00:02
Peter Dunn
My country I was saying it better the last time. Hi, everybody. It's Vita Blanchard show. Kristen asked for music and I was like, I'll just sing something patriotic because it's 4 July. My country of the sweet land of liberty of the ice see Damian Dunn. Kristen Ahlenius joined us. Hello, everybody.
00:29
Kristen Ahlenius
Hello.
00:30
Peter Dunn
Hey.
00:31
Kristen Ahlenius
That was great. Love it.
00:33
Peter Dunn
I'm patriotic. It was something. It was something. Hello, everybody. Welcome to the Pete the Planner Show first show of July 2022. All right, so this week there is going to be a brawl on air. A brawl on air. Kristen and I are on either side of the issue. Damian will be our Mills Lane, old boxing referee that used to fights against, like, Mike Tyson and Evander Holyvel. Mills Lane. Damian will be our ref for the battle where Kristen and I argue over income share agreements. And then Damien's got a question about should you convert to a Roth IRA right now? And then the blaming news. Hope everyone's got good plans this weekend. Good morning, Big Rick. Swink. Hello, Kristen. What are your plans this weekend, 4.
01:26
Kristen Ahlenius
July weekend to keep renovating my house.
01:32
Peter Dunn
Will you do it in Americana garb. Will you have on like a flag tee or something like that?
01:37
Kristen Ahlenius
I will wear an old navy flag tee. Absolutely.
01:41
Peter Dunn
Dame, how will you get yourself ready for the holiday?
01:47
Damian Dunn
This will be a big shock to you, but we are going to spend some time at a swim meet this weekend.
01:53
Kristen Ahlenius
No.
01:54
Damian Dunn
And then probably do maybe a little bit of home renovation ourselves or office renovation, so to speak.
02:02
Peter Dunn
There's Andy. Hello, marriage, kids and family. America on the live stream. I am fishing all weekend long. Ted and I are going to Cabela's. I'm taking a half day today. We're going to get some fishing supplies so I can lure the fish into the shore. I was at a business function yesterday. A woman came up to me and she Pete the planner. And I said, hello, woman lady. And she said, I took a financial course online with you and your brother Damian. And I said, let me stop you right there. Not related. Not related. And Damian, of course, for you podcast listeners, is wearing his not related t shirt that he had made up. Hello, Daniel. Good day to you. All right, Kristen, are you ready to argue?
02:51
Kristen Ahlenius
I mean, we both know that I'm not going to be that aggressive.
02:56
Peter Dunn
I'm sort of overselling it. All right, let's do this. Let's do a little wound up today. Had a lot of caffeine.
03:10
Kristen Ahlenius
More than one Miguel?
03:12
Peter Dunn
No. I went Starbucks cold brew today on the way in. I don't know why. Sort of a weird move. I never do that.
03:20
Kristen Ahlenius
There's no way there's more caffeine in a Starbucks cold brew than in a Miguel.
03:25
Peter Dunn
I don't know.
03:26
Kristen Ahlenius
Come on.
03:26
Peter Dunn
Only the internet would tell and I'm not willing to google it. In three, two, one. This week on the Pete the planner show. We answer your money questions. Here's how the show works. You email us. Askpete@petetheplanner.com that's askpete@petetheplanner.com. And what will happen next is, some would say, a miracle. We would answer your question on the air. By we, I mean Kristen Ahlenius, director of education at your money line, and Damian Dunn, vice president of advice at your money line. Hello, folks.
03:55
Kristen Ahlenius
Hello.
03:57
Peter Dunn
Kristen's spending her 4 July weekend renovating a home. Damian is spending the 4 July weekend wishing that he and I were actually related, and I will be fishing. Happy 4 July weekend to all of you this week on the show. Kristen, you and Dame both went to Purdue. Is this correct?
04:15
Kristen Ahlenius
Yes. Dame, can you verify that's technically true.
04:21
Damian Dunn
I did go to Purdue. I might have finished at another state school, but I did go to Purdue, and that's where my heart lies.
04:26
Peter Dunn
Okay, well, there is a story this week about Purdue's. Highly touted income share agreements are not only being suspended for the upcoming school year, but there's some controversy. So we're going to talk about what they are, what they're supposed to be, and whether they're good or bad and why they're suspended and why a letter went to the department of education in March stating that I don't want to say the F word on the radio fraud, but that there's some pretty big problems. So we will start there. We're, of course, going to talk about a question dame had coming this week about, is this a good time to convert to a Roth IRA? So we'll talk about that. And then, of course, BOM and news. Kristen, an income share agreement years ago, president of Purdue University, now former president, future former president of Purdue University, mitch Daniels, former governor of the state of you know, I think we got an idea here.
05:26
Peter Dunn
We're going to do something called the back the boiler program. A back, a boiler program is where a group of investors will give money for education to a produced student, and then that student enters into an income share agreement, which is the way to repay the investment the investors made in the student. Now, there's a lot of sort of semantics as to what it is, but it is said to not be a public loan. It is said to actually not be a private loan. It's an income share agreement. You give a share of your income depending on what your income is, and that's the basis. Right. So, Kristen, on the surface, you think this is a really good idea?
06:10
Kristen Ahlenius
I think that the idea is really good, yes.
06:14
Peter Dunn
Damien, on the surface, how do you feel about it?
06:17
Damian Dunn
I think in theory, this could be a very interesting idea.
