4 Places to Keep Your Cash When The FED Drops Rates – Money Q&A

Transcript:

On this episode of the personal finance podcast, four places to keep your cash when the fed drops rates.

Ooh, what's up everybody. And welcome to the personal finance podcast. I'm your host, Andrew founder of master money. co and today on the personal finance podcast, we're going to be diving into four places to keep your cash when the rates. If you guys have any questions, make sure to join the master money newsletter by going to master money.

co slash newsletter. And don't forget to follow us on Spotify, Apple podcasts, YouTube, or your favorite podcast player. And in addition, if you're getting value out of this show, Consider leaving a five star rating and review on Apple podcasts, Spotify, or your favorite podcast player. Now, today we're going to be diving into three of your questions.

And one of these questions actually has three parts to it, and it's going to be something that has action packs. So we have what to do when the fed lowers rates and how do you actually think through this process? We'll talk about that a little bit more when we go through that question. Two is a tactical plan to manage cashflow when you just don't have enough coming in.

We're going to talk through that. And then number three is how can I access my Roth 401k early? But there's also two other parts, including we're gonna be discussing direct indexing and in what order should they be pulling from their accounts if they want to retire at age 55. So these are the three questions that we are going to be diving into today.

We are really excited about this episode, so let's get into it. All right. So the first question is since the fed just lowered rates, how do you think about where to keep your cash? When this happens specifically, should we continue to keep our cash in high yield savings accounts and or are there other options that you think through?

So this is a great question because I think for a lot of people, People, they start to panic when the Fed lowers rates. And for those who don't know, if you're listening to this way in the future, it's not going to matter as much for you. But for those who don't know the Fed lowered rates at a half a percent.

Now, what happens when the Fed lowers rates? A number of different things can happen. Um, but one of the bigger things that happens when the Fed lowers rates is it's going to impact your cash, meaning the amount of money that you save the interest rates in your high yield savings accounts and in other places can go down.

Now, on the positive side is if you are in credit card debt or your debt is something that is variable, your interest rate on that debt can also decrease, which is a positive to that situation. And in addition, you know, housing and mortgage rates will drop, auto loans will drop. And so this is a positive.

Overall for borrowers, it helps them more, but for savers and people who have cash on hand, it may not help you get as high of a return on your cash. That's the simplest explanation of kind of what happens when the Fed lowers rates. That's going to impact you directly. Now, when we think about this, we want to maximize the rate of return on our cash.

It's been a beautiful time for the last couple of years because we've had a high interest rate on our cash so we can put it into something like a high yield savings account. Thanks a lot. And get anywhere from four and a half to 5 percent interest on our cash and a high yield savings account.

Something like that is a very flexible way to hang on to your cash. But there are some ways to combat against this if you want to try to lock in a rate and there's not cash that you think you would need immediately in an emergency. And so this is something that we can kind of talk through here. Number one is T bills.

So if you don't know what T bills are, they are short term U. S. government debt securities that mature in one year or less. And so when we're looking at T bills, they are considered one of the safest investments because they are backed by the U. S. government. So typically, when you look at this, there's a couple of different benefits to them.

One is if you're in a state that has very high state and local income taxes, this can help protect you against those taxes because, especially if you're a high earner, these federal taxes are still out in the interest, but state exemption can also boost the effective return for those of you, maybe you're in Cali.

Foreigner in New York, uh, that can be something that can be very beneficial for those who are in high tax areas. Now they're also backed, like we said, by the U S government. So they have a high safety metric, uh, when it comes to that. Now yields are still going to fall because the fed cut rates, but T Vills.

Often offer better returns than traditional savings accounts, so they can still be better overall than something like a traditional regular old savings account. The last place you really want to keep your cash is in a savings account at your bank with a 2 percent interest rate or anything like that.

But they also can mature at different times, so you can do anywhere from four weeks to 52 weeks, which allows you to have flexibility on how long you want to commit to your money. And when they mature, you can just reinvest them. Even though the yields may be lower, they still offer a reasonable rate of return in comparison to other alternatives.

So T Bills is number one that you can look at. Now, this is in no particular order. I'm kind of trying to inform you on some of the places that you can keep your cash on hand. To our money market accounts. Now, money market accounts are something that are very similar to high yield savings accounts. The difference is they are basically mutual funds that invest in short term, low risk securities, like government bonds.

They invest in commercial paper, things like CDs, and they aim to provide some liquidity and they usually will earn a slightly higher yield than a standard savings account. Now I see money market accounts and high yield savings accounts pretty close to the same regard because the interest rates typically are very close.

