Your 401(k) Might Be Costing You Thousands

[00:09] >> Brent, I am so excited to talk about this because we know that the 401k is an unbelievable tool available to most working individuals out there. And yet,

[00:21] tool, it could be someone that's potentially costing you. And you likely that's what we want to talk about today. Well, I mean, let's let's talk about why are these so powerful. First of all, we know even from our own millionaire

[00:35] studies that we've done, this is the first account that most millionaires cross into seven figures with, and there's a lot going for it. If you think about there's lots of tax incentives, you think about free money from your

[00:47] employer, the fact that you're getting profit sharing, there's a lot of things to get really excited about a 401k. So, we want want to make sure that you're doing it right. But not all 401ks and 401k plans are created equal. There's

[01:00] actually a study done by the Department of Labor that found that of a thousand of the largest 401k plans out there, over half of those plans had funds that shared revenue with the plans administrator. Meaning that there was

[01:14] some sort of kickback, some sort of payment for the funds and the other investment options that were found in the plan. And so you may be wondering, well, I is that for sure a bad thing? Well, not necessarily in every

[01:28] circumstance, but can it be a bad thing? And can it be an expensive thing? And can it be a costly thing? Absolutely. >> Well, I mean, let's let's talk about that there's extra fees in there, we we've seen this in several different

[01:40] ways. I remember when we've gone and reviewed 401k plans, you see sub account fees. Even what's amazing, usually this is an active account. You know, if you manager or there's something, but I've even been surprised that they have

[01:54] >> That's right. >> So, you even have to pay attention to the way the index fund of your 401k is structured to make sure you're truly even found there was a plan, I'm not going to say too many names, but there

[02:09] was a plan that was labeled as a Vanguard S&P 500. And then when we looked at the internal expenses, we looked at all the fine print. We found expense ratio that was over half a percent. That's right. When we know that

[02:23] percent. That's right. When we know that the the the traditional Vanguard S&P 500 is less than 10 basis points. So, you've got to pay attention to this because it long term. >> Yeah. So, you may see an expense ratio

[02:35] inside of a fund and that expense ratio may be going may be paid as a kickback back to the plan provider. So, it's something that you want to make aware of fee, it can really affect how many dollars stay in your back pocket. And

[02:48] there were some other really interesting findings in this study that was done by the Department of Labor. Uh, the average 401k of these thousand largest plans they looked at offered about 22 different investment options. So, it's a

[03:01] lot. It's a lot. It's not insane though. It's not hundreds, >> but about 40% of those available investments were affiliated with a 401k a bad thing. You're probably thinking, "Oh, I've got a Fidelity 401k. I've got

[03:16] Fidelity funds. I've got a Vanguard 401k. I've got Vanguard funds." But oftent times when it's associated with the provider, when you see the same fund family there, there's a really good chance that those are not the best funds

[03:29] available, those are not the lowest cost funds available, and oftent times those available either. >> I think it it's just you have to it requires an extra step. when I see a prop proprietary funds and like I said

[03:42] you said a good one like if you think about the S&P 500 at Fidelity that's going to be low cost the lowest cost and that would probably fall into this 40% bad but it does mean you at least need to go follow all the asterisks all

[03:55] whatever markings they put next to the internal expenses so that you can figure paying because we just want to make sure you're not paying those proprietary fees on funds that are just it's not necessarily in your best interest. And

[04:09] there's also be careful of the active managers that are essentially closeted expensive. >> Yeah, let's look at an example. And that's the closet index fund is a great example. A fund that is doing the same

[04:23] thing as indexes, but charging a whole lot different. Let's think about two investors or two funds available inside of your plan. Let's say that one has a non-revenue sharing, just a lowcost index. And let's say that both of these

[04:37] funds aim or goal is to track the S&P 500 and the S&P 500 return is 10%. Well, when you actually look at the underlying internal expense ratio, the fund that

