July 10, 2026 • 27 mins
Tom’s on vacation, but the listener questions are not. In this packed Q&A episode, Don tackles one of the most common retirement dilemmas: if your Social Security and annuity income already cover your expenses, do you still need a traditional emergency fund?
From there, the questions keep coming. Don weighs in on what to do with “lazy money” earning only 3%, whether a MYGA is really a better deal than a CD ladder, how to structure a taxable brokerage account for long-term growth, and where to keep nearly $300,000 set aside for a home purchase in the next two to three years.
He also takes on a thoughtful question about managing a taxable portfolio for elderly in-laws who need additional income for memory care, and wraps up with a step-by-step explanation of how inherited IRA money can potentially be used to fund backdoor Roth contributions.
Along the way, you’ll hear why “guaranteed” doesn’t always mean what insurance companies want you to think it means, why simplicity often beats ETF overengineering, and why liquidity still matters—even in retirement.
0:05 – Intro and why Tom is getting buried in listener questions while on vacation
1:14 – Don thanks listeners and mentions Apple featuring Litreading
1:58 – How to send recorded questions at TalkingRealMoney.com
2:16 – Question 1: Do retired investors still need a six-month emergency fund if Social Security and annuities cover expenses?
3:14 – Why Don still favors stable, liquid emergency money even in retirement
4:30 – Question 2: What should retirees do with “lazy money” that’s earning only about 3%?
5:28 – Don’s preference for CD ladders over MYGAs and why “guaranteed” doesn’t mean risk-free
7:33 – Question 3: How should a high-income investor build a long-term taxable portfolio at Vanguard?
10:03 – Don’s case for simplifying with AVGE or DFAW instead of mixing multiple ETFs
11:24 – Question 4: Is a five-year MYGA better than a five-year CD ladder?
12:01 – Why Don still leans toward CDs despite the higher MYGA yield and tax deferral pitch
14:16 – Question 5: Best place to keep $291,000 earmarked for a home purchase in two to three years
14:46 – Money market vs. high-yield savings vs. CDs vs. BND for short-term house money
17:04 – Question 6: How to structure a $300,000 taxable portfolio for elderly in-laws who need extra monthly income for memory care
18:37 – Why Don would keep lots of liquidity, use only a little equity, and skip muni bonds in a 22% bracket
20:50 – Question 7: Can inherited IRA proceeds be used to fund a backdoor Roth for both spouses?
22:40 – Don’s step-by-step answer, including opening new IRAs and watching out for the pro-rata rule
25:07 – Don plugs The Line Uncrossed and offers a free one-hour advisor meeting
25:42 – Reminder to send questions and be patient while Tom is on vacation
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Episode Transcript
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SPEAKER_00 (00:05):
You're gonna do a really great financial future.
Tom and Don are talking realmoney.
SPEAKER_02 (00:11):
You guys are freaking Tom out.
He's on vacation, and I cannotconvince Tom vacations.
But he doesn't vacation.
He has his computer, and hetends to look at it a lot.
He has a hard time cutting thecord.
(00:32):
Well, you guys have beenfreaking him out with all the
questions.
Apparently, he got justinundated with written
questions.
And we say he loves them, butit's right now it's sort of a
love-hate relationship.
So uh fair warning, some ofthose questions may be a bit
delayed.
I have also seen a commensuraterise in the number of recorded
(00:55):
questions too, which means thatat least for the next couple of
weeks, we're going for recordnumbers of questions on the Q
⁇ A Friday edition of theTalking Real Money Podcast,
which of which this is one.
This one.
So we got a bunch of questionstoday.
We'll get to those in just aminute.
(01:15):
Um, but uh I want to thank youfor all those and thanks for
listening and all that stuff.
We really, really appreciateyou.
And also uh I just wanted tobrag a little bit.
I I don't think it's stillthere, but uh just about a week
ago, Apple Podcast featured nottalking real money, talking real
(01:38):
money has a huge audience.
Uh it featured my short storypodcast, Lit Reading, as a great
place for summer stories.
So uh I hope some of you got achance to check that out.
If not, go check it out.
Hopefully we'll keep it in theuh in the top hundred fiction
podcasts in the country, becauseI think last I checked it was uh
(02:00):
number 15, and that's prettygood from not being rated at
all.
So a little bragging.
Now we're gonna get to a littlequestions.
These questions are sent in attalkingrealmoney.com using the
little microphone button in thelower right hand corner.
It's so easy.
You just click on that, yourecord the question.
Then I run it through some coolAI stuff to make you sound like
(02:21):
you're in the studio, and I tryto answer them like I'm gonna
try and answer this question.
One of seven today.
SPEAKER_06 (02:30):
This is Steve, and I have a question about our
emergency fund.
And do we still need it?
We're both retired, and only oneof us is drawing Social
Security.
All of our expenses are coveredby our income stream of Social
Security and annuity.
We have a high six figures inRoth and traditional IRA, and
(02:51):
based on what we sp spend,that's plenty, and it's going to
keep growing, of course.
So we're just wondering, is itstill necessary to keep six
months in an emergency fund uhat low income, three percent?
Or with what we have, could wecould we assume that we could,
if we had an emergency like aroof or a car, we have plenty to
draw on in our funds.
SPEAKER_02 (03:13):
Thanks.
Okay.
The trick with emergency money,with emergency pools, is the
high degree of stability thatthose are supposed to provide.
You talk about 3%.
Well, you can get four in a highyield savings account.
And the good news about that isthat that money is available
(03:35):
without any penalty, without anyvolatility, should the roof blow
off or something big occur.
That might require that youliquidate an asset that is down
dramatically.
Even a bond fund could be down.
So that's why we're bigproponents of having the
emergency money in somethingthat is incredibly stable.
(03:58):
Now that could be part of yourregular portfolio.
So it really depends on you,your comfort with liquidating
assets if they're downdramatically.
And uh I that's why I keep I'mpretty good with risk.
