In this episode of Motley Fool Answers, Alison Southwick is joined by Motley Fool personal finance expert Robert Brokamp and Megan Brinsfield, head of financial planning for Motley Fool Wealth Management, to answer listeners' financial and investment questions,  like: How much do you need to earn in a brokerage account to outweigh the benefits of 401(k)? Learn more about  managing the retirement portfolio of a new retiree, the tax benefits for people working from home, paying down student debt, how to decide between an FSA and an HSA, and much more.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

This video was recorded on September 29, 2020.

Alison Southwick: This is Motley Fool Answers, I'm Alison Southwick, and I'm joined, as always, by Robert "highway robbery" Brokamp, Personal Finance Expert here at The Motley Fool.

Robert Brokamp: Where in the helicopter did that come from?

Southwick: It's just ... I don't know, man! All right. It's the September mailbag, and we're answering your questions with the help of Megan Brinsfield. She's Head of Financial Planning for Motley Fool Wealth Management. Bro?

Brokamp: A sister company of The Motley Fool.

Southwick: You need to get a little faster on that one in the future. All that, and probably not much more, on this week's episode of Motley Fool Answers.

[...]

Southwick: Megan, thank you so much for joining us.

Megan Brinsfield: Thanks for having me, Alison.

Southwick: Now, you're coming to us from a place that is very special and near-and-dear to my heart right now.

Brinsfield: And that is the great state of Idaho.

Southwick: The great state of Idaho. Yes, that's right, my home state. So, I hope you're enjoying it.

Brinsfield: I am. I mean, the license plate says "FAMOUS POTATOES" and it's true.

Southwick: [laughs] Yeah. Now, you're actually in Eastern Idaho right now, but hopefully you'll get to take in some other prettier parts of the state; no offense to Eastern Idaho, but I did spend a few years there, and it is a rugged, rugged terrain.

Brinsfield: Yeah. So, we're driving through several areas, so I'm sure we'll see some of the bright spots as well.

Southwick: All right. Well, to all of our listeners in Idaho, I'm sure there's at least two of you, when you see Megan drive by, go ahead and give her a wave. All right. Well, should we get into the questions?

Brokamp: Let's do it.

Southwick: All right. First one comes from Aaron. "I'm a 30-year-old Foolish investor, subscriber, and podcast listener. I've been fortunate enough to be able to max out my 401(k) since I was 22, plus investing 30% of my take-home into my other accounts. That being said, my work 401(k), like many, has very few choices to invest in. This crazy year alone, my individual account is up 92%, Roth IRA up 44%, but my 401(k) is only up 2%." Womp-womp. "I'm fully aware of the tax benefits of a Roth traditional 401(k), but at some point, would I be better off taking that $19,500 and investing it in a brokerage account instead? Over a span of 25 years, I would sure think the 15% long-term capital gains taxes would be offset by the potential for much higher gains of investing in anything I want. I would still contribute enough to take advantage of the 6% company match."

Brokamp: Well, first of all, Aaron, quite awesome of you to be maxing out your 401(k) since age 22, plus investing 30% of your take-home pay. So, I don't know if you're specifically a FIRE person, Financial Independence, Retire Early, but man! You're on the right track. And you're definitely smart to be taking advantage of the 401(k) at least to get the match.

But I would really just open up a spreadsheet and run some numbers and see how much you have to earn in the brokerage account for it to make sense to basically outweigh the benefits of the 401(k). I actually did that very quickly, like, a five-minute spreadsheet, so don't take this as like legal advice. So, I just said, OK, I would just assume you made $100,000. You said you have to contribute 6% for the company match, $6,000, minus that from the $19,500, that leaves $13,500. So, I basically assumed you're investing $13,500 every year for 25 years. I compared a taxable brokerage account to a Roth 401(k). I chose the Roth because they're both after-tax. The Roth, you never have to pay taxes on. The brokerage account keeps growing, but then you have to pay that 15% capital gains tax. My very rough estimate indicated all you would have to earn is 2% more a year in the brokerage account to outweigh the benefits of the 401(k), which isn't very much.

Now that said, it's very simple. That assumes you bought stocks and didn't sell for 25 years, didn't factor in any dividends that you'd receive and have to pay taxes on. But if you're pretty confident that you can earn 2% to 3% or 4% above whatever your options are in the 401(k), I think it's worth considering maybe favoring the brokerage account. Especially if you are on the road to FIRE, in that you're trying to retire early, because then it's easier to get money out of your taxable brokerage account before the age 59.5 than your 401(k).