[04:49] has a revenue share arrangement in place might have an expense ratio of like 67% where the actual indexed nonrevenue sharing version could be as low as 0.015%. So a fraction of a percentage point is

[05:04] what you're paying in a fee. Well, when you think about it, if the broad index itself is returning 10, the actual return that you receive via the nonrevenueing nonrevenue sharing index could be something like 9.985

[05:19] versus the revenue sharing fund, which is like 9.33%. And even though these are the exact same funds tracking the exact same index with the exact same type of exposure, the results that you get as an investor are not the same. And when you

[05:35] think about how meaningful could that difference be over the course of an entire working career, it could be substantial. It could be in the hundreds of thousands of dollars category. >> Wow. I mean, that's why, look, pay

[05:48] make sure you're getting value out of it. That's the thing. We don't like it when there's fees that don't technically add any value to what you're getting. If there's a much better index fund, get the lowest cost version of itself. I do,

[06:04] is what you receive. And we just want to make sure that those things are you can do? What are some key takeaways? And a lot of people don't realize this, that you actually have the power to be an advocate for your plan. So, make sure

[06:19] you're asking the right questions. A lot of times we've actually had this happen where a big fan of the show reached out and said, "Guys, my 401k is just not and said, "Guys, my 401k is just not great. It's a it's a provider and the I

[06:33] it's account sub account fees and it's very expensive and the employer match is not great and it's just it's real who can fund it, you know, because it's old >> And so we said, "Hey, why don't you ask your HR department these questions? Hey,

[06:47] Hey, why don't we think about a safe harbor plan? And we gave them basically they took it to the HR department and they said, "Yeah, sorry. Honestly, we looked at it. It's been on someone's desk. Uh, where did you get this

[07:04] were actually able to come in and improve the plan. Actually put in a lowcost safe harbor type plan. So, if you can ask the right questions, even if you can't change a custodian, you might be able to say, "Hey, can we just make

[07:18] rather than just having all these active funds? Can we get an S&P 500? Can we get an international index? Can we get a small cap index?" And you might be amazed that having those changes take place in your plan is not as difficult

[07:32] >> Yeah. And that's I mean, you just hit on all the reasons on why you need to know your investment options in the plan. And look, it it's on it's on the responsibility list of being a fiduciary provider of a retirement plan for many

[07:46] employees that they should be paying attention to how good these investment investment options are. So, so empower yourself, empower your fellow employees. likes employer doesn't want an employee that's out there just causing trouble

[07:59] for the sake of trouble. But if you truly can make things better for your co-workers and for yourself, let's go advocate for this. Well, that what win-win. If you can create the scenario where you say, "Hey, not only will this

[08:12] plan be better for me and I'll get lower cost options, but man, it's going to save you as the employer in terms of administration costs and it's going to be better for the co-workers if we have a safe harbor plan. Then maybe the

[08:24] more money in without having to worry about failing testing." There are ways that you can structure the conversation. Again, to be an advocate for yourself because the 401k is an incredible

[08:37] account. It's an incredible tool. And if you're going to work an employer, you want to make sure you have the best 401k possible, the best 401k available. >> And I like, look, we already said majority of plans 22 funds. They they

[08:50] they add a lot of complexity. The win is typically keep it simple. If you know what you can control, get out there and maximize those things and then set it, people. That's how you win the 401k game.

[09:05] >> I love it, Brian. I love that we get to talk about this. I love that uh we can not know. They might not be they might know, hey, I need to I need to save and nuances to the 401k and the investment options I didn't know about. I love that

[09:19] we get to sit in the spot where we can talk about those things. And I also love that we can talk about the things that you guys care about. It's why we show up here every Tuesday morning at 10:00 a.m. Central to load you guys up. So if you

[09:32] take, if you want us to weigh in on something in your life, we have the team out in the wings collecting your questions right now. So make sure you get them in the chat. With that, creative director Reie, I'm gonna throw