I've been doing this a longtime, and yet I keep a fairly
large amount of money in a veryliquid, immediately available
(04:23):
account that yields right nowabout 4% in case of a major
emergency.
Hope I never have one, but thenI don't have to liquidate my
other pro uh portfolio productsshould uh they be down.
So that's really the reason.
Do you need it for sure?
Well, no, you've got otherassets.
That should be fine, but I wouldprobably have it.
(04:47):
Thanks for the question.
I appreciate it, and here'snumber two of seven.
SPEAKER_06 (04:52):
This is Steve from Minnesota, and I'm looking for
suggestions on investing what Iwould call lazy money.
And uh we're both retired.
We have monthly expenses coveredby Social Security and
annuities.
We have a six-month emergencyfund that is fully funded, but
we're seeing our short-termsavings growing to a level that
(05:12):
we feel we should be earningmore than 3 percent in a in a in
a low-term money market.
And so I know what most of usfeel about uh annuities, but
would uh would a MIGA paying 5.5percent over three years be one
solution?
And what are some othersolutions to put lazy money to
work?
SPEAKER_02 (05:32):
Thanks.
Lazy money, that's aninteresting term.
I'm not it's not one we use, butuh because I don't think any
money should sit around beinglazy.
Uh it serves its purpose.
Emergency money is emergencymoney.
It should be liquid, as Imentioned previously.
Uh I personally, and again, Iput my money where my mouth is.
(05:52):
I personally prefer that thatkind of money, the money I want
safe, but that I don't needliquid, is in laddered CDs.
That's where the bulk of mineis, along with a little bit of B
and D or a lot of BND.
Uh that's what I'd go through,I'd go for first, is laddered
CDs.
Because I'm getting over 4%across my ladder.
(06:15):
Um, not as high as a amulti-year guaranteed annuity or
MIGA, the cute little insurancecompany term.
Uh, but there's also less riskwith a CD, and I don't care what
the insurance companies say.
They can claim guaranteed allthey want, but the guarantee is
really pretty much only as goodas the company.
(06:38):
And let history be your guide.
We had we have had insurancecompanies go broke and people
who had annuities have to takedecades-long payouts in some
cases, years and years ago.
AIG nearly went down if itwasn't for a government bailout,
and it is very unlikely, it isvery unlikely that those state
(06:59):
pools would have been able tocover them.
So it's insurance.
I don't think insurancecompanies should be allowed to
say guaranteed, personally, butuh they they do.
Multi-year guaranteed annuity.
Yeah, you know, guaranteed bywhat?
Not full faith and credit of theU.S.
So I'd go CDs.
(07:21):
I guess if you get a reallygreat MIGA and all goes well,
good for you.
Thanks for the question.
Now I I believe, I think we haveanother MIGA question coming up.
I don't know if there it's likea big sales pitch going for him.
I don't know if this is the oneor not, but here's three of
seven on our very busy QA day.
SPEAKER_04 (07:42):
Hey, Don.
Uh, thanks for taking myquestion.
And I just want to thank youguys for all the advice that you
give and uh on your show.
I've I've definitely learned alot over the past few years from
listening to you guys.
I really need some help on ataxable investment strategy, a
long-term investment.
And um just to give you somebackground, I'm 43 years old.
(08:03):
Um, I'm a high income earner,and I've paid off my mortgage,
so I can I've I'm able tomaximize my all my retirement
investing.
And so I've started to maybe acouple years ago aggressively
fund um a taxable brokerageaccount that I have with
Vanguard.
Long story short, my strategywhen I first started was just to
try to get as much money intothe SP 500 as possible.
(08:24):
Uh so I've done that and um I'msitting on about 170K in VOO.
I have about another 20K in AVDEand another 20K in some uh
various uh uh funds, but nothingtoo significant.
So um I've also just acquired alarge sum of money from some
company stock option sales.
(08:44):
So I have about 300K sitting inmy uh settlement fund right now,
and I'd really like to use thatmoney to rebalance this account
um and to come up with astrategy for investing uh in a
taxable account that's sort ofsupplementing my retirement.
So I'm just kind of curious.
I really need some help on whatis a good strategy.
(09:05):
Uh what type of fund should Ipick?
Should I avoid Avantis fundslike AVUV, or are those okay to
use?
You know, why and why not?
Uh my thought, just off the top,you know, just what I've been
playing around with was tomaintain 50 to 60 percent in V O
O, um, 20 to 25 percent in AVDE,and then split the remaining 15%
(09:28):
between A V U V, A V E M, andAVDV.
So if you could please commenton that, I would definitely
appreciate it.
Uh thank you so much.
That was a lot of letters.
SPEAKER_02 (09:41):
I'm curious as to why the emphasis on VOO, which
is the S P 500 fund.
Uh I I I'm not of the opinionthat the S P 500 is a great
representation of the themarket, particularly not the
global market, but you'regetting that with the uh the
AVDE, the international.
(10:03):
Here's what as I'm listening toyour question, four letters keep
running through my head.
Like it's not even a strategy.
It's just taking what you'retrying to do and making it a
whole lot simpler.
And uh well, actually, eightletters run through my head.
But since you're with Avantas, AV G E keeps running through my
(10:25):
head.
Cause it gets you the US, itgets you the S P 500 sort of,
but with more breadth.
It gets you the international,it gets you the emerging
markets, it gets you it gets youall of the market with an
emphasis on value and small cap,which is what our strategy is,
(10:46):
what we believe your strategyshould be, based on amazing
research done over the course ofdecades.
So if you want a strategy, uhfour letters, A V G E or four
other letters, D F A W, and thendon't think about it.
(11:08):
They're doing it for you.
Pretty easy.
Thanks for your question.
I hope that answered it.
Just do that.
We make things too complicated.
Okay, another question coming upthis one.
Again, send in attalkingrealmoney.com.
Okay, spoken in attalkingrealmoney.com using the
little green mic button in thelower right hand corner at
(11:29):
talkingrealmoney.com.
