On the Money Transcript | July 14, 2018

Hello everybody, welcome to another edition of out of money with the Certified Financial Group right here on News 96.5, WDBO, it’s all part of our Ask the Experts weekend. Today we’ve got the Oracle of Orlando, Joe Birk, alongside Aaron Birk, certified planning professionals from the Certified Financial Group here to take your phone calls at 844-220-0965. Good morning gentlemen.

Good morning.


How are you guys today?

Good. Good to be here, thank you.


Alright, well that’s just — July is hot out, summer.

Hey, at least it’s not snowing, baby.

Joe’s what’s on the menu to call us about today?

Aaron and I are here to take your questions that are on your mind regarding your personal finances, things you might be thinking about, decisions that you have to make. As we say, we go through life trying some of this, trying some of that, wake up when we’re 55 years old, look across the kitchen table to Loretta and say honey, we’re going to be retiring here pretty soon, how do we continue doing those things we want to do? We’ll have Social Security, maybe a 401k, maybe an IRA, how do we turn that into income so we can continue enjoying our lives? That’s what we do at the Certified Financial Group, day in and day out for a fee, but on Saturday morning Aaron and I are here absolutely free. So if you have any questions regarding your personal finances, as they revolve <Inaudible> that you might be making about an IRA, about a 401k, about stocks, bonds, real estate, long-term healthcare, IRAs, annuities, life insurance, reverse mortgages, all that and more, we are here to take your questions. The good news is there’s absolutely no one in line, so if you have any questions, anything you’ve been thinking about. There’s no question that is silly, because <Inaudible> we say they don’t teach us this stuff in school, you know? So we kind of stumble through, we read Money Magazine, we talk to our coworkers, we make some dumb moves sometimes. We’re here as your financial body shop to get out the Bondo and we’ll patch you up.

I have a phone. I asked <Inaudible> a lot of dumb questions on this show and you guys make it sound like it was a genius question after.

You don’t ask dumb questions, the questions that you don’t know, don’t know what to ask, or maybe get bad information sometimes can get you in trouble. So our certified financial planner professionals, that’s what we do.

If you want, call us up. 844-220-0965. That’s 844-220-0965. We also have the text machine up and running as well at 21232. Just keep it to about 160 characters, that’s all we can see on our screen. 21232. Aaron Birk has got today’s topic, finding missing money in forgotten 401ks.

So 401k plans are plans at work, and not just specific to 401k plans. Any retirement plan at work, really, people contribute over their working lifetime. They’re at a job, they put money in, they move their job, they get employer matches, they go to a new job. We see this a lot, that people don’t take their 401k plans with them. A lot of times they just leave them sitting where they were, and unfortunately people move, they forget about them, they have small balances, here, there, whatever, and so people forget about their 401ks. We’ve seen this happen before, actually. We had a client come in and we started talking about their work history and what they had done in the past. We always ask did you have a retirement plan there? He’s like you know, I think I did, and this was 20 years ago. We’re like well, can you contact the old employer, are they still around, find out what happened to them? He’s like yeah, I can, so he reached out and actually found $20,000 in an old 401k plan. Which is not normal. That’s not the norm, but it does happen. So what we see a lot of times too is that businesses go out of business, so what happens to those old 401k plans when they go out of business? So really what the point of this topic is about is a way for people to go out and search for plans or lost benefits, whether it be a pension or a 401k plan, and they can go out there — and we actually put a link up on our website through the PBGC, which is  a Pension Benefit Guarantee Corporation. They actually guarantee the benefit on pension plans that basically are defunct or go out of business. So they guarantee those benefits and they’re setting up a website where you can go on and you can actually search by name for lost benefits that may have been reported to them. There’s actually a bill moving through Congress right now that’s going to require as plans shut down to report those benefits to the PBGC so that you can then go find those benefits. So that they’re never really lost to you. The point is that your benefits are never lost, they’re always there. Now there’s a place for you to go look them up if you think that you may have a lost benefit out there. I went out there and just plugged in my name and some old relatives of mine, just to see if there’s any old money sitting out there. I didn’t find any, unfortunately. The idea is to go find some lost money and benefits that my have been available to you.

What was that website, because I’m going to do that right now.

