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Don't miss out on the ultimate thrifting experience at our Pix Exchange parking lot anniversary sale at our Torrance location. Visit pixexchangehh.org for more details. Today on Radical Personal Finance it's live Q&A! Welcome to Radical Personal Finance, the show dedicated to providing you with knowledge, skills, insight and encouragement. You need to live a rich and meaningful life now while building a plan for financial freedom in 10 years or less.

My name is Joshua and I am your host. Today live Q&A. I've been doing a special series of live Q&A shows this week and we round out with our third one. This will be the last one for a little while that's open to the entire audience of the show.

I usually restrict these Q&A calls to patrons of the show, those of you who find enough value in the show to financially support it. You can do that if you're interested in doing that at radicalpersonalfinance.com/patron. Radicalpersonalfinance.com/patron. Thank you to the many of you who do support the show that way.

But this week I've been doing a special series of live Q&A shows. Super fun. We can give interesting questions with people that we don't usually get to talk to. So our first caller today is Karen in California. Karen, welcome to Radical Personal Finance. How can I serve you today, please?

Thank you, Joshua. I'm calling because I'm trying to figure out for me and my husband what we should do next with our finances. We're older, so I'm 46. He is 49. But we've only been married about five and a half years. But when I married him, we had a lot of student loans from his end.

And I really had to organize the finances for us. And we were able to get on track. And we actually paid it all off a couple months ago. It was $140,000 worth of student loans. We both had a career change, and so that's how the student loans came about.

But at this point, I'm trying to figure out with moving forward what we should do next. If we should just really focus on the retirement, or we should buy a home, or maybe we can do part of, like, you know, I know people have told me you can buy a home, and that could be part of your retirement, too.

So I'm really not sure what to do because the finances are limited, but housing is very expensive here, and we also need to retire at some point. What's your household income? Right now, our household income is about $140,000. Do you expect that to continue at $140,000, or do you expect any dramatic increases or decreases?

It will probably stay about the same. There might be some increases coming up over the years. The income actually increased significantly just last year because I changed jobs. So I think at this point, $140,000 is a good number, but then it might increase a little bit every year. Okay.

And how much money do you guys have just in savings, non-retirement accounts, just money that's available to you in bank accounts, things like that? We have $100,000. And how much money in retirement accounts, IRAs, Roth IRAs, that type of thing? It's $200,000. And do you have any other major assets, a home somewhere else, any other major financial assets?

No. I actually had a condo in Georgia, but I sold it, and that's where the cash came from. Great. And do you owe any money to anybody for any reason? No. We only have a car loan of about $60,000. You broke up just a little bit. How much? $16,000.

And how much is the car worth? I don't know, actually. Probably about the same. Okay. Well, conceptually, you're living in California. Why would you choose to buy a house in California? Well, because we're considering living here long-term, and the job market is very good for us. Do you want to own a house?

Not necessarily, but it seems like the right thing to do. Why? I don't know. It seems like if I don't own something, the rent continues to grow. And if we want to stay here, it only makes sense at some point to buy something. Have you gone shopping for places to rent and/or places to buy?

I've looked at what houses might be available to us to buy. And, actually, with the amount that I – the mortgage I'm looking at, it's limited, but possible in terms of housing that's available to buy. So if you did buy a house, how much would it cost and how much would the house cost?

Yeah. So I'm looking at all the houses. Most of the houses in the market is about a million dollars, but there are houses that are like $600,000 or $700,000. So I'm looking at possibly if I can own something that's $500,000 to $600,000, that would be wonderful. And how much – to rent the place that you're living now, how much are you paying each month in rent?

So right now, rent is pretty fair. It's about $1,800, but that's only because we started – we rented it about six years ago. So they can't really increase it too much every year, but the landlord has been increasing it every month – I mean, every year by about $150 each year, a month.

So I know at some point he might either try to kick us out or – because rental market is about, for my apartment, probably about $2,500. Based upon where you're living now and the lifestyle associated with how you're living, are you and your husband happy? Yes. Based on what you're describing, I don't see a whole lot of advantage to buying.

Now, California real estate is very difficult. Let me just give you some things to think about because ultimately you're going to have to make these decisions obviously. But California real estate is a unique animal. Let's talk conceptually generally first. Reasons to buy, reasons to rent. It's my conviction. I'm convinced generally that rentals are often going to be about the same financial results as owning a house, especially by the time you factor in the care and the maintenance of a place to live and et cetera.

Many landlords underprice their property. Now, the problem is that has to be expressed locally. It has to be looked at locally. Sometimes you'll find that rents are very high. Sometimes you'll find that rents are very low. What you're describing to me, without knowing the exact properties involved, if you can rent a place that you're happy with for $1,800 or the alternative cost is to go and to buy a house that may cost you somewhere between $600,000 and a million dollars, if both of those bring you equal satisfaction in terms of lifestyle, no question, given that scenario, I would rent because there's just such a dramatic difference in your flexibility.

There's such a dramatic difference there and it sounds like you have an undermarket rent, which is helpful. If your landlord is increasing your rents once a year, that's great. That's exactly what they should be doing. That's exactly how they should be reacting. After all, the value of property all around has been increasing in recent years and that will – and it's only just and fair that the landlord should be able to increase your rents steadily.

So you should keep an eye on the rental market locally for equivalent housing units and see am I getting a fair rent. But it sounds like you have an undermarket rent. If you're happy with that, there's no way in the world that you could own a house where the pure cost, ignoring any kind of investment options, there's no way in the world you could own a house with a $600,000 to a million-dollar price tag and have the pure cost of your taxes and your insurance and your just simple costs of acquisition, et cetera, that would be anything less than $1,800 a month.

You would not be building equity just because you went on and took on a $2,500 or $3,000 a month mortgage payment. Your pure cost will be more than your rental expense. Now there may be a lifestyle difference. For example, I don't know if those prices that you're quoting are related to the same kind of place that you're living now.

What happens often is when people move and especially when people buy, they often tend to buy more house than they would otherwise rent. That's why I asked you the question about lifestyle satisfaction. Given what you've described to me, sounds like rental is just probably conceptually better. It gives you more freedom, gives you more flexibility and it's going to have a lower net cost for you at this point in time.

Now with regard to California real estate, you could make an argument and say, "Well, we're going to be here for the very, very long term. The local job market is good to us in our careers. We're going to be here for the very long term." I don't know enough about your local area to be confident in giving any kind of real estate advice.

California real estate seems and feels to me, living on the other side of the country, like it's a very heady market right now. Now it's hard because real estate prices are supported by jobs and there are pockets in the California marketplace where there are very high incomes and there are very high wages and those very high incomes and very high wages push up real estate prices.

Those little pockets where high income earners live tend to have high real estate appreciation. Now will that continue? I don't know and it's impossible for me to know but you would have to very carefully assess that. In general, I'm personally from observationally the other side of the country, I would be pretty nervous about owning California real estate at this point in time based upon what I can see, not being a local.

So you would have to assess that. Now let's talk conceptually because of the basic question you asked of retirement versus real estate. Whatever you choose to do, you should probably focus on retirement and saving and investing for retirement. Even if you do choose to buy a place to live, if I woke up in your shoes, I would probably put the minimal amount of money down on that property and I would focus on accumulating more investment assets at this point in time.

I wouldn't use a lot of money and I wouldn't use a lot of income to buy real estate and I think that you should be very careful to not change the asset allocation of your portfolio to be very heavy in real estate. Realistically speaking, sounds like these career changes have been good for you.

But at this point in time, you don't have a ton of money compared to the amount of money that you're earning. So these new earnings, you need to take some time and have them build up. You have $100,000 in cash. That's probably a very decent amount to keep in cash.

I wouldn't be concerned about having $50,000 to $70,000 as my emergency fund if I were living in California in your situation and I wouldn't be upset about having – keeping that other money around in case I did want to buy something, adjust something, move somewhere, etc. So to me, having $100,000 of cash feels pretty good.

Now having $200,000 in retirement accounts means that you have some exposure to investment assets. If you were to go and to purchase a $600,000 or a million-dollar property, let's say that you were to put 10% down on that property, you'll start to be heavily weighted towards real estate and I think this is a danger for you because the thing that would affect California real estate prices would be a change in employment.

