Qualifying The Called IRA Investments

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This is the Truth Network. Welcome to Finishing Wealth, brought to you by cardinalguide.com, with certified financial planner, Hans Scheil, best-selling author and financial planner, helping families finish well for over 40 years. On Finishing Wealth, we'll examine both biblical and practical knowledge to assist families in finishing wealth, including discussions on managing social security, Medicare, IRAs, long-term care, life insurance, investments, and taxes. Now let's get started with Finishing Wealth. Well, welcome to Finishing Wealth with certified financial planner, Hans Scheil. Today's show, qualifying the called IRA investments. And if you're sitting there going, I don't know what that means, Robbie, that's good because the idea of qualifying the called, you might've heard that, that, you know, God doesn't call the qualified.

He qualifies the called. And the reason why he does that, it has to do with discipleship, right? Which means an enthusiastic learner. And, you know, back in Matthew 28, of course, as a car salesman, I always took great interest in Matthew 28. It was called the Great Commission, Hans. And so I immediately was drawn to that.

That's good. But the Great Commission is, you know, go you there for and make disciples of all nations. And I really think if you were to get to know Hans, the thing that I marvel at our relationship is he is truly a disciple and a disciple of people.

In other words, he is an enthusiastic learner. He is interested in learning about what you do, your story, how you reflect God and those kinds of things. And so it appears to me that as we go into different relationships, if God is wanting us to be disciples, obviously, yeah, we're going to be disciples of Jesus, but Jesus is in everybody that you ever met. And, you know, part of what we get to do as disciples is find Him in there and then, you know, see what we can do to help that person show them off. And at the same time, show Jesus off, that is. I'm sure if you're like me, you love it when other people are looking for Jesus in you. And so this is kind of how we qualify the called, is we go about being a learner.

And even in long-standing relationships like my wife, like when I get home for dinner tonight, if I just make a bunch of assumptions on what she's going to say and do, I'd miss out on a lot of opportunities to sit and listen and hear her heart and maybe where she's seeing God in something that I would have totally missed. And so I think today's show, you're going to be excited that Hans will not only teach you about qualified IRAs, which that's an interesting term, but he's going to teach you what he learned from a really beyond cool disciple that I guess we're going to call Dr. Bob. Yeah, we're going to call him Dr. Bob. In the book, he's Marshall is his name because we gave everybody an alias, but we're going to call him Dr. Bob.

He's been passed on and he's been in heaven for eight years. And he became a client in 2012. But first, before we talk about him, we want to like, so how we ended up on this was there's such a thing as called qualified money. And that's really kind of an industry term that people like me use. And I have to laugh when people like me try to use that term when they're talking to consumers and people like, what in the world is qualified money and what is non-qualified money? And so I'm going to just give a little definition is that qualified money is IRA money, 401k money, even Roth IRA money. It means that this money qualifies as an IRA. It's met all the rules, regulations, contribution limits, where the money came from, how it's managed, how it's held, how it's invested, how it's going to be paid out when you want distributions, all those. So when we refer to something as qualified, we're talking about IRA money.

And when we say non-qualified, that's all the other money that's not in an IRA. So it's a little weird. We don't necessarily use it, but sometimes we have to use it when we're talking to consumers just to find out what we're talking about. Yeah. As I was thinking about, if I'm trying to finish well, right? One of the biggest things that we've talked about in the last few weeks is, you know, building it on the rock and doing some planning. Well, a great deal of that planning is deciding how you're going to use the qualified money versus the unqualified money, right?

Well, sure. And so the thing that makes it qualified, unless it's a Roth, is you've never paid taxes on this money. I mean, that's just, if you really just want to boil it down, is you've enjoyed the benefit of no taxes on this money and you'll continue to enjoy the tax benefits as long as you leave it in there. But I'm going to tell you, the IRS is going to get their money. I mean, there's just either you're going to hold it for a long time and then you're going to die and it's going to go to your beneficiaries and then they're going to cash it in and they're going to pay the taxes, maybe at higher rates than yours, or you're going to start distributing this over your retirement, which is what it was intended for. And then you're going to pay the taxes on the distribution and then you're going to live on the rest. So from the difference between an IRA, a Roth IRA, and a regular IRA, they're both qualified money, correct? This is actually, we're learning as we go here, folks.