06:25
Peter Dunn
What could go wrong? That really wasn't answer. But what could go wrong, of course, is that a person's career path takes a weird turn. They end up, based on their income, paying a lot more back than they thought because they've sort of promised their future income. Do you remember, Dame, years ago on the show, NFL players could sell their career as a security, and so this company would buy an NFL player's career, and then you could buy shares of this person's career, and they would share their salary with you, and that thing failed dramatically. Well, this is a version of that. So much so that the Student Borrower Protection Center sent a letter to the Department of Ed in March of this year saying Purdue's back. A Boiler program offers rising sophomores, juniors, and seniors tuition financing of $5,000 or more through an Isa. An Isa is a form of a private student loan wherein students pledge to pay a predetermined percent of their gross income each month during periods after graduation when their income exceeds a minimum income threshold.
07:39
Peter Dunn
Students continue paying until the sooner of having made a predetermined maximum number of payments having made payments cumulatively equal to a maximum cap of dollars paid or having been in repayment for a length of time to a maximum repayment window, regardless of how many payments they have made for the cumulative amount that they have paid over that period. Under the Boiler Isa, borrowers monthly income share and length of repayment obligation vary based on their major graduation date and funding amount. It is owned back of Boiler is owned by two private Indiana companies, and the charges levied by this organization, the Student Borrow Protection Center, suggest that there's misrepresentation of what they actually are, that they are actually a private loan and they're not sold to be a private loan. And this is at the heart of the issue. You both are so stunned, you don't even know where to go with this.
08:42
Peter Dunn
They were discontinued this year. What ended up happening was Purdue University switched service providers from VIMO Education to Launch Servicing, and they suggested that Launch Servicing cannot do this sort of loan origination. Now, this is why there's concern. Ben Kaufman, who is with the Student Borrower Protection Center I just mentioned, said that, well, he used actually pretty aggressive language, if I'm being honest with you. He says that if you want to find an origination partner, they could have done it. He finds that to be a BS representation, and instead the program has run into trouble. One student who borrowed $39,000 now finds himself on the hook for $900 per month to the income share program for the next eight years. Andrew Hoiler, the first graduate of the backup Boiler program, previously told this publication that monthly payments of his $21,000 loan have ranged from one hundred and seventy four dollars to three hundred and thirty four dollars.
09:48
Peter Dunn
So dame again. Good idea. But it seems for some reason it has fallen apart.
09:54
Damian Dunn
Why are you against finding ways for kids to pay for their college? Joking. I'm joking. Yeah. So there are some issues, it seems, on the surface of payments not being commensurate to potentially the income that's being earned. I don't know the exact calculation how to work that out. Man you said you came with some research, which I'm really hoping that you have a way to compare what these people in the back boiler program are paying versus what a standard student loan might because I think that would be very convincing.
10:31
Peter Dunn
I think the bigger issue is that Purdue implies that the Isa is not a loan itself. Right. They say it is not a loan. And the charge here, including an op ed in the Washington Post in 2019, president Daniels says it's a powerful alternative to student loans, and he thinks of it as equity instead of debt. But it is quite clear these are debts, and so this is one of the reasons they shut down. I actually think there's a bigger issue to this. The bigger issue is the period we just went through where student loan payments were set to zero or interest rates were set to zero and people got student loan relief over the last 29 months because of COVID People in the back of boiler program probably did not get relief and they were making payments the entire time.
11:20
Kristen Ahlenius
But okay. Purdue, to my knowledge, they do not push the back a boiler program in advance of federal student aid. So if someone had, they would be utilizing the program after they had exhausted their federal student aid. So I would think that someone in this program would have gotten some relief as part of the pandemic provisions that we've seen. It would just be whatever they owed in excess would be my guess. I could be wrong.
11:52
Peter Dunn
Yeah, go ahead, Dan.
11:54
Damian Dunn
Additionally, if that's how it is presented, the alternatives then become parent plus loans or private loans. If they go the private loan route, they probably didn't get relief during the pandemic either. So they were probably still making some student loan payments, if that's the Use case.
12:11
Peter Dunn
I think the issue is that they were represented as an equity and not a debt when they're very clearly a debt. And I think that if you're telling people to avoid student loans, oddly enough, I wrote a book called Avoid student Loans, then people are going to look for something called an income share agreement or equity within their education. And I feel like that is insincere at best. Stunned. Stunned. They are. They don't even know what to say. Either my argument is so dumb or they are so stunned. Coming up after the break, we will discuss this further, and we will hope that Dame and Kristen are not so stunned by my receipts. Right here on the Pete the Planner show. I'm Pete the Planner. Stunned.
12:58
Kristen Ahlenius
I have a problem. I only had, like, 15 seconds.
13:01
Damian Dunn
Yeah, I thought you were going to run the clock out.
13:05
Peter Dunn
No, it's waiting for witty banter.
13:10
Damian Dunn
You came to the wrong place.
13:13
Peter Dunn
What's your point. Kristen, do you want to make it now or start to make it now and then make it on the air?
13:18
Kristen Ahlenius
I do not know the second half of the answer to this, but if someone doesn't make more than 20 grand, they don't enter payment or repayment on the income share agreement, how long can that last? Do we know the answer to that question? If someone never makes more than 20 grand, or if they don't make more than 20 grand for ten years.
13:43
Peter Dunn
Does.
13:43
Kristen Ahlenius
The investor just not get repaid? What happens?
13:46
Peter Dunn
That's a good question. I don't know.
13:52
Kristen Ahlenius
And how's that different from income driven repayment on federal student loans?
14:01
Peter Dunn
I don't know. Because those are student loans and this is said to not be a loan. It's said to be equity.
14:09
Kristen Ahlenius
Can it be a loan if you don't have a balance due?