Actually, it’s a long link, so we put it up on our website, financialgroup.com. You can go there. It’s the PBGC Missing Participant link is what it is. So it’s the opportunity to go out there, just see if maybe you’ve got some old money sitting around. The more important thing is as you move employers, take your 401ks with you. Either roll it to an IRA or move it to your new employer’s plan so that you don’t forget about those benefits, because really you could have I think the worst is we had a client come in, we ended up rolling over 10 401ks, old 401ks that weren’t huge balances, but put them all together it adds up. It becomes impossible to manage, and more importantly you forget about them. And you say how could someone forget. You just move, you don’t remember them. Especially when you have that many. Hard to keep track of, so move them, take them with you, and if you think you may have an old one now you have a place to go look it up and look for lost benefits.

There you go. So where is it on the website? Our website, financialgroup.com, but how do I get there once I get to our website there?

Hold on one second.

I’m pulling it up because I’m going to follow along with you. <Inaudible> Very detailed website here.

My web guy told me he put it up on the website. We’ll have it here in a couple minutes. It is on the website.

First thing is go on the website, financialgroup.com, and while you’re there you can sign up for the upcoming workshop. Gary Able has got his big famous well known workshop coming up on Medicare, decisions that you have to make, long-term care, or I should say Medicare decisions.

Healthcare options in retirement.

Thank you very much. That’s coming up when, I think August?

August 25th, in our office, 9:00 to 11:00.


So no cost for that, leave your checkbook at home as we like to say.

Saturday morning?

If you’re interested you can go in and go to our website, sign up for that, and Gary provides great information about healthcare options in retirement.

We had a caller Kelly here on the line, but she had just dropped off as we were about to go to her. She had I think it was a question about using her retirement funds before retirement age.

Well, you can.

<Inaudible> open question, I hope she calls back.

You can, there are some things that you can use your retirement funds for. The thing that you have to keep in mind though is that unless you meet some of the exemptions like first time homebuyer and so forth, you’re going to be hit with not only the taxes that are due on it but an extra 10% penalty. We generally don’t recommend that you do that, we see people doing that and they want to buy a car or they’re in financial difficulties, financial straights, and they cash out their retirement plan only to find out that they end up with maybe 35%, 40% less than what they would have had because of the taxes that are taken right off the top. It can be done, you’re better off if you’re still working to borrow from your plan. Most plans allow you to borrow from your plan, and you pay yourself back. You’re acting as your own bank and you pay yourself back through every paycheck, and that’s a lot better than putting it on a credit card or using one of those, heaven forbid, payday loans or cashing the thing out entirely. There are some options that are available to you generally with most plans.

The blue and yellow building that looks like what could have been an old Blockbuster is not a good place to walk into to get a payday loan.

That is correct, yeah. They stole those colors, didn’t they?

Yeah. Now they’re just as frequent as Blockbusters, it seems like. Got a couple of texts at 21232, that is 21232. I have a Roth IRA that I’ve put $300 a month and it’s about 12,000 now. I am 56 and I also have money market with 10,000. I have no insurance disability. That’s why ask you to keep it to about 160 characters, because that’s all we can see on our screen of your question, text unfortunately did cut off. Joe, can you see what they’re going for there?

Well I think what they’re concerned about, rightfully concerned about, is he’s got a little bit of money set aside in his Roth, $10,000 in money market account, that’s not a lot of money. If you’re looking at if you’re 56 years old and you’re hoping to retire at normal retirement age, that’s not going to work, and the other concern is disability insurance. What if you become disabled and can’t continue to work, what you need to look at is this available to you through your employer, because that’s often times a way to at least buy some form of disability coverage through your employer. That’s what I would be looking at, because that is his biggest asset, is ability to continue to work. If you lose that asset, you’re really in trouble. The bottom line here is for this individual unfortunately it doesn’t — they don’t have a lot of capital accumulated for retirement years. Perhaps he has a pension in addition to Social Security, which will certainly help, but unfortunately most people don’t have pensions today unless you work for the county or city or state governments, or the school system. Well, that’s still the government I guess. Most companies have foregone pensions, so the day of the pension is gone, and what you’ll have is Social Security plus whatever you’ve been able to accumulate over your working lifetime. That’s where you need direction, that’s what Aaron and I and the other 11 certified financial planner professionals at CFG do day in and day out, is helping our clients wade through those decisions that you have to make.

Is there a resource you could find, a calculator maybe, to see how much Social Security you’re going to have at whatever age you decide you want to retire at?