And so for me. If it's between the two, you know, it's a toss up. I don't really care about which one you actually put your dollars in because the yields are typically the same, because as we look at this, we also have high yield savings accounts. Now the last place that you want to keep your money again is in your bank saving account.

That's not a high yield savings account. You need to earn some interest on that high yield savings accounts. So if you don't know what this is, these are savings accounts that offer you more interest for keeping your money in those accounts. Now, this is a no brainer for pretty much anybody out there who is interested in keeping cash on hand.

We recommend keeping your emergency fund in a high yield savings account. Why it is the most flexible option of all of these. We recommend any cash that you need short term going into a high yield savings account. This is always going to be my number one recommendation, even when rates drop because. You need that flexibility.

This is not about maximizing your cash. If it's an emergency fund, this is about making sure that you maintain your flexibility, but you can also find these high yield savings accounts with competitive rates. Now, if you've been enjoying this five and a half percent or this four and a half percent for a long period of time, it's time to go.

It will drop some. And so you're going to notice that it will drop some in the next couple of weeks and or months if it has not already. And so you may get an email from your bank letting you know or just keep checking back to kind of see where those rates drop. But this is a time also to see who's going to maximize the amount of interest that they are willing to provide to their customers.

And maybe if you're someone who is a rate chaser, I am not a rate chaser whatsoever. I think it is something that's just not worth my time. But if you are a rate chaser and you're willing to also move your cash around, you can do some really cool things with this. Now let me tell you a couple of different ways to get a return on your high yield savings account.

I have friends out there who will actually go and move their savings account around every 90 days or so. Why do they do this? Because they find banks that have big signup bonuses. So some banks will offer 500 if you put in 30, 000 into a high yield savings account. And so every 90 days, they're trying to get that 500 because they can collect an extra 2, 000 per year just by taking advantage of some of these sign up bonuses.

And so that's something you can do. They call it churning, meaning that you churn to different accounts all the time. For some people, if you're trying to get to those big, big emergency fund numbers, maybe you're trying to get to your three or six month goal, you know, an extra 2, 000 is going to get you there that much faster every single year.

Over the course of five years, that's 10 grand. And so that's a big, big difference in your emergency fund that you can start to boost it over time when you need that cash on hand. 2, 000 can cover a lot of emergencies per year where maybe you're not even dipping into your emergency fund by doing some of that churning.

So just think through that process a little bit. It's not something I do personally. Uh, I've thought about it in the past and then I just realized, you know, it's going to take a little bit more time than I want to. to to invest and so overall it depends on the specific person, but that is one way to also boost your savings accounts in some of these situations.

And then lastly, there are CDs. Now CDs are probably the best way to lock in your rates. If you want to keep these current interest rates that are going right now and you think the Fed is going to continue to lower rates, I think the Fed will continue to lower rates because millennials and Gen Z are having a very hard time affording specific things, including housing.

And so this is something where as they lower rates. Housing can become more affordable or we'll see maybe prices become more inflated because the demand increases and we have not built enough homes. That's one big thing that we need to think through is how much inventory do we have on hand? It's going to be a big, big change as time goes on here.

We need to build more houses and that's part of the problem. Now, when it comes to these no penalty CDs, uh, one thing I want you to think through here is that a CD is something as a certificate of deposit, but it is where you place your money for a certain period of time. It can be six months. It can be one year, it can be two years.

It can be, they have 30 year CDs out there and you put your money into this CD. And then what happens is you have to keep it in there until the CD matures. Now, once that CD matures, then you can take your money out and you can reap the benefits of whatever that interest rate is. So if you want to lock in a 5 percent interest rate on a CD, then you would go to the bank, put your CD in for X amount of time.

Maybe it's two years, maybe it's five years, maybe it's one year, depending on what the interest rates are And then from there, you can go and lock that rate. And so this is something I think for a lot of people, uh, they really want to think through how to lock in their rate. And this is by far the best way to do it.

There's still a bunch of them out there. Like at the time recording this, that have higher rates, but as the fed decreased rates, there was a bunch of CDs that had over 5%. And I'm already seeing them now with lower rates. So four and a half, 4. all that kind of stuff. So these are something I think. Can be very interesting for some people, but these are one year rates for CDs that, you know, right now we are looking at CD rates that if you want to lock in closer to that 5%, probably now is a time to do it.