14:14
Peter Dunn
Yeah, I guess it gets to what is the definition of a loan? I'm going to look up loan definition.
14:20
Damian Dunn
If it had been posed as a loan, would your opinion change? If it would have been a school financed education?
14:31
Peter Dunn
I don't know. Potentially. I think the bigger issue is that it's misrepresented.
14:37
Kristen Ahlenius
How much counseling do you think someone has to go through before they sign a promissory note or well, if it's not a loan, there's no promissory note. But before they sign for this, read.
14:50
Damian Dunn
This pamphlet, come back and let us know if you want to sign for it.
14:52
Peter Dunn
By the way, I just looked up loan and I found the definition. I think it's a bad definition. The definition is a thing that is borrowed, especially a sum of money that is expected to be paid back with interest. I don't think interest is an operative part of a loan. People borrow money without having an interest rate associated with it, and it's still a loan.
15:20
Kristen Ahlenius
I would agree.
15:24
Damian Dunn
Mrs. Advice just sent a brilliant text message.
15:27
Peter Dunn
She said, Whose side is she on? Before you read this on air, whose side is she on here?
15:32
Damian Dunn
Truth, I think it's probably yours.
15:36
Peter Dunn
Okay, let's hear it. That's what she got.
15:38
Damian Dunn
This is annuity, not a loan.
15:44
Peter Dunn
That's fair. And by the way, it's worth noting, annuity is not an investment, it's an insurance product. So maybe what we're saying is this isn't a loan, it's insurance.
16:02
Damian Dunn
Which is also regulated.
16:09
Peter Dunn
There's an act that I'm sort of reading through this here. Congress passed a student loan sunshine act in 2008. As part of the year of that year's reauthorization. Under the act, institutions of higher ed access to Title Nine aid must come. So this also has to do with Title Nine must comply with sweeping code of contract related to private student loans. This code includes substantial limitations on and disclosure obligations surrounding the relationship with individual private lenders. And so one of the big issues there is that the act stipulates that the schools with any private lender agreements must disclose to students several aspects of the loan products that their creditor partners in these arrangements offer, including the potential range of rates of interest applicable, which, since they weren't even calling these loans, they didn't disclose.
17:01
Kristen Ahlenius
In theory, though, disclosing the interest rate is great, but to a 19 year old, does that interest rate, are we really educating? Because I'm speaking from experience, right? So I have two sides to why I think this is potentially a good idea. And the first is my experience in financing my personal education. And I'm telling you that it could have been way worse because I had no idea what I was doing, and I could have borrowed a lot more money when I was 18. And the second is what we do for a living, which is just like seeing anecdotal experiences of personal finance. I don't know.
17:40
Peter Dunn
Let's take it to the air in three, two, one. Back on the Pete the Planner Show, joined by Damian and Kristen this week talking about Purdue's back a boiler program which has been suspended, which sounds negative, it sounds really aggressive, but in fact, it has been suspended. No new Back a boiler income share agreements will be issued this fall. Ones that have already existed will continue to be serviced. And Kristen, would you believe that one of the reasons that critics of this program feel as though it has misrepresented itself involves Joe Camel? Now, I know you are much younger than Damien and I, and you may, because of this, not even know who Joe Camel is. So, Kristen, out yourself right now. Do you have a relationship with Joe Camel? Do you know who Joe Camel is?
18:35
Kristen Ahlenius
I'm so scared. No, I don't know.
18:37
Peter Dunn
Who Joe Camel? Okay, so, Damien, my point is just proven here. That worked. Damian. Why does Kristen not know who Joe Camel is?
18:46
Damian Dunn
Because Joe Camel was allowed to not exist after a certain period of time. Joe Camel was a have you ever seen a pack of Camel cigarettes, Kristen? Yes, they have a Camel on them. Well, Camel Cigarettes took that Camel and made a cartoonish character they called Joe. And it was very clearly marketed towards kids to try and influence them to take up that all American habit of smoking and destroying their lungs. Well, the government decided they didn't like that. They thought it was bad, and they said, Joe's got to go. Joe's got to go. And away he went.
19:32
Peter Dunn
So that's why you don't know who he is, because they used a mascot to gain influence with young people. The Student Borrowed Protection Center says that the act of 2008 that recast student loans explicitly forbids schools from engaging in the co branding of products offered by a preferred lender, including by prohibiting the use of the name, emblem, mascot or logo of the school, or other words, pictures or symbols readily identified with such institution organization. In the lender's marketing of private loans to students. Purdue peted, they Joe Camelled, these young people, to take on these newfangled loans. Called back a boiler. And that, my friends, I feel like matlock, and that's how Joe Camel and back a boiler are related. Is anyone buying this?
20:27
Damian Dunn
To be fair, if they would have used the head of Purdue Pete on any of these, it would have been enough to raise suspicion way earlier, because entirely the creepiest mascot in the US. I don't think that's.
20:46
Kristen Ahlenius
But the boiler is not the mascot. The boiler is the student. So did they really violate that I'm the boiler.
20:54
Peter Dunn
Okay, the name, emblem, mascot, or logo or any other words, pictures or symbols? Words. Boilers, boiler makers. It is their mascot.
21:05
Kristen Ahlenius
It's the student, the mascot's, the train, or Purdue Pete.
21:10
Peter Dunn
The main web page used to market the back of boiler loans are hosted at a purdue.edu web domain. Purdue's logo placed directly next to the header back a boiler on the top of the page.
21:24
Kristen Ahlenius
True.