Actually the best place to go is the Social Security website. You can go to ssa.gov/estimator, and you can actually plug in — you know your Social Security number, they know your work history, plug in your date of birth, mother’s maiden name, all that kind of stuff. They can spit back to you what your benefit is projected to be at your full retirement age.


You can also do what if games. So you can say well I’m not going to — they assume that you’re going to continue to earn at your current rate, but you can plug in what if I don’t earn anything going forward, something like that if it’s going to be, because then it recalculates what your projected benefits will be. We do that with planning clients. You come in and say hey, I want to retire at 60, say well go to Social Security and plug in what your benefit is going to be, assuming zeroes, and a lot of times they’re shocked about the reduction because they just don’t have the work history to support that bigger benefit assuming that they keep working at the same level.


You want to be careful when you get those Social Security estimates if you’re still in the workforce, as Aaron said, it assumes that you’re going to continue to work until your full retirement age at or near your current income. If that drops off or is eliminated, your benefit will be reduced. It’s the high 35 years that determines your Social Security benefit, your retirement benefit, anyway.

The texter was listening to that answer, and he texted the rest of his question. At 56, money market account. It’s up here at the top. I have no insurance, disability or life insurance, what would be my next step?

Well, the question is do we need life insurance? You don’t need life insurance if you don’t have any dependents. In other words, if you pass away and is there anybody that’s dependent on your income? If there is, then the next thing you want to look at is life insurance, the best form of life insurance is term insurance. You can go select quote, go online, get it, and don’t be fooled into buying one of the insurance programs that says you can also use it for retirement. We hear a lot of these ads and so forth and I just got a message there from our TV director says what, this week’s must read! Okay.

This week’s must read I think is where we put the link for the lost and forgotten 401k link. If you’re interested in finding out where — if you may have any benefits out there, you go to our website, on the right hand side under news is This Week’s Must Read, and we posted that link there, so you can go to the PBGC and look to plug your name in there and see if maybe you forgot a 401k or pension somewhere.

Yeah, that’s huge.

Or, more importantly, did your parents forget a 401k or pension out there or something like that where there’s still outstanding benefits that you may be eligible for? That happened actually with my grandmother and Joe, after she had passed away, they found out they had an old pension sitting out there.

Hey, there you go.

Should have told us about it, we never knew about it, mom passed away a couple years ago and all of a sudden we get this letter that she’s got this money. Then the bad part about it was is it had to go through probate, because it wasn’t set up properly and my mother wouldn’t listen to me, what does her kid know.

Oh yeah, trust me.


Works out.

You don’t know anything. I go ah, you’ve spent all the money for me to learn it. Just saying. 844-220-0965 is the number to jump in on the conversation. The text machine has just exploded today. We’ve got a lot of great text questions. We’ll get to them right after we get the three big things we need to know, but if you want to get on the phone line it’s 844-220-0965. 844-220-0965. We are planning tomorrow today with Joe and Aaron Birk right here from Certified Financial Group on News 96.5 WDBO.

Welcome back to On The Money with the Certified Financial Group right here on News 96.5, WDBO. We are here taking your phone calls at 844-220-0965. That’s 844-220-0965. We also have the text machine up and running as well at 21232. Just keep it about 160 characters, that’s all we can see on our screen. 21232. Joe and Aaron Birk are here live in the studio from the Certified Financial Group. Not only are we taking your phone calls, we’re also taking your Facebook Live comments, right Joe?

How do they do that, Kyle, you’re the expert, what do they need to do?

You tell me, I don’t know where we’re going on Facebook.

What are we doing, how do they find — <Inaudible>.

You blew me up there, I don’t have any <Inaudible>.

Why don’t you go to Facebook and then hit the Certified Financial Group in the search bar, and then they’ve got — scroll down and they’ve got their live video up and running.

Facebook.com, you can go to the CFG, Certified Financial Group page that we have. Like us, the next time we go live you will get a notification that we went live, and you can then go in and see us there broadcasting and see my lovely face, as well as Joe, and my son’s here too in the background and you’ll get to see the whole crew out here.

How we doing?

So this is the new — and I understand we’ve got a whole new studio that WDBO is building out especially for us.

I don’t know what you’re talking about, at all. I don’t know what you’re talking about whatsoever. 844-220-0965. Let’s get back to our text questions here. Question for the financial experts, I am 51 years old and have not started thinking about my future yet and retirement. What direction should I be looking into? I know I’m starting late but that’s pretty much the cards that life dealt me. I am married, but my wife does not work.