This is a concept I did not know prior to the show. So with the Roth IRA, it's qualified money, but I've paid the tax on it yet. I don't have to pay tax on the reason that it would stand out as a Roth IRA is it makes, you know, interest that I'm not getting taxed on.

Am I right? Correct. It's tax free. That's the benefit. That's, that's, that's the real benefit. And then you can pull money out of it tax free and then you can give it to your kids and your kids won't, you know, at your death and then your kids won't have to pay tax on it either. So it's, that's the benefit. Yeah. I mean, that's really cool. So I, you know, just to review, cause I'm excited about what I learned.

I've been a disciple. But to get that benefit, you had to pay tax on the money going in. So, so in other words, if you have a hundred thousand dollars in a Roth IRA and maybe it's grown from 50, you made 50 of contributions, you had to make like 80 or 90 to have 50 left. To put into the IRA. But once it's in there. Once it's in there. I'm not paying tax on the, on the increase. On the growth or the principal. I mean, that's what makes it qualified.

Sure. Now most money though, doesn't sit in Roth IRAs. It sits in traditional IRAs or 401ks. And most of that is in the never paid tax on a category, but gonna pay tax.

So just again, cause I'm trying to be a disciple here, a learner. And a traditional IRA do when I take it out and have to pay the tax on the original income, but not on the growth. You pay tax on both. Oh, so wait a minute now.

I'm learning something really cool. So with a Roth IRA, I don't have to pay tax on the growth, but with a traditional IRA, you have to pay tax on both the original on both on both, but not until you take it out. Right. But if I take it out, I'm going to have to pay tax and you will take it out either in your lifetime or somebody else's somebody's going to take it out. So a Roth IRA has this other really cool benefit is like you don't pay tax on the growth on a Roth IRA.

No, no, that's just, they're wonderful for young people. I did not know that. I've done this show with you for two. Well, it takes a while.

And I'm guessing that a lot of our listeners are just starting to get it. I had a incoming client last Saturday afternoon. Couldn't talk to him during the week cause he's too busy and talked to his wife.

And then we set it up Saturday. He's a CPA. He's not acting as a CPA. Now he's running this big law firm, but I explained some things about Roth IRAs to him that he didn't know. In fact, he was debating with me a bit.

And then, you know, guess who won that debate. And he's now a client. But so the topic of the show today is really, we're going to show you show you how you can buy longterm care insurance with your qualified money, which is what most people have an abundance of. If most people that I work with, even this guy, he's got in the millions of IRA money and he has almost no nonqualified savings. I mean, that was one of the things I pointed out to him.

He's done this great job. It's almost 2 million in his IRA that he's built up or it's still in a 401k. And he has almost no savings that he can go grab or money that he can pay that he doesn't have to pay tax on a withdrawal. And that's not necessarily a very good place to be in because in retirement, you know, you, you all of a sudden would have a need for a substantial amount of money and you're either going to have to withdraw it out of your IRA cause it's the only place you have money. And if you do that, it's going to mess your taxes up cause you're going to have a big spike in income for a year or you're going to have to take out a loan, you know, which is not real smart in retirement. So just kind of some sub points on IRAs, Roth IRAs, nonqualified savings, which is like a brokerage account. And so the topic that we're going to get into in the second part of the show is really talking about since most of my savings is in my 401k and in my IRA in something that I haven't paid taxes on. And I'm interested in buying longterm care insurance and specifically interested in buying this kind of single premium or short number of years premium.

I don't want to pay on this for the rest of my life. So I want to buy hybrid longterm care, hybrid life longterm care. And I'd like to do it with my IRA money. And that's really what my client eight years ago, Dr. Bob, that's exactly what piqued his interest is, is that he had an abundance of IRA money and he was having to distribute it because he was 79 years old when he became a client. And he was very intrigued with the idea.