21:26
Peter Dunn
Look, I'm not actually upset about any of this at all. I find it interesting because the bigger issue, as Kristen said to me this morning in pre show, is, like it's sort of funny how there's all of this criticism around how people pay for college, and it's pretty convenient how it circumvents the idea that maybe college is too expensive. Maybe that's the issue. We talk about student loan forgiveness. We talk about free college. We talk about back a boiler, we talk about Joe Camel. But are all of these things ultimately just making college more expensive as opposed to less expensive?
22:05
Damian Dunn
Yes.
22:11
Kristen Ahlenius
Go ahead, dame, go.
22:12
Peter Dunn
No, guys, I would like ten more seconds of silence so that anyone listening in their car on 4 July weekend can just be like, man, I wonder if two people on a video call are nodding right now. I wonder if that's what's happening. I'm going to go to the fireworks store and hope that there's an explosion just so I can hear something over the next 10 seconds, but go ahead, Dan.
22:33
Damian Dunn
No, I'm going to sit here and be quiet for another 10 seconds just to extend the awkwardness that we all feel as we try and work out this show with three people, which is an improvement in my estimation, but here we are, going through the growing pains of adding a third person. Kristen, we love you, and we're happy you're here.
22:52
Kristen Ahlenius
Thank you. I was worried for a second. Thought I was going to fire.
22:58
Damian Dunn
No. In fact, it was so awkward, I don't even remember what Pete's original point was. For me to disagree with the cost.
23:05
Kristen Ahlenius
Of higher education is really the it's like you said, it's convenient that now, this is the thing that we're debating is Purdue's trying to find, I believe, an innovative way to fund higher education in a way that gets the student more involved in the cost of their degree, which I think is the biggest plus to this whole program, is having a better understanding of ROI and what it's going to cost you to go to school. And somehow we've circled all the way back to Purdue is the villain in this situation. And it's not that they froze in tuition for the entirety of Mitch Daniels tenure, by the way, but that it's. That school is just too expensive.
23:44
Damian Dunn
Which actually gets to a really interesting question. If the plurality of people are saying college is too expensive, what's the right cost? Because we can all sit here and say, well, I can't save that much. It's going to put me into the hole. I'm going to have to take out debt to send my kids to college to get them a quality education. Okay, what's fair? Because if we look at what tuition costs for a year of college, I don't think it's that far off. $12,000 for a year of college I don't think is that unreasonable. Now, when you start tacking on all the other stuff, I think that's where we start getting into trouble. Room and board, books, technology fees for student union, whatever, walking around money. Now you're over double what you're going to pay for. That true. So is the issue the cost of college or the whole college experience?
24:41
Damian Dunn
Is the education affordable? And everything else is what makes it unaffordable?
24:46
Peter Dunn
I will note that within the last ten years, college inflation has slowed. One of the biggest talks in financial planning in the last few decades was hey, at 6.7, at 7% annual inflation of tuition costs, no one will be able to send their kid to college. And that definitely slowed, including at a place like Purdue where they froze tuition for a number of years. And so I will note, number one, I do not blame Purdue in any way, shape or form on this of it's hyperbolic at best and silly at worst. I think they tried to be incredibly creative. But this gets to a completely different point here. I think with all of the consumer inflation over the last year, the one industry that has not yet got to weigh in on how inflation has affected them and how they're going to pass it on is higher ed.
25:41
Peter Dunn
I think these years and years of frozen tuition are about to explode. Obviously not this fall. Prices were already set. But I think fall of 23, fall of 24, you are going to see massive tuition increases as these organizations are going to have to fund cost of living adjustments and deal with supply chain issues and cost of increased goods or increased cost of goods. And it's going to be shocking next fall.
26:12
Damian Dunn
We should have had friend of the show Phil Schumann join us so we could have four people on this show to really increase the likelihood of awkward silences.
26:20
Peter Dunn
Do you really think having an IU guy on during a critical conversation about purdue would have been a good idea.
26:27
Damian Dunn
Yeah, I think he's largely fair.
26:30
Peter Dunn
He is. I want to note one last thing. Number one, disclaimer, disclaimer. I really don't care. Number two, I find this the most predictable thing of this letter from the Student Borrow Protection Center. The department's Office of Federal Student Aid should condition Purdue's continued participation in title nine aid programs on the school's abandonment of this risking illegal lending schemes. In addition halting the issuance of new private student loans and they should be required to remediate its past violations by arranging for the cancellation of all unlawfully originated loans and refunding of all the money paid. I'm Pete the planner. We'll be back after this.
27:11
Kristen Ahlenius
That statement, that's absurd. It's absurd. It's absolutely ridiculous. Then every institution that ever gave a diploma to someone who couldn't pay back their student loans has to pay? Come on. That ask is egregious.
27:30
Peter Dunn
The thing I really want to know, I think, goes kristen's point of this. So you couldn't get back the boiler unless you capped out your federal student loans. Was that your guess?
27:39
Kristen Ahlenius
I don't know that they made it a requirement, but I do know that President Daniels was clear about not replacing the initial limits of federal lending with the back of boiler program.
27:54
Peter Dunn
See, this is where the Joe Camel thing actually comes into play. In my estimation, if you are an innovative, young, excited student and your choices are between a student loan or the back the boiler program, you're going to choose the back the boiler program. It's sexier. Even if they say, don't choose back a boiler over student loans, you're going to be like, I'll take the equity income share agreement first.
28:17
Kristen Ahlenius
I don't know, because I would still guess that it's easier to get a federal student loan. And I think more people are inclined to take the path of least resistance in respect to higher education funding, would be my guess.
28:30
Peter Dunn
This past week was the 50 year anniversary of title Nine. Is that correct? Is that one of the news you all saw?