I'm not a big predictor, but I think the Fed could possibly lower rates again coming up in the near term because if they did not lower it, I thought they were going to lower it a quarter percent and they lowered it a half percent. And so just kind of picking up on some of those cues means that they may lower it again.

Going forward, they're probably gonna see what's gonna happen and then go from there. So as we think through this, we definitely want to make sure that we lock in those rates. If you have additional cash on hand that you don't plan on spending within the next couple of year or so, you could lock in your rate for a year so that you don't have those lowering interest rates bogging you.

down. So C's are the other great place to keep your cash. Other than that, there's some other things. You could buy bonds, you could buy other things, but they are going to vary based on what the interest rate is. So if you want to lock in that rate, that's one of my favorite ways to do it is by using no penalty CDs.

Now, uh, For me, for the most part, I am a high yield savings account guy. I just keep it in a high yield savings account, keep it flexible. Now, if I feel like I want to lock in a rate, I would use a CD. I have no problem doing that, but I like to have flexibility with my cash because I'm focused on buying, you know, different investments, different businesses, and I need to have that stuff liquid.

Now, no penalty CD is fine. You can still withdraw without penalties. So it does give you a little bit of security, especially if you're in a declining rate environment, that might be something to think through as well. So. Anyways, these are the places that I would look to kind of keep that cash on hand.

If you have any other questions, though, please let me know. All right. The next question is figuring out how to put together a tactical plan to stop a spending deficit, essentially. So, uh, this person specifically gave their entire story of, you know, how they have five kids and how they're trying to figure out how to manage their money properly.

And so here's the question. My biggest hurdle right now is knowing where to start when I know that we are working from a deficit. at the beginning of each month and at every paycheck. We need to catch up. How do I strategize this and where do I begin? It's not as simple as spend no more than X amount of dollars on, you know, whatever category that is.

I built a workbook in Excel that helps me understand and track trends. Where should I go from here? I want a tactical plan as well as an understanding of the strategic mindset I need to have to keep this going forward. That's the only way this will realistically be a lifelong thing. So, this person specifically is taking over the finances for the first time and so we are going to talk through this plan.

Now, Listen. As I'm talking through this, I want you to know that I definitely think you can absolutely make a change here and you can do this. This is something I think most people get into starting this and thinking that this has to be perfect. And if I'm not perfect, then I should not continue to do this.

That is not the case whatsoever. I'm going to tell you right now. I have never in my entire life had a perfect month with my budget financially. Ever in my entire life. And you could talk to anybody else out there who is in the personal finance space and they will tell you the same exact thing. This is not a game of being perfect.

This is a game of maximizing what you value, putting dollars towards things that actually value to you. And then from there, then we let everything fall into place. And so I'm going to show you tactically how to do this. And the number one is I want you to keep this in the back of is if you are starting from a deficit every single month.

Instead of starting from a deficit every single month, we need to figure out a way to get out of that deficit. How do we do that? We give our dollars a job. So every time money comes in, and I know you're familiar with zero based budgets, you said, every time money comes in, we need to make sure that dollar Has a job.

It goes towards something, no matter what. So immediately on payday, I want you to take that chunk of money that comes in and say, where does this need to go next? And we should be mapping out where our bills fall, what dates they fall on. So for those of you who are in a deficit and you're listening to this, The more of a deficit that you are in, the more detailed you need to get.

Now, for those who are not in a deficit, they can get a little more lax and leeway on how they manage this. But if you are in a deficit, you need to figure out the details of every single situation because you're working day to day and week to week. You are not working month to month or quarter to quarter.

And so because of this, you need to figure out where your bills fall. What days do these fall on? Now, if your bills are falling in a certain scenario, Where you think they are way out of whack and it's kind of hard to keep up with them because the date they fall on, you can call these companies and you can say, Hey, can we change my billing date to X day?

You can do it a couple of days after you get paid. Now, I would not do it on your payday in case there's any issue with your payday. I don't know where you work, but it depends on if there's an issue with your payday. I would do it, you know, Monday, Tuesday, After your payday and set up these bill dates. So, you know, exactly when they are.

Now, if you don't feel like doing that, make sure you at least map out, knowing when your bill dates are available, Monarch money can do this for you. Uh, when you utilize Monarch money, it actually has a calendar on there that tells you exactly when your bills are due based on your transaction history from the past, and so let's figure out exactly when your bills fall so that when your pay comes in, we can allocate dollars towards exactly where that money.

Secondly is we need to analyze this deficit. We need to look at this deficit and get real here. We need to say to ourselves, Hey, why am I in this deficit? Or there are specific things that I'm spending dollars on that maybe I don't need to be doing. So your baseline expenses, these expenses that are fixed, the ones that you need to spend money on every single month.