If there were a change in wages, change in the economy that affect change in wages, stock bonuses went down, that would have an impact in time on the local California real estate market, would cause it to decline and that change in wages could affect you and your husband and your income and also affect your real estate.

This is one of the reasons why it's unwise for people to put so much money into their own personal real estate. People are often so heavily weighted in personal real estate. So for all these reasons, I like the idea of your building up a bigger investment portfolio. I like the idea of your having more diversity and if you can live happily and rent for $1,800 a month in a market where you would need to pay $600,000 to a million dollars to buy a place to live, I think I would personally, I'd be renting very happily.

Okay. So let's say the concern I have is that the rental market or the rent that I'm paying may change very quickly. If it goes up significantly, would your thinking be different? You're asking a question about the future that is unknowable. So here would be – that is a concern and that is one of the challenges of being a tenant.

It is possible that your landlord will adjust your rents relatively quickly. Now what protection do you have from that? Well, number one, you have a lease I would guess of some kind that probably can reset on an annual basis. Number two, you have the local market and your landlord wants to be competitive in the local market.

And so there's going to be some reason why the local rental market is changing. Your landlord can't all of a sudden say, "I'm going to double your rent from $1,800 a month to $3,600 a month and everything around costs $2,000 a month." You would move out and you'd find a different place.

So the only reason your landlord is adjusting the rent is going to be because in the local base and local area, the rents are changing. And what you described to me, if you've been somewhere for quite a while and if you are a good tenant, most landlords I think would be – are happier to have a good tenant who pays reliably, doesn't cause a lot of problems and they're happy to take a little bit of an undermarket rent.

So I'm just not that concerned about your rent going from $1,800 a month to $2,000 a month next year. That's not going to make a big difference. Now you have the exact same risk if you flip it around and say, "Well, if we buy a house," and here would be the example because now we have the risk of housing prices changing.

If you buy a house that costs $800,000 and there's just a minor 10% correction in the cost of housing, that's $80,000 of value that you could lose if you purchased a house and there were a decrease. Of course it could go the other way. You could have a 10% increase in the value of housing.

But it's not unusual to have a 10% swing in the price of houses. So there's risk either way and if you think about it and you compare the risk of having a house that's $800,000, having a 10% correction in the real estate market, which is going to cost you $80,000 of value, if you take $80,000 out, you would have to have a major – let's do it this way.

At $1,800 a month, if you had an $80,000 decrease in the value of your home, 80,000 divided by 1,800, that would be the equivalent of 44 months or four years of rent, of your total rent. So your risk, your personal financial risk as a tenant in this case is much, much lower than your personal financial risk as a homeowner.

Okay. That makes sense. I guess I was thinking how housing is so limited. So housing for sale, buying a home is a good investment because it may just increase significantly and rent is increasing so significantly maybe so that maybe it makes sense to buy. But now I have more to think about.

So go back in the early archives of Radical Personal Finance and I did some shows on real estate, how to do a rent versus buy analysis. In your case, I would do one very simple analysis. You take a property that you would be interested in buying. Find an actual property that's listed.

Calculate what you would need to do to get a mortgage for it, how much money you would need to put down, calculate what type of mortgage rate you would be eligible for, calculate the cost of taxes and the cost of insurance. And I'd wager with you that when you do that, I bet you will find the pure cost of that home.

By cost, I mean the cost of your annual real estate taxes, the cost of your annual insurance coverage and any other pure costs – sorry, the cost of interest on your mortgage. Those three costs, I would bet that those three costs are in excess of what you're paying in rent by a substantial margin.

Now you go run the math and if you find that it's very different than that, go ahead. You might find otherwise. But to me, I would say that those pure costs are going to be very, very substantial to you. So I'm going to run the math on your specific situation, but based upon what you're describing, if I woke up in your shoes, I think I would rent.

Dean in Alabama, welcome to Radical Personal Finance, sir. Well, thank you, Joshua. It is great to be able to talk to you and I want to say thanks because you do take a different spin on personal finance than most of the other shows do. So I guess that's why it's called Radical.

My pleasure. I hope that it's actually a useful spin. How can I serve you today, sir? Great, great, great. Well, my question is about the donor advised funds. I'm wanting to use one to front load my future charitable contributions. And the reason I'm thinking about doing that is I want to put a large sum in there.

When I say large, it's large for me, you know, $75,000, $80,000. And my goal has always been to try to stay in the 15% tax bracket, which gives me plenty, plenty, plenty of money to spend, but I will never see any tax deductions because it's hard to make it past the standard deduction.

So I thought if I front loaded, took the deduction this year, which would be large, then I would have a fund to pull from to make charitable contributions and keep my standard deduction kind of a way of making more cash flow. Do you have a high income year this year or do you have another?

Is there a is there something that you can foresee that would push you into a high income when that would be particularly helpful to you to make this do this plan? Well, if the way my income sits this year and will be probably for the foreseeable near future is going to be about $73,000 for the year.

And so that's where I was. I was thinking that if I front loaded, it was like $75,000 or $80,000. Keep me under the when I make the big deduction for the charitable contribution, it still keep me in a 15% tax bracket. And then like I say, and then between my pension and my wife's social security, I am retired.

My wife's social security and some disability income she has coming in. We really have plenty to cover all the bills. I have no debt. I'm like I say, I'm retired. Most all of my money is in 401ks and IRAs. So everything that comes out has got to be taxed anyway.

And so my goal is to try to pull out and stay in the 15% tax bracket. Yeah, I like it. Do you have a local community foundation or a sponsor of the funds that would be appropriate for your personal charitable goals? Well, it would mostly be just church donations.

And it's mostly that's what I'm thinking of is my tax. Even paying 10% on $96,000 if you stay in the 15% tax bracket, I still never hit the standard deductions. It's almost like you're paying out the money, but you're not getting the deductions. So if I front load it, then I can pull it out of the donor advised fund, pay my tithe, and I still have the standard deduction to meet up to.

I haven't been able to find anybody else to tell me whether it makes sense or not. It makes sense in my mind. Yeah, the biggest thing is just simply finding a local foundation, a local charitable foundation that will run the fund properly. And then making sure that the fund will get through to the charitable organization from that donor advised fund.

So – Would you not be able to use Fidelity or Vanguard as the donor advised funds to do this through? I'm not sure. I don't see any reason why you couldn't. I don't know what – I don't know of any reason why it wouldn't work. I'm not aware of any reason why it wouldn't work.

Administratively, that would be the next question I would ask because I would call whoever you're planning to use as your coordinator for the donor advised fund and make sure that a public – make sure that the charity that you are working with would be an approved charity. I don't know – it's a good idea.

I've never done it and I've never done it with a client and I can't see any conceptual reason why it wouldn't work based upon my knowledge. But I would have to actually follow through and work through and see can I actually administratively do it. That's the best I can do for you.

That's – and I haven't been able to find the answer from anyone else either because they say the same thing. No one's done it. They didn't know anyone that's done it. And my – I've always pushed back with, "Well, you can get a tax deduction anyway, but you can't get a tax deduction unless you go over $12,700 filing jointly." Right, right.

I would sit down – the church that – so you want all the money to go to your local church, is that right? More than likely, yes. Is this local church – Do it in like a monthly or quarterly basis. Is this local church a large church or a small church?

I'm going to say a medium church. When I question our financial people on using donor advised funds, they don't have the knowledge. They don't understand them. Right. Because they give you that questionable look like, "A what now?" Is there an insurance agent or a financial advisor or an estate attorney that you know of in the church?

You know what? Not that I know of. Not that I know of. I have not heard of anyone that's down them lines. So just like you say, even if you used to leave – if I was to move and go to another church and I still have my funds that I could pull from to make my contributions then.

Is it important – I'm just looking at it as a front load, just what I'm looking at it as. I'm going to pay a tithe regardless. I just want to get the best tax deduction possible. I would sit down – And you don't ever know what the tax code's going to change.

We might not even be able to do that this year. You never know. I know you got to show them that one too. You never know from one year to the next what it's going to be. I think for any of us predicting the tax code is the definition of impossibility.

