage. If I have a
(13:00):
a strategy of wanting to pay down debt before I
get to retirement, what should I do. I should make
it as the make it the first thing that happens
after I get paid. So pay down my debt first.
So set a payoff strategy and then stick to it.
Another thing that we've noticed that has high degrees of
like I'll call it cognitive success, is something called the
(13:23):
debt snowball. This is the debt snowball is listing your
debts in order of smallest balance to largest balance, so
it's basically ignoring interest rates. What you do then is
you make a minimum payment on every single debt in
that debt snowball. Besides the smallest balance, you put all
(13:43):
of your excess cash flow that you can possibly you know,
scrounge together towards the smallest balance, and then once that
one is paid off, you do the same thing. You
move down to the next smallest balance, minimum payments on
everything but the smallest balance, and you then snowball your
pay payments until they're all gone. Now, some people go,
why would you do that? What if I had a
(14:05):
credit card at fort you know, at twenty two percent,
that was my second you know, second smallest balance. Shouldn't
I attack that first because the interest rate is large
enough or as you know, it's too high. Hypothetically, yes,
but what you're missing is that actually what got you
into the problem was behavior problems, not math, right, and
so we're going to use behaviors as a way to
(14:26):
get us out of debt as well. So said another way,
we have found that there's a lot of cognitive triggering
that occurs when you get a debt paid off, and
it can almost make a game out of it. It's
like gamifying your debt, your debt reduction. Okay, more on
that in the future. You can call us if you
have any questions. Also, set up automatic payments, so back
to my comment about the federal governments, make sure that
(14:48):
they get paid before you get paid. Well, similarly, you
should consider setting up those auto payments and having them
be first right after you get paid, and making them large.
So then what ends up happening is you live on
off of what is left over. Often we'll find Eric
and I will hear people say you know, I want
to save for retirement, but there's just nothing left at
(15:08):
the end of the month, and we go, well, that's
the first problem, because what I hear you saying is
that saving for retirement is the last thing that you
do right, So basically you should be paying the things
that are most important to you first and then living
off of the residual and then obviously, you know, do
(15:31):
try to find some a balance between debt repayment and
saving for the future. I know this is something that
a lot of people get head trash around. As it
relates to Dave Ramsey is like, do I not save
into my four one K plan when I'm paying off debt?
And our answer would be talk to a good financial advisor.
It depends upon a number of factors. But we don't
really disagree with Dave on this as much as just
(15:52):
there's a lot of subtlety involved in that. So you
do want to make sure that you talk to a
good advisor, talk to a good accountant, and make sure
that you are both trying to say for the future,
save for a rainy day and paying down your debt.
Speaker 1 (16:03):
Really good guidance and advice as always from retirement planning
professionals from Class Financial the website Class financial dot com.
That's class k l as financial dot com. Also on
the website you can listen back to this in previous
shows podcast. As matter of fact, you can subscribe right
on the website Class financial dot Com. There're TELF number
six O eight four four two five six three seven
(16:24):
No charge for that initial gets no appointment Tech and
Loss Financial. It will be complementary to you. Now shifting gears,
let's talk about kind of the other side of it,
which is how can you avoid adding to your debt
then as you as you get closer to retirement.
Speaker 4 (16:39):
Yeah, Sean, this is this is really all about habits
and mindset and really what CJ was referencing there too,
which is just this kind of behavioral finance component that
we would call it just understanding that there's a human
there's a human element to this. We can all sit
down and say I'm making a plan, I'm going to
pay off my debt, but our behaviors are going to
(17:00):
creep in if we're not thinking about it, if we're
not thinking about it, you know, on an ongoing basis.
So the first part of this is is simply from
a spending standpoint, if you have a if you have
an issue with with spending way too much on your
credit cards, and it's it's something that you're trying to address.
(17:20):
Get rid of. Get rid of those credit cards, get
them out of your wallet, go cash only, and eliminate
the temptation to spend. This is there. There's nothing more disheartening,
I guess, and working with clients for them then then
you know, I see them in a meeting and then
I see them I don't know, maybe six months later,
and we check in on things and they say, yeah,
(17:42):
we've been making that new payment on the on the debt,
but you know it balance really hasn't gone down that much.
I'm like, well, that's because you're still using it.
Speaker 3 (17:49):
You know.
Speaker 4 (17:49):
It's just this idea of you need to take away
the temptation. Be aware of your interest rates. So make
a list of your debts. I know it sounds really overwhelming,
and you think, gosh, I don't need to see all
that in one spot. But making a list and understanding
how much each of the debts is costing you an interest,
You'll be really surprised how motivating it is when you
(18:11):
when you see how much, how much extra you're paying
on certain certain debts and interest, and it really encourage
you to tackle those head on. Don't be afraid to
use debt repayment tools and calculators. Websites like credit Karma
or calculator dot net. They offer free tools that kind
of help you plan out how your your debt payoff
(18:33):
journey is going to go. And finally, this is going
to sound obvious, but pay bills on time, late pees,
and misspayments. They hurt your credit and they're going to
cost you extra in terms of late payment fees and
higher interest. So set reminders or auto pay wherever possible.
And just as I said, be very cognizant of this,
(18:54):
because all the best intentions kind of go by the
wayside if we're not if we're not thinking about it
on an ongoing basis.