I would point out, the 401(k)s do have some extra-legal protections. You will have like, for example, more protection from creditors if you have money in a 401(k). But you also might want to just talk to your employer and say, can I get better investment options, can we have a side brokerage account within the 401(k)? Because then you get the best of both worlds.

Brinsfield: A lot of clients ask us a very similar question when it comes to saving in 529 accounts, because that's another area where oftentimes your investment options are quite limited, and so you can, kind of, find a tax equivalency in terms of the yield you would need to get in order to justify saving outside of a 529 plan, and spreadsheets are the best tool to do that in my experience. [laughs]

Southwick: Our next question comes from Dan. "I've always had an FSA that was "use it or lose it" by the end of the year. However, this year I have an HSA. Because I can carry the balance forward, is it worth considering cash flowing any medical expenses and allowing this fund to grow for future use? I'm 40 and my wife is 39 and we have a two-and-a-half-month old."

Brinsfield: All right, so this question is an age-old comparison between HSAs and FSAs. And just as a recap, an FSA stands for Flexible Spending Account, the limit for 2020 is $2,750. And that is the "use it or lose it" component. It's not included in your taxable income. Another fun fact is you don't pay payroll taxes on that money either, so it can be a very tax-efficient way to pay for medical expenses that you have some high confidence that you're going to incur that year.

The HSA is a different animal entirely. So, this stands for Health Savings Account. And one of the prerequisites for having an HSA is that you are in what's called a high deductible healthcare plan, meaning you'd have to have a pretty high out-of-pocket commitment before that insurance kicked in. And because you're committing to that higher out-of-pocket limit, there's a special savings account that you have access to that also has higher limits for a family, like Dan is, who asked this question, the limit is $7,100 for a family, that you can contribute to the HSA. And this is often called an account that has a triple tax benefit. The first one is that the contributions are tax deductible, so that $7,100 going into the account, you're not paying taxes on today. The second is tax-free growth. And then the third is that you actually don't pay anything in terms of taxes if you distribute those funds for qualified medical purposes.

So, the idea is that, in theory, you could have this HSA account that you're contributing the maximum dollar amount to every year and it can essentially be sort of a healthcare retirement account, if you wanted it to be. Because once you get older, once you're over 65, you can use that money for anything, not just medical expenses. So, it becomes a really powerful compounding machine, but what that means is, in the meantime, you have to pay for all of your medical expenses out-of-pocket. So, that's kind of what Dan was talking about with cash flowing his medical expenses today and letting that HSA account grow and compound over the next 25 years.

I think one of the bigger decisions is less about the compounding of the HSA and really the risk involved in being in a high deductible healthcare plan. So, if you are a person that has chronic illness or you're in a high-risk group, you know, if you have a young child, a lot of people don't want to take the risk of being in a high deductible plan in case some sort of illness develops that requires ongoing care. But assuming you have that risk tolerance [laughs] in terms of your medical care, you're healthy, you have very few ongoing prescriptions and things like that, being in a high deductible healthcare plan can make sense. And then you can, actually, get this triple tax benefit from the HSA.

Southwick: Our next question comes from Cecilia. "I am a teacher scheduled to retire at the end of 2021 at age 67 and would like to know where I should invest a combined nest egg of about $300,000 when I retire. Some of this money is in IRAs and some is a lump sum that the State of Florida will give me that I will need to rollover. Currently my IRAs are in a target retirement fund with Vanguard, but I want to consider other options. And after years of hard work and raising three children, I want to have some fun. I plan to withdraw the recommended 4% to 5% every year, which will supplement social security and a pension. As an FYI, I am divorced, so I'm self-supporting."

Brokamp: Well, Cecilia, as a former teacher and a former Floridian, I'm very happy for you that you are about to retire. Congratulations! To answer your question in terms of how to invest that money, longtime listeners will know that the foundation of a retirement portfolio is the income cushion, basically you'll take out how much you think you need every year, subtract your pension, subtract social security, then you have the amount that you're going to need each year from your portfolio. Multiply that by five, that's your income cushion. Normally I would say, adjust that for inflation too, but inflation is so low these days you probably don't have to worry about that.

That income cushion should be protected; cash, CDs, maybe short-term bonds, but very safe. The rest of it could be invested in stocks. In my Rule Your Retirement service, for a moderate to conservative investor, 60% stock, 40% bonds, pushing it up to 75% stocks, for people who are more aggressive, or if you're getting a pension like you and if your pension covers most of your expenses, then you probably could take a little bit more risk with your portfolio.