I'm talking groceries. I'm talking rent and mortgage. I'm talking loan payments. I'm talking utilities. All of these expenses need to get added up. Okay. And I want you to add up these expenses every single month. Go back last three months, figure out how much you're spending on your baseline expenses, your needs, exactly what you need every single month.

This is very important because we need to know this number on what your baseline expenses are. Now your kid's going to soccer is not a baseline expense. What is a baseline expense though, is making sure that we note our needs, exactly what they are. Is driving this issue and so for this list, we have our needs in our baseline met next are non essentials.

What are our non essentials that we're spending money on? It's dining out. It's subscriptions. It's impulse purchases. We need to put all this on a list as well. Now, this is not a forever situation. This is not something that we're gonna be taking away. But we want to have this on a specific separate list so that we know what are the things that may not be a need that we can start to reduce or cut out.

I'm going to talk about how to reduce this in a second as time goes on. Now, small wins are going to add up. So over time, we're going to see this as we look at these baseline expenses or our needs, we have our once in play. So your once can be anything, like I said, from dining out. They can be things like subscriptions, impulse purchases, kids, games.

They could be, you know, just all these different things put into play. Okay. And now we're going to do a reset is what I like to call it. And with a reset, what we're going to be doing is we're going to be looking at, Hey, what's the difference between our needs and our wants. And how can we start to reduce some of the things that may be taking up way too much of our budget?

The only way to do this is with hard, real numbers. So you need to go back to those three months and say to yourself, add everything up and put it into categories and figure out exactly where you're falling short. For a lot of people, when they start doing this, one place to look is auto loans. That's a huge place to look.

If you have a bunch of auto loans, consider that and think through that process. Another big one though, and most. People spend way more here than they think they do, is groceries. Groceries can eat you up every single month, and there's changes that you can make. You could change from, you know, going to the expensive grocery store to all to your Costco.

You can change from going to the expensive grocery store to Walmart. There's a lot of different things that you can do there to make some adjustments, but in addition, after you do that, then we gotta realize, hey. How much are we spending here? Do we need each and every single thing every single week? I actually, when we know we're spending too much on groceries, I actually started to take over the grocery shopping because I'm more tactical with the way that I shop where my wife is more just kind of grab and go.

And so that it works out for us. I don't really mind doing it and she doesn't like doing it. And so for that situation, it helped us to flip who did the grocery shopping. So there's a lot of different things that you can do there that may help going forward. And so as you start to do this reset, you're going to identify some of the places.

That really may have way too much spending. And we're going to start to reduce the spending in each of those areas. So I want you to just pick the two biggest ones. And when you look at these, the two biggest ones, we are going to gradually reduce over time. So if it's eating out, for example, you spend 800 a month on eating out and you want to get it down to 400 per month, we're going to look at a six months timeframe, and we're going to start reducing that down by.

By 50 to 100 per month. Okay. Maybe the first month is 50. So you don't feel so much pain. Just ripping off the bandaid month. Two is a hundred month. Three is 75 month. Four is 50 and maybe month five. You have your parents coming to town. And so you spend a little more on eating out. That's okay. You're going to fall backwards.

It is fine. Month six, you get back on track and you reduce it a hundred. And now you're down to 400 per month. That's just an example of one way to do it. Same thing goes for, let's say the grocery bill is massive and you're spending 2, 500. 1, 200 a month on groceries. You have five kids. I don't know how much you spend.

And that's a lot. Most people would not spend on that. I spent about 1, 100 a month on groceries for a family of four, about to be a family of five. So we'll see what that ends up being. But anyways, let's just make this more realistic. Let's say you spend 1, 500 per month on groceries. Okay. And you want to get down to 1, 200 a month.

Well, you're going to start to slowly reduce that over time or the course of six months by 50 per month. Okay. This gradual reduction is going to help you achieve your goals. And it's not going to feel so painful for you and your family, and they're not going to hold it against you because you're now the budget person.

Because one thing I want you to know is that all of a sudden the budget person comes in and they are trying to reduce some of your bills to do better financially. And then everybody kind of turns and looks at them with and points fingers at them and says, Hey, you're ruining my life. That's not really the case.

What's really happening here is you're just trying to take care of their financial situation. So this gradual reduction in each of these areas is going to really help. I like picking two. If you see that you can identify a couple of areas and you think you could do three or four more power to you, I like to do it slowly over time.