28:37
Kristen Ahlenius
Could be.
28:38
Damian Dunn
I think so.
28:40
Peter Dunn
Funny how it started out have to do with women's athletics, that they were so underfunded and unfairly funded in relation to men's athletics, and it extends its reach all the way to this story about backup euler wild.
29:03
Kristen Ahlenius
I think my last point about this is the thing that I like most about this, and I kind of mentioned this, is that it forces the student and whoever else is involved in the financing of their education to be proactive and to do some initial research. The primary issue is that at Purdue specifically, this is not happening until they're a sophomore. They've already chosen their school, they've already chosen their degree program. And then looking at the back the boiler program, if they've chosen a degree, that's not as advantageous for this program. It's like the carriage before the horse having this discussion would have been great for them as, like, a senior in high school before they picked their school in their major and everything else.
29:46
Damian Dunn
I will note they may have chosen their degree, but they'll change it three more times after they're a sophomore.
29:52
Kristen Ahlenius
I changed mine as a so.
29:55
Peter Dunn
See, I don't remember what my degree is in. Guys, purdue also had it. That's true. It's a liberal arts degree. Purdue actually had some amazing news that's true this week, which I think tells us a lot of how economic development is going to happen going forward around our country. They have a public private partnership with a semi conductor manufacturer overseas. I want to say it's in Singapore, where basically there's going to be several dozen, maybe a couple hundred high paying semiconductor design jobs in West Lafayette associated with Purdue University. And what happened was Mitch Daniels and the new incoming president of Purdue basically went out and formed these relationships and recruited this company to come do this. What I'm saying is, I think the future of economic development around college towns are going to be these business centric presidents of universities going overseas and trying to bring particular companies to join in these partnerships.
31:05
Peter Dunn
And that is actually very innovative and incredibly fascinating.
31:09
Damian Dunn
Do those semiconductor jobs eventually become pro conductor or full conductor jobs?
31:18
Peter Dunn
No.
31:19
Kristen Ahlenius
Terrible.
31:21
Peter Dunn
Wow.
31:24
Damian Dunn
You think that was terrible, wait till the news.
31:27
Peter Dunn
Great.
31:29
Kristen Ahlenius
Dame, car guy. President Daniels did that with. Was it Rolls Royce, too?
31:35
Damian Dunn
Yeah, but I think that was Rolls Royce aircraft for their engines.
31:40
Kristen Ahlenius
Touche.
31:41
Peter Dunn
What's Aston doing this week as an organization?
31:45
Damian Dunn
I'm just waiting for mine to show up, be delivered for the holiday weekend.
31:51
Peter Dunn
All right, Dame, are you leading the charge on this next segment here?
31:57
Damian Dunn
I can if you want me to.
31:58
Peter Dunn
All right. I will set you up as an intrepid field reporter, and you can just take it from there. Okay.
32:06
Damian Dunn
Do I need to queue up my helicopter sound?
32:08
Peter Dunn
I've got it. I'll take care of the helicopter sound in three, two, one. Back on the Pete the Planner show. Joining us live from undisclosed remote location is our intrepid field reporter Damien Dunn. To talk about it's, the news chopper, the Pete the Planner. Whirlybird. Dame, can you please talk about the Roth IRA conversion and its Prudence here in the year 2022?
32:42
Damian Dunn
Hello, pete, it's kind of hard to hear you over the whirling of the blades. No, I've seen a number of questions lately and had a couple come into our queue on whether or not now is a great time for a Roth conversion. Kristen, do you want to clue the audience in what a Roth conversion is in general?
33:08
Kristen Ahlenius
Sure. So when someone has a traditional or a pre tax IRA, they actually have an opportunity to, as its name implies, convert those dollars to post tax dollars, pay the tax, and then put those funds into a Roth IRA so that the. Growth and distribution of those dollars is tax free moving forward.
33:30
Damian Dunn
Yeah. So the key here is that you have an opportunity to convert some dollars, pay some money to do it, but then you will get out of having to pay tax later in the future and have required minimum distributions because they're no longer in a taxable IRA. So why would we consider now a good time to do that? Well, I don't know if you've noticed, but the market values are down somewhat significantly in some cases, and that makes it potentially very attractive to move an investment from a taxable account to a Roth account because you still have the same number of shares that will hopefully recover in the future. But the value of those shares that you would be taxed on is much less. So you could pull a little bit of fancy maneuvering and potentially set yourself up really well for the future by well, paying some taxes now versus later.
34:30
Damian Dunn
So the question becomes, is now a good time to do that? Know, the previous few years? And I'm going to throw it to Pete for his opinion on, is now a good time to convert? And we will throw in some considerations here. As the conversation goes.
34:49
Peter Dunn
I don't want to say unequivocally yes, because that's just not how I roll, but yeah, I think it is. I mean, if you're thinking through this lens, this is not tax loss harvesting, because tax loss harvesting would be where you would sell a security to garner a loss and then buy whatever. This is not that because you're not selling securities. I'm not actually giving investment advice here. This is more tax advice. Damian yeah, I would say it is a good time with a bear market. Yes.
35:17
Damian Dunn
So the big challenge becomes for most people, if we agree, and I think now is an advantageous time. Kristen yes. Advantageous time, yes. Shaking your head.
35:27
Kristen Ahlenius
Yes.
35:30
Damian Dunn
The challenge becomes is how do you come up with tax money? Because if you're under the age 59 and a half and you move this, you don't want to take the money out of the IRA because it'll become taxable distribution. So you got to come up with that cash out of your own pocket to pay for this. That becomes a significant challenge, right?