Speaker 1 (19:01):
Talking this morning with our retirement planning professionals from Class Financial,
Eric Schwartz and CJ. Closs, of course you can learn
more about Class Financial. They've got a great website. It's
Cossfinancial dot com. That's Class k l aa S Financial
dot com and their telephone number four four to two,
five six, three seven no charge for that initial gets
no you appointment tech Class Financial. It will be complementary
to you after your house. It's probably one of the
(19:22):
biggest loans you've ever taken, which is of course your car,
your automobile. Will talk about auto loans, we'll talk about
those next, and we'll also do the listener question corner.
We'll do all of that as Money in Motion with
COSS Financial continues right here on thirteen ten WYBI talking
with CJ. Closs and Eric Schwartz, our retirement planning professionals
from Class Financial the website coss financial dot com. That's
(19:44):
coss k l aa S financial dot com talking debt
and goodness. This is one of those that I think
sometimes slips our mind that it is a debt, which
is our cars and our auto loans. I know there's
this is kind of one of those areas that can
sneak up on folks a bit Canada.
Speaker 4 (19:59):
Eric, it sure can, and it's I think CJ would agree,
a bigger issue today than it's ever been. Car loans
are lasting longer than ever before. It seems like gone
are the days of the thirty six or forty eight
month repayment schedule. Now we're seventy two, eighty four ninety six.
You know, we're getting close to a decade to pay
(20:21):
off a car, which, as we know, is a depreciating asset.
So when you're taking that long to pay off to
pay off the balance, depending how much you borrow, you're
very quickly getting to a place where where maybe you
owe more on the vehicle than it's worth. But as
we sit here today, in recent loans for a new
(20:42):
car averaging about seven point three percent, use cars are
somewhere around eleven. Now these are averages, right, They're not
just the promotional rates that are being run at dealerships
or whatever it might be. But car loans are becoming
a bigger piece of the debt picture as we look
(21:03):
at as we look at an eight year loan and
we say, wow, that seems like a long time. Well,
the average loan right now is seventy months, and that's
for a new vehicle. And while longer term lowers your
monthly payment and increases the total interest that you pay
on the debt, and as I mentioned earlier, it gets
(21:23):
you to a point where you are upside down on
the loan where you owe more than the.
Speaker 3 (21:27):
Car is worth.
Speaker 4 (21:28):
So if you can stick with a five year loan
or even shorter. That's great. Better Yet, you can build
a sinking fund, which is this idea of setting money
aside each month, basically like a phantom car payment, into
a savings account, so that when it comes time to
buy a new vehicle, you actually have a chunk of
cash there to use. But just be smart about these,
(21:49):
Be smart about auto loans, because they become an issue really,
really quickly.
Speaker 1 (21:53):
It's funny, Eric, as you were talking there, I did
not catch the sinking fund line. And I remember a
couple of years ago CJU initially had brought up that term,
and I remember googling it and I looked it back
up again because I'm like, boy, I hope we mentioned
sinking funds, and thank goodness it was.
Speaker 2 (22:07):
It was in because what a cool thing.
Speaker 1 (22:09):
Another thing too, I've noticed with if you actually save
for a car rather than finance a car, you're a
little more and I don't know what it is. There's
probably psychology, and you guys understand this more than anyone,
that when you've got the money on hand to buy
a car, your decision making is a little bit different
than I don't know, when you're going to finance it. It
just seems like we'll go, yeah, we'll upgrade everything and
(22:30):
maybe we'll go one one class up.
Speaker 3 (22:32):
And there's a lot of psychology behind it. There's two
phrases we use, which is it's easier to spend somebody
else's money than your own. Number one and number two,
we would say the following. Poor people, more poor minded
people ask how much does this cost me? Per month?
Rich people or people with rich wealth creation mindsets ask
(22:56):
how much does this cost period? Because the mindset of
the poor is can I make the monthly payment? The
mindset of the wealthy is can I afford this? So
just remember that as you go throughout life, if you're
ever asking well I can make that monthly go, that's
the wrong question to be asking. The right question is
(23:18):
how much will this cost?
Speaker 1 (23:19):
And as we talk too about some of these you know,
these bits of wisdom and things that you guys get
to experience at class financial and getting to know folks,
what are there some other areas about you know, that
kind of warning areas when it comes to carrying dead CJ.
Speaker 3 (23:33):
Yeah, So we would just say again some of the
warning areas would be, you know, just like you can
use compound interest to accumulate wealth through saving into a
retirement account and seeing the compound growth of of a
four to one K plan or IRA. Well, the same
can be true against you, and so debt can compound
(23:55):
against you, especially those really high interest debts. Now again,
I want to be cautious here, as Eric was kind
of poking at me and having fun, which I appreciated,
and good faith. It is something that we realize there's
not utopia here. We can't just have a million dollars
to go buy our dream home when we're twenty five
years old, right, So what are we going to do?
(24:16):
And the answer is, well, your great grandparents actually just
lived in small homes and eventually migrated up if they
could afford it. So there is a world in which
you have to understand this idea of mortgage debt and
credit card debt and auto loans. These are modern marvels
and you don't have to use them number one. But
then number two, it would be if you're going to
use them, use them cautiously. That's it. That's all we're saying,
(24:39):
Just be cautious because it's kind of here would be
the equivalent. Hey, is alcohol, by its definition a bad thing?
Speaker 4 (24:47):
No.