I would have to be really certain of a direct divine revelation to make any comments of a tax code and I probably wouldn't even then declare it out of fear of being completely wrong. It's hard. It's just like I've worked many years. I'm just a factory worker and I've saved in the 401(k), saved in my RAs, deprived myself along the way so that I can hit this retirement years and be able to enjoy them.

So I want to be able to get that money out and pay as few taxes on it as I can and still be able to travel and do things. Right. And it's really frustrating to have the government leeches come in and pull off 10 or 15 percent of the money.

So here practically is what I think you need to do. Number one, I think you need to go and speak to somebody in your local church who has a complete connection. If you're in a medium-sized church, there may be somebody there in the church that you don't know that would be a professional expert in this area.

And so go and ask somebody on your pastoral team, go and ask somebody who's connected in the church and just say, "Do we have any insurance agents? Do we have any financial advisors? Or do we have any tax or estate attorneys or accountants in our church?" It's hard for me to imagine a medium-sized church body that doesn't have at least somebody from one of those areas.

Now with that local professional, it would be good to start and ask, "Hey, here's what I'm thinking," and try to get a referral to a local estate planning attorney or local estate expert. Another way to approach it would be to go to your local community foundation. Find a community foundation near you and go to your local community foundation.

Call them up and ask to sit down with one of their planners and describe to them what you're trying to accomplish and describe to them what your financial goals are, what your financial assets are, and what your financial intentions are. It's worth it to sit down with a competent estate planner in this context and make sure that this is the best plan.

What I have found doing this type of work in the past is frequently people will neglect an asset or neglect something that is potentially very useful. For example, they might have an appreciated stock or an appreciated piece of real estate. Sometimes you can use that charitably to generate a very high tax deduction while it's not actually costing you all that much out of pocket.

My biggest fear is that you're thinking on a cash basis when in reality you might have an asset that would be more useful for you and have a higher utility in this context. In the church world, you'll be able to find somebody locally. You'll be able to find somebody who works in this area.

You can do this on the phone. You can talk with them. Tell them about your financial situation. You'll be able to find somebody who will work with you. There are teams of people who give specific advice in this area. The goal is to figure out how to get money into the church and into the local church community in the most efficient way.

I think you can find somebody in your local area who can look this over with you and make sure that this is the best way for you to approach it. Then finally, administratively, I would reach out to the potential sponsor that you have and talk to one of their advisors.

Every company who would offer this kind of service will have a team of advisors who will talk through this with you. If you want to go to Fidelity or you want to go to Vanguard and you want to talk to them, they'll put you on the phone with a charitable advisor and they'll put you on the phone with one of their teams and they'll talk this through with you.

They have the expertise. Then finally, if none of those plans work, reach out. Do a little bit of research in your local community and find an insurance agent from one of the big old insurance companies. Here's the secret to that scenario. That particular insurance agent may not have specialized knowledge in estate planning.

But because insurance agents like to sell great big insurance policies, they know that they need experts. Most of the insurance companies have is they have teams of what are called advanced planning attorneys. These attorneys are real experts in their industry, but they're paid by the insurance company. You can use this as a way of your getting good, competent, free advice through your relationship with the insurance agent.

They'll look at the different options. They'll talk through the different options with you and they'll make sure that you're getting a good, useful scenario. I used to do this all the time. I had access to my advanced planning attorneys. I have friends that were with other companies. They would have access to their advanced planning attorneys.

It's a good way to get a specialized estate planning attorney on the phone without your having to stroke the check for the hourly fee. They'll sit with you. They'll talk it through with you and they'll see if they can suggest any ideas that will help you better. Those are the action steps that I would take, Dean.

Deacon Harris That sounds fantastic. In my research and doing all this, everything that you touched on right there, I have come across that in all the research. My hardest part is like appreciated assets. I don't have any appreciated. All my money is in this 401(k) and these IRAs. It limits you.

It limits you on how you can use them funds. You can have a million dollars in there, but it sure does limit you on how you can get it out and use them funds. Just like you were saying before, I didn't put enough money in taxable accounts or buy something or stocks or whatever.

Something that would appreciate up that you could use in a tax advantage like that. All I've got is an income and my 401(k)s and IRAs and that's it. Preston Pysh (00:06:00): Have you looked through in your situation the IRA, 401(k) charitable contribution directly out of the 401(k)? David Tepker (00:06:10): Out of a 401(k)?

No, I have not. I did not know that you could do that straight out of a 401(k), not unless you were 70 and a half. So… Tavish Leff (00:06:22): You can make… I'm not current enough to walk you through this in a live format. I've gotten rusty on this topic in the last couple of years and I'm just not current enough to walk you through the details in a live format.

Do a web search. Just pull up duck.go and do a web search for 401(k) charitable contributions and read through that. This was a big opportunity about three, four, five years ago, something like that. This was a big opportunity when the tax law changed about four or five opportunities to do direct contributions of retirement assets directly to the charity.

And so you would need to just pull it up, look at it, read it, find the IRS website appropriate publication on this and look to see what the current rules are on making charitable contributions directly from your retirement funds. The benefit is it may be a way for you to get money out of the 401(k) and get it directly to the charity while doing it in a very efficient way with minimum fees.

So again, just do some searching and do some additional research on charitable contributions directly out of a retirement account and hopefully that will help you. Eddie in Virginia, welcome to Radical Personal Finance. How can I serve you today, please? Eddie: Hey, Joshua. I'm calling. I just want to get some career advice on you.

I'm contemplating a move out of my current industry. Currently I'm a commission-based employee, 100%, and in an industry that goes up and down pretty often. And I'm thinking of making a move, but I'd take a pretty significant pay cut. It wouldn't change my lifestyle drastically because my wife and I don't spend a lot of money, but it would definitely change some of our plans.

And I just wanted to see what sort of advice you had. Well, if you're going to make less money, why would you make the move? What's in it for you? Joshua: Stability. It's a salary. Yes, stability, salary position, typically. Eddie: Has living on an unknown up and down income, has that been hard for you?

Joshua: Yes. Yeah, because you've talked about this before. Some months you make $20,000 and some months you make zero. Not that budgeting's hard, but it's just very difficult to game plan where it is. And my organization has been not as great on delivering products in a timely manner outside of my control.

So it's hard. Eddie: So in the last year, how much have you made in the last year in your commission-based job? Joshua: I will approximately make about $100,000. Eddie: And if you go to the salary-based job, how much do you think you'll make in the next year? Joshua: About $80,000 to $85,000.

Eddie: In your commission-based job, have you exhausted all of your opportunities to dramatically increase your income under your current commission structure? Joshua: Yes. Eddie: In your salary-based job, will there be opportunities for substantial increases in your income? Joshua: I believe so if I move up into a higher level management position, yes.

Well, that to me is the biggest concern because, yes, commissions can be stressful. And I think here you have to ask the question, "What's the cost for you? What's the cost for your wife? What's the cost on your family?" There are different levels of stress that you may or may not find helpful and find difficult.

An example, in my situation, I've lived on a highly fluctuating, highly variable income since 2008 and it's been hard, very hard at times. But I've learned this increasing skills to deal with it. I still have a long way to learn, I'm sure. But I've learned increasing skills to deal with it and I've been able to make steps in order to put enough of a financial buffer that is not so painful as it once was.

There were times where early – earlier in life, it was quite painful. But I've learned and it's not particularly painful to me at this point in time. And in integrating with my wife, there were times during our joint management of finances early in our marriage where it was painful.

But my wife never – it was never an emotional problem for her. She was never emotionally connected to the challenge of having low-income months and high-income months. So it was never all that stressful for her. Thus, it was never all that stressful in our marriage. I've worked and counseled other couples who were in similar industries and experienced similar fluctuations of income.

And in their situation, for differing reasons, their experience of the stress of fluctuating income was very, very different. And specifically, I know of one couple that I was engaged in in personal financial counseling where for them to go from a fluctuating income to a fixed income, even though there was a slight pay cut, was a tremendous blessing for them and their family and their overall emotional makeup, especially for the emotional stability of the wife.