SPEAKER_05 (11:31):
Hello, Don.
Jay from Texas.
Before I get to my question, I'dlike to say downloaded the book
this morning, The UncrossedLine, looking forward to
starting it this weekend.
My question fairly simple.
You talk about the five-year CDladder.
What about using a five-yearMIGA?
Pays a little bit more, and theinterest is tax deferred.
Just wanted your thoughts onthat.
SPEAKER_02 (11:50):
Thank you.
I knew there was another MIGAquestion.
I thought I saw it.
That was the one.
Uh please see previous answer.
Um I it I yeah, it's okay.
The tax deferral is ofnegligible benefit.
Really negligible, because it'sa limited term device.
So at the end of the term,whether it's three or five
(12:13):
years, you're gonna pay thetaxes.
So pay me now, pay me later,unless there's a specific reason
you don't want to.
That should be not even afactor.
They pay slightly more.
Why?
Because they're slightlyriskier.
That's why.
If you're okay with thattrade-off, then who am I to say
(12:35):
not to do it?
Just make sure you're dealingwith some of the best insurance
companies out there becauseyou're really relying on them to
back that guarantee.
So, yeah, I do CD ladders.
I have an option, I could usethem.
But I understand the risk.
(12:55):
And it is there.
No matter what the insurancepeople will tell you, it is
there, and it has in the pastreared its ugly money-losing
head.
Not saying it will in thefuture, but darn it, in 2008 it
almost did again.
Just be aware of that.
It's okay.
It's like anything else.
(13:15):
If you want to make more money,you take more risk.
And it's it's sort of aprevarication that they're not
riskier on the part of theinsurance companies.
They they get away with it.
I can I can pretty confidentlystate that if they were
federally regulated now, I can'tsay this with abs absolute
(13:36):
certainty because I don't sit onthe board of the Securities and
Exchange Commission, but I'mpretty sure if they were
federally regulated, the theSecurities and Exchange
Commission would not allow themto use the word guaranteed
unless it was a full faith andcredit backing of the U.S.
government.
We can't say guaranteed.
We get in trouble all the timeif we even imply it when we're
(13:58):
jesting.
And we jest a lot about it.
But no, guarantees are a veryspecial thing, and insurance
products don't have an ironcladguarantee.
They don't.
Thank you.
And now, what are we at?
Five?
Wow, five of seven.
Big day.
SPEAKER_01 (14:16):
Good morning.
I have about two hundred andninety-one thousand dollars in a
Vanguard brokerage account.
Uh, in it's all in VMFXS, M FXX.
And I would like to purchase ahome with this money in uh two
to three years.
And I'm just wondering if Ishould be putting it in some
(14:38):
other funds, uh, maybe some bondfunds, et cetera.
And would love your input on howI can maximize the yield over
the next couple of years.
Thank you.
SPEAKER_02 (14:48):
The fund you were trying to say is VMFXX.
It's hard to say.
That's the Vanguard FederalMoney Market Fund, uh, which is
a very safe, federally backed,uh, absolutely safe.
And you can't say all moneymarkets are absolutely safe
because some of them arecorporate, so they're not 100%
safe.
They're a higher degree ofsafety.
(15:09):
But this one is federal, so it'sreally safe, and it's yielding
about 3.6%.
So that's pretty good.
Although you can beat that withhigh yield savings, and like
high yields like this, highyield savings, of course, have
adjustable rates.
You don't know where the ratesare gonna go, so they can
fluctuate.
(15:30):
Therefore, there are otherthings you can do.
As I mentioned earlier, one ofthe things you can do is ladder
out CDs, or if you're prettysure it's gonna be two to three
years, get some of your CDs attwo years, well, get all of your
CDs at two years, and then go toa high yield savings account at
(15:50):
that point as you're shoppingfor a house.
But if you're sure you're notgonna go uh less than two years,
then get some two-year CDsthrough Schwab or another
brokerage firm.
And you can lock in that almost4% yield.
You could go to BND, but you dohave the potential of some
volatility, some loss ofprinciple, not huge likely, but
(16:13):
it exists, and we have to beclear about that.
So a couple of ways you can go.
You could go high yield savings,gives you a lot of flexibility,
and about four-tenths of apercent in the highest yielding
ones, better than than Vanguardis giving you.
You can stick with Vanguardbecause it's pretty darn good.
(16:33):
Or you could get two-year CDs orladder, one, two, and three-year
CDs if that's comfortable foryou, too.
Or you could go to BND or a fundlike it.
Yield a little bit more rightnow, uh, and that locks it in a
little bit longer, but you alsotake some risk of volatility of
principle.
So it really depends on whatyou're looking for.
(16:55):
Uh, absolute safety CDs are theuh federal money market or high
yield savings, FDIC insured.
Thanks for yours.
Another question is coming upright now.
SPEAKER_03 (17:08):
Hi, Don.
I'm managing about a$300,000taxable portfolio for my
in-laws, ages 80 and 82.
They have a fantastic pensionsocial security floor, but
require an additional$2,000 amonth of income to help pay for
some memory care and additionalliving expenses.
We'd need this$300,000 portfolioto last at least 10 years to
(17:29):
cover that gap.
They also have about$250,000 inhome equity that they would
unlock in a few years when mymother-in-law downsizes the
house.
Given their low risk tolerancebut need for long-term cash and
liquidity, my main questions areis somewhere between a 20 and
40% equity allocationreasonable?
And should we use somethingsimple like AVG or VT to
(17:50):
maximize those returns?
And I'm also wondering how weshould structure the remaining
per 60%.
Should we keep two years in cashin their money market and then
use some sort of tax efficientbond fund since this is
completely taxable?
For example, would somethinglike VTEB make more sense than
BND since they're uh in the 22%bracket.
(18:12):
Love the show and thank you forthe guidance.
SPEAKER_02 (18:14):
Given the age, given their age, given the fact that
there's already memory caregoing on, I think having a lot
of liquidity is a very, verygood thing.
