1051. Are you worried about the rising cost of college? In celebration of College Savings Month, Laura compares the two main types of education accounts: 529 savings plans and 529 prepaid tuition plans. You’ll learn their key differences and how to choose the right plan.

Key Takeaways

• Both 529 savings and prepaid plans offer tax-free account growth and tax-free withdrawals when used for qualified education expenses.
• 529 savings plans invest in market portfolios (like index funds) for higher growth potential, while prepaid plans lock in current tuition rates at state universities to hedge against rising costs.
• 529 savings plans cover tuition, room, board, books, computers, trade schools, and up to $20,000 per year for K–12 tuition. 
• Prepaid plans only cover tuition and mandatory fees at a preset in-state university.
• Unused funds in a 529 savings account open for at least 15 years can be rolled over tax-free into a Roth IRA for the beneficiary (up to a $35,000 lifetime cap).
• You can use both accounts to lock in prepaid tuition rates and a savings plan to cover many other qualified education expenses.

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1050. Buying a car can feel like a financial landmine. Host Laura Adams answers a listener’s question about buying a car before starting his first job. You’ll learn how to evaluate your current car, set a budget, secure financing, and find a great deal that doesn’t wreck your financial goals!

Key Takeaways:

• Compare a car’s repair bill against months of new car payments and a potentially higher insurance premium before giving up on an older vehicle.
• To keep transportation costs affordable, follow the 20/4/10 rule to put 20% down, finance for no more than four years, and cap total expenses at 10% of income.
• Get an auto loan pre-approval before you start car shopping so you have an interest rate benchmark if a dealer offers financing.
• Request auto insurance quotes for different cars you’re considering so you understand the cost before buying a vehicle.
• Focus negotiation on a vehicle’s total purchase price rather than the monthly payments, which can be adjusted to include fees or longer loan terms.
• Leasing a car may make financial sense if you need a lower monthly payment, drive lower annual miles, prefer a new vehicle every few years, and don’t care about building long-term equity.

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1049. Think building wealth requires a six-figure salary? Think again. Host Laura Adams breaks down five small, high-impact habits that lead to serious long-term wealth, regardless of your current income. You’ll learn how to turn quiet daily routines into big financial freedom!

Key Takeaways

• Wealth is built on consistency. Setting up automatic transfers to high-yield savings and retirement accounts eliminates the temptation to spend.
• Taking advantage of tax-advantaged accounts creates opportunities for growth and short- and long-term tax savings.
• Low-cost index funds combined with dollar-cost averaging offer a proven, stress-free path to long-term market growth.
• Using the debt avalanche method to target high-interest debt first yields a guaranteed return equal to the interest rate avoided.
• Income is what comes in; net worth is what stays. Regular updates to a net worth dashboard provide the truest measure of your financial progress.

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1048. Receiving an inheritance can be a life-changing financial event, but passing a portion of those funds along to family members comes with a unique set of tax rules. Host Laura Adams breaks down the federal tax consequences of sharing an inheritance. You’ll learn how inherited assets are taxed at receipt, how the federal annual gift tax exclusion works, and smart tax-free strategies to help your loved ones without triggering extra tax paperwork.

Key Takeaways:

• Receiving plain cash or life insurance proceeds does not trigger federal income tax, and you do not need to report it on your federal return. However, a gift giver could owe state tax depending on where they live. 
• As a gift giver, you can exclude up to $19,000 per person per year (or $38,000 if married) without reporting it. 
• Gifts above the exclusion simply require filing IRS Form 709 to count against your $15 million lifetime exemption, meaning almost no one owes actual gift tax.
• Inheriting property or taxable investments adjusts the asset’s cost basis to its fair market value on the owner's date of death, erasing past appreciation.
• If you want to pay tuition or medical bills directly for someone else, it does not count toward your $19,000 annual exclusion or require Form 709 reporting.
• You can superfund a 529 savings plan for someone else and use five years’ worth of annual exclusions at once.

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1047. Host Laura Adams cuts through the confusion and explains the basics of Medicare for anyone approaching 65 or helping a relative compare options. You’ll learn how parts of Medicare work, which expenses Medicare doesn’t cover, how to fill insurance gaps, avoid lifetime penalties, and the truth about costly Medicare myths.

Key Takeaways:

• Medicare Part A covers hospital and inpatient care (premium-free for most), while Part B covers doctor visits and outpatient services for a monthly premium ($202.90 in 2026).
• Medicare Advantage (Part C) is an all-in-one alternative that bundles Parts A, B, and usually D into a single plan with network restrictions and out-of-pocket caps, often adding basic dental and vision coverage.
• Original Medicare doesn't cover long-term care such as assisted living or nursing home stays, or routine dental, vision, and hearing care.
• Medigap protects against out-of-pocket costs, such as deductibles and 20% coinsurance left behind by Original Medicare, but it cannot be combined with Medicare Advantage.
• Missing your Initial Enrollment Period triggers lifetime penalties unless you have active, creditable employer health coverage. 
• Enrollment isn't automatic unless you already receive Social Security benefits when you turn 65. 