Alright, so you’ve got to face reality here, you’re 51 years old. You’ve got at least 15 years, 16 years before you’re eligible for full Social Security benefits. The most important thing that you need right now, my friend, is some retirement savings. The first thing we would ask him, Aaron, is what?

Do you have a 401k at work?

Right. If you have a 401k at work, what do we tell him?

Max it out.

Max it out, and at his age he can put in how much?


Right, and depending on what his total income is on top of that they can do what?

They could possibly do a spousal IRA for his wife if she’s not working, so that’s assuming she’s over 50, that’s another $6,500.

You’re pretty good. <Inaudible>.

That’s the key, you want to max out your contribution to your retirement plan. The benefit is that you get an immediate tax deduction, everybody is looking for tax deductions come tax time, so it’s right off the top. You start slamming some money in there, it’s even better if your employer matches because that’s free money. <Inaudible> if your company doesn’t match, you want to put that money in the 401k. It will grow for you a lot faster than trying to save money outside of a retirement plan. It’s not very complicated, just look at a target-date fund that’s designed to coincide with your retirement date and put in as much as you can as fast as you can. If your wife doesn’t work, that’s — it’d be helpful if you had more income. Assuming the kids are out of the house and she’s able or capable of doing something on the outside, any little bit that you can help, that you can save for the next 15, 16 years will make a huge difference when you get into your 80s. Because my friend, that’s what you need to do. We’re facing a retirement crisis in this country, an actual retirement crisis in this country and the reason being is because his generation, my generation did not see our parents and grandparents struggle for the most part. Our parents, grandparents, the retired, the house is generally paid for, they had — many of them had pensions, they had their Social Security, they didn’t have the big weddings, didn’t have the college expenses. So we looked at mom and dad and said you know, we didn’t have to think about retirement. They’re okay. Now we’re in our 50s and realized that we don’t have what mom and dad had. We had the colleges, we had big weddings, we had the expenses, the medical things, all those things you had, and in some cases we’re taking care of mom and dad!


So we have a retirement crisis in this country. The sooner that you begin to plan for it, the easier it is. The toughest cases that Aaron and I worked on are clients that have come to see us and they’ve retired and they haven’t done any planning, right, Aaron?

Yeah, like this guy, if he we’re to walk into our office after retiring and really had no savings and is relying on Social Security. Because really, it’s all about cash flow. What money do you have coming and what money do you have going out? My guess with him is that he’s got as much going out as he has coming in or he’d be saving something.


So he needs to make the decision, if you want to continue your lifestyle at the current spending rate, when you stop working, where are those paychecks going to come from?


If you’re not saving for yourself, you’re going to have either drastic, different lifestyle when you stop working or you’re going to work until you die. So it’s — that’s really what we do when we do planning, is you’ve got to look at money coming in, money going out and run projections.

We don’t pull any punches, like you go to your doctor and say doc, how am I doing, and if you have an illness that needs to be cured, <Inaudible> tell you, and if it can’t be cured — well, all situations can generally be fixed, but unfortunately some of them take some radical decisions. Downsizing your house, getting another job, working longer, changing your lifestyle, but we will tell you. We don’t pull any punches in the certified financial planners, that’s what our clients hire us to do.

Alright, if you have a question for the panel, it’s 844-220-0965. That’s 844-220-0965. We are planning tomorrow today with Joe and Aaron Birk from Certified Financial Group. Time for the news, here’s Dave Wall.

Welcome back to On The Money with the Certified Financial Group right here on News 96.5, WDBO. We are here taking your phone calls at 844-220-0965. That’s 844-220-0965, with Joe Birk, the Oracle of Orlando, alongside Aaron Birk, both certified planning professionals from the Certified Financial Group. Joe, for anybody who may have joined us during the latest news, weather, and traffic, what they can call you about today?

Aaron and I are here to take your calls that might be on your mind, answer questions that might be on your mind regarding your personal finances. As we say, we go through life, trying some of this, trying some of that, wake up at 55 years old and find out we may not be ready. So at Certified Financial Group, the certified financial planner professionals, we do financial planning, retirement planning, wealth management for a fee, And we work with our clients to show them what they need to do now so they don’t look back 5 or 10 years from now and say gee, I wish I would have known, gee, I wish somebody would have told me this. And that’s what we do. But on Saturday morning, we do it absolutely for free. So if you have any questions regarding your personal financials, we are here to take your calls and you don’t even need to identify yourself. You can pretend that you’re a Jack or a Daphne or a Loretta or whomever you want to be, and we will do it that way.