Couple of years in money marketor high yield savings, probably
wise, because you never knowwhen there's going to be a need.
And the need could be highenough, could be, that you're
(18:38):
gonna threaten this moneylasting for uh as long as you
might need it to last.
It's not a lot of money.
I mean, it's 500.
They're not in a high bracket,so forget about tax advantaged
portfolios.
The difference between VT andVT, not VT, B N D and VTEB,
(18:59):
which is the tax exempt bondfund, the difference is a full
percentage point, which is about25%.
So they'd have to be in a muchhigher bracket to make the
tax-free make sense.
Don't don't worry abouttax-free.
Uh I would I really would keep Iwould go for high yield savings
because you can get up to aboutfour now with high yield savings
(19:22):
versus about three point six formoney markets.
Although money markets are okay.
Uh having a little inequities isprobably and I do mean a little,
like 10% has the potential toextend the life of the
portfolio.
And if they lose half of 10%, uhit's not gonna be
(19:44):
earth-shattering.
But the gains can help extendthe life a little bit.
So I think that's nice to have.
I wouldn't go 20 or 30,probably, not at their age, and
with their already higher needsthan even a few years ago with
that extra 2,000 they need thatyou need to last for quite a few
years.
(20:05):
So there's no easy answer tothis.
Yes, you should have some moneyin stocks.
I would stretch for yield.
If you want to go with a bondfund, BND would be a better
choice than VTEB.
Better choice.
Uh liquidity and maybe ladderedCDs going out three, four, and
(20:25):
five years past the liquiditywith a little bit of equity
might be a way to go.
So that you, again, boost thatyield ever so slightly and lock
it in in case rates decline andthe short-term savings or the
money markets go down.
But there's no great answer tothis.
You just have to make do andhope for the best.
(20:46):
And remember, if they do runout, there is that final
fallback of Medicaid.
So thank you for that.
And now it's seven of seven.
SPEAKER_07 (20:58):
Hi, Down and Tom.
I am the beneficiary of mybrother's IRA and will cash it
out at the end of the month inyear one of his death and pay
all the taxes on it per mybrother's instructions.
Using the after-tax amount, Iwill distribute slash gift the
money to my siblings, nieces,and nephews again per my
brother's wishes.
Each of us will end up withapproximately$14,000.
(21:21):
The money is at Swab and I nowhave an inherited IRA at Schwab.
This is the only account I haveat Swab as I broker with a
different company.
With this inheritance has pushedme above the modified adjusted
gross income requirements forcontributing to a Roth IRA like
my wife and I normally do.
The money has been transferredto a money market fund until I
sell it and pay the taxes.
(21:42):
I am interested in doing abackdoor Roth with this money
for my wife and myself.
My wife and I are both over 50,so we can get the$7,500 plus
$1,100 catch up for up to$8,600.
So here are my questions.
Can I do this with this money,or would it be easier to close?
The inherited IRA and start anew IRA for the upcoming Roth
(22:03):
backdoor.
If I can do this, can I leavethe money accumulated until
December and come closer to the$8,600 versus the$7,000?
Finally, again, if I can do thisand I leave the money
accumulated until December, myassumption is that I can add to
the IRA up to the$8,600 and thendo the Roth conversion.
(22:24):
Thank you for your insight.
SPEAKER_02 (22:25):
All right.
Let's go through this bit by bitbecause this is kind of hmm
confusing a little.
Um Yeah, you can use theinheritance to provide the cash
to fund the non-deductible Rothafter you've basically closed it
(22:47):
out and taken all thedistribution.
So let me just try to go throughthis step by step, just making
it simple.
So you take the inherited IRA,you take out that money, you pay
the taxes, then set aside thattax so you don't accidentally
gift money that's the IRS'sshare to the nieces and nephews
(23:09):
and whomever.
Okay, so set that aside.
Then here's what you must do: open new traditional IRAs. (23:12):
undefined
Two of them, one for you, onefor your spouse.
Okay?
Or if you already have anexisting well, no, let's I don't
want to confuse this anymore.
Open two new IRAs.
Um then you didn't mention this,but make sure you don't have any
(23:34):
other pre-tax IRAs.
Okay?
Because this could this could mmess up the plant.
Then fund the 8,600.
Yeah, you can keep them theretill December.
Um then make the$8,600non-deductible IRA contributions
(23:58):
for each one of you.
Then after those are in theaccount, then convert each one
to a Roth very quickly so thatthere's no extra gains.
File form$8606, I believe it is.
But bear in mind, if you haveany traditional IRAs or
rollovers or SEPs or simples orany of those kinds of things out
there that are pre-tax dollars,wow, then the pro rata rule hit
(24:22):
you.
So I'm not even gonna I'm notgonna get into that.
I'm a assuming you don't havethose.
But if you do, then this is notnearly as clean and you're gonna
have other conversions that haveto be made and taxes paid on
those.
But yeah, you can do what youwant to do.
You just have to settle up thoseinherited IRAs and then start
(24:43):
anew with your own new IRAs.
I think I covered everything.
Thanks for your question.
Thanks for all the questionsyou've sent in.
Thanks to the people who boughtthe book, like the one gentleman
mentioned, the The LineUncrossed, my uh my historical
fiction novel based on the lifeof my great-great-grandfather in
(25:05):
the Civil War.
Uh and uh please tell a friendor two about Talking Real Money.
If you would like some morein-depth help from one of our
advisors, we absolutely helppeople.
We don't charge you.
We'll give you a a reallydetailed look at what your
situation is and tell you whatyou might want to do
(25:25):
differently, and you're notgonna get a high pressure sales
pitch, okay?
Not gonna get it.
We'll get your questionsanswered, we'll help you out,
not gonna cost you anything, nohigh pressure sales pitch.
If you want more than an hour'sworth of work, though, or help,
then you need to hire us.
It's only fair.
And what else do I have?