[09:46] >> Yep. I've got a few questions queued up, but first I need your help with but first I need your help with something. I want to try a new segment called It Doesn't Depend. It's a rapidfire segment where Brian and Bo

[10:00] answer questions rapid fire style. And the one rule is they have to do it in words it depends. >> Oh wow. >> So look [laughter] at you. What I need you to do if you are watching live and

[10:13] are active in our chat right now. If you have a rapid fire question, just put the the initials RF in front of your question and then write out your >> So So here's what I think is funny. What y'all don't know, I love kind of sharing

[10:27] back in town. If y'all if y'all didn't catch on, I'm actually here. Um when you're here. >> Bo, right before we went live said, "Reie, we should do rapid fire." And I love that Reub is so fast acting. She's

[10:41] like, "Okay, if he's going to make this and and push me to do this rapid fire, >> So, I was >> on these guys. So, let's take out It you a rapid fire segment, Bo. Let's go." >> I love it.

[10:54] >> Let's go. [snorts] So, we are going to do some normal triedand-true money guy questions, but then we are going to do our it dep it does not depend rapid fire segment between the 30 and 40 minute mark of today's show. So, get those

[11:08] questions in the chat because uh yeah, I'm excited about it. We'll see what Brian and Bo say. But to kick off our Ask the Money Guy, let's go to Ryan Jay's question up first. It says, "Hi, Money Guy team. I love your content and

[11:22] millionaire mission." That's awesome. >> My question is, I recently did a rollover conversion from an old IRA to a Roth. It's about 45K. Should I dollar cost average over time or just throw it in all at once? What do

[11:39] before we get to the rapid fire. I want to get them [snorts and laughter] all out. Um, we get this question a lot of times. Now, yours is uh specific to the lot of times people will come into a large lump sum of money. Maybe they uh

[11:53] sell a business, they have a pension that pays out a lump sum, they sell a piece of land, they have a capital transaction, whatever the thing may be, they want to think, man, I really want to put this money to work, but I'm so

[12:06] nervous because what if I put it in and then fourth quarter of 2018 happens or 2022 happens or 2008 happens, >> how do I decide when is the right time to put it in? Or is the answer I should always dollar cost average? For those of

[12:21] means I'm going to buy a specific chunk on a specific timeline uh every single month or every single week or whatever your cadence is. And so the question that people often ask is, okay, which one is better? And how do I know when

[12:35] >> Well, this is why I love at least our it depends. We give you some rules, man, because without a doubt, lump sum investing historically is the best >> markets up more often than >> markets make money eight out of 10

[12:49] years. So you can, you know, right there, you know, hey, the edge is in my favor if I get this money working ASAP. It's the oneoff stuff that really throws you off. So I hate it when people go all of a sudden binary where it's either on

[13:04] sum or we're going to be dollar cost averaging. We're like, well, that's not the way real money management and good decision-m works. Is what's the risk of this transaction to my entire financial life? Because look, if you got 45,000,

[13:20] but you have a million dollars working in the background, throw it in there. Just get it to work ASAP. But what if this is the you've only got $50,000 of investments and this $45,000 is now, you know, 90% of your holdings.

[13:35] >> We need to understand that there is some variation to what you need to do. And that's why it's called intoepins. But we give you rules. And that's why I'm going to put the content team on um quick. Let's see if they can do it. But we have

[13:48] >> that works on trying to figure out whether you want to do lump sum versus dollar cost averaging. It's all tied to what is this as a percentage of your what is this as a percentage of your total investable assets.

[14:01] Oh, >> this so give them a couple extra >> I just need a little but look, we give you the rules right here. So our depends actually has an answer is because we say look if this is less than 10% of your

[14:15] total investable assets put that money to work ASAP. Obviously if this starts to get be between 10 and 20 spread it out over four months. That way it's not really pausing the gain process too much but at least is protecting you from that

[14:28] quick hit of losing 20 30% in a small period of time. If this is over 50%, just like we talked about, if this was 90% of your holdings, let's spread that DCA over 12 months just so you get this.