Maybe you do two for the first couple of months. And if you see a lot of progress, then you can add another one in and month by month. Three or four and then add another month in in month five or six. And so that's how I would kind of go through that process. Now, if you're in debt, this is another scenario on why you might be in a deficit because debt can be the huge driver to why most Americans are in a deficit, auto loans, mortgages, those types of things will absolutely kill you.

And if that's what's putting you in the hole, you need to rethink that process. And we have a ton of episodes on how to think about that when you go through this. Next, we need to get a little more strategic. So if we were to get it really strategic, we want to automate this. I don't want you spending all this time in the spreadsheet upfront.

You're going to have to to identify what the heck is going on. Now, if you don't want to go back three months yourself manually and bank statements, a tool like Monarch money will help automate all of this for you. Uh, we have a promo code PFP. If you go to monarch money. com slash PFP, that'll get you a month free if you want to test that out.

So that might be great for setting all of this up. And then once you have this in the system, you want to Automate your budget. You don't want to sit there and be in spreadsheets all day long and like entering in every little thing. Instead, what you want to do is make sure this process begins to automate.

And so you can do this by using tools like Monarch Money. There's other ones out there, but Monarch Money is my favorite, the one that I use. And you can go in there and start to consistently automate this process. It's very important to automate your money as much as you possibly can. The more you automate, the less you have to rely on your willpower to get up and have to, uh, I got to go do all this stuff again.

So that's really, really important. And then embrace flexibility. You're going to make mistakes. I want you to know you're going to make mistakes. You may stay in the deficit for a little longer before you get into the positive. And because you're making those mistakes, you're making progress also at the same time.

So progress is what I want to see. I don't care if you're perfect. I just want you to see progression every single month. If you fall backwards one month, it's okay. Do not quit. Instead, continue to try to make progress every single month so that you can shift from that deficit to a surplus mindset. I want you to have that surplus mindset.

Changing your mindset that you can do this is the number one key. And I know you can. So please. Reach out to me. If you have any other questions on that, that's the tactical way that I would approach this to get started. And then from there, then you can start to move some of these pieces around in ways that fit your budget.

Listen, you doing this is going to change your family's financial future. It's going to help you build wealth. It's going to help you to. Actually be able to retire. And so this is the only way to do it. I know you're picking up the work here, but this is something that really, really will make a ton of sense.

Once you get the ball rolling, it's getting started and staying consistent. Those are the two things. And the best way to stay consistent is to start to automate this process. The last question is a three parter. So, Hey, Andrew, I'm a listener of the personal finance podcast, and I love it because it reemphasizes many of the things I know and teach my friends.

And I'm learning some new tips. I have been listening to past episodes and I have a couple of questions for you. First, a bit of background. My wife and I are 29 and just reached 1 million net worth. So first of all, congratulations on that. That is absolutely amazing. Of which 700, 000 is investable net worth.

And no debt besides our low interest mortgages. Fantastic. We plan to retire early and I champion many of the things you teach, especially utilizing low cost index funds. The majority of our investments are low cost ETFs and are in a Roth. Great, great work there. So here's my questions. Are Roth 401k contributions able to be withdrawn penalty free during early retirement, just like Roth IRA contributions.

I cannot find anything that explicitly states yes or no for Roth 401k like the rules for the Roth IRA. Question two, if retiring 55 or earlier, in what order do you recommend utilizing these accounts? Roth IRA 401k contribution basis, HSA using saved receipts over the years, or taxable brokerage money?

We'll get into that. And then lastly is not necessarily a question, but there was a listener question you answered on 812 episode that I want to bring up. The question was around the Schwab personalized Indexing. You addressed this listener question mostly around how you should use low cost index funds over any actively managed fund to fees.

I completely agree with the low cost approach, but would be interested to hear how a more educated discussion about direct indexing product, which I would love to, I'm going to, I'm probably going to do an entire episode on this by the way, um, which is possibly the next big thing in the industry. Schwab has a minimum of 100k for this account currently, From what I know, this is less of an actively managed fund and more of a robo advisor on steroids using tax harvesting is still the index based.

Perfect. And then it kind of goes on a little bit more there. So number three is one that I will do a very long episode on because I'm getting this question more and more, and there are more advisors trying to sell direct indexing, and it is something that I think is a, I'll dive into it more on that episode.

episode, but this is, um, something we can definitely talk through more. Now, the biggest benefit to direct indexing before I dive into the other two questions is that tax loss harvesting thing. And that is going to be something that we can talk through on that episode, but I will put that in its own episode.