Speaker 3 (24:48):
Wife has a glass of wine maybe once a week,
and she does great with it. But for this guy,
for me, it was a big problem and so therefore
I had to cut it out of my life. So
it's knowing yourself and it's understanding that when you are
going to touch something that has created a lot of damage,
touch it carefully. So debt to us is one of
(25:08):
those things. Hey, it's kind of like fire. The fire
can make a nice fireplace and bring you warmth, or
it can destroy everything. So be cautious of debt because
it's destroyed a lot of American households. And we would
say just use it kind of like fire. Just control it,
contain it, and keep it small. But the big takeaway
is this, make it your goal to retire debt free,
(25:31):
including your mortgage if possible. The freedom it brings is
well worth the effort.
Speaker 1 (25:38):
Talking great stuff this morning as we talk with our
retirement planning professional CJ.
Speaker 2 (25:42):
Closs in Air.
Speaker 1 (25:43):
Schwortz, we're going to actually real quick go to the phones.
Mike called in. Mike, I do want to get you
on the air. Thank you so much for calling. We've
only got a couple of minutes, but I see your question.
I think it's a real important one. Welcome to Programming
are on the air with CJ. Closs and Airic Schwartz
of colass Financial.
Speaker 5 (25:57):
Thanks Sean, say, yeah, my question has to do with
taking an RMD so and taking the rm D, paying
the taxes, and then thinking about beneficiary ideas with getting
that somehow into a ROTH. Okay, and let's leave out
all the eligibility issues there, assuming that the money could
(26:20):
go into a ROTH, because it's eligible if you're over
fifty nine and a half you've taken the rm D.
Does the five year rule apply to both the converted
funds and that's the wrong word, the deposited funds and
the income or does the five year rule only apply
to one or the other of those two?
Speaker 3 (26:42):
Man, great question. There's a lot in that. And you
told me to ignore the eligibility rules. That's tough. I'm
going to abide by your outline here, but that's tough
because there could be significant eligibility rules if you're using
rm ds to make contribution, because you're right, we're not
doing cun versions, we're doing contributions. But I'll ignore that
(27:05):
and then you're right, Yeah, is there a five year
rule as it relates to this new hypothetical wroth iray
that you're going to establish and make contributions to. And
the answer is no. So the five year rule applies
to the growth you can't remove, and it applies to
when the roth ira was established. So to be clear,
(27:26):
if you establish a roth ira, I'll use your number
fifty nine and a half or sixty, let's call it. Well, actually,
and that doesn't work here because you're using rmds. I'm
going to say you're seventy five years old. So you're
seventy five years old. Pulling out rmds. You are making
a contribution to a wroth, which means you It means
you have to have earned income to do so. If
that roth has been open for at least five years prior,
(27:47):
so you have old wroth money and now you're putting
new money in, then both the contributions and the growth
can be removed at any time without any tax or penalty. If, however,
you are establishing a new roth ira at seventy five
years old, then it is only the contributions that can
be removed at any time. The growth would have to
wait for five years thereafter, very complicated answer, but that's
(28:09):
what the letter of the law says.
Speaker 5 (28:11):
Well that's why I asked, though, because I appreciate your
expertise on this, and I see such general discussion of
it that's not as precise, so I really appreciate it
very much.
Speaker 1 (28:21):
Thanks Mike, Thank you for the call, great question, great calls.
Don't forget if you ever have questions, great data, start
that conversation at COSS Financial their website six h eight
four four two five six three seven. No charge for
that initial get to know your appointment at Colss Financial.
It will be complimentary to you. As a matter of fact,
I want to hold on to that teleph number because
it's time now for the Class Quiz Question the Week.
It works like this, just a moment, I'll ask you
the class quiz question the Week. You'll then have thirty
(28:43):
minutes from the interday's program to call the Class Financial
office right here in Madison. And again they're number six
oh eight four four to two five six three seven.
If you are the first call correct answer to whin
this week's prize, which is say twenty five dollars gift
cards two best buy this week's class Quiz Question the
Week Is this true or false? According to the Federal
Bank of New York a total US household debt, the
(29:04):
total US household debt hit almost eighteen trillion dollars in
the fourth quarter of twenty twenty four. Is that true
or is that false? Telphone number six oh eight four
four two five six three seven first garwth correct answer.
When this week's prize again. That's Class Financial's office right
here in Madison, their number six oh eight four four two, five,
six three seven. Guys, it's always informative and it's always
(29:27):
especially fun. Great to talk to you, guys. Enjoy the day.
Speaker 3 (29:30):
Thanks Sean.
Speaker 4 (29:30):
Thanks Sean.
Speaker 2 (29:31):
News is next right here at thirteen ten WIBA
The phone line's been hot the past few weeks. I
love to keep that straight going. If you've got a question,
love to hear from you. This morning, we've got a
retirement planning professionals from Class Financial CJ Closs and Eric Schwartz.
Telephone number to get on the air six soh eight
three two one thirteen ten. That's six oh eight three
two one thirteen ten. Loved you, have you join us?
Speaker 2 (00:17):
Don't forget.
Speaker 1 (00:17):
You can learn more about Class Financial on their website.
It's great website. It's called Cossfinancial dot com. That's Coss
klaas Financial dot com. They're telephone number six so oh
eight four four two five six three seven. No charge
for that initial get to know you appointment tech Coss Financial.
It will be complementary to you again. Their number six
oh eight four four two five six three seven and
(00:38):
the telephon number to get on the air six so
eight three two one thirteen ten. That's six so eight
three two one thirteen ten. Now, last week I said
we'd be introducing Eric first this week, CJ.