[14:42] that gets the money working, but it's now protecting you from the risk of the transaction. Love it. >> That's great. Ryan Jay, appreciate your >> By the way, is that is the Goldilocks I know now that we have made the site so

[14:56] much more searchable. You probably can go to moneyguy.com and just search Goldilocks, but Is this a resource? >> It's going to pull up an episode, but resource. >> We have talked We've talked about the

[15:09] Guy rule book is on the is on the docket team. >> But now, but the good news, the searchability of the website is so good by us talking about it. >> That's right.

[15:22] >> Are you seeing all these rapid fire questions, man? If we just if we took a >> Are they all money based or any of these like you know you know was Bose's bicep,

[15:34] >> You'll have to wait and see. >> Of all the lists, that's the weirdest >> I like it. [laughter] >> By the way, we have a new thumbnail that's working its way around the ranks. And I don't even know if Bo knows this

[15:46] because when Rey sent me the draft of it, and I was like, why is Bo flexing? new podcast. an audio listener, you may be seeing it today. And I know I hope I but Reie goes, "If you think that one looks flexing, you should have seen the

[16:01] >> Yeah. He said, "Why is both legs now?" I was like, "That's all the photos. was like, "That's all the photos. >> I'm not so swole. So swole that you just >> I don't know what to tell you. >> Tell

[16:16] wealth. >> Let's go on to Jacob the CPA's question. It says, "Is it okay to lower savings rate to 10% for one year? I'm 26 with one time saved, which is 81k. I'm guessing that's one time as income."

[16:31] >> Infoo step six. With baby number two, we need a new van and my wife's car won't fit two car seats and isn't reliable. We will do 238. because so many people, so many financial mutants out there, they think,

[16:46] content team, if y'all pull this up. So many people think the foo is a straight line. You go from step one to step two and step two to step three. And over the straight from bottom left up to top right. But in reality, that's not how it

[17:02] often works. Life happens. We have things where uh we get married and we buy a home and we start a family and we have to replace a car and we have a job on all the things. And so a lot of people get so wound up thinking, man, I

[17:16] can never go back. I can never not be exactly where I am, where I am. And you have to remember that money is nothing more than a tool that allows us to achieve and accomplish our goals. Money is not the goal in and of itself. And so

[17:31] the FOU is supposed to be a guideline that helps move you towards your goals. if you find yourself in a situation two, congratulations. That's amazing. Your wife's car won't fit two car seats.

[17:45] you're going to be able to save for that 20% down to go buy that automobile to follow 238 is you have to back down your savings to be able to do that. That's okay. That's part of life. That's part of the financial journey. Can you do it?

[18:01] Absolutely. Now, what I love is at $81,000 saved up at age 26, you're already like well ahead of the curve. Like you're doing awesome already. talk about by 30 you want to have one times. you're already well above that.

[18:17] motivated, just a little little facets that that will, you know, help you keep yourself on track. I have no problem with you bringing it down to 10%, but at least try to get the employer matches and all the things that get you free.

[18:31] You know, they level you up in a lot of really cool ways like 50%, 100% guaranteed rates of return. It's hard to walk away from those things, but then also put the pressure on yourself to get on track ASAP. feel like that there is a

[18:44] ticking time clock of compounding growth, your army of dollar bills that are not growing through the wealth multiplier formula because you've made this decision and I think that will keep you motivated. But being a CPA 26,

[18:58] crushing it, I think this will just be a hiccup in your long successful life >> Congratulations. >> Great answer. Thank you for the question, Jacob the CPA. We've got a question from Jeff P next. It says,

[19:14] "Question for the team. Does it make sense to move my traditional IAS back into my 401k to free up the backdoor Roth opportunity without triggering the pro rattle rules? I'm male 50, retiring at 65.