You say that you're in a Vanguard Target Retirement Fund, I'm guessing that's probably about 50% stocks, 50% bonds, so it's a little conservative as far as Fool standards go, but if you're a conservative investor, that's probably a good choice at least for some of your money.

Just a couple of other things I'll touch on that you talked about. First of all, you said that you were married at some point, divorced. If you were married for at least 10 years, you might be eligible for a bigger social security benefit as a divorced spouse of your husband, if he had significantly higher lifetime career earnings. So, it's just something to investigate.

And you talk about taking out 4% to 5% every year. I personally feel like that's a little high. We've talked on the show before about the 4% rule. But I think because interest rates are so low and the returns from cash and bonds are going to be so low, I think 3.5% is probably safer for someone in their late-60s. They can move it up to 4% once they reach their early to mid-70s, but I personally think that's too high. As I've often said, if you're going to retire, you're on the verge of retirement, I completely recommend that you see a fee-only financial planner to make sure that you have all your ducks in a row. You can find a fee-only planner from the Garrett Planning Network or NAPFA, which is the National Association of Personal Financial Advisors. However, you have an IRA, you have a target retirement account or target retirement fund with Vanguard, I don't know if that means you have an account with Vanguard, but most brokerages will offer financial planning services. And if you have enough money with them, they'll do it for free or at a discount. So, I would contact whoever your brokerage is, and see if they can do your retirement analysis for you.

Southwick: Next question comes from Caroline. "I recently lost money when the company that I owned stocks in filed for bankruptcy. Normally, one can only deduct a stock loss on their taxes if one is also claiming capital gains, correct? Will I be forced to sell something to realize a capital gain, so I can deduct this loss or are the rules for loss deduction different when the company just went belly up?"

Brinsfield: All right. So, there's no belly up deduction rule unfortunately. I wish there was, because it might make us feel better when this happens to companies. But the good news is that you can deduct up to $3,000 of capital losses without having gains to offset them. So, those losses can offset your other income across your income taxes up to that $3,000 limit, and you can keep using that $3,000 every year until your total loss runs out. So, there is a little bit of leeway there, it just depends on how big this loss is. For Caroline, you know, how long she'll have to take those losses over a period of years or potentially consider selling some stocks that have gone up in value in order to capture that capital loss.

Southwick: All right. Next question comes from Patrick. "Can you explain who a whole life or universal life insurance policy is best suited for? Every insurance salesman, of course, thinks everyone is."

Brokamp: Well, Patrick, let's first talk about the differences between the two, so we're on the same page. So, universal life and whole life policies are what I like to call cash value policies, the industry calls them permanent insurance, although it's really only permanent as long as you keep paying the premiums. Basically, when you buy one of these policies, pay the premiums, you're paying partially for insurance and partially for a cash value account that you hope will accumulate over time. Contrast those two to a term life insurance policy, where you're just paying pure insurance for a certain amount of time: 10 years, 20 years, 30 years.

Just to give you an idea of the difference in terms of how much these cost, NerdWallet had a good article, it just basically listed out estimates for policies in 2020. So, let's say you're a female, 30 years old, you want a $1 million policy. If you want a $1 million policy for term policy for just 20 years, it's going to cost you $296/year. If you want a $1 million policy for 30 years term $520. If instead you want a whole life policy, every year $6,300. So, more than 10X the cost. In fact, one of the problems with these policies is that because they're so expensive, people don't stick with them. I found one article that estimated that up to a third of people let their policies lapse within the first five years because it costs several thousand dollars every year. So, we have long recommended that generally people should just go for the term policy and have as much coverage for as long as you need it and invest the rest.

But your question, Patrick, was who are these suitable for? And I would say there are people who want permanent insurance, they want to be insured for the rest of their life. It's very difficult to get a term policy that goes beyond age 70, 75. So, if for some reason you want insurance beyond that age, in many cases it's for estate planning purposes, you almost have to go with some sort of a cash value whole life policy, universal life. If you wanted a policy, for example, that goes to 100, you almost always have to get a universal life policy. Very expensive if you're buying it at that age, but it is possible.

Brinsfield: I'd say behaviorally there are few situations where these types of policies could work out. Like, if you're someone who's just bad with money, like, you need a bill to pay in order to save, this is better than nothing, in my opinion. You know, it's kind of a forced savings mechanism, you're getting this monthly or quarterly statement where you have to pay the premium. And some people just mentally need that trigger otherwise they're spending what's in front of them.