And so I think that you should analyze that separate from financial increase. And that's not a factor to be discounted. It's something that's important. Now, on the flip side, you should look and say, "Well, if I do make this switch, how much is it going to cost me and then how much am I giving up on the upside?" If you've maximized all your opportunities and you're maxed out at about $100,000, then that doesn't sound too exciting to me, no matter whether you're a commissioner or salary.

If this other job is a better fit for you and you can move to a salary position at $80,000 but maybe a year and a half from now, you can make a jump in the levels of the company and go from 80 to 120, that sounds probably more exciting than the fact that you're maxed out on commission at $100,000 with your current business structure.

So the fact that there's not a big possible increase on the commission basis to me just doesn't sound that exciting. And for those reasons, I think I probably would. I'd probably take the temporary pay cut, move to the stable income. That will be helpful. And then focus on what do I need to do to bump up in the level of the compensation tier here or to move into the bonus program here even though it's not directly tied to commissions.

Okay. Awesome. Thank you. You're welcome. Did we miss anything? Are there any other extenuating factors? Is that good enough? No. I mean, that's really what it came down to. My current position is odd hours as well, so that's putting some stress there. I'm going to add that. The other position is going to be more of a nine to five.

So those were factors that I'd already kind of ruled what I'm willing to do, but I wanted to get your opinion on it. So I really appreciate your podcast. It's hard to say. The odd hours are actually a big benefit and so is just simple stability. I think most of us who work in these commission-based or fluctuating income scenarios, I think most of us regularly look at and say, "You know what?

Maybe I should go get a job." It's funny. I was talking about this with a friend of mine who is also an entrepreneur and we were talking about the challenges of just simply trying to build a business starting with nothing with young children. And our comment together, both him and me, and we're motivated, goal-oriented people, was we underestimated how difficult it was to build a business that would work when also trying to do a good job with young children.

And many times I think you look around and as much as I love entrepreneurship and business, et cetera, I think there is a lot of benefit in simply having a job that is steady, that provides a steady income, it helps with planning and provides a good structure. And I think that can work really good benefits.

Travis in Kentucky, welcome to Radical Personal Finance. How can I help you, sir? Travis Buehler, CEO, Radical Personal Finance, Inc. Hello, Joshua. I appreciate you taking the call and appreciate all that you do on the podcast. I really enjoy it. My wife and I were recently blessed to welcome our new daughter into the family.

So we now have a 4-year-old and a 2-week-old and we're looking to add some coverage to our life insurance. I currently have a million dollars worth of term life insurance coverage and my wife doesn't have anything currently. And I was exploring the options between just adding term life, some more coverage for both myself and for her, but also weighing that against the idea of maybe doing something like a joint universal life coverage.

And I guess I've heard you talk about it extensively in recent podcasts and heard you talk about how it can be such a valuable tool, you know, in different circumstances and that you have policies in your family. And I guess as I run through some of the scenarios doing my math, it's hard for me to overcome the idea of buy term and invest the rest.

Most of the calculations I do, that seems to be the most beneficial way to go. But I guess before I went ahead and made a decision, I was wanting to pick your brain about some other things I may not be considering. What's your household income? $150,000. Okay. So there's two levels of analysis.

Just what makes me nervous is you talked about a joint policy. Why were you considering purchasing a joint life policy? Well, I guess the idea was, is the reason that we were wanting to buy the insurance was not so much for the end, you know, hopefully we live to be the ripe old age and, you know, dying at 85, 90, 95, whatever, and then having a death benefit come to us.

That's not really the idea of why I want to buy the coverage. It's more of if one of us dies prematurely, you know, I want to be able to have some money to cover, you know, the, basically the services that she provides to the family. Of course. And of course, vice versa for me.

So I guess the idea of maybe doing a joint policy was you kill two birds with one stone and you know, I'm covered if I die quicker or she's covered or, you know, vice versa. I'm covered if she dies quicker, she's covered if I die quicker. You know, it might not be that there's any benefit.

You know, maybe a whole life on me and a whole life on her, you know, maybe that's something to explore as well. Um, and I guess that's, but still I always run into the idea that, you know, the term is cheaper. And if I take the difference between what I would be putting in a whole life policy and just I'm responsible and invest that, you know, reasonably well, um, the time horizon that you're talking about with, you know, holding a whole life policy, if you let your capital accumulate, you know, in a mutual fund or, you know, you know, well diversified investment account, uh, at the end of the day, I keep coming back to the idea, well, I'm better off just doing that.

Um, and so I guess I'm wondering, is there an aspect that maybe I should be considering, um, before I just go ahead and say, yes, that's what I should do. Um, and the reason why I guess I'm a little bit nervous is I, I listened to you talk and I foresee and maybe project some of the things that you're probably doing with your personal finances and I'm wondering why you're arriving at the idea that, yeah, a whole life policy is better for me.

Um, cause I'd imagine we're probably similar with the way that we approach, um, you know, these, these types of problems. So I want to, yeah, the error that you're making is the either or, uh, discussion. And that's usually the error when it comes to the buy term invest the difference discussion is we're not as, as York, you're saying I should either do this or I should do that.

So hold on one second. We'll get the whole life insurance in just a moment. First the joint life discussion. Um, I assume that you were talking about a joint life first to die policy. Uh, is that right? Or were you, were you talking about a second to die policy?

Okay. All right. I don't like this and I don't think there's any benefit to your buying a joint life first to die policy. Uh, for the sake of other listeners, you can purchase a life insurance policy that is, is, it is, uh, underwritten on the life of two people.

Uh, and there are two ways that it can be done. The first way it can be done. So in this, in this particular situation, it would be underwritten on the life of Travis and on Travis's wife, Travis, how old are you? How old's your wife? I'm 33 and she is 32.

Okay. So the idea here is, um, whenever one of them dies, then the policy would pay out a certain sum of money. And uh, uh, then, and hopefully the idea is because it's on two, two lives, it's a little bit cheaper than it would be on one or the other.

Uh, I don't like it. I don't think that, um, and this, these are guesses. You could disprove this with your actual numbers from some insurance companies. I'm giving you a gut feeling based upon experience, not a, uh, a mathematically calculated provable thing where I just ran, um, policies on you.

Joint life first to die policies are very rare. And so I don't think the market is competitive. I think if you buy a joint life first to die policy, you're going to wind up paying more per, um, uh, per thousand dollars of insurance than you will with a term life policy.

Term life policies are so competitive. The prices are in the floor. And so I don't think you're going to get as much of a benefit. Number two, I don't think you're going to get, um, the coverage that you should get. If, if my wife dies, then, uh, my, then I need money in order for me to be able to care for our children in the way that we want our children to be cared for.

I couldn't do that if she were dead, if she didn't have life insurance. But now I still face the risk of, well, what about me if I die? And the money that I would need to care for my children is not the same amount of money as my children would need if both of us were dead.

And so I think a much happier with the plan to a much happier with the plan to put in place, uh, uh, policies on both of us so that if she dies, then I receive money. If I die, she receives money. And if we both die, then our children receive the sum total of all of the money.

So I don't like the structure of the joint life. Also there are concerns with regard to ownership, who's going to own the policy, how is the policy going to be owned? And there are concerns for you, for your wife and for your children to protect you in case of divorce.

What happens if you were to divorce? Um, what happens to the policy and how do we make sure that the insurance stays in force? So as a financial planner, I just, I don't like the joint life first to die. That's different. That's very different than joint life second to die when we're using that at a later stage.

But for you as a young family, I don't see any compelling benefit to pursuing a joint life first to die policy. Make sense? Okay. Okay. Now, second, we're talking about term life insurance versus universal life insurance. This is a blanket statement, but this is kind of my opinion based upon experience.

I don't like universal life insurance for unsophisticated people. Universal life insurance has its place and it's a useful tool, but I don't like universal life insurance for unsophisticated people. And unsophisticated is not an insult, but it's a level of understanding of how insurance works. Universal life insurance is the most complicated form of insurance and it can be a useful tool because of the flexibility.

It can be a useful tool in the hands of a competent financial planner or in the case of a sophisticated insurance buyer. But many people buy it and they don't understand how it works. So universal life insurance is often underfunded and it often doesn't work long term. Now it can be a way of providing a family with the equivalent in some cases of an extended term life insurance policy with options.