[19:30] I mean, we don't know the details of the 401k that you're rolling it back in, but this is definitely a very viable strategy to open up the opportunity to do backdoor Roth conversion strategies. >> So, I what I'll do is I'll explain uh

[19:44] doing. I'd love you to think, Brian, times that it would make sense or would look for for it to or to not make sense? So, for those of you that aren't familiar with what Jeff is saying is that if you make too much money to be

[19:59] able to contribute directly to a Roth IRA, there is currently an opportunity where you can put money into a traditional IRA, not take the tax contribution and then you can convert that to Roth. Well, if you do that and

[20:14] you don't have any other outside IRA assets, so no IRA rollover, traditional assets, so no IRA rollover, traditional IRA, SE IRA, simple IRA, you don't have that conversion, if all you're converting is after tax dollars, and

[20:29] after tax dollars are all you have in your IAS, then it is a completely tax-free backdoor conversion. And so what Jeff is saying is, hey, I have money. Rather than having them sit there, I'm going to roll them into my

[20:42] 401k into my employer sponsored plan, thereby reducing my IRA balances to zero and opening up my ability to do backdoor Roths. It's a wonderful strategy. A lot of people do it. A lot of people uh make that movement so they can do back doors.

[20:59] make sense? So, I'm trying to think about Brian times when it would not make >> Yeah. Let me let me give the two that just immediately and I'm sure if just in case my my my brain is not working as fast as yours if you come up with

[21:14] additional on top of this um easy low-lying fruit is you have a four horrible 401k with really expensive funds really high fees and other things that way outweighs the the the putting the money in there that that so that's

[21:29] the first thing but if you work for a big company and you have a great 401k with lowcost index funds lots of options Um, yeah, I think it makes a lot of sense at that point. There's also what if your income is not high enough to

[21:43] where you even need to do a backdoor Roth conversion contribution. You know, that's why I was scrambling because we're in a brand new tax year, so I don't want to give out bad numbers, but on the spot, I should have already

[21:56] flipped over to this. Um, you know, you can make contributions up to a Roth IRA back. This is back in 2025. So, I'm sure this has gone up for incomes

[22:08] where Oh, here we are. Here we are. For a um 2025, $236,000 to $246,000 for a married couple. >> Um, for single, it's 150,000 to 165,000.

[22:23] So, if your income is under those thresholds, you don't have to worry contribute directly to the the Roth accounts. But if you're in a higher income situation and you have a really clean 401k with lots of opportunities, I

[22:39] kind of like it. I mean, this is why I resemble this in some ways is that I >> I'm going to give you uh one from experience where you just want to think through this. You know, often times traditional IAS are just sort of this

[22:52] to have your attention and then it loses your attention and it comes back. And so we've seen this with clients where they had a traditional IRA that at some point in time they recognized, man, I want to do tax deferred savings, but I make too

[23:06] much to do a deductible contribution or I make too much or I already have a going to put money in my traditional IRA. And I do that for a few years and not really thinking about it, I end up

[23:18] having some after tax dollars in my traditional IRA. Well, fast forward in my career and I change jobs and I roll a 401k in and so now my traditional IRA has this big pot pod of money in there.

[23:30] traditional IRA that there might be some what we call basis in that. >> there. I'm literally thinking about uh two clients we were going to do this strategy where we were going to roll their traditionals back into their 401ks

[23:45] where' the traditional money come from? Like oh well it was a smattering. you well you guys have always worked for large companies when you contributed were you doing deductible contribution like no we were just looking for like a

[23:57] tax we actually forensically went back I want to say it was like 11 or 12 years >> on their tax returns and found every single year where they had made a contribution we were able to unload for each or to uncover for each of them like

[24:10] it was something like 60 or $70,000 of basis in those traditionals and so what we were able to do is we were able to roll all the pre-tax money into their 401k, leaving behind just the basis, so like $60, $70,000 of basis, and

[24:25] immediately convert that basis that was already after tax to Roth. Had they not that, what they would have done is they would have rolled after tax dollars into a pre-tax account, thereby putting it back inside the tax shelter, causing it

[24:42] to be taxed two times and missing out on tons tons of Roth opportunity, Roth planning. So, you want to make sure, Jeff, before you just willy-nilly blanket roll money into your 401k from a traditional, you know where those

[24:55] traditional dollars came from because you don't want to mix up after tax there's a big planning opportunity otherwise. >> Wow. So smart. >> That was awesome. I mean, cuz I knew he

[25:08] something I'm probably not coming up with and the basis is a big big somebody and somebody's going to be like, thank goodness I listened to that >> It was literally like hundreds of thousands.