Speaker 2 (00:48):
Is that okay? If we introduce Eric first this week? Sure?
Speaker 3 (00:51):
Right ahead?
Speaker 1 (00:52):
Joining us this morning our CERTI find final a little
bit of everything.
Speaker 2 (00:57):
So one of those days.
Speaker 1 (00:58):
Eric, how you doing, man, I'm getting great, Sean start,
I'm doing great.
Speaker 2 (01:03):
I want to start giving you guys his titles and everything. CJ,
how have you been.
Speaker 3 (01:07):
Man, I've been doing good.
Speaker 2 (01:09):
Thanks Chan, It's good to talk with both of you.
In goodness. We've got an important show, a big show
I had.
Speaker 1 (01:14):
We're going to talk about something that that is for
a lot of folks becomes the facts of fact of life,
which is debt. And it's something that's important to be uh,
to be always aware of and certainly something as.
Speaker 2 (01:26):
You near retirement.
Speaker 1 (01:27):
To get into retirement you definitely want to have squared
away and have a plan for it. So we're gonna
be talking about that with CJ and Eric this morning.
Don't forget it. Phone lines are open whether you want
to talk about debt or any type of retirement related question.
Our retirement planning professionals are here for you. Tell forh
number six O eight three two one thirteen ten. That's
six oh eight three two one thirteen ten. A lot
of great stuff on the program. Also, we'll be getting
(01:49):
to the money and motion listener question corner. Also another
cool thing is the class Quiz Question the Week your
chance to win a fantastic prize. This week our friends
from Class Financial I provided a twenty five dog gift
card to best by. Tell you a little bit later
on in the program how you can win the Class
Quiz Question the week. Just a little tip listen closer
to the program. Not only rely get some great information,
you will also have a leg up on everybody else
(02:11):
because oftentimes about every show the question and answer come
up during the program. And speaking of the Class Quiz
Question the League, let's actually take a look back at
last week's program get the question and answer there as well.
Speaker 4 (02:24):
Sure, so, thank you everybody for listening last week, and
especially to our winner Scott from Belleville. The question was
true or false? As you plan for retirement, should you
regularly review your needs for health insurance, life insurance, long
term care insurance, and property and casualty insurance? And Scott
knew that the correct answer was, of course true.
Speaker 1 (02:45):
Fantastic stuff. As of course, we did a great show
last week on that imant important topic of course, insurance
and forms of insurance and all the different things. You
can always listen back at classfinancial dot com. That's Coloss
k aasfinancial dot com this week thought be talking about
a debt, and of course folks are preparing for retirement debt,
(03:08):
of course it becomes a major topic. How common is
it for folks to carry debt CJ.
Speaker 3 (03:14):
Yeah, it's probably more common than people realize, and it
can create some real challenges. So retirees are living on
obviously more fixed incomes when they get to get into retirement,
and obviously debt payments then can quickly eat into their savings.
According to the Federal Reserve Bank of New York, total
US household debt hit a record eighteen trillion dollars in
(03:39):
the fourth quarter of last year, so fourth quarter of
twenty twenty four. Now that includes mortgages, credit cards, car loans,
and student loans. But here's the key, everybody, I mean debt.
While while not all forms of debt are necessarily evil,
debt equals risk. It leverages you and requires you to
(03:59):
bring us certain amount to the table and pay the
bank first or the lender first, before you can pay yourself.
And so therefore, when you think about debt, this is
kind of a modern marvel. Most of us who are
listening to this show, this is a modern marvel we
have lived with our entire lives. But if you talk
to great grandparents, you know, during the early nineteen twenties,
(04:21):
nineteen thirties, maybe even before then, debt wasn't really much
of a thing. It was almost like a thing for
the wealthy people like that. You just if you made money,
you bought stuff. If you didn't have money, you didn't
buy anything. And so the reason I say this too
is because you actually have to realize that debt is
a modern marvel that doesn't delay gratification. It actually gives
(04:42):
you gratification now, right, So, because why am I using
debt well to buy something I can't afford? That's why, right, Like,
let that sink in. Why am I using debt to
buy something I can't afford today but hope to be
able to afford over a long period of time. Now,
some of you are panic right now, going is he
saying we shouldn't buy homes with mortgages? Now I'm not
(05:04):
saying that, but let's be clear. You are buying a
home with a mortgage because you can't afford it today,
that's what you're doing. Now. Why am I emphasizing this
right now? Well, because if you don't eventually get that
behavior under control or don't eventually understand what you're doing
by saying I'm going to use a mortgage to buy
(05:25):
a home, and you don't ever kind of like corral
that risk profiling. When you get into retirement, it becomes
really dangerous because you can't work your way out of
the problem. You can't just get raises and bonuses or
move to new employers to suddenly take care of that problem.
So my encouragement to you all is to recognize certain
(05:46):
types of debts while you're young and working and more
risk tolerant. Fine, but when you get older, you need
to really, in our humble opinion, pivot that mindset to say,
I need to do my best to eliminate that debt
so that when I am in retirement on a fixed income,
I won't feel the scarcity of the debt or of
(06:06):
the bank taking all of my cash flow. Now, specifically,
studies have revealed that credit card debt is more common
than mortgage debt, believe it or not, with almost forty
one percent of US families having a mortgage or home
equity loan, whereas forty five point two percent are carrying
credit card balances. Twenty percent are carrying education loans, which
(06:27):
is a little bit separate. So because as you approach
retirement and are now creating income streams, the last place
you want to be diverting your cash flow is towards debt.