But it's so complicated that it's very hard for me in my experience to believe that the average person with a basic working knowledge of insurance would be able to successfully buy one and get all the benefits of it. I much prefer the simplicity of term life insurance. The second problem with universal life insurance is what is it invested in?

And if the policy is a variable universal life contract, which it frequently is, then all of a sudden now we have to factor on the risk factors of stock and equities markets and the risk factors of an insurance product and it just becomes very complicated. It does have a place but I don't like it for young couples who just need simple insurance planning.

So I'm very nervous about you pursuing a universal life insurance contract as the basis for – in any regard. I like the simplicity of term life insurance. With me so far? Okay. Okay. Now you need a lot of term life insurance and your wife needs a lot of term life insurance.

Chances are I don't know anything about your assets but at your age, I don't see any reason for you not to have double or double and a half the amount of term life insurance coverage that you have. I don't see any reason for you not to – for your wife not to have a million dollars of insurance coverage for her.

Term life insurance is so cheap that there's a compelling benefit for you to have quite a bit of it. With $150,000 annual household income, it will make – the cost of premiums will make effectively no difference in your household versus the potential benefit of your having two or three million dollars of coverage and your wife having a million dollars of coverage.

You can go and you can do more careful calculations, et cetera. But we're talking about the cost of a pizza. For 32, 33-year-old healthy non-tobacco users, we're talking about the cost of a pizza a month, a couple of pizzas a month and you'll like having more and it will put more tools in your portfolio.

The best thing for me about life insurance is that having millions of dollars of term life insurance allows me to guarantee my financial legacy for my children. It's one of the most powerful feelings you can get when you're young and you don't yet have all the money that you want to have.

It is really rewarding to recognize the fact that if I'm dead, I can guarantee a significant estate for my children and term life insurance is one of the most powerful financial tools to do that. For you as a 33-year-old male healthy non-tobacco user, you can have two to two and a half, three million dollars of life insurance for something like probably 75, 80 bucks a month depending on the structure.

Once you have that, you'll find that that is very, very powerful in terms of psychologically or at least I have found it to be that way. So don't look at anything, don't look at universal life insurance, don't look at whole life insurance, don't look at anything until you have properly established the total amount of death benefit that you need with regard to you and your wife using term life insurance.

Make sense? Now, with whole life insurance, I would like you to have insurance policies on your children's lives, small whole life insurance policies on your children's lives before you buy it for you. So if you are willing to spend a little bit more money on insurance and you properly squared away term life insurance for you and your wife and you can buy some small whole life policies for your children, I think that's a good idea.

I own whole life insurance policies on all of my children, small ones, well-designed from a good company that will be an efficient accumulation of money over time. I've done shows on life insurance for children in the past. Also make sure that your disability insurance is squared away fully, that you have as much as you can get and that you're covered and make sure that your health insurance is squared away as well.

Now once health insurance, disability insurance, term life insurance are squared away, now we can have the whole life insurance conversation. But it's not either or because there's no comparison between the two. It's not either you buy a million dollars of term life insurance or you buy $33,000 of whole life insurance.

We always solve death benefit needs first and we always solve that with term life insurance. You don't solve death benefit needs with whole life insurance. Okay. Okay. Now, should you buy some whole life insurance? I don't know. If the question is buy term and invest the difference, so you have to recognize you can't buy term and invest the difference and get the equivalent of a whole life insurance policy.

Whole life insurance is a unique product. If you're going to compare, should I buy a whole life insurance because I'm already telling you, you should buy term. You should buy term. So now separate the question from either or and say, "I'm considering buying a whole life insurance contract or I'm considering purchasing this other investment." Now compare them on the merits.

And where the whole conversation breaks down is that if you're an aggressive investor and if equities markets continue to perform, in general, an equity market should outperform a traditional portfolio-based whole life insurance contract and it should. Now, it doesn't always and the returns come at varied times. It should outperform that.

The basic functional benefit of whole life insurance that I appreciate is a few things. Number one, whole life insurance is a stable asset. Life insurance companies, well-run life insurance companies and a traditional non-equity, business-based based life insurance contract is – the value of the contract is guaranteed to go up.

The amount at which it goes up changes but it's guaranteed to go up. That gives me a stable pile of money. Second thing I like about it is if a policy is well-constructed and it's well-purchased, it can be fairly efficient. It can function and be fairly efficient. It's going to have higher costs than some other things because you have to deal with the cost of insurance.

But it can be fairly efficient. It's also very flexible. And so unlike some other things that I can choose to invest and put money into, a whole life insurance contract can be flexible. I can put money in or take money out anytime I want. So I have a stable pile of money that can increase, that was guaranteed to increase at a varying rate, that will be very, very safe and it will function as a non-correlating asset to some of my other investments and it's very, very flexible.

I can get money in and out of it and it's protected and exempt from the claims of creditors. That's helpful. Just like the money in a 401(k) and IRA is. It's not the only asset. But it is protected and exempt from the claims of creditors and it pays out a death benefit which can be very, very useful and that death benefit is paid out income tax-free and it's an asset that I can pledge a security for a loan.

It's an asset that I can move into a trust. It's a very, very flexible asset. Where people make the mistake is trying to make it do everything and I think that's a wrong approach. So I think it's worth – I don't have an insurance license. I don't sell whole life insurance anymore.

But my generalized advice has often been to purchase – you always cover death benefit with term life insurance. And if you find benefits in the whole life insurance attributes and if you can develop a policy that's well-run, well-built, et cetera, then there is a place for you to put some money into it if it's useful to you.

But that's as far as I would go. To me, that's a practical, actual, realistic way to approach it. Most of the argument on the subject where it's all – it's a matter of everything into whole life insurance or nothing into whole life insurance. It's up to the devil. It's just a waste of money.

Those have not been true in my experience. So what I've just described to you is about the only way that I can get at what seems to be true based upon my experience and my knowledge. Ryan Neuhofeldt Okay. So if I'm hearing you correctly, in essence you're saying if the idea is to cover expenses or debt due to the event of your death and you're looking for the death benefit, then you focus on your term life insurance.

If you're looking for other ways to invest capital, look at a whole life insurance policy more like a bond proxy, an alternative to a bond or an alternative to another investment. Is that in essence – Trevor Burrus Yeah, that is – Ryan Neuhofeldt – that might have the additional benefit of a death benefit should you die?

Trevor Burrus Exactly. And I don't underestimate the value of that death benefit. One of the things that – when I first got into the insurance business, I thought that as you got older, your need and your value of insurance, of life insurance would go down. The basic concept is that over time, you should be able to self-insure.

So you buy term life insurance when you're younger. Over time, you're able to self-insure because you have more assets and you have fewer liabilities. You pay down your debts. Your children grow and move out of the house and so you have fewer liabilities to – fewer responsibilities and fewer liabilities.

So you get to the point where you need less insurance and hopefully at some point you need no insurance. Now, that's not wrong. It does happen. It's obvious that it happens that your responsibilities change over time as your children grow and move out of the house. But my experience in working with actual clients was that very few people actually got to the self-insurance model because what tends to happen in the arc of finance and the cycle of many families was that people didn't necessarily downsize from so much as they other days did.

They might have moved to a smaller house but they often upgraded it to a luxury house or they often just found that they liked having the insurance. When I think about children and my wife, I feel a significant amount of responsibility to my wife to make sure that if I die, even if our children are grown and gone, that she is well-supported.

Now, I want to do that with assets. But as an example, my wife is not an income earner in our household. She is at home full time and she's not an income earner. So as a husband, I owe her a duty of care that goes beyond the life of my children.

I need to make sure that because she is not earning income, she doesn't have income where she's saving. I owe her a duty of care to make sure that if I die after our children are grown, that she is able to continue in our lifestyle without the need to go and to get a job, without the need to go and move into poverty.

So what happens is there becomes value – there comes a lot of value with the life insurance policy. Then finally as an estate, with the whole life insurance policy, the policy always being in force. When you get them when you're young, the premiums disappear over time or they're so insignificant as to be – well, insignificant.

So they become a very useful asset. Even as a financial planner, I look at it and I like the idea to be able to use life insurance as a way to equalize the estate. I'm too young and you're too young to have any clue about paying estate taxes. But that's often been a scenario where you have to cover and say, "Well, how do we pay these estate taxes?" Life insurance is a particularly useful and flexible tool.