I think we need to really start to increase the discussions on those because I have a very strong opinion on that and might bring someone on to debate me on it too. So we can go through that process, uh, and I'll keep you guys posted on when that episode comes out. All right. So first, let's talk about the Roth 401k question.

So to reiterate the question, are Roth 401k contributions able to be withdrawn penalty free during early retirement, just like Roth IRA contribution basis? So here's how this works. OK, so the Roth 401k is a little bit different. And because it's a little bit different with a Roth IRA, you can withdraw contributions, but not earnings at any time.

Penalty free. And tax free since you've already paid taxes on that money. Okay, so that's the Roth IRA rule for those listening who do not know the rule. Now the rules for the Roth 401k are a little bit more complex. Now the thing with the Roth 401k, because it's a newer product, they are changing the rules constantly, which drives me up a wall, but they're changing the rules constantly.

So while both the Roth 401k and Roth IRA contributions are made with after tax dollars, Roth 401k contributions cannot. B withdrawn penalty free before age 59 and a half unless you meet certain expectations like using a Roth conversion ladder. But I'm going to give you the options on how you can get your money out of that Roth 401k early.

Uh, and there are two that I have at the top of my head here. So to access Roth 401k funds in early retirement, one strategy is to roll the Roth 401k into a Roth IRA after you leave your job. So once the Roth 401k funds are in a Roth IRA, they'll follow the more flexible Roth IRA rules, allowing you to withdraw contributions penalty free.

That's the first option. The second option is to use a Roth conversion ladder. And this is converting portions of your Roth 401k or you can do it with a traditional 401k to, to a Roth IRA and waiting five years before withdrawing penalty free. That's option number two. So you can do the conversion ladder, you can roll it into a Roth IRA.

Both are going to be similar in structure on how you do that, but those are the two options I see for early access currently. Now, as these rules change, I am wondering if they're going to change some of these rules. Again, we will see what happens going forward, but those are some of the ways that you can access it early.

Now, when we're talking about early withdrawals for retirement, in which order to kind of look at some of this stuff, if I was retiring early, there are some that I would consider first. Now, one is a taxable brokerage account, especially if you're not working, utilizing something like a taxable brokerage account can give you some flexibility.

And because the long term capital gains are taxed at favorable rates, you can sell some specific investments to minimize the taxes. Secondly is I would look at the Roth IRA contribution basis. And that would be probably the second one that I would look into. Because if you roll your Roth 401k into a Roth IRA, you can also access those contributions as well.

And this will allow your Roth earnings to continue growing compound free, but you can start to pull out some of the basis of your Roth contributions. If you retire early. Third is I would look at the HSA and the HSA, you know, utilize for medical expenses. If you have a lot of medical expenses going forward, then maybe I would bump this up to two because you have to reimburse yourself at some point in time and you get that triple tax benefits.

So, you know, they grow tax free, you can pull them out tax free for medical expenses. But if you think you're going to have large medical expenses later on in retirement, Then you can kind of save some of that stuff. But upfront, if you have a lot of receipts there and you have them available, then, you know, you can start pulling from the HSA.

I just know healthcare is just getting more and more expensive. And so a lot of times I would think through waiting on the HSA until a little bit later for that reason. But. If you don't have access to Roth contributions, for example, or if you don't have a taxable brokerage account, then the HSA is going to get bumped up more because it helps you in early retirement.

So you don't reach penalties. If you're going to reach penalties, then using that HSA, if you have a lot of money in there is going to be very, very good for your long term situation, uh, to make sure that you access that HSA. And then lastly, you can use the Roth conversion ladder also. And I would do the conversion based on your standard deduction.

And that way you can go and not have to pay taxes on that Roth conversion ladder. If you need an episode on that, we have one with, uh, Katie, Gaddy Tassin, who is the host of money with Katie. And she talks through that in that episode as well. We can link it up down below. Uh, and then again, we will do the direct indexing question on another episode, but that is a great question.

I'm glad you brought that up. It'll be something that we probably do a full episode on and kind of talk through the pros and the cons of direct indexing and how we want to think about that. So thank you again. For submitting this question. And thank you everybody for listening to this episode and investing in yourself.

Cause that's exactly what you do when you listen to this podcast as you are investing in yourself. If you guys have a question, send it over to us via email by joining the master money newsletter, you go to master money. com slash newsletter, and you can respond to any of those newsletters that come out and we will be able to answer your question there again, thank you guys so much for listening to this episode and we will see you on the next episode.