[25:22] was a big big one. >> That's good stuff. Jeff P, I hope that question. as it was. >> No, but that's exactly what that's what you want out of your financial advisor.

[25:34] And this is why we say your wife starts off financially so simple because building wealth is not necessarily hard or or even complicated in the beginning. It's just a matter of making the things as simple and automatic as possible. But

[25:49] things like that happen where all of a sudden your life gets complicated even though you are trying to keep things structured as simply as possible. And that's where we'll leave the porch light on. And we this, you can tell we got the

[26:02] well. Love it. >> It's good stuff. All right. Uh, your chance to get rapid fire questions in is coming to a close. If you're watching live right now, be sure to put an RF in front of your question. It will be part

[26:15] of our rapid fire segment in just a few minutes. But first, we have Leah Feld 4397 and her question. It says, "Can you have too many syncing funds?" We have six a six-month emergency fund plus funds for

[26:31] a new car, repairs, travel, etc. Combined, this puts us at 140K plus in cash. >> Household income is 225K. Uh they're 32 years old, 400K saved in retirement. They are crushing it.

[26:48] think about uh >> Hang on before y'all take that off, let me just get because there's some lots of data here. talk. >> Well, the answer to the question is, can

[27:02] actually uh we did a making a millionaire episode. If you've not if subscribe right now to the channel so you can get updates every other Monday of people do this. They say, "All right, I've got my emergency fund and I know

[27:16] living expenses, but in addition to that, I might need to replace my car. syncing fund, but then I might have some home repairs and I have that. Then I've got this trap and then I've got and all of a sudden you have these 8 n 10 12

[27:30] yourself into the situation like Leah where your household income is $225,000 and you have well over half of that amount in cash which is likely way

[27:43] bigger of a cash cushion than you need because odds are not all of those things are going to hit at once. I'm going to buy a new car and going to have to travel and I'm going to need to tap into my emergency fund.

[27:57] You're not recognizing that dollars inside of syncing funds can be used for multiple purposes at different times. But I think financial mutants, we like little nice little chunks, but it does get you in the situation where even

[28:10] though you guys are absolutely crushing it, you're probably in way more actually need to be in. Well, I think you're you're you're focusing on the minutiae of it instead really you're you're focusing on the on with a fine

[28:24] like you need to pull the microscope back like you're you're looking at you just need one times and just look at it as a whole so you can get the the it as a whole so you can get the the overview that hey what is really do I

[28:38] >> and then let's look at our emergency fund slashsyncing funds in that scope of three years and then yes, let's keep that money. But if this is now this

[28:50] full year's salary and we don't need that much, especially six figures, multiple six figures the way it's >> Um, yeah, we we we've probably turned a good behavior into a hyperfocus and and

[29:05] like all things in life, too much of a good thing can all of a sudden turn into a weird obsession or bad thing. And that's why we got to have perspective. the purpose because what I don't want you to do especially did did we get the

[29:18] >> I think 32 is how old they are. >> Um if you're in your early 30 Yeah, multiplier at age 32 >> huge >> huge >> is is still 18 times. So you can imagine

[29:31] >> is is still 18 times. So you can imagine if you if you're misjudging this by 20 40 $50,000 all of a sudden I mean you're walking >> hundreds of thousands >> hundreds of thousands of dollars um

[29:44] working out there in your army of dollar bills. So, and especially if you're not at step eight, you know, cuz sometimes I if you read millionaire mission, I share that cash can be a a kind of a contrarian wealth builder, but that's