The other case where I've seen policies like this, kind of, save the day, is for young people who insure themselves early and later become uninsurable. So, it's hard to know that at the time, but you might be younger and assessing your risk factors, like, if there is a history of cancer or other chronic illness in your family, and then you plan on starting a family in the future where you would need insurance at some point in the future, one of these more "permanent policies" might make sense.

Southwick: Our next question comes from Blake, "As many of us are now working from home during the COVID-19 pandemic, I have a tax question. Are there any tax benefits that people who are working from home can take advantage of during this time? No time like today to start planning for next year's tax season."

Brinsfield: Blake, you're after my heart here on advanced tax planning. I definitely appreciate that aspect. And this is actually an answer that has changed recently. So, with the big tax cuts that came through in 2018, those tax changes also eliminated the ability for employees to claim a home office deduction, but I did say employees, so it really depends on what your employment situation is. If you're an employee and you get a W-2 at the end of the year, there really isn't a way to deduct any sort of cost associated with working from home, that option is now gone as of 2018. But if you're an independent contractor and at the end of the year you get a 1099 to report your income, you might qualify for a home office deduction against that self-employment income. And for meeting the qualifications as a home office, you have to have a space that is used regularly and exclusively for your home business. So, a lot of people miss the mark on the exclusivity component. So, for example, like, your kitchen is probably not a place that you use exclusively for business, so there are a couple of qualifications that would need to be met and you would have to be a sole proprietor or a business owner in order to take that deduction. So, a lot of employees, like our fellow Fools here that are just working from home and employed by a company, unfortunately have no tax break there, but tons of gas savings.

Southwick: We do have that. All right. Next question comes from Joe in Denver. Hey, maybe you can go visit Joe on your way back to Virginia. Joe, Megan is coming over, get the guest bedroom ready. "My wife and I have been diligently saving and paying down debt. We've had a great 2020. Crazy, right? And have enough saved to pay off our student loans in one fell swoop." That's awesome. "But should we, there are rumors of loan forgiveness through additional stimulus packages or possibly through Biden's administration if he gets elected. I'd hate to throw $20,000 at a loan that eventually could be forgiven. There's a lot of other stuff I'd like to do with that money, like stocks." Get some. [laughs] Oh, Megan, if you don't go visit Joe and his wife, I will. They sound like fun.

Brokamp: Well, Joe, congratulations on your successful and crazy 2020. So, a couple of things I would say, first of all, we generally don't recommend that you make any decisions based on what might happen in any election, but particularly this year. And I would not make any investment choices, any personal finance decisions based on who I think is going to win this election, because this one is going to be crazy and it might even take a while until we [laughs] figure out who won in the first place. So, I would just say that.

But even if that were not part of it, you said that you're saving, and we've had a great 2020, and now you have enough to pay off your loans. I'm assuming that means because your stocks are up. And I would not be inclined to sell stocks, I have to pay the taxes in order to pay off school loans which generally have low interest rates, and the interest rates on school loans from the government these days are between 2% and 5%. If you have private loans, it might be a little higher. But I would not be inclined to do that, especially if you have a long time horizon, you're comfortable with the ups-and-downs of the stock market, I wouldn't be inclined to do that.

That said, debt always has a psychological component. Some people just love the idea of being debt-free. And so, if that's worth it to you, I'd consider it. But generally speaking, I think it's better to keep low interest debt and keep investing in stocks.

Southwick: I would have to imagine that if there is going to be any sort of student loan debt forgiveness program in the future, it would probably be based on need. Like, I don't know that, I mean, I don't know, maybe you guys have heard better rumors than I have, but I can't imagine that the government would be like, guess what everybody, I don't care how rich you are, you don't have to pay that school bill.

Brokamp: Yeah, there's several proposals out there, some of it is based on income, some of it is based on just a certain amount everyone would have forgiven and then you'd have more forgiven above a certain amount. But it's hard to say, right?

Brinsfield: The largest asset of the U.S. government is student loan debt, so it seems unlikely that that's going to be forgiven on mass, just from a fiscal responsibility standpoint.

Southwick: Our next question comes from Desmond. "I recently filed for my first LLC to get into real estate by acquiring property and renting it out. Also, I have a Thrift Savings Plan through the military, a Roth IRA, a brokerage account with about 20 stocks -- thanks, Motley Fool -- and two accounts for my kid. Finally, I expect to also have a military pension plan when I retire. However, I don't really have a mapped out financial strategy. Between taxes and everything else, how should I prioritize getting professional help to assist with building a strategy? Do I start with the CFP, a CFA, a CPA or all three? Ahh! I just don't know what to do. Thanks for taking my question."