Oh, send your questions in attalkingrealmoney.com.
(25:46):
If you've if you've typed somein, be patient.
Tom's on vacation, so it maytake a little while to get some
of those answered.
And uh I think that covers it.
Thanks for listening to TalkingReal Money.
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The firm only transacts businessin the states where it is
properly registered, or excludedor exempted from registration
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Registration with the FCC or anystate securities authority does
not imply a certain level ofskill of training.
Appello does not provide tax orlegal advice, and nothing either
stated or implied here should beinferred as providing such
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Thanks for listening, and pleasevisit talkingrealmoney.com for
(27:23):
more information and importantdisclosure related to
performance of any specificindex or fund quoted in this
podcast.
The lawyers get richer.
You're gonna do a really great financial future.
Tom and Don are talking realmoney.
SPEAKER_02 (00:11):
You guys are freaking Tom out.
He's on vacation, and I cannotconvince Tom vacations.
But he doesn't vacation.
He has his computer, and hetends to look at it a lot.
He has a hard time cutting thecord.
(00:32):
Well, you guys have beenfreaking him out with all the
questions.
Apparently, he got justinundated with written
questions.
And we say he loves them, butit's right now it's sort of a
love-hate relationship.
So uh fair warning, some ofthose questions may be a bit
delayed.
I have also seen a commensuraterise in the number of recorded
(00:55):
questions too, which means thatat least for the next couple of
weeks, we're going for recordnumbers of questions on the Q
⁇ A Friday edition of theTalking Real Money Podcast,
which of which this is one.
This one.
So we got a bunch of questionstoday.
We'll get to those in just aminute.
(01:15):
Um, but uh I want to thank youfor all those and thanks for
listening and all that stuff.
We really, really appreciateyou.
And also uh I just wanted tobrag a little bit.
I I don't think it's stillthere, but uh just about a week
ago, Apple Podcast featured nottalking real money, talking real
(01:38):
money has a huge audience.
Uh it featured my short storypodcast, Lit Reading, as a great
place for summer stories.
So uh I hope some of you got achance to check that out.
If not, go check it out.
Hopefully we'll keep it in theuh in the top hundred fiction
podcasts in the country, becauseI think last I checked it was uh
(02:00):
number 15, and that's prettygood from not being rated at
all.
So a little bragging.
Now we're gonna get to a littlequestions.
These questions are sent in attalkingrealmoney.com using the
little microphone button in thelower right hand corner.
It's so easy.
You just click on that, yourecord the question.
Then I run it through some coolAI stuff to make you sound like
(02:21):
you're in the studio, and I tryto answer them like I'm gonna
try and answer this question.
One of seven today.
SPEAKER_06 (02:30):
This is Steve, and I have a question about our
emergency fund.
And do we still need it?
We're both retired, and only oneof us is drawing Social
Security.
All of our expenses are coveredby our income stream of Social
Security and annuity.
We have a high six figures inRoth and traditional IRA, and
(02:51):
based on what we sp spend,that's plenty, and it's going to
keep growing, of course.
So we're just wondering, is itstill necessary to keep six
months in an emergency fund uhat low income, three percent?
Or with what we have, could wecould we assume that we could,
if we had an emergency like aroof or a car, we have plenty to
draw on in our funds.
SPEAKER_02 (03:13):
Thanks.
Okay.
The trick with emergency money,with emergency pools, is the
high degree of stability thatthose are supposed to provide.
You talk about 3%.
Well, you can get four in a highyield savings account.
And the good news about that isthat that money is available
(03:35):
without any penalty, without anyvolatility, should the roof blow
off or something big occur.
That might require that youliquidate an asset that is down
dramatically.
Even a bond fund could be down.
So that's why we're bigproponents of having the
emergency money in somethingthat is incredibly stable.
(03:58):
Now that could be part of yourregular portfolio.
So it really depends on you,your comfort with liquidating
assets if they're downdramatically.
And uh I that's why I keep I'mpretty good with risk.
I've been doing this a longtime, and yet I keep a fairly
large amount of money in a veryliquid, immediately available
(04:23):
account that yields right nowabout 4% in case of a major
emergency.
Hope I never have one, but thenI don't have to liquidate my
other pro uh portfolio productsshould uh they be down.
So that's really the reason.
Do you need it for sure?
Well, no, you've got otherassets.
That should be fine, but I wouldprobably have it.
(04:47):
Thanks for the question.
I appreciate it, and here'snumber two of seven.
SPEAKER_06 (04:52):
This is Steve from Minnesota, and I'm looking for
suggestions on investing what Iwould call lazy money.
And uh we're both retired.
We have monthly expenses coveredby Social Security and
annuities.
We have a six-month emergencyfund that is fully funded, but
we're seeing our short-termsavings growing to a level that
(05:12):
we feel we should be earningmore than 3 percent in a in a in
a low-term money market.
And so I know what most of usfeel about uh annuities, but
would uh would a MIGA paying 5.5percent over three years be one
solution?
And what are some othersolutions to put lazy money to
work?
SPEAKER_02 (05:32):
Thanks.
Lazy money, that's aninteresting term.
I'm not it's not one we use, butuh because I don't think any
money should sit around beinglazy.
Uh it serves its purpose.
Emergency money is emergencymoney.
It should be liquid, as Imentioned previously.
Uh I personally, and again, Iput my money where my mouth is.
(05:52):
I personally prefer that thatkind of money, the money I want
safe, but that I don't needliquid, is in laddered CDs.
That's where the bulk of mineis, along with a little bit of B
and D or a lot of BND.
Uh that's what I'd go through,I'd go for first, is laddered
CDs.
Because I'm getting over 4%across my ladder.
(06:15):
Um, not as high as a amulti-year guaranteed annuity or
MIGA, the cute little insurancecompany term.
Uh, but there's also less riskwith a CD, and I don't care what
the insurance companies say.
They can claim guaranteed allthey want, but the guarantee is
really pretty much only as goodas the company.