35:54
Peter Dunn
It does. Was that a rhetorical right or were you looking for me to step in?
35:59
Damian Dunn
No, I was looking for somebody to step in more often.
36:02
Peter Dunn
We're on it today. This is the best show we've ever done, I would say. Yeah. Cash is going to be an issue there, I would note. If you're someone that typically gets a tax refund, that's one way to sort offset what your tax liability may be. But then depending on the size of what you're converting, it may far exceed your tax liability may far exceed whatever excess tax surplus or credits you might have.
36:30
Kristen Ahlenius
So our considerations here are the following how you feel about future tax rates right. Where you're at in your earning potential in your career. If you're at the height of your career and you're making more than you've made and you're likely to continue to make that wage, that's consideration. Or if you're on the opposite end of the spectrum, if you're probably at a lower income rate than you might be in the future. And then how you feel about a bear market and a recession. Because if you believe that we're headed for a recession, we still have some time, or there's still going to be some downside in the market. We're not quite to the average bear market drop yet.
37:13
Damian Dunn
Yeah, I would say if that's the case, that most people aren't going to do entire IRA conversions all at once. You don't have to. It's not all or nothing. You could do a chunk of money this year, a chunk of money next year, basically fill up tax brackets if you want, and over time, you can make that conversion. There is one other consideration that is really important, especially if you're really close to retirement. That's a five year rule. Kristen, are you familiar with five year rules?
37:44
Kristen Ahlenius
Oh, probably not enough to be the subject matter expert here.
37:48
Damian Dunn
So there are three different five year rules that go into effect with Roth IRAs. This one, however, that says once funds are converted, you have to wait five years before you can start taking them back out. Now, you can always take contributions out, but growth is off limits. So if you are within a few years of retirement, you want to be really careful about converting within that five year period, within a certain time period, because if you need that money, you may not be able to access all of it. You're going to want to make sure that your timing lines up with your needs.
38:25
Kristen Ahlenius
If there was ever a case of personal finance doesn't happen in a vacuum, I think that this is a prime example of like, this can look like a really great idea for somebody, and then you could have a variable that just completely throws our recommendation out the window.
38:44
Peter Dunn
Yeah. Dame I think this is one of those strategies that flies under the radar specifically for people who don't have financial advisors. There's a lot of people that manage their money themselves, and it doesn't go as far as they're a personal finance nerd. They are not necessarily well read in personal finance. They just like the mechanics of running their own financial life. But then you get into something like Roth conversion, the only way they're ever going to really hear about it is catching it on an article on CNBC or going through the airport and seeing a Kiplinger's investment magazine and having it on the COVID And again, that is another reason. This is just one small example of why we feel so strongly about people having financial advisors is because it's their job to look out for strategies like this that can have a serious impact and to try to run your entire financial life for decades completely by yourself and be up to date on all the latest trends and styles that's problematic.
39:45
Damian Dunn
I agree. Roth conversions aren't going to be party talk very often unless you run with nerds like us. The bigger consideration that I've got outside of Roth conversions and backdoor Roth contributor, whatever it is, make sure you're saving enough. You've got to be able to know that what you're doing is going to support the goals that you've got in the future, whether that's five years from now, whether that's 50 years from now, you've got to make sure you're on track to accomplish what you're setting out to do. And if you think that a Roth conversion is going to be key to helping you get there, well, maybe not. Because if that savings habit and that savings discipline isn't ingrained in what you're doing in your day to day financial lives, it's very unlikely that some trick or move or conversion or pulling a rabbit out of a hat that's probably not going to save you.
40:43
Damian Dunn
You've got to make sure you're doing the work to get to where you want to be.
40:48
Kristen Ahlenius
Yeah. A Roth conversion is a supplement, not a substitute for good just financial foundation. I think you're exactly right, Dame.
40:57
Peter Dunn
All right, so we can't ever give blanket answers because they don't work. But, yeah, it's something you should look into. It's something you should talk to your financial advisor about if you have one. But ultimately yeah, you know what? I got to be honest, it's got me thinking about my own situation. You bring it up, I'm like, yeah, stuff's kind of down. And that would be actually kind of good to deal with that this year. So maybe I'll call your money line and talk to someone and see if I can do that. All right, dame. Coming up after the break, you promised snarky news this week with bad dad jokes. So when we get back after the break, you're going to deliver on that. Plus, this week's biggest waste of money of the week, which, frankly, is kind of terrifying. Like, it's a whole category of foods that people are really into.
41:45
Peter Dunn
It helps you sleep. It helps you feel good. This one is work related and it scares me. That's next on the Pete the Planner show. I'm pete the planner. How about that for a tease, Danza? Call your money line and get the answers. Nice teaser. Well, if your employer has your money line.
42:06
Kristen Ahlenius
And if not, they should talk to them about that.
42:08
Peter Dunn
We opened HQ Two this week, Dave.
42:13
Damian Dunn
Is it officially open?
42:15
Peter Dunn
As of last night.
42:16
Damian Dunn
Okay, so the public grand opening is next week.
42:23
Peter Dunn
Next week? Yeah. HQ Two is the you've heard of Amazon HQ Two where their global headquarters has a second headquarters. HQ two. Your moneyline now has a second location. HQ Two, we call it, because we are basically the Amazon of personal finance jungle out there.
42:44
Damian Dunn
Yeah. I submitted a really good idea for naming conventions for the rooms and conference rooms. I'm excited for you to see it.
42:54
Peter Dunn
Good. I did see it. I liked the arts. I liked them. They're pretty good.
42:58
Damian Dunn
Could you come up with a fit? Nobody needs to know. But I'm going to need help with the last one. No one cares.