Do you actually know a Loretta?

Do I know a Loretta?

Loretta Lynch <?>, that’s the only Loretta I’ve ever — Not that I’ve ever met.

Loretta Young. Remember Loretta Young?

There was a lot of Loretta’s back in Joe’s day.

I guess so.

Anyway. So we are here. The good news for you is that the lines are wide open. We’ve got some texts we want to answer, but if you want to get on the air. And we’re also Facebook live. If you want to see what it looks like here in the studio, what Aaron are working with here this morning, all you have to do is go to Facebook.com, right, plug in in the search bar there Certified Financial Group. Our page will come up and you’ll see us live and you can see what’s going on right here behind the scenes.

Yeah, actually you can ask questions through there too, because we’re monitoring it.

Oh there we go.

<Inaudible> asking a question, we’ll take them through there as well.

Okay, smooth.

We’ve got text, <Inaudible>

Not only —

Phone number to dial us up is 844-220-0965. 844-220-0965. Or you could text us, 21232. Just keep it about 160 characters, that’s all we can see on our screen. That’s 21232. Got a text question here. At age 55, is it better to take a lump sum or roll over to a self-directed IRA?

Well, it depends. It depends on if you need the money. Normally, it’s not a good idea to do the lump sum. I’m assuming by saying lump sum, they want to cash in their account, pay all the taxes, and have the cash in the bank.

That is not a good move.

Which is usually not the best move to make. So, normally it’s best to roll it into a self-directed IRA assuming that you don’t need the money in a lump sum. Most people don’t need the — Now, I will point out one thing, though, that if you do move it into an IRA, if you’re younger than 59 and a half and you do end up needing the money, you’re going to end up paying income tax and a 10% penalty. So if you think between — but, that is excluded if you are working — or if you leave it in the retirement plan at work. So from 55 to 59 and a half, you could take withdrawals from your retirement plan at work and not deal with that 10% penalty. So if you do think you’re going to need money, it’s better to leave it in the company plan and then just take it as you need it from there versus doing a lump sum. You can leave it in the plan. As long as you have over $5,000, they can’t kick you out. So if you think you’re going to need money between 55 and 59 and a half, leave it in the plan and then take it as you need it.

Yeah, that’s some of the things you have to look at when you try to make those decisions. Unfortunately, some folks go to these folks that want to manage their money and say yeah, take all your money out of your 401k, roll it into this IRA, and your 56 years old and they don’t tell you that you could have avoided the 10% penalty if you need the money between 56 and 59 and a half. So these are the things that we look at and deal with every day as certified financial planner professionals and why we charge a fee and not try to sell you something. That’s what we do.

I saw Loretta just called. So that’s —

Loretta. Alright, Loretta is here.

You want to take Loretta?

Let’s talk to Loretta.

Good morning Loretta.

The good old Loretta, here <Inaudible>. How are you?

Now I know a Loretta.

It’s Loretta.

Sounds like Loretto.

What’s up Loretta?

I’ve got a question about my 403b account. If I changing jobs that doesn’t have a 403b, can I change that into anything?

Yes you can. You can roll it into the 401k at your job.

Can I roll it into my private Roth?

You could put it into a Roth. Unfortunately, you’ll have to pay taxes on the money that you take out of the 403b and put in the Roth, so you don’t want to do that. What you want to do is —


What you want to do is keep the money growing without being taxed for as long as you can. So the options that you have are roll it into an IRA totally tax-free, leave it in the 403b, and/or roll it into a 401k at your new job. So those are the things you want to do.


You want to avoid the taxes at all cost and you don’t want to cash it out.

Well, Loretta, we really appreciate the call.

Thank you.

Take care.

Alright, Loretta. From Loretta, let’s go to Richard. Richard in Bravard County. Go ahead, you’re on with the Certified Financial Group.

Richard, what’s up?

Yes sir, I’m a single man <Inaudible> dependant. Fortunately, I’ve been a great investor and saver over the years, had a good Scottish mother who taught me a work ethic and how to save. <Inaudible> I’ve got a neighbor around the corner, I’ve known him since I was 10 years old, and he’s got not a penny to his name and he’s barely getting by, lives in a home owned by a very shit brother. Has nothing. I’m just wondering, can I come forward and set up a retirement account for him?