So I mean, I can buy longterm care insurance and I can do it with a lump of my IRA money. Exactly. But I got some explaining to do. And it took us a while.

Well, I say a while, a few meetings. And that's exactly what we did. And now eight years later, it's eight years since he bought this. I just got the statement and I thought, you know, I want to talk about this on the radio because I've sold this same policy to lots of people.

But he's the first one that I sold and then I sold myself on and I did it with IRA money. So we're going to talk about that in general and tell a little bit more of the story of him. Right. It's going to be like we're disciples.

We're learning. And then again, don't miss this. I love this part of the story. If you know Hans, he loves stories. People's like, what's the story behind this person and how did they get to where they, where's God in this?

Those kinds of things. It's just absolutely beautiful. And that led to his book, Complete Cardinal Guide to Planning for and Living in Retirement, which of course, this is brought to you by CardinalGuide.com. Don't forget to put Cardinal in front of the guide, and then you get to CardinalGuide.com.

You can email Hans, get the entire book. Today's chapter that we're talking about are the seven worries that we talk about constantly is the IRA, which we now know is qualified money. So when we come back, we're going to find out more on how to essentially call the qualified to become IRA money.

We'll be right back. So Hans and I would love to take our show on the road to your church, Sunday school, Christian, or civic group. Here's a chance for you to advance the kingdom through financial resources by leveraging Hans' expertise in qualified charitable contributions, veterans aid and attendance, IRAs, social security, Medicare, and long-term care. Just go to CardinalGuide.com and contact Hans to schedule a live recording of Finishing Well at your church, Sunday school, Christian, or civic group. Contact Hans at CardinalGuide.com.

That's CardinalGuide.com. Welcome back to Finishing Well with certified financial planner, Hans Scheil, and today's show calling the qualified IRA investments. And so, you know, we get into this, which, you know, this is, it's really, really cool to me because we're going to talk about an annuity, which I had no clue what that was two years ago.

But so we're going to get into that and we're going to get into this whole concept, which is, it's just really cool to be a disciple and learn this kind of stuff. Yeah. So in the book, this is Marshall and Elizabeth, and you can read the whole story, but I'm going to try to give you the quick version of it is, is that my brother sold these people Medicare supplements and reduced their premium. He was 79, about to turn 80.

She was probably 76. And my brother just got talking to him about the things that I do and being a certified financial planner and a CFP. And that's kind of our business model is I got a whole bunch of people doing Medicare, and then they talked to them about how we can help the people with their finances. And he wanted my brother to look at his long-term care, which had gone up in premium. He had bought it several years before and it was this huge premium.

And so I got on the phone with him and started talking to him and I said, well, you know, you got some alternatives. You could buy this hybrid long-term care insurance. And where that is, is it's a life insurance policy and a long-term care policy put together. And those two things put together, you can pay with a single premium. So instead of paying this 1400 bucks a month that you're paying for your long-term care, we could take some amount of money. I think in his case, it was $180,000 of IRA money. And we can put that to the insurance company. And then he paid some other money for the extension riders out of non-qualified money. So I don't want to get zooming around with a whole bunch of numbers, just principally, he was able to use his IRA money to buy long-term care insurance.

And there's one specific company that at least had, I don't think they, I think it's expired, a patent on this whole process, which is kind of unique. So I go down to see him. We go through all this type of stuff. And then I also realized that he was troubled by his minimum distributions because he had three different IRA accounts and actually four different IRA accounts. Cause one of them was his wife's hers was a small amount.

And he was most troubled with hers because it just seemed like a lot of doing and a lot of work. And he was asking me if I'd help him with that. And I said, well, sure. I'd help you with those calculations every year, but how would it be if we just set this, all your IRAs on a course where that stuff is just met for you every year for the rest of your life? And boy, he was, he was liking that. And I said, this long-term care IRA, long-term care insurance, it meets minimum distributions too, because they're going to distribute it a little bit at a time over your lifetime to pay the premiums on the long-term care insurance.