So listen, we don't live in utopia. We live on
planet Earth here, so we recognize that sometimes even people
who want to have their debt paid off are not
able to or or you know, life throws them some curveballs.
(06:49):
We get it, we get it, we get it. What
we really don't like seeing, though, is an attitude that
says debt doesn't matter, and debt doesn't equal risk, and
so as I enter into retirement debt, you know, I'm
just going to carry all the debt. We would say
good luck, good luck. We don't see that having high
high probabilities of success.
Speaker 2 (07:09):
Talking this morning with CJ.
Speaker 1 (07:10):
Closs and of course Eric Schwartz, they are our retirement
planning professionals, and they come to us from Class Financial,
the website class financial dot com. That's coss k l
aa ns financial dot com. They're tell for number six
oh eight four four two five six three seven No
charge for the initial get to know your appointment Tech
Loss Financial, it will be complimentary to you again. Their
numbers six oh eight four four two five six three seven.
(07:32):
So Eric, obviously we talk about, you know, kind of
those big implications and really why this is a big deal.
What kinds of debt then should folks be most focused
on when it comes to ridding themselves of as they
as they approach and get into retirement.
Speaker 4 (07:46):
That is a great question, Sean. And before I jump
into that, I just got to give some props to
CJ for going through that whole first section, because nobody
hates debt more than CJ, let me tell you. And
he just had to read all of those stats about
carrying credit card and he did it wonderfully.
Speaker 1 (08:04):
Yeah, like you make Dave Ramsey seem like a softy sometimes.
Oh wow, wow, oh my gosh.
Speaker 4 (08:15):
All right, well, let's let's talk about some of those
common types of debt. CJ mentioned this earlier, the credit
card debt, and that is an incredible stat being more
common than mortgage debt. The average credit card interest rate
right now is hovering, you know, between twenty and twenty
four percent, some of them up to thirty percent and
even higher. We've we've talked before on the show about
(08:40):
the impact of the interest rate level on credit card
interest rates, and they tend to be very impacted by
by higher interest rates. And we are seeing that right
now with mortgages. Even if you're locked in at a
six to seven percent rate or even less, that's still
a monthly payment in retirement. That's still cash flow that
(09:01):
you have to put somewhere else other than towards expenses
of the things you want to do in retirement. So
even you know, we often say, well, mortgage is good debt,
and that's true if you're comparing it to the other
types of debt you can have. But if we can
prioritize paying that down before retirement, that is just all
the better for retirees. Last one I want to talk
(09:23):
about here is student loans, and surprisingly a lot of
retirees are still carrying these. Sometimes they're actually their own loans,
sometimes their loans of children. I would say probably more
commonly now we're seeing parents with loans for their children's college.
Federal undergrad loans are you know, around six and a
(09:45):
half percent graduate loans or even higher between eight and nine,
and then private loans they'll be there. This is a
huge range. They're anywhere from three point four to seven
up to seventeen point.
Speaker 5 (09:56):
Nine to nine.
Speaker 4 (09:57):
It really depends on the institution you're working with. But
if you're considering refinancing those those public loans to private loans,
just remember private loans don't offer the same protections like
deferment or income based repayments, So just make sure you're
you're well aware of what you're doing if you're thinking
about consolidating and refinancing.
Speaker 1 (10:19):
Talking this morning with every tirement Flying professionals Eric Schwartz
and CJ.
Speaker 2 (10:22):
Closs.
Speaker 1 (10:23):
Of course they come to us from Coss Financial their
website coss financial dot com. It is a great website
that's coss k l aa S Financial dot com. Great
chance to get to know the team at Coss Financial
also learn about their separate divisions.
Speaker 2 (10:35):
Another cool feature at.
Speaker 1 (10:36):
Cossfinancial dot com is the chance for you to sign
up for the weekly Market Pulse newsletter, so once a
week email gives you a snapshot of what's been going
on in the markets. Also a link to the most
recent podcast that available to you at Cossfinancial dot com.
Speaking of things available to you, the telephone number at
Coss Financial six oh eight four four two five six
three seven not going to cost you a think for
that initial get to know your appointment at Coss Financial.
(10:58):
It will be complementary to you again their number six
oh eight four four two five six three seven fold
lines are open also here at station. If you've got
a question for CJ and Eric, all you got to
do is give us call six oh eight three two
one thirteen ten. That's six eight three two one thirteen ten.
So we've established that that debt is is not good. Well,
we're going to talk with the guys about some strategies
to reduce and eliminate debt before retirement. We'll do that
(11:20):
next has Money in Motion with Coss Financial continues right
here on thirteen ten WIBA talking with our retirement planning
for professional CJ.
Speaker 2 (11:28):
Closs and Eric Schwartz.
Speaker 1 (11:29):
Of course they come to us from Class Financial to
website Coss financial dot com. That's Class klaasfinancial dot com.
Talking debt this week and of course, uh, really important
thing to get under control. And as we as we
think about that, I know a lot of folks start
to focus in and say, well, are there strategies?
Speaker 2 (11:47):
Are there techniques?
Speaker 1 (11:48):
What can folks be doing when it comes to working
towards reducing or eliminating their debt before retirement.
Speaker 3 (11:54):
Yeah, good question, Sean. It it does start with a plan.