You can’t set up a — Does he work?

Over the years he’s had little, menial odd jobs. He’s run up some huge credit card debt. Which leads to the second question. One credit card has an interest rate of over 26%. Is that legal and is there any recourse against that? But could I involve myself in his life with setting up some retirement account for him that he can’t touch?

Alright, so what you really want to do is you want to put this money into a trust for him. A retirement account, if you put in — retirement account — actually, when we think of retirement accounts, we’re thinking about IRAs, 401ks, those kinds of things. Those things are controlled by the owner, and in this case it would be your neighbor. So that’s out the window. What I hear you saying is that you have been disciplined throughout your life, you’ve saved money and you want to — you’re charitably inclined and you want to help your neighbor. The best way to do that is to set up a trust of a — for his benefit. Now, do you want him to get his money now or when you’re gone or what’s your intention there?

I definitely want — again, I don’t want him to touch it, so it’s for down the road. Now, we’re both about the same age, late 50s, and I don’t want him to have access to it now.

Okay. So you want to — Okay.

I really don’t — I’d love to do it for free. I don’t want to pay for a trust and have someone else oversee it. Is that doable?

Well, you can oversee it. It’s just that you would set that up with him as the beneficiary in case something happened to you, then a trustee would be named to then carry on your wishes of him not being able to get a lump sum of money. So you would set up a — you could do a living trust with you as the trustee, him as the beneficiary. You could make contributions to that living trust every year. The trust will growing however you invest it.


And then whatever the stipulations of the trust are for him to make withdrawals, he would have to meet those in order for him to get the money in the future. And then if something happens to you, you then name a successor trustee within that trust to continue to carry on your wishes with that lump sum of money.

Okay. What is the fee like for setting up a trust for this individual?

Well, we’re not attorneys and there’s going to be different expenses. It depends on how complicated or straightforward the situation is. I would imagine in the range of $1,000 or $1,500. It’s not a big deal. Let’s think this through, though, a little bit. So, here’s your neighbor. He’s really up against it. You’re charitably inclined. I think what I hear you saying is you want to be sure he’s got food on the table and the lights are on.

Yeah, he’s getting by, but I want to make sure the lights are turned on and there’s food on the table down the road.

Okay, now let’s stop there. Down the road. Does that mean when you’re no longer — when you’re not his neighbor because you’ve died and he’s still living and now the lights are off and there’s no food on the table?

Well, I’m a control freak, and that’s how I made my money and that’s <Inaudible> learning to save, so I want to be in charge, I want to have a say until I’m not around in case something happens to me.


But I’m healthy and I expect to be around a long time.

Okay. But you’re saying in the event that you get hit by the car this afternoon and he’s still <Inaudible> on, you want to be sure that the lights are on and food is on the table for him?

That’s right.

Okay. So, as Aaron said, what you want to do is create some form of living trust. You still control it during your lifetime and then when you’re gone you’re going to name a successor trustee, somebody that you trust, your spouse, your brother or somebody that can then, under the terms of the trust, will — he will be entitled or be able to receive money to pay his light bill, to provide medical care, whatever stipulations that you want to put in that trust, that’s a way to control it from the grave. During your lifetime, there’s nothing wrong with you just writing a check. Now, you have gift tax problems here if you start giving him more than $15,000 a year. You have to file a gift tax. There’s no taxes that are due because of the credits that offset that tax, but technically if you give him more than $15,000 then you have a gift tax consideration, unless you’re married and you and your wife can give him 15,000 apiece, or you and — however you <Inaudible>. But an individual is limited to a $15,000 per year without triggering some —

If it goes into a living trust, it’s not really a gift until the point that he starts getting distributions from it.

So when you say gift tax, would that include a medical emergency that I paid over 15,000 for?


Well, unless you pay the doctor directly. If you pay the doctor directly, there’s really no —

If I paid cash directly to the doctor.


There’s no gift tax there.

Yeah? Are we sure?

Yeah, for medical and for education you can pay the institution directly and it doesn’t count as a gift.

There you go.

And how about his credit card interest of over 26%.

Well, that’s the killer. He’s definitely —

Is that allowable?