And so it's going to meet minimum distributions. So he was happy with all that, bought all the stuff. And then in the course of talking to him, I learned that he was a Christian, a very Christian man. And he, like me had suffered from alcoholism and he was a recovering alcoholic, which I am, and really found God through that. And for him, that had been many, many years ago for me, not as many years, but it's still been a long time from now. And so I, one of his big deals was the getting Bibles into China. I mean, this, he was like fixated on that, that, that, that, that was, that was his calling that God had called him to do.

And he gave a lot of money to those people and supported them and got others to support them. And so I ended up telling him after he bought this, because I always want to stay away from inducements. I said, I'm going to give part of the commission that I earned that I earned from this. And I'm to, to, to that Bibles to China mission.

And I should know right off the top of my, cause I get mail from them constantly because I'm a large contributor to them as well. And so I learned about that. And then I also learned that he had more IRA money and he wanted to do with the minimum distribution thing with all of his IRA money.

And I kind of went home thinking like, how am I going to solve this problem? Well, there's lots of ways to do that. And he gave me Ed slot's book. And if any of you have read my book, I've become one of the ed slot groupies. And I've been part of ed slot now for eight years. And I go twice a year and get training and ed slot is America's IRA expert. And I took his book, read it over the weekend, went back down to see Dr. Bob and sold him three more insurance policies that are all designed to give tax free money at his death and his wife's death to his beneficiaries, as opposed to giving them IRA money, which is going to be taxed by them, but yet still hanging onto the money in case they need it for their lifetime. So we were able to solve all that, which meant even more money for the Bibles to China crowd and which was great. And then, you know, I had to meet, meet him out in the driveway for him to slip me because he didn't want me discussing all this in front of his wife because she didn't really like him giving away all this money.

Well, at least he had a perception of that and I guess he was probably right. It's, you know, his marriage. And so we're meeting out in the driveway and he's slipping me the address and the name of the place and to send the check to them and slipping me ed slot's book. And anyhow, so we get all this done. And then about three months after he qualified for the life insurance and all that, Dr. Bob passes away.

Okay. I mean, just, I mean, I'm away at a meeting and I get word. So, you know, that really just kind of shook me, but it, it, it, you know, I, I really thought about what I learned from him and I know that he's in heaven and he even talked about going to heaven at some of our lunches and he was just, just a great guy. And so what I learned from him were, you know, were many things about just charity and giving.

And I learned some about just a man loving his family and loving his, his children. I met with his estate planning attorney because his estate planning attorney was telling him that I was wrong about a few things or maybe he was going in there and he could be pretty adamant about what he wanted. So finally we had a meeting that was the last meeting before he died.

I mean, just think about that. I mean, about a month before he died, we, we, we were in this meeting and we kind of cleared up all of that. And then his estate attorney got everything set up the way we wanted it and the way he wanted it. And just so, so the story that I really wanted to get to everybody here is what he did is he took, we were working for a $5,000 a month long-term care benefit. That's what his other policy paid on both he and his wife. And we were looking for a long benefit period. In fact, we were still able to offer lifetime.

He was concerned that he was going to have a stroke or something or have some kind of condition and then be in a facility or getting home healthcare for like a long time. So we, we, we, we went to lifetime benefits on this. We put inflation in there and then he also wanted to take care of entirely his wife's IRA. So we actually had to write four policies. I mean, we wrote two using his IRA money and two using hers.

So the numbers get a little bit confusing, but I was just going over these with Robbie and it's just, it's, it's, it's great for me to look at something that I sold. He's been dead for almost eight years and she's living on and she's just got these wonderful benefits. She may never use them. And if she doesn't, their kids are going to get a substantial amount more out of this thing than they ever put in it. And they're going to get the more tax-free cause it's going to be a life insurance benefit. If she uses some of it, but not all of it, but then they're still going to get more than they put in it. I mean, it's, it's, it's really a win for everybody involved. And to just see this thing performing exactly like a percentage, just see it in black and white eight years later is just fulfilling to me.