It's not the only tool but it's a particularly useful and flexible tool. So in the hands of a competent financial planner, a life insurance policy is a very flexible asset. It doesn't work for everything. It's just a flexible asset that has value. That's about as far as I would go.

Make sense? Steve Horwitz: Okay. Yes, it does. One follow-up question I would have with in terms to the children, how do you determine the amount of a whole life insurance policy to place on a child? Trevor Burrus: Life insurance company will have a minimum amount that they'll cover. You may be able to cover a death benefit.

I mean not be remiss and say that you have to buy whole life insurance. You sometimes can cover a death benefit as a term life insurance rider but this is usually only found in the context of employer-based life insurance. I haven't seen that frequently on individual-based life insurance. But if you have a job, you may be able to put life insurance contract on your children through your group life insurance contract.

The only contracts that you can buy in the open market that I'm aware of for children are going to be whole life insurance contracts. The insurance company will have a minimum policy size that they'll sell. It's often $25,000. Sometimes it's $15,000. Sometimes it varies but often it's something like $25,000.

What I often encourage clients to do is to put the minimum policy, a $25,000 policy on each of their children and to put it on there with what's called an additional purchase benefit. One of the benefits of a life insurance policy for children is yes to have some insurance coverage in case they die.

But that's not my big thing. I've always appreciated having what's called an additional purchase benefit which guarantees their ability to buy additional insurance in the future. Now that's a cost and it means that from the perspective of an investment calculation, just pure cash accumulation, that a child's policy doesn't – it's not as efficient as others because there's a higher cost of insurance.

When you add an additional purchase benefit or a waiver of premium benefit onto it, it changes the efficiency of the contract. Those are pure insurance benefits. Thus, they add additional cost. And so my children's policies are not spectacular when measured by a rate of return perspective. But they're very, very useful when measured by an insurance perspective and that's how I view them just simply as an insurance perspective.

I have them for all of my children. I sold a lot of them when I was an insurance agent. It just made sense from – I've always just felt like it makes sense. If you've got the financial – now, it's not appropriate for somebody who has no money. If somebody is scraping to get by and it's not appropriate, people don't have their own coverage squared away.

That's why I talked about disability insurance for you, life insurance for you and your wife, make sure your health insurance is on track, et cetera. But if you can cover those things out of your income and there's still additional flexible money that can cover it, I find it compelling.

Trevor Burrus: OK. The idea is they can always purchase more life insurance even if they're sick or have some disability. Is that what that rider is? Tavish Lynch: Exactly. It's an additional purchase benefit. So for example, with the policies that I own for my children, at each – I think if memory is right, there are seven opportunities starting at the age of 20, between the ages of 20 and 40, every three years, wherein the insurance company will send them a letter and during a 90-day period, the child can exercise the additional purchase benefit option and they can just simply say, "Yes, I would like to purchase an additional $150,000 of insurance." The only downside is they're not – that doesn't apply to term life insurance.

It's only whole life insurance that they can purchase. But at each of those times, they have the option guaranteed to be able to purchase an additional $150,000 of life insurance. So what it means is that you can have a child who has a $25,000 policy and with that $25,000 policy, if they can buy an additional purchase option of 150,000 times seven, you wind up where they can purchase up to basically over a million dollars of life insurance without any medical exams, without any lifestyle questions.

It means no hobby questions, no avocations, no occupation questions. So those things that are often very, very difficult for a client – sometimes it's health stuff. But that's – maybe it happens, maybe it doesn't. But a lot of times, maybe the child is a beginning pilot or they're learning to fly helicopters or they're engaged in a risky occupation or they're doing something like they're a race car driver.

You can't get insurance in those contexts. But with the additional purchase benefit, there's the option there for them to be able to get new contracts. Now I'm probably – let me not hedge that. I'm biased because of my experience as an insurance agent. What happens is when I – I still don't like certain kinds of insurance.

I'm still very kind of cheap when it comes to buying insurance. I still – I share that ethic of I don't like to buy insurance, that ethic that many of us have. But when you go into the insurance business, you start to see different situations and over the years, my appreciation of insurance has substantially increased and you're hearing that tone come through in my voice based upon experience, seeing how in so many situations having that insurance in force would be really, really valuable.

It's hard to talk about because the chances are so remote. I've never told the story on radical personal finance. But just as a way of example of showing how valuable an insurance contract can be, I was – I had a client of mine in the past. This client was probably not a great fit.

They weren't a great fit for insurance because they had a highly fluctuating income and they were entrepreneurs and they were in an industry which when I first met them was in a really tough space and in the construction industry. When I first met them, I was a very novice insurance agent and they were excited about buying insurance and as a novice insurance agent, I was impressed with the fact that they were excited and because they were excited about buying insurance, I was excited about selling them insurance.

So I sold them life insurance policies on the whole family. Now, I did a good job, term life insurance mom and dad. But I sold them – in addition to that, I sold them child policies on their children and I felt really good about it. But I underestimated because of my greenness, because of my novice experience in the business, I underestimated their financial capacity to pay and I had gotten over exuberant in what I had sold them and I underestimated their financial capacity to pay.

A year later, I forget if it was less than a year. I forget if the policies technically lapsed or not. But basically a year or something later, they couldn't keep up the payments and so the insurance went out of force. It lapsed and I felt very bad about that.

As an insurance agent, one of the worst things that can happen for a client is if they buy anything other than term life insurance, if they buy whole life insurance of any kind and then the policy lapses, it winds up being very, very expensive in the short term because there are so many costs at the inception of a contract that if they don't keep the contract, it winds up going out of force and it's very, very expensive.

So the policy lapsed and I was of course disappointed but what could I do? Well, a few years later, they reached out to me again. Things were better at this point and things were better and they were doing better. Their business was more stable and so they said, "We want to buy insurance again.

We really liked having it but we want to buy it again." Well, they were excited about buying it. I was excited about selling it. So I went and I sold them a whole new suite of life insurance policies, proper good planning term for mom and dad and whole life for the kids.

I was excited about it and it was great. Well, unfortunately yet again, they – and I had – by this point, I had a little bit more experience. I was a little more cautious but they were demonstrating significant capacity to pay. Their business was stable. They were in a good place.

So I sold them policies. Well, I can't remember exactly what happened at this point but sometime later, they wound up lapsing those policies again. I think they made it through so it wasn't as expensive. They lapsed all the policies and I was disappointed but I didn't worry too much about it.

They had moved out of the area and I just said, "Well, sometimes as an insurance agent is too, sometimes clients don't talk to you. They lapse their stuff and they go on. That's life. That's business." Well, unfortunately, I forget the exact timing but a couple of years later, their youngest son was murdered and it was just a heartbreaking story but their youngest son was murdered.

I was pretty distraught about it. I don't want to – the word devastated comes to mind. It's probably a little bit of an overly charged word but I was really disappointed and really upset. I went through and I just thought, "Was there anything I could have done to keep that in force?

Why do you think did I not do my job of keeping the insurance in force for them?" But it's pretty devastating because I watched then the horror of watching parents deal with the murder of their young son. He was six, seven years old. I wished so much that that insurance contract had been in force because if it had been in force, it would have been so helpful to mom and dad.

Now thank God their marriage survived. Very frequently in the death of a child, when a couple experiences the death of a child, very frequently their marriage does not survive. Thank God their marriage survived. They worked through it and thank God they've had another child. So in the end, tragedy turns to triumph.

But in that circumstance, I saw so clearly what a benefit that life insurance policy would be. Now that's an experience I've just shared with you, the emotion of it. I put that experience up against hundreds of other child life insurance policies that I sold that the child is fine and chances are it will just be kind of a decent long-term policy and that's the nature of insurance.

So once you're exposed to that business as an insurance agent, then it starts to affect your emotions and you start to see how valuable that is and it changed me. That experience changed me. Travis, I'll give you the last word before I go on to my final caller. Travis Thurston: Sure.

No, I appreciate it. That's all great advice. You answered what I needed to know. I really appreciate it. Marc Thiessen: Well, congratulations to you and your wife on the birth of your child. I think that's fantastic and I think you'll make good decisions. Hopefully this was helpful for you.