Well, if you pay off his credit card debt, that’s definitely a gift. And you would —

I wouldn’t want to touch that with a 10′ pole.

Pardon me?

I don’t want to touch that with a 10′ pole.

Yeah, I understand that. And you don’t want the credit card company to touch whatever you’re going to have for him. So keeping control of the assets is the best thing you could do.

But is that legal, though? The interest over 26%.

Oh yeah. Yeah, unfortunately.

That’s the fine print in the credit cards. Yep, that’s where the banks are making their money today, unfortunately. They’re taking advantage of people that don’t read the fine print or get in trouble and the only recourse they have is to put it on a credit card. That’s why you need to have emergency funds.

Now, there — I would say —

That’s why I want to keep the money. If I set something up, I would want to keep him away from it because he’s the same guy that signed up for the 26% interest.

Sure, I understand.

If he’s getting buried under debt, there are debt counselors that can renegotiate those rates for him and work on getting some of that debt forgiven. So that’s something —

And do you think it was a good idea for me to tell him for God’s sakes, quit making your $10, $20 payment on your credit card debt and call back and tell them with a lesser rate you can begin making payments. But don’t continue to make payments when you’re under this cloud of 26%.

Yeah, what he needs —

He needs to go talk to a debt counselor.

Call our office on Monday. We’ve got a good one that we can recommend him to that could probably help him clean up his mess. That’s the first step. Because he’s never going to get out from under it. But we appreciate the call.

Thanks Richard.

Appreciate your kind heart and helping your neighbor. That’s a wonderful thing.

Yeah, it’s a good thing. We need to see more Richards  out there. <Inaudible>

Yeah, more Richards.

Alrighty Richard, thanks so much for the phone call. <Inaudible> it’s 844-220-0965, 844-220-0965. Let’s go to Susan in Orlando. Susan, you’re on with the Certified Financial Group. Good morning.

Good morning Susan.

Good morning. Thanks for taking my call.


Can I briefly make a comment about the man that just called.


What a sweet man, but reading kind of between the lines, I would really wonder if this gentleman <Inaudible> extreme physical or perhaps mental health needs, he might be looking at a special needs trust, otherwise, depending on what — unless the gentleman is just making poor choices and down on his luck, but I hope he gets a really good attorney to sort that out. Because otherwise, he could disqualify him for benefits in the future. But anyway, my question is <Inaudible> of a spouse that has permanent disability, had a catastrophic stroke, left a company after 30-odd years, the decision is looming if you’re certain you’re going to stay in the primary residence, do you pay off the primary residence, which would still leave some funds, or is it better to just not pay it off? There’s a heated debate happening in our family and we’ve got some dividing lines going on, pay it off or don’t pay it off. It’s in a very nice area and the payoff is very, very reasonable. Even if the market entirely flooded and we’d wanted to sell it, there would still be ample —

Alright, let be sure I understand. You’re connection, you kind of sound like you’re underwater. I don’t know if it’s my headphone.

Yeah, a little bit.

Yeah, you’re connection sounds like you’re underwater. But let me see if I can recap what you just said. You have a situation where the income has stopped due to medical situations and the question is should you pay off the house. Is that the bottom line?


Okay. I can say it depends. It depends on what the interest rate is. It depends on how far you are into the mortgage. There’s two sides to this question. One is the financial, one is the psychological. We can help you with the financial. The psychological is the one you’ll have to deal with. Now, the point is of course as you pointed out, if you pay off the mortgage, what you’ve done is you’ve just dumped a whole bunch of capital into your house and you can’t go to the kitchen sink, turn on the faucet, and get what we call cash flow. It’s going to be tied up in your home. Now, if you plan on staying in the home, then you may want to consider doing a reverse mortgage where you can get money out of your home, or maybe, depending on the equity that you have in your home, you can pay off your existing mortgage with a reverse mortgage and stop the mortgage payments and still have your cash flow. How old are you and/or your spouse?

58 and 54.

It’s not going to work. You have to —

Yeah, there’s adequate — We wouldn’t want — We’re not interested in a reverse mortgage. There’s no — There’s still adequate cash flow even if we pay off the house.


The other question is where is the money going to come from to pay of the house? Do you have cash sitting there or are you pulling it out of a retirement plan?

We have cash in a retirement account.

No, no, no. Don’t touch the —

That —

Hold it, hold it.

And now because of illness, they are no longer able to work.

Hold it, hold it, hold it.