(06:38):
And let history be your guide.
We had we have had insurancecompanies go broke and people
who had annuities have to takedecades-long payouts in some
cases, years and years ago.
AIG nearly went down if itwasn't for a government bailout,
and it is very unlikely, it isvery unlikely that those state
(06:59):
pools would have been able tocover them.
So it's insurance.
I don't think insurancecompanies should be allowed to
say guaranteed, personally, butuh they they do.
Multi-year guaranteed annuity.
Yeah, you know, guaranteed bywhat?
Not full faith and credit of theU.S.
So I'd go CDs.
(07:21):
I guess if you get a reallygreat MIGA and all goes well,
good for you.
Thanks for the question.
Now I I believe, I think we haveanother MIGA question coming up.
I don't know if there it's likea big sales pitch going for him.
I don't know if this is the oneor not, but here's three of
seven on our very busy QA day.
SPEAKER_04 (07:42):
Hey, Don.
Uh, thanks for taking myquestion.
And I just want to thank youguys for all the advice that you
give and uh on your show.
I've I've definitely learned alot over the past few years from
listening to you guys.
I really need some help on ataxable investment strategy, a
long-term investment.
And um just to give you somebackground, I'm 43 years old.
(08:03):
Um, I'm a high income earner,and I've paid off my mortgage,
so I can I've I'm able tomaximize my all my retirement
investing.
And so I've started to maybe acouple years ago aggressively
fund um a taxable brokerageaccount that I have with
Vanguard.
Long story short, my strategywhen I first started was just to
try to get as much money intothe SP 500 as possible.
(08:24):
Uh so I've done that and um I'msitting on about 170K in VOO.
I have about another 20K in AVDEand another 20K in some uh
various uh uh funds, but nothingtoo significant.
So um I've also just acquired alarge sum of money from some
company stock option sales.
(08:44):
So I have about 300K sitting inmy uh settlement fund right now,
and I'd really like to use thatmoney to rebalance this account
um and to come up with astrategy for investing uh in a
taxable account that's sort ofsupplementing my retirement.
So I'm just kind of curious.
I really need some help on whatis a good strategy.
(09:05):
Uh what type of fund should Ipick?
Should I avoid Avantis fundslike AVUV, or are those okay to
use?
You know, why and why not?
Uh my thought, just off the top,you know, just what I've been
playing around with was tomaintain 50 to 60 percent in V O
O, um, 20 to 25 percent in AVDE,and then split the remaining 15%
(09:28):
between A V U V, A V E M, andAVDV.
So if you could please commenton that, I would definitely
appreciate it.
Uh thank you so much.
That was a lot of letters.
SPEAKER_02 (09:41):
I'm curious as to why the emphasis on VOO, which
is the S P 500 fund.
Uh I I I'm not of the opinionthat the S P 500 is a great
representation of the themarket, particularly not the
global market, but you'regetting that with the uh the
AVDE, the international.
(10:03):
Here's what as I'm listening toyour question, four letters keep
running through my head.
Like it's not even a strategy.
It's just taking what you'retrying to do and making it a
whole lot simpler.
And uh well, actually, eightletters run through my head.
But since you're with Avantas, AV G E keeps running through my
(10:25):
head.
Cause it gets you the US, itgets you the S P 500 sort of,
but with more breadth.
It gets you the international,it gets you the emerging
markets, it gets you it gets youall of the market with an
emphasis on value and small cap,which is what our strategy is,
(10:46):
what we believe your strategyshould be, based on amazing
research done over the course ofdecades.
So if you want a strategy, uhfour letters, A V G E or four
other letters, D F A W, and thendon't think about it.
(11:08):
They're doing it for you.
Pretty easy.
Thanks for your question.
I hope that answered it.
Just do that.
We make things too complicated.
Okay, another question coming upthis one.
Again, send in attalkingrealmoney.com.
Okay, spoken in attalkingrealmoney.com using the
little green mic button in thelower right hand corner at
(11:29):
talkingrealmoney.com.
SPEAKER_05 (11:31):
Hello, Don.
Jay from Texas.
Before I get to my question, I'dlike to say downloaded the book
this morning, The UncrossedLine, looking forward to
starting it this weekend.
My question fairly simple.
You talk about the five-year CDladder.
What about using a five-yearMIGA?
Pays a little bit more, and theinterest is tax deferred.
Just wanted your thoughts onthat.
SPEAKER_02 (11:50):
Thank you.
I knew there was another MIGAquestion.
I thought I saw it.
That was the one.
Uh please see previous answer.
Um I it I yeah, it's okay.
The tax deferral is ofnegligible benefit.
Really negligible, because it'sa limited term device.
So at the end of the term,whether it's three or five
(12:13):
years, you're gonna pay thetaxes.
So pay me now, pay me later,unless there's a specific reason
you don't want to.
That should be not even afactor.
They pay slightly more.
Why?
Because they're slightlyriskier.
That's why.
If you're okay with thattrade-off, then who am I to say
(12:35):
not to do it?
Just make sure you're dealingwith some of the best insurance
companies out there becauseyou're really relying on them to
back that guarantee.
So, yeah, I do CD ladders.
I have an option, I could usethem.
But I understand the risk.
(12:55):
And it is there.
No matter what the insurancepeople will tell you, it is
there, and it has in the pastreared its ugly money-losing
head.
Not saying it will in thefuture, but darn it, in 2008 it
almost did again.
Just be aware of that.
It's okay.
It's like anything else.
(13:15):
If you want to make more money,you take more risk.
And it's it's sort of aprevarication that they're not
riskier on the part of theinsurance companies.
They they get away with it.
I can I can pretty confidentlystate that if they were
federally regulated now, I can'tsay this with abs absolute
(13:36):
certainty because I don't sit onthe board of the Securities and
Exchange Commission, but I'mpretty sure if they were
federally regulated, the theSecurities and Exchange
Commission would not allow themto use the word guaranteed
unless it was a full faith andcredit backing of the U.S.
government.