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1046. Did your teenager earn money from a summer or part-time job? Laura answers a listener’s question about two tax-advantaged savings accounts for minors: the Roth IRA and the new Trump Account. You’ll learn how both accounts work and where working teens or their parents should put their hard-earned dollars first.

Key Takeaways:

• Minors can have a custodial Roth IRA when they earn income from W-2 employment or self-employment and contribute up to $7,500 or 100% of earned income, whichever is less.
• A Section 530A Trump Account can be opened for kids under 18 regardless of whether they earn income, and contributions can total $5,000 annually.
• A Roth IRA offers tax-free growth and tax-free withdrawals in retirement.
• A Trump Account grows tax-deferred, and once the owner turns 18, it becomes a traditional IRA, with distributions taxed (except for contributions that were previously taxed).
• Parents or relatives do not need to use a minor’s money to fund a Roth IRA; they can match or make an eligible contribution for the minor.
• After age 18, doing a Roth conversion on an old Trump Account is a wise move to lock in tax-free growth forever.
• Eligible working minors can max out a Custodial Roth IRA up to their earnings limit and receive up to $5,000 in a Trump Account from family, friends, or employers in the same tax year.

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1045. Are you taking full advantage of tax-free retirement growth? While both workplace Roth plans and Roth IRAs offer tax-free growth, they come with vastly different eligibility limits, withdrawal rules, and investment options. Laura breaks down the key Roth differences so you can decide which option is right for you. 

Key Takeaways:

• You can contribute up to $24,500 to $32,750 in a workplace Roth for 2026—over triple the $7,500 to $8,600 limit for a Roth IRA, depending on your age.
• Roth contributions make sense if you believe your income or tax rate will be higher in the future when you can take tax-free withdrawals. 
• High earners who exceed the 2026 Roth IRA MAGI limits can not make full contributions to a Roth IRA. 
• You can withdraw 100% of your original Roth IRA contributions anytime, tax- and penalty-free, but that’s not possible with a workplace Roth. 
• A Roth IRA offers better investment choices and early liquidity compared to a workplace Roth. 
• Workers over 50 and earning over $150,000 in prior-year wages must make any workplace catch-up contributions on a post-tax Roth basis.
• Most investors should prioritize contributions to a workplace retirement plan to receive 100% of any employer match.

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1044. Are rising healthcare costs ruining your budget? Laura answers a listener’s question about how to maximize every tax advantage available for healthcare costs. You’ll learn the rules for deducting them on your tax return or paying them with tax-advantaged savings accounts like HSAs and FSAs. We’ll cover which expenses are tax-free and simple strategies to optimize your healthcare spending.

Key Takeaways:

• You can only claim the medical tax deduction if you itemize deductions on Schedule A instead of claiming the standard deduction on your tax return.
• You can only deduct unreimbursed healthcare expenses that exceed 7.5% of your adjusted gross income (AGI), making the medical deduction best for years with high medical bills.
• Tax-advantaged medical savings accounts are powerful because they allow you to save 20% to 35% on qualified costs without claiming a medical deduction.
• Health savings account (HSA) balances roll over forever, can be invested for tax-free growth, and can be withdrawn penalty-free for non-medical expenses after age 65 (subject to ordinary income tax).
• Flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs) are employer-sponsored perks for cutting healthcare costs.
• You cannot claim an itemized medical deduction on Schedule A for any healthcare expense paid for or reimbursed using pre-tax funds from an HSA, FSA, or HRA.
• Lawmakers have expanded HSA, FSA, and HRA qualified expenses to cover various over-the-counter (OTC) medications and products.

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1043. Dreaming of your next getaway, but need to do it on a budget? Laura demystifies the world of “travel hacking” for complete beginners. You’ll learn how to leverage everyday spending to earn valuable reward points, maximize their redemption value for free travel, and strategically use credit cards without hurting your credit scores or accumulating debt. This is your secret weapon to travel more for a fraction of the cost.

Key Takeaways:

• Travel hacking isn’t about buying things you don't need, but routing daily bills, groceries, and gas through rewards cards to earn a "rebate" on your regular budget.
• High interest rates on rewards cards can wipe out the value of any points earned.  If you carry a balance, travel hacking doesn't work.
• Various bank currencies like Chase Ultimate Rewards, Amex Membership Rewards, and Capital One Miles are transferrable, giving you freedom.
• Instead of shopping directly on a retailer's site, use a shopping portal that allows you to stack rewards on top of card points.
• Redeeming points for cash back or merchandise usually yields less than 1 cent per point, which gives you a low value.
• Transferring points directly to airline and hotel loyalty programs, especially during bonus promotions, can boost their value significantly.
• Once you have bank cards with flexible rewards, add specific airline or hotel cards (like Hyatt or Delta) to unlock status, free checked bags, and annual free-night certificates.

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On a road trip, tackling a summer cleanup, or just catching up on podcasts? QDT has you covered with Summer Saturday encores from your favorite shows. See the full Summer Saturday lineup on Spotify and enjoy this episode, which first aired in November, 2024.

Laura reviews money rules for couples who want to avoid common pitfalls and have a healthy financial life.

Money Girl is hosted by Laura Adams. A transcript is available at Simplecast.

Have a money question? Send an email to [email protected] or leave a voicemail at 302-365-0308.

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