Right. And we are sitting there looking at these numbers and this is an annuity. And so as we've taught before an annuity pays out, this kind of annuity pays out a monthly amount and like, wow, she's getting what is it?

$5,000. Well, actually I even got you a little mixed up on that is that the reason this is an annuity and a life insurance policy side by side. And the reason it has to be an annuity is you can't put qualified or IRA money into a life insurance policy directly.

If you did, you'd have to pay taxes on all the money. Right. So nobody wants to make $180,000 IRA transfer.

Right. To have to pay, you know, $80,000 in taxes. So the whole 180 in his case went into an annuity and then the annuity has guaranteed interest and it pays the life insurance premium for 20 years exactly on the penny. And the annuity will be empty in 20 years, but she's not getting that money now. That money is just moving from the annuity to the life insurance. Right. But we can imagine that it must be a whopper of a life insurance policy if the, if the premium is $5,000 a month. Well, the $5,000 a month is actually the longterm care benefit. Okay. If you use it right now.

Okay. And that $5,000 a month is guaranteed for lifetime. So that's the hybrid part of it. Like it's paying the premium on the life insurance, but it's also providing this if the, if you invoke the longterm. Well, the life insurance benefit is only there if you don't use it for longterm care. And if you use it for longterm care, the life insurance benefit, you can, they can only use it to the extent of $5,000 a month. Now that's since been inflated up to about 8,000 a month because this thing has inflation on it too.

So I'm throwing all these numbers at you. In other words, his wife and he, while he was alive, have wonderful longterm care insurance. That's just there. As long as they ever need it. As long as they ever need it. But if they don't use it or they just use it, he's not going to use it cause he's deceased.

He died six months after these policies were issued. She might use it. I think she's 84 now. She might use it. And if she does, it'll be there for her. And if she uses it up to its fullest, there's going to be nothing left for the kids.

I mean, it's just, it's, you know, it's gonna, it's gonna pay out its money. So then she's gonna be really glad they had it. If she just uses a little bit or doesn't use it at all, then there's going to be a substantial life insurance payment after she dies, which is just refunding all the money that they paid into this and more. So that's the benefit of hybrid longterm care.

And what we're able to do is we're able to do this kind of planning. And it's certainly for people younger than them, it doesn't take $180,000 to cover two people on longterm care and provide the life insurance cause he was 79, she was 76. So it's, it's, it's less expensive than that.

But that's a good ballpark number. And what they were able to do and what he was able to do with this is just make sure that his assets aren't going to all get depleted at the end of either or both of their lives. Sure. Wow. You can see there's some discipleship we all could use in this area as we begin to research more into finishing. Well, again, the underlining thing of this is, is how cool is it when we get to know people's story, get to know them, get to see God in them. And, you know, I think it's a wonderful opportunity for everybody listening really to reach out to cardinal guide.com, you know, go there, get Hans's book, the complete cardinal guide to planning for and living retirement or better yet, just call Hans and say, Hans, you know, we need to meet and hear my story and see what God's doing in my life.

And I'd be shocked if Hans didn't learn something from you and I'd be shocked if you didn't learn something from Hans. That's awesome. Thank you for listening. Thank you. We hope you enjoyed Finishing Well brought to you by cardinalguide.com. Visit cardinalguide.com for free downloads of this show or previous shows on topics such as social security, Medicare, IRAs, long-term care, life insurance, investments and taxes, as well as Hans best-selling book, the complete cardinal guide to planning for and living in retirement and the workbook. Once again, for dozens of free resources, past shows or to get Hans's book, go to cardinalguide.com. If you have a question, comment or suggestion for future shows, click on the Finishing Well radio show on the website and send us a word. Once again, that's cardinalguide.com. Cardinalguide.com. This is the Truth Network.