We can't say guaranteed.
We get in trouble all the timeif we even imply it when we're
(13:58):
jesting.
And we jest a lot about it.
But no, guarantees are a veryspecial thing, and insurance
products don't have an ironcladguarantee.
They don't.
Thank you.
And now, what are we at?
Five?
Wow, five of seven.
Big day.
SPEAKER_01 (14:16):
Good morning.
I have about two hundred andninety-one thousand dollars in a
Vanguard brokerage account.
Uh, in it's all in VMFXS, M FXX.
And I would like to purchase ahome with this money in uh two
to three years.
And I'm just wondering if Ishould be putting it in some
(14:38):
other funds, uh, maybe some bondfunds, et cetera.
And would love your input on howI can maximize the yield over
the next couple of years.
Thank you.
SPEAKER_02 (14:48):
The fund you were trying to say is VMFXX.
It's hard to say.
That's the Vanguard FederalMoney Market Fund, uh, which is
a very safe, federally backed,uh, absolutely safe.
And you can't say all moneymarkets are absolutely safe
because some of them arecorporate, so they're not 100%
safe.
They're a higher degree ofsafety.
(15:09):
But this one is federal, so it'sreally safe, and it's yielding
about 3.6%.
So that's pretty good.
Although you can beat that withhigh yield savings, and like
high yields like this, highyield savings, of course, have
adjustable rates.
You don't know where the ratesare gonna go, so they can
fluctuate.
(15:30):
Therefore, there are otherthings you can do.
As I mentioned earlier, one ofthe things you can do is ladder
out CDs, or if you're prettysure it's gonna be two to three
years, get some of your CDs attwo years, well, get all of your
CDs at two years, and then go toa high yield savings account at
(15:50):
that point as you're shoppingfor a house.
But if you're sure you're notgonna go uh less than two years,
then get some two-year CDsthrough Schwab or another
brokerage firm.
And you can lock in that almost4% yield.
You could go to BND, but you dohave the potential of some
volatility, some loss ofprinciple, not huge likely, but
(16:13):
it exists, and we have to beclear about that.
So a couple of ways you can go.
You could go high yield savings,gives you a lot of flexibility,
and about four-tenths of apercent in the highest yielding
ones, better than than Vanguardis giving you.
You can stick with Vanguardbecause it's pretty darn good.
(16:33):
Or you could get two-year CDs orladder, one, two, and three-year
CDs if that's comfortable foryou, too.
Or you could go to BND or a fundlike it.
Yield a little bit more rightnow, uh, and that locks it in a
little bit longer, but you alsotake some risk of volatility of
principle.
So it really depends on whatyou're looking for.
(16:55):
Uh, absolute safety CDs are theuh federal money market or high
yield savings, FDIC insured.
Thanks for yours.
Another question is coming upright now.
SPEAKER_03 (17:08):
Hi, Don.
I'm managing about a$300,000taxable portfolio for my
in-laws, ages 80 and 82.
They have a fantastic pensionsocial security floor, but
require an additional$2,000 amonth of income to help pay for
some memory care and additionalliving expenses.
We'd need this$300,000 portfolioto last at least 10 years to
(17:29):
cover that gap.
They also have about$250,000 inhome equity that they would
unlock in a few years when mymother-in-law downsizes the
house.
Given their low risk tolerancebut need for long-term cash and
liquidity, my main questions areis somewhere between a 20 and
40% equity allocationreasonable?
And should we use somethingsimple like AVG or VT to
(17:50):
maximize those returns?
And I'm also wondering how weshould structure the remaining
per 60%.
Should we keep two years in cashin their money market and then
use some sort of tax efficientbond fund since this is
completely taxable?
For example, would somethinglike VTEB make more sense than
BND since they're uh in the 22%bracket.
(18:12):
Love the show and thank you forthe guidance.
SPEAKER_02 (18:14):
Given the age, given their age, given the fact that
there's already memory caregoing on, I think having a lot
of liquidity is a very, verygood thing.
Couple of years in money marketor high yield savings, probably
wise, because you never knowwhen there's going to be a need.
And the need could be highenough, could be, that you're
(18:38):
gonna threaten this moneylasting for uh as long as you
might need it to last.
It's not a lot of money.
I mean, it's 500.
They're not in a high bracket,so forget about tax advantaged
portfolios.
The difference between VT andVT, not VT, B N D and VTEB,
(18:59):
which is the tax exempt bondfund, the difference is a full
percentage point, which is about25%.
So they'd have to be in a muchhigher bracket to make the
tax-free make sense.
Don't don't worry abouttax-free.
Uh I would I really would keep Iwould go for high yield savings
because you can get up to aboutfour now with high yield savings
(19:22):
versus about three point six formoney markets.
Although money markets are okay.
Uh having a little inequities isprobably and I do mean a little,
like 10% has the potential toextend the life of the
portfolio.
And if they lose half of 10%, uhit's not gonna be
(19:44):
earth-shattering.
But the gains can help extendthe life a little bit.
So I think that's nice to have.
I wouldn't go 20 or 30,probably, not at their age, and
with their already higher needsthan even a few years ago with
that extra 2,000 they need thatyou need to last for quite a few
years.
(20:05):
So there's no easy answer tothis.
Yes, you should have some moneyin stocks.
I would stretch for yield.
If you want to go with a bondfund, BND would be a better
choice than VTEB.
Better choice.
Uh liquidity and maybe ladderedCDs going out three, four, and
(20:25):
five years past the liquiditywith a little bit of equity
might be a way to go.
So that you, again, boost thatyield ever so slightly and lock
it in in case rates decline andthe short-term savings or the
money markets go down.
But there's no great answer tothis.
You just have to make do andhope for the best.
(20:46):
And remember, if they do runout, there is that final
fallback of Medicaid.
So thank you for that.
And now it's seven of seven.
SPEAKER_07 (20:58):
Hi, Down and Tom.