43:05
Peter Dunn
All right. I'm ready for bomb. Let's do it. On the other side of this is me editing the show, sending it to all the radio stations and going to Cabela's with Ted and then going fishing. So when people are like, oh, you don't always say you're busy. I want to go hang out with Ted and get him to catch a fish, some fish and touch the fish. He doesn't like touch the fish. I got to get him to a point this weekend in which he will grab a bass in the face and hold it up.
43:35
Damian Dunn
Can he be bribed? I mean, have you tried just old fashioned bribing?
43:39
Peter Dunn
No, he runs and scatters and flips his hands, so it's not going to work. Well, Danta says your money line is like Amazon. Blink twice if you need help. Kristen and Dame.
43:57
Kristen Ahlenius
That's funny.
43:58
Peter Dunn
Come on, I'm a shareholder. Okay, so let's do this. Dame's got the news ready in three, two, one. This week's biggest waste of money of the week, right here on the Pete the Planner show is the assistant productivity gummies. Between social media texts or just stress, staying productive is one of life's most challenging tasks. When focus is lacking, assistant productivity gummies offers a little boost. The allnatural daily chew is formulated with Sunvinine, a potent nootropic clinically proven to stimulate alpha waves and boost calming brain chemicals. Within 30 minutes of taking, focus will sharpen, energy will increase, and the mind's flow state will enhance. To provide over 5 hours of productivity, each sweet morsel is made with natural fruit for a wild berry flavor, and it's free of gluten and artificial chemicals. Dame, first off, this is like creepy future workplace. Walk in, grab a gummy, be productive, right?
45:18
Peter Dunn
I mean, that's the feel you're getting. Yeah.
45:20
Damian Dunn
I mean, don't they just have a bowl of greenies and fetamines by the door as you walk in, toss them down the hatch and go for it?
45:30
Peter Dunn
This really does have do you guys ever see that Bradley Cooper movie? I think it's called Limitless, where he takes this pill and it makes him, like, hyper intelligent and productive, which I just assume was Adderall or something like that. This just makes me think, man, tech companies are going to have this at the door in the snack room next to the draft cold brew for people. They're $45, by the way, which who cares what they cost? That's just sort of a terrifying idea. I know where this is going. This is going to be next to the cans of pringles and a moon cheese. In the break room. You're going to see productivity gummies.
46:13
Damian Dunn
Can't we get this stuff infused in pringles and oreos and all that? Of this? You eat some stuff and then you have this motivation to go do something.
46:24
Peter Dunn
I like being productive as much as anybody, and I use good old fashioned drugs like caffeine.
46:30
Damian Dunn
Caffeine?
46:34
Peter Dunn
Do we need another way? Instead of caffeine, I have to use that. Potent nootropic is really the direction I want to go.
46:45
Damian Dunn
You know what? Maybe it is, Pete. You don't know unless you experiment a little.
46:49
Peter Dunn
Know? I can't sleep. I think most people who know me well know that I don't actually sleep. I'm like a vampire. I don't sleep. I don't know if vampires sleep or not, so I don't know why I said that. And so people, my friends are always like, well, you should try gummies. You should do this, Mellies. Melatonin gummies. I'm like, I don't want to have to depend on something to sleep. That seems problematic. But I was talking to a friend, and they were like, you should take Mellies. And I was like, Mellies, what are you talking about? And they're melatonin gummies. I'm like, I just can't I don't want to take a bunch of gummy bears to do different things like be productive, not be productive, be tall. I don't want to do it.
47:29
Damian Dunn
How long have you not been sleeping, Pete?
47:31
Peter Dunn
44 years.
47:33
Damian Dunn
Okay. It's not a new development. It's just something.
47:37
Peter Dunn
No, it is. I mean, pandemic, right? I mean, it all started with work 18 hours day and then realize that you could have had to turn your brain off after doom scrolling the New York Times website at 01:00 a.m. And then waking up in the hellscape once again. And then from that point forward, I think it's also age. I just don't sleep as well.
47:59
Kristen Ahlenius
Going to have to cut your caffeine intake.
48:02
Peter Dunn
I've tried that, but that's no fun because then I have to take productivity gummies.
48:06
Kristen Ahlenius
You got to just have a healthy balance between your uppers and your downers.
48:11
Peter Dunn
It'll be dame. What's on the news this week?
48:15
Damian Dunn
Retailers typically want their sales numbers to be red hot, but not their customers. Bed Bath Beyond is reportedly dealing with cooled momentum and heated customers at its stores. A new report from bank of America claims that the company has cut air conditioning in an effort to quickly lower expenses to make up for a slump in sales. Bed Bath Beyond told CNN that any changes in store temperature guidelines did not come from corporate. We've been contacted about this report, and to be clear, no Bed Bath Beyond stores were directed to adjust their air conditioning, and there have been no corporate policy changes in regard to utility usage, said a representative. Some analysts suspect, however, that Brenda and towels was finally able to access thermostat and turn it up to a, quote, livable temperature.
49:01
Peter Dunn
Dame, if you got the only vote in your household around thermostat to your temperature and there are no consideration for anyone else, where are you landing? This is during the summer. Yeah. Okay. Kristen, you do get the say of your thermostat. Where do you land?
49:26
Kristen Ahlenius
I'm cheap, so it depends on if it's the winter or the summer. But when I lived in Arizona, in the afternoon would let thermostat get up to 84.
49:34
Peter Dunn
Oh, my God.
49:36
Kristen Ahlenius
And then in the winter wouldn't turn the heat on until it bottomed out at 60.