You don't have to reinvent the wheel here. There are
a lot of tried and true strategies. But I would
say to you, you know, pay attention to like what
what banks and what the federal government does to make
sure that they get paid. So what does a bank
do well? They automatically draft out of your bank account
(12:15):
your debt service payment and if you go like more
than about thirty days, they're going to start foreclosing on you.
I mean it's quick and it's decisive. So said another way,
a bank is going to make sure that they get
paid first. What does federal government do well? They institute
is something called the payroll tax, So before you get paid,
they get paid. Think about that. Let that's settle in.
They actually say no, no, no, no, no, Actually we're going
(12:37):
to work with companies and with you know, accounting firms
and all that to make sure that we get paid
before you get paid. So now that kind of freaks
people out. The point here is like, oh, these are large,
mega institutions that have figured out. If you want something
to be done, do it immediately. Okay, So we can
use that technique to our advantage. If I have a
(13:00):
a strategy of wanting to pay down debt before I
get to retirement, what should I do. I should make
it as the make it the first thing that happens
after I get paid. So pay down my debt first.
So set a payoff strategy and then stick to it.
Another thing that we've noticed that has high degrees of
like I'll call it cognitive success, is something called the
(13:23):
debt snowball. This is the debt snowball is listing your
debts in order of smallest balance to largest balance, so
it's basically ignoring interest rates. What you do then is
you make a minimum payment on every single debt in
that debt snowball. Besides the smallest balance, you put all
(13:43):
of your excess cash flow that you can possibly you know,
scrounge together towards the smallest balance, and then once that
one is paid off, you do the same thing. You
move down to the next smallest balance, minimum payments on
everything but the smallest balance, and you then snowball your
pay payments until they're all gone. Now, some people go,
why would you do that? What if I had a
(14:05):
credit card at fort you know, at twenty two percent,
that was my second you know, second smallest balance. Shouldn't
I attack that first because the interest rate is large
enough or as you know, it's too high. Hypothetically, yes,
but what you're missing is that actually what got you
into the problem was behavior problems, not math, right, and
so we're going to use behaviors as a way to
(14:26):
get us out of debt as well. So said another way,
we have found that there's a lot of cognitive triggering
that occurs when you get a debt paid off, and
it can almost make a game out of it. It's
like gamifying your debt, your debt reduction. Okay, more on
that in the future. You can call us if you
have any questions. Also, set up automatic payments, so back
to my comment about the federal governments, make sure that
(14:48):
they get paid before you get paid. Well, similarly, you
should consider setting up those auto payments and having them
be first right after you get paid, and making them large.
So then what ends up happening is you live on
off of what is left over. Often we'll find Eric
and I will hear people say you know, I want
to save for retirement, but there's just nothing left at
(15:08):
the end of the month, and we go, well, that's
the first problem, because what I hear you saying is
that saving for retirement is the last thing that you
do right, So basically you should be paying the things
that are most important to you first and then living
off of the residual and then obviously, you know, do
(15:31):
try to find some a balance between debt repayment and
saving for the future. I know this is something that
a lot of people get head trash around. As it
relates to Dave Ramsey is like, do I not save
into my four one K plan when I'm paying off debt?
And our answer would be talk to a good financial advisor.
It depends upon a number of factors. But we don't
really disagree with Dave on this as much as just
(15:52):
there's a lot of subtlety involved in that. So you
do want to make sure that you talk to a
good advisor, talk to a good accountant, and make sure
that you are both trying to say for the future,
save for a rainy day and paying down your debt.
Speaker 1 (16:03):
Really good guidance and advice as always from retirement planning
professionals from Class Financial the website Class financial dot com.
That's class k l as financial dot com. Also on
the website you can listen back to this in previous
shows podcast. As matter of fact, you can subscribe right
on the website Class financial dot Com. There're TELF number
six O eight four four two five six three seven
(16:24):
No charge for that initial gets no appointment Tech and
Loss Financial. It will be complementary to you. Now shifting gears,
let's talk about kind of the other side of it,
which is how can you avoid adding to your debt
then as you as you get closer to retirement.
Speaker 4 (16:39):
Yeah, Sean, this is this is really all about habits
and mindset and really what CJ was referencing there too,
which is just this kind of behavioral finance component that
we would call it just understanding that there's a human
there's a human element to this. We can all sit
down and say I'm making a plan, I'm going to
pay off my debt, but our behaviors are going to
(17:00):
creep in if we're not thinking about it, if we're
not thinking about it, you know, on an ongoing basis.
So the first part of this is is simply from
a spending standpoint, if you have a if you have
an issue with with spending way too much on your
credit cards, and it's it's something that you're trying to address.
(17:20):
Get rid of. Get rid of those credit cards, get
them out of your wallet, go cash only, and eliminate
the temptation to spend. This is there. There's nothing more disheartening,
I guess, and working with clients for them then then
you know, I see them in a meeting and then
I see them I don't know, maybe six months later,
and we check in on things and they say, yeah,
(17:42):
we've been making that new payment on the on the debt,
but you know it balance really hasn't gone down that much.
I'm like, well, that's because you're still using it.
Speaker 3 (17:49):
You know.