[29:58] >> the, you know, steps one through seven. up in the background and now you're looking at how do I use cash as a as a as a magnifier of wealth by having money when nobody else does during the, you

[30:12] know, any upcoming downturns. But if that's not and you're young, um, let's sidelines. >> 32 with 400,000. >> Oh yeah, we definitely work with us is definitely in your future, Leah. I mean,

[30:26] because that's incredible, y'all. Well done. Um, golf clap. I mean, that that's >> A golf clap. I like that. It is true. If you cuz it Paul Hollywood has the handshake. We got to figure out what what we can

[30:40] everybody. >> So, but maybe maybe he's a high five too >> no, >> you know, but so we got to figure out thing is when somebody's done something so well that we

[30:55] out. >> We'll work it. We'll keep it smart creative people around us. >> I don't know. We'll think about it. But I, as I was saying, it is true that if you ever are at that level of complexity

[31:10] know and you want to make sure you get it right, go to moneyguy.com and click on become a client and you can just explore what it looks like to become a client of Abound wealth. We're always here for you when you need us.

[31:23] the show. >> Oh boy. when it is time for our it does not depend rapid fire segment where Brian and Bo will answer a series of questions submitted by our live chat today in under a minute and they are not

[31:39] allowed to use the words it depends. >> All right. And so I want to make sure >> Yes, they are. >> It's a minute combined, right? Like the seconds. >> So I can't hog it because we know I'm

[31:51] if we're not careful. Okay. >> I say yes. And here's what I will I will throw you a bone here. At the end of our questions, we will have a maybe it does

[32:03] depend segment where you can say all the things that you were just dying to say >> Okay. >> Be careful. who starts. >> So do it. Be short. I want to see you do

[32:16] >> All right. Okay. >> Here we go. First question from Miris Rants says, "Best strategy if employer does not offer a 401k. >> No 401k. Best strategy would be save into a traditional IRA assuming that you

[32:31] could deduct it. If not, then or Roth IRA, traditional IRA, then after tax >> God, I loved it. That I mean, you crushed it because that's exactly the >> It's already eased up all this time. [laughter]

[32:43] >> He just took so long to say I loved it. I loved it. Well, who because I mean it's totally the Roth IRA. I mean, and by the way, let me show it's supposed to be >> because Andy Hill did a great job, but

[32:58] supposed to. When you get the foo, you shake this thing and then that's what said, and then when you get out to retirement, since you don't have an traditional IRA and if you don't have that, you go down here to step seven and

[33:12] account. So, set it >> perfectly. That's wrong. You give Brian >> No, we 50 seconds. We still have 50 seconds. >> Next up, BP6685 says 529 or Trump account.

[33:26] money from the the Trump account for sure because free money is good. But are going to be treated just like normal IRA accounts. So, there might be a Roth conversion opportunity in the future. We still think that 529s, go get the free

[33:40] money cuz we love free money, but then we still love 529s as long as there's a future. >> Yeah. >> Yeah. >> Yeah. Fred D asks, DCA Roth IRA

[33:52] contributions or lumpsum them in January? portfolios reach the size to where the Roth contribution is immaterial relative >> Yeah. If if you've got and I'll put numbers to it. If you've got over

[34:07] $60,000 of investable assets, then you probably should just have the strategy of of just lumpsuming it in there. Unless, now know thyself, if you're one thing. I love setting up dollar cost averaging. If your income is nowhere

[34:22] near the the the tippity top um of the exclusion of you make too much, then I like setting up automatic behaviors to just buy every month when you get paid. just buy every month when you get paid. Zach P says, "Would you rather a one $88

[34:37] Zach P says, "Would you rather a one $88 beer or$881 $1 beers?" >> First of all, >> I have to know what $88 beer tastes >> honestly I like a fancy beer. Honestly, that's like a That's like top tier. One