49:41
Peter Dunn
There is one answer and one answer alone for me, and that is 68 degrees.
49:46
Kristen Ahlenius
That is too cold.
49:48
Peter Dunn
No, it's great. I'm a sweaty Midwesterner. I don't want in this economy I mean, what I'm doing is I'm basically going to hotel rooms and I'm turning it down to 68 when I get in there on business travel. And I just suck in their AC for a nice nightly fee. I think that's reasonable.
50:07
Damian Dunn
Do you play the game with not turning on air conditioning as long as you can, or you just set it at 68 and that's what it is year round?
50:15
Peter Dunn
I've said this before I went to college and earned a college degree for two reasons. One, to be able to afford two ply, and two, to be able to use as much air conditioning as I want. And so I stand by that. I felt that way for over 20 years. And we're talking actually, it's a newspaper column I wrote about what sort of inflation are you willing to accept and absorb, and there are just certain things that they are non negotiable. For you, I will use some air conditioning.
50:45
Damian Dunn
Would you give up two ply or air conditioning first?
50:48
Peter Dunn
Don't do that. I mean, that's just unsavory. It seems unfair. That's a great question. I'd give up two. Play first. That's no good, because you can always fold. Dane, what else is in the news?
51:08
Damian Dunn
General Mills said higher prices helped lift sales in the recent quarter, even as the food maker sold fewer items across the board. That's right. The maker of Cheerio cereal and Betty Crocker cake mix on Wednesday posted an 8% increase in sales to nearly $4.9 billion for its fiscal fourth quarter ended May 29. Organic sales, which strip out effects from currency fluctuations and mergers, rose 13%. Inflation isn't expected to let up soon. General Mills forecast costs to rise at double digit rates over the next year, with more cost cuts and price increases planned to try to protect profits. Well, how'd they do it, Pete? General Mills has been raising prices for its products through a variety of measures, including list price increases and changing packaging and sizes to charge more per ounce. It projects sales will rise four to 5% in the current fiscal year. That's right.
52:01
Damian Dunn
They're selling less and making more.
52:05
Peter Dunn
Shrinkflation talked about it a couple of weeks ago or whatever.
52:09
Kristen Ahlenius
Awesome. How much does that have to do either of you know from a data perspective? Do people buy more non perishable foods when money is tighter? Does that have something to do with this? That they're like the center aisles of the grocery store?
52:25
Peter Dunn
That's interesting. I would think people would buy more perishable food.
52:31
Kristen Ahlenius
You think?
52:32
Peter Dunn
But I don't know. I think they'd be more vegetables and grains than they would prepared foods, packaged foods.
52:43
Damian Dunn
I think they'd buy cans of soup, canned vegetables, stuff like that.
52:48
Kristen Ahlenius
Maybe.
52:50
Peter Dunn
I don't know. One more story, dame.
52:53
Damian Dunn
We'll make it quick. Two La. Schools UCLA, USC will join the big Ten in a major realignment of college athletics. The big Ten used to be associated with just Midwestern universities, but the prospect of big dollars via broadcast deals has transformed the big Ten and the SEC into two marquee conferences, drawing teams from across the country. The two California universities will link up with the big Ten in 2024, right after the conference's current TV deal expires. The new deal could be one of the richest in college sports history.
53:25
Kristen Ahlenius
The worst news of the week.
53:26
Peter Dunn
Yeah, I mean, I'm just not a fan. I like the old school, old conferences. It just made sense. I mean, it is all about money, but it also it's like, okay, so you're not just flying up the coast for a Wednesday night basketball game. You're flying to Pennsylvania. Now this makes any sense.
53:41
Damian Dunn
I'm wondering if that's going to blow out all the championships being held indy.
53:46
Peter Dunn
Thank you for being on the show this week. Everyone sending good vibes. Good vibes. Are all that's in the budget? I'm Pete the planner. This is the show.
53:56
Kristen Ahlenius
Terrible.
53:58
Peter Dunn
That's dumb.
53:59
Kristen Ahlenius
It's so bad, but it's dumb.
54:03
Damian Dunn
Do you think we'll see schools change conference?
54:07
Kristen Ahlenius
Yes.
54:10
Damian Dunn
They come here for 1020 years, and then they move on to the SEC. If the dollars are better, we seeing the end of loyalty to conferences.
54:21
Kristen Ahlenius
They would just go to the SEC now, like Texas, and somebody else is going to the SEC.
54:32
Damian Dunn
Is A and m going I don't think.
54:42
Kristen Ahlenius
Maybe. I don't know.
54:48
Peter Dunn
I have no idea. I started reading my email, and now I'm lost. I just need to put it out office on I never put it out office. Just I need to do that, though. Alas. That's it. All right, everybody. Kristen, first thing you're going to do when your work day ends today is.
55:08
Kristen Ahlenius
I have to run 7 miles today.
55:11
Peter Dunn
No one has to run 7 miles unless your car broke down and there's a wild game chasing you.
55:17
Kristen Ahlenius
There's a race this fall that I want to do, and if I want to perform semi decently, then I should run 7 miles today.
55:25
Peter Dunn
Dame, how many miles are you running today?
55:29
Damian Dunn
Can I round if I round, my answer is going to be zero.
55:35
Kristen Ahlenius
Zero?
55:39
Peter Dunn
Yeah. I probably run about a mile and a half, if I'm being honest. Today. Yeah.
55:45
Damian Dunn
Now I got to go run.
55:47
Peter Dunn
Well, all right, everybody. Have a good weekend. Dame Kristen, good job. Everybody else, in the words of E 40, stay getting money. Bye.