Brinsfield: All right. So, there are a lot of different designations out there for financial pros, and they all kind of do different things. I will, in self-interest, say that a Certified Financial Planner is probably going to be the best place to start to kind of get all of these moving pieces under one purview. I'm also a CPA, so I can say that in general CPAs are less -- or tend to be, I won't blanket statements -- but tend to be less forward-looking and are more concerned about, kind of, the compliance of making sure they account for everything that happened in the last year correctly, and maybe giving you some advice for the next year. But most CPAs are not looking out over the course of your working career and into retirement and helping you plan for that.

And CFAs are also, that stands for Chartered Financial Analyst, those are highly specialized professionals within investments. And so, you can find people that have all three of these credentials or a mix and match of both or even adding in some extra ones. But of those three, the CFP, Certified Financial Planners, are really the only ones that have a very broad, sort of, education and experience requirement to help put all those pieces in place.

It doesn't say how old Desmond is, but I would think this is, you know, increasing priority as he starts to get closer to retirement. I'd say, if you're within five to 10 years of retirement, this starts getting really critical to take a look at just the timing and amounts of all of these different savings vehicles and income streams and things like that.

Brokamp: On top of Megan's comments, and maybe coming to defense of some CPAs. Some CPAs have basically added to their tax knowledge by taking some financial planning classes, passing an exam, and they are a PFS, a Personal Financial Specialist, I think is what that is. So, it's basically tax pros who've learned a little bit more about financial planning, so that might be something to look out for as well.

Southwick: All right. Our next question comes from Leonard. "What are great options for a Roth IRA?" Wow! That is a short one.

Brokamp: Good job, Leonard. So, the Roth IRA is the tax-free account. So, that's the one you want to grow the most. So, ideally, you put in the investments that you think have the highest potential. So, if you were deciding that your overall portfolio should have cash, bonds, and stocks, you would definitely put the stocks in the Roth IRA, because ideally over the long term that will have the most growth. Now, if you are someone who has so much stock that it fills up more than what's in your IRA, which most of us have, you have to decide, OK, which stocks do I think have the most potential growth. And if you've been an investor for a long time, and you've demonstrated skills that you can say I own 30 stocks, but I think these five to 10 are going to be worth the most in the future. Put those in your Roth.

You can look at history and say that, while historically smaller stocks have outperformed larger stocks, that hasn't been the case for several years, and some people wonder whether that will continue in the future, because these days companies don't come public as soon as they used to. So, now when companies come public, they're already large caps, so there's some debate about that. But looking at history, people have often recommended that you put your smaller stocks in your Roth IRA, because historically smaller stocks have higher returns.

And Leonard, you didn't say whether you're a subscriber to Fool services, but if you are, most of the Fool services do have some sort of, like, best buy list or basically some way of designating their recommendations that they think have the highest potential. So, if you are a subscriber, you can use that for guidance as well.

Southwick: All right. Next question comes from Rebecca. "My daughter works for a small start-up ad agency with about 20 employees. She has incentive stock options as part of her compensation package. I've had stock options in a publicly traded company, but this is new territory for me. The company is sending out emails with information about the tax ramifications of exercising options now versus waiting until the company hopefully sells, as is their goal. How are ISOs for private companies different from public companies? Given all the unknowns, my gut reaction is to advise her to take the money she would need to exercise the options and put it in an S&P index fund and just take the tax hit if the company gets sold and the stock is easy to sell on the open market. Any thoughts on this matter?"

Brinsfield: All right. So, there's a lot packed into this question. One is, ISOs as a form of compensation, they're one of the two kinds of verticals of stock options that you could have; the other one is nonqualified stock options, which is kind of what you hear about more like executive CEOs getting these stock option packages and stuff like that. ISOs are mostly for start-ups, and it's because start-ups often don't have a lot of cash to pay their [laughs] employees, and so they sweeten the pot with these incentive stock options. And one of the benefits is that it gives employees the ability to, kind of, get into the stock at a lower rate and experience some tax benefits over time.

These kinds blew up in the early 2000. So, if you remember that time, there were all these internet companies starting up, executives and, you know, admins alike were getting all of these incentive stock options, and it was seen as this, like, can't go wrong strategy. I'm going to exercise my incentive stock options, watch the stock price increase, and capture capital gains treatment on that instead of ordinary income tax treatment.