All right, last caller of the day, Gidish from Tennessee. Welcome to the show. How can I serve you today, please? Gidish Gidish: Thank you, Joshua. You have been doing tremendous job and I appreciate you doing this for non-patrons of the show. I have two questions and I'm aware of your views on 529 plan, but I'll do a little bit of my background.

I currently have, I contribute to maximum possible for both me and my wife, 401 account. This should be a year we should be able to maximize on Roth as well. Have a good term and disability insurance in place. We have two daughters. One is almost three year old. One is about nine month old.

And so my goal for next year is start considering about 529. My education was not in this country. And so it was very customary for parents to fund college education and I would probably want to continue to an extent. I understand this is a different culture and I want them to take ownership of their education.

So I haven't really figured out all the thoughts I would like to do, but I do know that if I want to fund some portion of it, this is the time to start thinking about it as far as 529 and time horizon of 15, 20 years or whatnot. So what would be a good goal to, you know, in terms of amount of money, let's say, you know, if I'm thinking at least half of their education, I want to help and then the rest of them, I can either, depending on how they do, they can take a loan out or I can help with my taxable.

So I know a lot of prediction involved, but what would be a good amount you would consider? And I have one more question after that. You said you listened to my shows on 529s? Yes. I mean, I'm aware of your thoughts on it that, you know, your retirement should always come first and that's what I have been focusing on.

And so I believe now that, you know, I'll be able to fully fund whatever the pre-tax opportunities are as far as my retirement income goes. So I would like to think about 529 versus taxable, and I know taxable would always have more flexibility. And so I kind of feel conflicted here.

You know, I come from a background where parents traditionally fund their children's education with no obligation whatsoever. This is kind of a thing that you do, everybody does, but then now I'm in a different country where I also want them to have skin in the game, so to speak.

You know, at least those are my views right now. Well you're conflicted and I'm conflicted. So let me give you my two answers. If I were a financial planner and you were my client and we were speaking strictly in a professional context, then the way that I would answer it is everything that you said, okay, are you on track for retirement?

We would talk through, do you have debt? Do you have other uses of the money, et cetera? And you would say to me, no, Joshua, we're in good track. I'm well employed. My financials are on track. Then I would just say, well, what kind of school would you guess would be appropriate for your daughters?

And you would say, well, the University of Tennessee. And so I would say, well, what's the current cost of Tennessee? And you would say, I want to fund it at 50 percent. We would basically just say, let's do some calculations and put some money in. That's the only answer in terms of a financial planning answer.

So that's the technical answer. And basically you just stick some money in and you hope that it works out. I'm conflicted because I have an ideological block on this particular topic. And my ideological block is I see that college has changed and is changing. And I look at my young children and I cannot believe that I would send my children to any mainstream college with the exception of a hard science approach, something like engineering, mathematics, chemistry, that type of thing.

That's about the only thing that I would ever send my children to. Everything else, as far as kind of just the mainstream approach to college, is just such a waste. I mean, it's an ideological swamp. And so the only exception for me is, OK, is there a hard science?

And when I look at that and I look at about all the ways to get college for cheap, I can't imagine sending my children into kind of the traditional, hey, let's go off to – for you, maybe the University of Tennessee or let's go off to the University of Florida.

I mean college these days is just such a cesspool that I look at it and I just can't even – I can't fathom myself ever wanting to encourage my children to wander into that filth. And so I have this massive ideological block around the idea of funding college. And that's what I tried to share in those shows, to say here's the technical answer to that.

So then the other thing is I look at the pace of change around. I look at the deep dissatisfaction that my generation has with college. I look at the data that still indicates that educational attainment has a high correlation on earning ability, lower unemployment among people who have college degrees, et cetera.

But I look at how fast the market is changing technologically and I look at the impact. And I'm convinced, especially since you have a three-year-old and a nine-month-old, I'm convinced that in the next 15 years, the world of education is going to be turned on its head. There have been movements happening under things, but these movements are picking up steam.

And so I think the momentum is there that in 15 years, the college environment is going to be unrecognizable. So I have this major – there's your professional answer first and then frankly I have this ideological block that says I think the whole thing is a worthless waste of time.

Okay. Okay. Well, that helps in a way that – I mean, I may – I mean, lately what I have been – I kind of go back and forth, but lately I have been leaning – yes, I may be missing out on some tax-free growth, but taxable is what would give me the best flexibility as far as use of money goes, whether it is unfold need of me, my wife, or my kids, you know, or whether it would require – if you would have asked me 10 years ago whether I would move to this country, I would have said no, and I'm here now and I plan to stay here.

And who would know what would happen, you know, by the time they would be off college. So maybe that is what I would do. The second question I have, and I know this is probably something that you would point me in the right direction, but that is what I'm looking for here.

I'm originally from India, and in India there is a big whole life insurance market with life insurance corporation, which is backed by government of India security, so it's very solid. I do have a substantial amount of different type of whole life insurance policy there, which I do contribute. I'm on a second year, and up to three years they have no cash values.

My main concerns with those are I'm very – with financial regulation being tightened up, when I got it, nobody was ever tracking what happens and how it goes, and I was not aware of that. But with increasing financial scrutiny, and I know how whole life insurance taxable thing works over here, I need some direction to find out answers about how do I need to report this if I do need to report whole life insurance policy.

I did look up IRS website and initially said, well, all your foreign account, if it has a collective of $10,000 or more, including surrender value of your whole life policy needs to be reported, but I'm not in that territory, but I would be there in a year or two, and I tried to ask around here in town to see if any particular CPA would have background dealing with something like this, and I ended up – everybody offers their service, but they don't necessarily have background or expertise that would make me feel comfortable with their answer.

So any – I don't know if you are aware or if you have any direction where I can find the appropriate resource to think what to do with this. So let me make sure I understand the situation. You own a whole life insurance contract that is slowly accumulating cash value, and it's an Indian contract that you purchased while you were in India from an Indian-based life insurance company.

You've now moved to the United States, and are you a citizen or are you on track to become a citizen of the US? Shailesh Kumar The latter part. Tavish Yehuda Okay. So you expect to become a citizen of the US, and as a US citizen in time – well, as a US citizen, you're now going to be subject to the full range of IRS regulation, and because the IRS requires for US citizens the reporting of foreign-held financial assets, you're trying to figure out if you need to report the value of your Indian whole life insurance contract to the IRS on the appropriate forms?

Is that an accurate summary? Shailesh Kumar Yes. And also if it would make – the reason I got this whole life policy because there were a whole lot of taxable benefit if I would have stayed in India. The incentives were good, tax-free, et cetera, et cetera. But I don't know if me staying in US, whether my whole life policy would be treated from India would be treated in the same way as if those whole life policy would be one that I obtained in US.

And so I also want to see that at some point would it make sense to just surrender it for simplification, and then maybe it would not be treated in a tax-advantaged fashion in US, and actually I would be better off investing that money. Anyway, I do make a sizable contribution every year on those, so.

Trevor Burrus: Right. What an interesting question. So do you have other accounts in India or other aspects of your financial life that continues to be in India? Shailesh Kumar Yes. Well, I do have an RE account which I had to open essentially to fund this policy. But that's pretty much it.

Trevor Burrus: And you intend to be in the United States, the best you can discern your intention now is to be a long-term resident of the United States? Shailesh Kumar Correct. Trevor Burrus: Okay. Well, do you continue to believe that this life insurance policy that you own is a good and valuable asset for you?

Or at this point, do you look at it and say, "Well, not really"? Shailesh Kumar I think it's a good and valuable asset. But a huge unknown is how the earnings on it will be treated when it would start paying off. And that's a huge uncertainty. You know, if it would be treated in a way that whole life policy earning would be, then it absolutely does make sense to me.

If it doesn't, and it would just put me up on the radar for IRS audit, then it probably does not. So that's the unknown for me, like how this policy would – earning from the policy would be treated here in the United States. Marc Thiessen So here's the best consideration that I can give you.

It is an interesting and complicated question, but here's the best analysis that I could give you. I would start with the question of, is this a valuable asset? Because there's no point in your – if you have an asset that stinks and it's just a piece of junk, you made a bad investment, then under that context, you cut your losses and sell it and move on and find something better to do with the money.