I am the beneficiary of mybrother's IRA and will cash it
out at the end of the month inyear one of his death and pay
all the taxes on it per mybrother's instructions.
Using the after-tax amount, Iwill distribute slash gift the
money to my siblings, nieces,and nephews again per my
brother's wishes.
Each of us will end up withapproximately$14,000.
(21:21):
The money is at Swab and I nowhave an inherited IRA at Schwab.
This is the only account I haveat Swab as I broker with a
different company.
With this inheritance has pushedme above the modified adjusted
gross income requirements forcontributing to a Roth IRA like
my wife and I normally do.
The money has been transferredto a money market fund until I
sell it and pay the taxes.
(21:42):
I am interested in doing abackdoor Roth with this money
for my wife and myself.
My wife and I are both over 50,so we can get the$7,500 plus
$1,100 catch up for up to$8,600.
So here are my questions.
Can I do this with this money,or would it be easier to close?
The inherited IRA and start anew IRA for the upcoming Roth
(22:03):
backdoor.
If I can do this, can I leavethe money accumulated until
December and come closer to the$8,600 versus the$7,000?
Finally, again, if I can do thisand I leave the money
accumulated until December, myassumption is that I can add to
the IRA up to the$8,600 and thendo the Roth conversion.
(22:24):
Thank you for your insight.
SPEAKER_02 (22:25):
All right.
Let's go through this bit by bitbecause this is kind of hmm
confusing a little.
Um Yeah, you can use theinheritance to provide the cash
to fund the non-deductible Rothafter you've basically closed it
(22:47):
out and taken all thedistribution.
So let me just try to go throughthis step by step, just making
it simple.
So you take the inherited IRA,you take out that money, you pay
the taxes, then set aside thattax so you don't accidentally
gift money that's the IRS'sshare to the nieces and nephews
(23:09):
and whomever.
Okay, so set that aside.
Then here's what you must do: open new traditional IRAs. (23:12):
undefined
Two of them, one for you, onefor your spouse.
Okay?
Or if you already have anexisting well, no, let's I don't
want to confuse this anymore.
Open two new IRAs.
Um then you didn't mention this,but make sure you don't have any
(23:34):
other pre-tax IRAs.
Okay?
Because this could this could mmess up the plant.
Then fund the 8,600.
Yeah, you can keep them theretill December.
Um then make the$8,600non-deductible IRA contributions
(23:58):
for each one of you.
Then after those are in theaccount, then convert each one
to a Roth very quickly so thatthere's no extra gains.
File form$8606, I believe it is.
But bear in mind, if you haveany traditional IRAs or
rollovers or SEPs or simples orany of those kinds of things out
there that are pre-tax dollars,wow, then the pro rata rule hit
(24:22):
you.
So I'm not even gonna I'm notgonna get into that.
I'm a assuming you don't havethose.
But if you do, then this is notnearly as clean and you're gonna
have other conversions that haveto be made and taxes paid on
those.
But yeah, you can do what youwant to do.
You just have to settle up thoseinherited IRAs and then start
(24:43):
anew with your own new IRAs.
I think I covered everything.
Thanks for your question.
Thanks for all the questionsyou've sent in.
Thanks to the people who boughtthe book, like the one gentleman
mentioned, the The LineUncrossed, my uh my historical
fiction novel based on the lifeof my great-great-grandfather in
(25:05):
the Civil War.
Uh and uh please tell a friendor two about Talking Real Money.
If you would like some morein-depth help from one of our
advisors, we absolutely helppeople.
We don't charge you.
We'll give you a a reallydetailed look at what your
situation is and tell you whatyou might want to do
(25:25):
differently, and you're notgonna get a high pressure sales
pitch, okay?
Not gonna get it.
We'll get your questionsanswered, we'll help you out,
not gonna cost you anything, nohigh pressure sales pitch.
If you want more than an hour'sworth of work, though, or help,
then you need to hire us.
It's only fair.
And what else do I have?
Oh, send your questions in attalkingrealmoney.com.
(25:46):
If you've if you've typed somein, be patient.
Tom's on vacation, so it maytake a little while to get some
of those answered.
And uh I think that covers it.
Thanks for listening to TalkingReal Money.
SPEAKER_08 (25:57):
The opinions and views expressed on this podcast
were current on the daterecorded.
Opinions, estimates, forecasts,and statements of financial
market trends that are based oncurrent market conditions
constitute our judgment and oursubject to change without
notice, including anyforward-looking estimates or
statements which are based oncertain expectations and
assumptions.
Although information andopinions given have been
obtained from or based onsources believed to be reliable,
no warranty or representation ismade as to their correctness,
(26:18):
completeness, or accuracy.
Information presented on thepodcast is not personalized
investment advice from ApolloWell.
The views and strategiesdescribed may not be suitable
for everyone.
This podcast does not identifyall the risks, direct or
indirect, or otherconsiderations which might be
material to you when enteringany financial transaction.
We hope you realize that theinformation provided on Talking
(26:40):
Real Money is for informational,educational, and hopefully
enjoyable purposes only.
The podcast is not trying to getyou to buy yourself any
financial products orsecurities.
Instead, the program is providedas a public service by Apello
Wealth, a fee-only registeredinvestment advisor.
Please see Apello Wealth ADVPart 2 and on our website for
information regardingAppellate's fees and services.
A public capital L O C D B AAppello Wealth is an investment
(27:01):
advisory firm registered withthe Securities and Exchange
Commission.
The firm only transacts businessin the states where it is
properly registered, or excludedor exempted from registration
requirements.
Registration with the FCC or anystate securities authority does
not imply a certain level ofskill of training.
Appello does not provide tax orlegal advice, and nothing either
stated or implied here should beinferred as providing such
advice.
Thanks for listening, and pleasevisit talkingrealmoney.com for
(27:23):
more information and importantdisclosure related to
performance of any specificindex or fund quoted in this
podcast.
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