There's a tricky little element in between there [laughs] called alternative minimum tax. And so, what happens with an incentive stock option is you get granted some options, it gives you the ability to buy the stock at whatever it's trading on that day. For a private company, that's just whatever the latest valuation was. So, for start-ups that can be like a number of cents; it's like a true penny stock a lot of the time. And the employee can take that option and exercise it usually within 10 years, and when it's exercised, the employee has to pay up that $0.10, $0.20, whatever it is per share to exercise the option. They immediately have to include the difference between that agreed upon price and the fair market value at the time as income for alternative minimum tax purposes.

So, going back to our, like, tech start-up example in the early 2000s, people would actually take out loans to pay their AMT with this promise of, like, it'll pay off down the road, and a lot of those companies imploded in the meantime and you're sitting there holding onto a stock that has no value, but with this massive loan that you used to pay your taxes, which is a pretty bad situation.

So, in any case, back to Rebecca and her daughter. With a private company, the valuation is the biggest thing that's different. So, a private company gets valued less regularly than a public company, you can't just look up the price on any given day, it's whatever the valuation is at the time. And there's limited liquidity, there's limited market for private companies, you are usually selling either to other employees or the company itself is buying back stock or a bigger company comes in and acquires the stock, so that's the biggest question mark in my mind, that is, if you spend money exercising your options, when do you have the ability to pull that money out? And with a private company, it's pretty infrequent and you don't really have a great predictable timeline as to [laughs] when that's going to occur. But it is still a great opportunity if your daughter really believes in this company, to get in at a low price now that she will appreciate and accumulate tax benefits over time.

The good news is, it's not an all or nothing decision. If you have 1,000 options, you can exercise two [laughs] -- a lot of companies have a minimum, maybe it's 10. You probably exercise 10 or you could exercise them all. So I would maybe take a hedged approach and say, how much can I reasonably afford to exercise now to experience that maximum upside in the future versus just kind of waiting and taking the tax hit down the road? Because ultimately, either way, if the stock goes up a huge amount, you're going to be happy even if you do have to pay [laughs] some tax at the end of the road.

Southwick: All right. Our last question comes from Kyle. "I'm getting close to needing funds for my first child going to college and I have a good amount in Fool stock picks designated for the 529 accounts eventually. Will there be a problem with cashing in some of those taxable brokerage positions and transferring them to the 529 into the money market option? I assume there is a benefit to having in the 529, but I wasn't sure about contribution limits and such."

Brokamp: Well, Kyle, I definitely like the idea of ratcheting down the risk of your college money as you get closer to needing it. Of course, when you sell those stocks, if they've done well, and I hope they've done well for you, you are going to realize some capital gains. And that might make you less eligible for financial aid. So, I'm just putting that on your radar, should you then take that cash and put it in the 529, even if you're putting it into the money market? Well, depending on your state, if you contribute to the state's 529, you'll get a small state tax deduction, that's the case here in Virginia, so that might be worth it. The other benefit of the 529 is that the growth that you realize on the money comes out tax-free as long as you use it for qualified expenses. If you're just investing in the money market option, there's not going to be much growth, the interest rate is going to be low. In fact, you might even be better off putting that money in a higher yielding CD, knowing that you're going to pay cash on that whopping whatever 1% you're going to earn, but even then it might make sense rather than putting it into the money market in the 529, it's probably not going to be paying that much.

So, generally speaking, if you're just going to put it in cash, I'm not sure it's worth putting in the 529, but it does depend on whether you get a decent tax deduction on it. And I should also say, I'm assuming that you're going to be using all the money, and if that's possible, you won't be using all that money and you'll be invested for several years and use it for another kid or maybe even grandkids, because you can leave the money alone. That maybe argues more for putting it in the 529.

Just because you did ask about contribution limits for 529s, they're very high, it varies from the states. I think the lowest is either Mississippi or Alabama, it's like $230,000, highest is California at $529,000. So, generally speaking, you don't have to worry too much about contribution limits.

Southwick: All right. Well, thank you, Megan, that is the show. We really appreciate you coming on and pausing during your trip to join us and share your wisdom. Do you want to come back again?

Brinsfield: Yeah, sure, definitely.

Southwick: Okay. Great. And I'm excited to find out where you'll be coming to us from at that point, who knows?

Brinsfield: Could be anywhere; could be Joe's house.

Southwick: [laughs] There you go. All right. Well, like I said, that's the show. It's edited road-trip-ly by Rick Engdahl. Our email is Answers@Fool.com. For Robert Brokamp, I'm Alison Southwick, stay Foolish everybody.