We can even roll it over into a self-directed IRA, borrow against it, pay off the house, or just pull it out totally and take a little bit of a tax hit.

No, I wouldn’t do that.


You don’t want to pull it out of your retirement plan to pay off the house. Especially if your rate is low. I would assume your rate is relatively low. Yes?

Interest rate.

Yeah, and it’s not going to take all of it to pay off the house either, that’s the whole thing.

No, I wouldn’t do that.

Do not go near your retirement plan or pull money out of your retirement account to pay off the house. Do not do that under any circumstances. Unless you’re in a 0% tax bracket and you’re only going to take $10,000 or something, because you’re going to take a haircut on that money, it does not make sense to do that.

Okie doke, well thank you for you that information.

I could not be more explicit about that decision.

Yeah, we get that question a lot, actually, and I think we have another caller on here that has the exact same question.

Michelle on line one has got a —

Pretty much the same question.

And that — Well, and that goes to the psychological part that Joe was — I mean there’s the financial part and there’s the psychological part. The financial part, it doesn’t make sense to pay 20% in tax or 10% in tax, usually, to take the money out of a retirement plan in order to pay off a loan that’s probably at under 4%. And if you’re on the tail end of that loan, you’ve probably already paid all the interest and you’re just paying capital. So why pay basically an interest-free loan — why pay 10% to pay off an interest-free loan? That’s kind of the way you’ve got to look at it. It doesn’t make sense most of the time.

In most cases it doesn’t make sense. There are always the exceptions, but in most cases it doesn’t make sense. And you know, it’s that old psychological thing, I want to have the house paid for when I get into retirement, but sometimes you shoot yourself in the foot by trying to do that.

That’s a question we see a lot.

That’s why I asked, where’s the money coming from. I mean, if you’ve got $100,000 sitting in the bank earning nothing and it’s in just a bank account or savings account, then — and you’ve just started the loan and you’re paying 7% interest, yeah, I mean then maybe it makes sense. But not if you’re in a low rate, you’re on the tail end of a loan and it’s coming out of a retirement plan. That doesn’t usually add up.

Well, thanks so much for the call, Susan, we appreciate it. Michelle <Inaudible>, we hope you were listening, because that answers that question. But we’ll talk to you on the other side if you want to have a little follow-up. 844-220-0965. We are planning tomorrow today with the Certified Financial Group. Time to <Inaudible> three big things you need to know.

It is the final seem to right here on News 96.5 WDBO of the Certified Financial Group’s On The Money. 844-220-0965. Joe Byrd and Aaron Byrd are live here in the studio answering your questions. We want to get right back to them, as we only have three minutes left. Two minutes left now. Let’s go to Paul in Orlando. Paul, go ahead.

Paul, what’s up?

On a certificate of deposit, what is a survivor option?

What do you mean by survivor option?

I don’t know, it says this CD is — has a survivor option.

CD has a survivor option? Well, perhaps that means —

You can name a beneficiary.

I looked it up on Google and it’s something about putable <?>.

Putable? This does not ring a bell at all. The only thing I’m thinking of is that the — that a named beneficiary can continue the CD without cashing it in at the current rate. So do you have the CD in joint names or is it — you have it —

It’s a brokerage.

It’s a brokerage CD. So chances are that you have named somebody as a beneficiary on this CD, is that correct?

No, it’s just in the account, in the brokerage account.

So on the brokerage account, is that set up as transfer on death? TOD, that if something happens to you —

It’s in a joint tenant account.

Okay. Looks like brokerage CDs, you’ve got to check to see if there’s trading at a premium above the — because they basically are traded, so what you want to go out and see is whether or not they’re trading at a premium. If they’re trading at a premium, then you can — then your survivor will want to continue that. Otherwise, they would just cash it in at face value and get the interest.

On a regular CD, say, at a bank, does the beneficiary, after the owner dies, do they carry on the CD or do they have to cash it in?

Well, first of all, there is no beneficiary unless you set it up as what’s called POD at a bank, pay on death, or in trust for. So there’s no beneficiaries, unlike a retirement account or an IRA or something like that. But we’re out of time.

Yeah, we are. We’ve got 15 seconds left. Websites, numbers.

Check us out online, financialgroup.com. We’re also on Facebook. If you go on Facebook, search Certified Financial Group and call our office on Monday, 407-869-9800 or 1-800-Execute. So look us up.

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