Speaker 4 (17:49):
It's just this idea of you need to take away
the temptation. Be aware of your interest rates. So make
a list of your debts. I know it sounds really overwhelming,
and you think, gosh, I don't need to see all
that in one spot. But making a list and understanding
how much each of the debts is costing you an interest,
You'll be really surprised how motivating it is when you
(18:11):
when you see how much, how much extra you're paying
on certain certain debts and interest, and it really encourage
you to tackle those head on. Don't be afraid to
use debt repayment tools and calculators. Websites like credit Karma
or calculator dot net. They offer free tools that kind
of help you plan out how your your debt payoff
(18:33):
journey is going to go. And finally, this is going
to sound obvious, but pay bills on time, late pees,
and misspayments. They hurt your credit and they're going to
cost you extra in terms of late payment fees and
higher interest. So set reminders or auto pay wherever possible.
And just as I said, be very cognizant of this,
(18:54):
because all the best intentions kind of go by the
wayside if we're not if we're not thinking about it
on an ongoing basis.
Speaker 1 (19:01):
Talking this morning with our retirement planning professionals from Class Financial,
Eric Schwartz and CJ. Closs, of course you can learn
more about Class Financial. They've got a great website. It's
Cossfinancial dot com. That's Class k l aa S Financial
dot com and their telephone number four four to two,
five six, three seven no charge for that initial gets
no you appointment tech Class Financial. It will be complementary
to you after your house. It's probably one of the
(19:22):
biggest loans you've ever taken, which is of course your car,
your automobile. Will talk about auto loans, we'll talk about
those next, and we'll also do the listener question corner.
We'll do all of that as Money in Motion with
COSS Financial continues right here on thirteen ten WYBI talking
with CJ. Closs and Eric Schwartz, our retirement planning professionals
from Class Financial the website coss financial dot com. That's
(19:44):
coss k l aa S financial dot com talking debt
and goodness. This is one of those that I think
sometimes slips our mind that it is a debt, which
is our cars and our auto loans. I know there's
this is kind of one of those areas that can
sneak up on folks a bit Canada.
Speaker 4 (19:59):
Eric, it sure can, and it's I think CJ would agree,
a bigger issue today than it's ever been. Car loans
are lasting longer than ever before. It seems like gone
are the days of the thirty six or forty eight
month repayment schedule. Now we're seventy two, eighty four ninety six.
You know, we're getting close to a decade to pay
(20:21):
off a car, which, as we know, is a depreciating asset.
So when you're taking that long to pay off to
pay off the balance, depending how much you borrow, you're
very quickly getting to a place where where maybe you
owe more on the vehicle than it's worth. But as
we sit here today, in recent loans for a new
(20:42):
car averaging about seven point three percent, use cars are
somewhere around eleven. Now these are averages, right, They're not
just the promotional rates that are being run at dealerships
or whatever it might be. But car loans are becoming
a bigger piece of the debt picture as we look
(21:03):
at as we look at an eight year loan and
we say, wow, that seems like a long time. Well,
the average loan right now is seventy months, and that's
for a new vehicle. And while longer term lowers your
monthly payment and increases the total interest that you pay
on the debt, and as I mentioned earlier, it gets
(21:23):
you to a point where you are upside down on
the loan where you owe more than the.
Speaker 3 (21:27):
Car is worth.
Speaker 4 (21:28):
So if you can stick with a five year loan
or even shorter. That's great. Better Yet, you can build
a sinking fund, which is this idea of setting money
aside each month, basically like a phantom car payment, into
a savings account, so that when it comes time to
buy a new vehicle, you actually have a chunk of
cash there to use. But just be smart about these,
(21:49):
Be smart about auto loans, because they become an issue really,
really quickly.
Speaker 1 (21:53):
It's funny, Eric, as you were talking there, I did
not catch the sinking fund line. And I remember a
couple of years ago CJU initially had brought up that term,
and I remember googling it and I looked it back
up again because I'm like, boy, I hope we mentioned
sinking funds, and thank goodness it was.
Speaker 2 (22:07):
It was in because what a cool thing.
Speaker 1 (22:09):
Another thing too, I've noticed with if you actually save
for a car rather than finance a car, you're a
little more and I don't know what it is. There's
probably psychology, and you guys understand this more than anyone,
that when you've got the money on hand to buy
a car, your decision making is a little bit different
than I don't know, when you're going to finance it. It
just seems like we'll go, yeah, we'll upgrade everything and
(22:30):
maybe we'll go one one class up.
Speaker 3 (22:32):
And there's a lot of psychology behind it. There's two
phrases we use, which is it's easier to spend somebody
else's money than your own. Number one and number two,
we would say the following. Poor people, more poor minded
people ask how much does this cost me? Per month?
Rich people or people with rich wealth creation mindsets ask
(22:56):
how much does this cost period? Because the mindset of
the poor is can I make the monthly payment? The
mindset of the wealthy is can I afford this? So
just remember that as you go throughout life, if you're
ever asking well I can make that monthly go, that's
the wrong question to be asking. The right question is
(23:18):
how much will this cost?
Speaker 1 (23:19):
And as we talk too about some of these you know,
these bits of wisdom and things that you guys get
to experience at class financial and getting to know folks,
what are there some other areas about you know, that
kind of warning areas when it comes to carrying dead CJ.
Speaker 3 (23:33):
Yeah, So we would just say again some of the
warning areas would be, you know, just like you can
use compound interest to accumulate wealth through saving into a
retirement account and seeing the compound growth of of a
four to one K plan or IRA. Well, the same
can be true against you, and so debt can compound
(23:55):
against you, especially those really high interest debts. Now again,
I want to be cautious here, as Eric was kind
of poking at me and having fun, which I appreciated,
and good faith. It is something that we realize there's
not utopia here. We can't just have a million dollars
to go buy our dream home when we're twenty five
years old, right, So what are we going to do?