If it's a valuable asset though, then you want to – then there's no reason to rock the boat. So my first question, is this a valuable asset? And part of that kind of a corollary is, is this a valuable asset given my changing tax situation? And that's kind of probably the key thing because you purchased it planning to be governed by Indian tax law, but now you're governed by US-American tax law.

And so the attributes of that may – have changed. You're subject to a different system, so the attributes of that have changed. So I would ask that question and that may be useful to you to analyze. Let's say that for sake of just numbers that are inaccurate but useful to the conversation.

Let's say you were previously looking at it and saying, "I was going to get what would be the equivalent of a 10 percent annual rate of return on my asset." That would be great. But that was a 10 percent effective return net of taxes because of the tax value of the contract.

But now I'm actually getting a zero percent rate of return. Well, in that context, dump the investment and move on to something else where you can at least get a better return. And so that tax consideration will be substantial. With regard to the IRS, I'm not scared of foreign reporting requirements.

I think I hate them. In terms of ideologically, I hate them. I don't see what business the IRS has with you and your money. But I am in the minority and I'm just basically a clanging gong in the street. For some reason, the US voting base thinks that the IRS is God and deserves to know about every minute detail of your financial life.

So I hate it but I'm not scared of it. The reality is that there are these requirements that if you hold foreign assets, you are required to report them. But I haven't heard any evidence or any even allegations. Maybe they're out there. I haven't looked. But I haven't heard any evidence or allegation that holding foreign assets would be a risk.

And I recommend to people frequently that they internationally diversify their assets. I think it's a good idea. I get uncomfortable with the idea of having all of my assets in one country. And now we have to be practical about this. There's no reason for somebody who is just getting started and has no money to worry about opening a Swiss bank account.

But as your wealth grows and as your assets grow, I think it's imprudent to keep all of your assets under one particular country, under one particular tax entity. Now I think there's an appropriate and prudent way to engage in international diversification. And unfortunately for US citizens, the price of entry is to file your FBAR forms, your report of foreign bank and financial accounts, your FBAR forms every year with what you have.

So I'm not scared of filing it and I wouldn't dump the policy just because I now have to file the FBAR form. I would actually look at your having assets in India as a useful part of your overall financial life. The most natural way for you to diversify your holdings internationally is to invest and keep assets in a financial system that you know where you have contacts.

I would guess you have family, friends, et cetera. And so for you, the most natural way for you to have that international diversification would still be to maintain a simple but not insubstantial financial life in India even though you're planning to be a long-term resident of the United States.

>>Corey: Okay. Very good. And so for that second question, how change in the – or current change in the tax situation affects what effective rate of return would be, who can – I have tried to call IRS helpline. I reached out to the agent I have in India, but both of them have very limited knowledge about what is pertinent in their part of world without the other part of world.

And so I want somebody who can take – who has an interest and can come up with solid advice on this is what your policy looks like, this is the current tax system looks like, and this is what it means when we connect two dots. Where do I start?

Because local – one or two local CPAs I reached out to, of course, they are willing to provide services, but when I ask them, "Have you done," not necessarily for somebody living in India, but this type of work before, they were not able to give me any reference or so forth.

So I don't know whom can I ask that question or what type of resources I can reach out so that I can answer that question for myself. >>Steve: I doubt the person exists. If they did exist, the only place I could imagine them existing would be somebody who is servicing the mega wealthy Indian American community, and I mean mega wealthy.

There may be somebody who has established a boutique accounting and financial advice practice and they work with the mega wealthy. But in terms of just a rank and file person, I doubt they exist. And so frankly, you're going to be the best person to do it. Here's how I would approach it.

Don't be scared of the government officials. Don't be scared of the IRS. The IRS – if you call the IRS, they're not going to have a clue about the answer and they're especially not going to have a clue about the answer of anybody that's going to be sitting on a phone bank.

There may be some highly advanced person in the IRS organization, but nobody sitting on a phone bank is going to be able to help you and your local revenue agent is not going to be – they're going to be nice about it, but they just don't know. That's a very specialized question.

What I would do if I were you, do your best to read around as you've done and then just ask yourself the question, "OK, based upon my reading of this, as a reasonable person who is desiring to comply with the law as I understand it to be, what do I think is the answer?" And whatever you need to do, go with that because here's practically the situation.

The IRS is going to have no knowledge of your assets in India with the exception of what you actually file with them in the forms. There is no international tracking of every dollar and so they're going to have no knowledge of your assets except for what you file with them.

The workings of a life insurance contract especially are opaque to the banking industry. It's unlike a retirement account. For example, the assets that you have in a retirement account are sent off to the IRS every year. But a life insurance contract doesn't have that connection and my guess is that the life insurance contract doesn't have that connection in India.

So this is an asset that is opaque to the government authorities until or unless something is done. In the United States, whole life insurance contracts, growth and the value is not reported. It's not reportable in any way. That's one of the benefits of a whole life insurance contract. So I think the only burden or responsibility that's on you is to say as a prudent person, what's my best guess at this?

What's my best approach? Chances are you'll never have any interaction with the IRS. The audit rate for people with the IRS is minute. I think if memory is right, it's under 1% of returns I think that are ever audited. Most of those audits, if my memory is right, are kind of automated letters back and forth.

You'll never sit down with a revenue agent who has any knowledge of Indian tax law. And it's just – it's inconceivable. Now if you are some kind of magical criminal underlord – or sorry, overlord and you've earned $4 billion in rupees last year and now you're trying to figure out, "Well, how do I hide the money?" Well, now you might wind up in tax court and have to do it.

But I think you're giving the IRS and the Indian version of the IRS far more credit. This is going to be irrelevant for you. Just do your best as a prudent, honest person so you can sit before the revenue agent and you can say, "Here's what I'm doing. I'm reporting it on these forms as you specified here.

Here are the situation." And I think that's the best that they can expect. I mean you didn't set out to create these complicated laws. They did. But I think the best that anybody can expect is for you to do your best honestly, uprightly, to read the law and do your best to follow it.

Everything beyond that is not worth worrying about. Okay. All right. Well, that helps. I will keep you posted on that. Thank you. It is an interesting question and I have found a number of those interesting kind of expatriate solutions. There is a business opportunity. I'm convinced, a business opportunity especially in the current world where it's much easier to target your listeners.

But if you have an interest in accounting or an interest in financial advice and if you have an ethnic background or an experience, if you're an Indian-American or American-Indian, whichever way, if you have this connection and cross-border knowledge, you can become an expert in both and you can do a ton of business with people who cross that line.

And remember, for most of these kinds of practices, you don't need that many customers. But many people who are expatriates from another country maintain a financial life in both. I remember a professor of mine in college was from one of the small countries in Africa, I forget which one, but he didn't invest in the United States.

He worked in the United States but all of his investments were at home. He built out computer internet cafes and he had his friends and his family run them. But he made great returns on his money but it was all invested back home. And whether it's Canadian and US citizens who are living in the United States or in Canada and crossing the border and all of that, that's obviously a huge market.

Or if it's Rwandan, people from Rwanda and the United States, you can target these tiny little kind of expatriate communities very effectively with the internet. And there are a lot of people like Girish who would have these kinds of questions that you could serve effectively. So, there's a business idea for you if you're into that.

I think that's a pretty cool little option. And if you're into travel, especially if you're part of that community, if you are Indian American, then I think you have a really powerful way where you can set up an identity, a business identity in both countries and you have an entirely plausible business to run that involves you going back and forth, seeing your family in your home country and also in your country of residence.

You have a really efficient way that you could set that up. So anyway, that's one idea, one thing I've thought of, one of my backup plans. I share it with you. I have a boring ethnic history so I'm just a boring old US American. But you never know. Maybe I'll move to India someday.

I'll be back with you all soon. This show is part of the Radical Life Media network of podcasts and resources. Find out more at RadicalLifeMedia.com. Hey, Cricut customers. Max with Ads is included with your Cricut $60 unlimited plan at no additional cost. Max is the streaming platform where you can watch Scoob, Meg to the Trench, the Nightmare on Elm Street collection and so much more.

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