(24:16):
And the answer is, well, your great grandparents actually just
lived in small homes and eventually migrated up if they
could afford it. So there is a world in which
you have to understand this idea of mortgage debt and
credit card debt and auto loans. These are modern marvels
and you don't have to use them number one. But
then number two, it would be if you're going to
use them, use them cautiously. That's it. That's all we're saying,
(24:39):
Just be cautious because it's kind of here would be
the equivalent. Hey, is alcohol, by its definition a bad thing?
Speaker 4 (24:47):
No.
Speaker 3 (24:48):
Wife has a glass of wine maybe once a week,
and she does great with it. But for this guy,
for me, it was a big problem and so therefore
I had to cut it out of my life. So
it's knowing yourself and it's understanding that when you are
going to touch something that has created a lot of damage,
touch it carefully. So debt to us is one of
(25:08):
those things. Hey, it's kind of like fire. The fire
can make a nice fireplace and bring you warmth, or
it can destroy everything. So be cautious of debt because
it's destroyed a lot of American households. And we would
say just use it kind of like fire. Just control it,
contain it, and keep it small. But the big takeaway
is this, make it your goal to retire debt free,
(25:31):
including your mortgage if possible. The freedom it brings is
well worth the effort.
Speaker 1 (25:38):
Talking great stuff this morning as we talk with our
retirement planning professional CJ.
Speaker 2 (25:42):
Closs in Air.
Speaker 1 (25:43):
Schwortz, we're going to actually real quick go to the phones.
Mike called in. Mike, I do want to get you
on the air. Thank you so much for calling. We've
only got a couple of minutes, but I see your question.
I think it's a real important one. Welcome to Programming
are on the air with CJ. Closs and Airic Schwartz
of colass Financial.
Speaker 5 (25:57):
Thanks Sean, say, yeah, my question has to do with
taking an RMD so and taking the rm D, paying
the taxes, and then thinking about beneficiary ideas with getting
that somehow into a ROTH. Okay, and let's leave out
all the eligibility issues there, assuming that the money could
(26:20):
go into a ROTH, because it's eligible if you're over
fifty nine and a half you've taken the rm D.
Does the five year rule apply to both the converted
funds and that's the wrong word, the deposited funds and
the income or does the five year rule only apply
to one or the other of those two?
Speaker 3 (26:42):
Man, great question. There's a lot in that. And you
told me to ignore the eligibility rules. That's tough. I'm
going to abide by your outline here, but that's tough
because there could be significant eligibility rules if you're using
rm ds to make contribution, because you're right, we're not
doing cun versions, we're doing contributions. But I'll ignore that
(27:05):
and then you're right, Yeah, is there a five year
rule as it relates to this new hypothetical wroth iray
that you're going to establish and make contributions to. And
the answer is no. So the five year rule applies
to the growth you can't remove, and it applies to
when the roth ira was established. So to be clear,
(27:26):
if you establish a roth ira, I'll use your number
fifty nine and a half or sixty, let's call it. Well, actually,
and that doesn't work here because you're using rmds. I'm
going to say you're seventy five years old. So you're
seventy five years old. Pulling out rmds. You are making
a contribution to a wroth, which means you It means
you have to have earned income to do so. If
that roth has been open for at least five years prior,
(27:47):
so you have old wroth money and now you're putting
new money in, then both the contributions and the growth
can be removed at any time without any tax or penalty. If, however,
you are establishing a new roth ira at seventy five
years old, then it is only the contributions that can
be removed at any time. The growth would have to
wait for five years thereafter, very complicated answer, but that's
(28:09):
what the letter of the law says.
Speaker 5 (28:11):
Well that's why I asked, though, because I appreciate your
expertise on this, and I see such general discussion of
it that's not as precise, so I really appreciate it
very much.
Speaker 1 (28:21):
Thanks Mike, Thank you for the call, great question, great calls.
Don't forget if you ever have questions, great data, start
that conversation at COSS Financial their website six h eight
four four two five six three seven. No charge for
that initial get to know your appointment at Colss Financial.
It will be complimentary to you. As a matter of fact,
I want to hold on to that teleph number because
it's time now for the Class Quiz Question the Week.
It works like this, just a moment, I'll ask you
the class quiz question the Week. You'll then have thirty
(28:43):
minutes from the interday's program to call the Class Financial
office right here in Madison. And again they're number six
oh eight four four to two five six three seven.
If you are the first call correct answer to whin
this week's prize, which is say twenty five dollars gift
cards two best buy this week's class Quiz Question the
Week Is this true or false? According to the Federal
Bank of New York a total US household debt, the
(29:04):
total US household debt hit almost eighteen trillion dollars in
the fourth quarter of twenty twenty four. Is that true
or is that false? Telphone number six oh eight four
four two five six three seven first garwth correct answer.
When this week's prize again. That's Class Financial's office right
here in Madison, their number six oh eight four four two, five,
six three seven. Guys, it's always informative and it's always
(29:27):
especially fun. Great to talk to you, guys. Enjoy the day.
Speaker 3 (29:30):
Thanks Sean.
Speaker 4 (29:30):
Thanks Sean.
Speaker 2 (29:31):
News is next right here at thirteen ten WIBA
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