[34:51] $88 beer. >> I would I could do 88 beers at this age. different. That would have been my beer that I could do. I could last me an entire year. So, it would be option two. 88 $1 beers would probably be all of my

[35:05] 20 2026 beer needs. >> I would have not drank. probably been 2026 and 2027. Now, college that might have made it, you college that might have made it, you know, two weeks. [laughter]

[35:22] >> I'm just not going to ask anymore. I did go to I did go to spers and club leva things were a little different. I grew up feral. up feral. >> Amber 62654 asks, "Is it okay to pull

[35:35] 2,000 from the emergency fund to max out my Roth IRA for 2025?" secrets about Roths is you can get to your basis penaltyree, taxfree if you have to, assuming that you have more in your emergency fund than just $2,000.

[35:51] behavior. This needs to be a one-off thing that yeah, that when you're you're running it so close in the beginning of behaviors and setting up good habits that yeah, I want you to maximize this by April, but then make sure in the next

[36:04] year your emergency fund is big enough that these things don't cross paths as >> All right, for these last five, we're going to shorten the time to 20 seconds. >> Wow, look at y'all. We're doing too good with one minute.

[36:18] >> Let's see what'll happen. So, you have 20 seconds. You can't say it depends. And then I will give you a followup at the end. You have to say what you need to say. >> Maxim B. Ken Cam 3342, that was a

[36:32] serious username, says, "Why do you say that Roth 401k depends on your marginal tax rate, but still encourage backdoor and mega backdoor Roths?" >> Uh, backdoor and mega backdoor come at different times. We encourage mega back

[36:46] door cuz whenever you can do Roth tax-free, you should do it. Doing Roth 401k is not taxree. >> Well, cuz look, if you're in a high tax >> Well, cuz look, if you're in a high tax bracket, God, I'm see

[36:59] need more time on that. >> It costs you money to put money in the Roth salary deferral if you have options to do pre-tax. Every dollar you put in saves you 30 cents in taxes. Backdoor Roths is not. You can do pre-tax

[37:12] Roth. Steve Harvey is making fun of me right now because I couldn't get that >> See, I did stress you out there. Sorry, Brian. Next is from an 11. What's Brian's favorite movie? >> I mean, the classic answer is like a

[37:27] Shaw Shank Redemption is is like one, but then there's also like we were Princess Bride, >> dude. >> Is is a good one. I mean, so it depends on what your flavor of what you consider

[37:40] awesome. Thank you for smoking. I mean, that was a good one. Do you remember There's I could come I could give you a list of five. I know Bo's gonna say >> I'd like to say I'd like to say Star Wars is Brian's favorite movie.

[37:52] >> Well, which one, Bo? Come on. >> Well, what's yours? >> The Star Wars. >> Yours is not Star Wars. Christopher >> The Dark Knight trilogy was fantastic. It was a good one.

[38:04] >> Manny G asks, "How to determine when enough money is enough money?" I mean it it's a personal I will tell you this is gosh that look at you

[38:18] >> this say it so bad he wants to say the words >> when you know who you are what you value and what brings you purpose and your

[38:30] >> you brain work so good that's the abundance definition right there on the levels of wealth you're so smart >> all right two more what's y'all's general quote unquote rule for sudden extra money like an inheritance bonus or

[38:43] investing. >> Spend a portion of it if you if you have something that you felt like you've been deferring in life. Um we love you saving. Pay attention how much you need to save. You we have resources for you.

[38:57] to save. You we have resources for you. And then um this is I'm not good at this. >> Uh give, save, spend. And I think you

[39:09] should do all three of them when you have inflows of money. Where you are in in each. >> Last but not least, for Breeze Me Up asks, "Who's your favorite Star Wars character?"

[39:22] >> Oh, that's that's Boba Fett. I mean, I hate what they did with the show because they if you went to my office and saw how I still have my original characters from, you know, from the 1970s, the actual action figures, and I used to

[39:34] sleep with that little little figurine. I mean, I had and I I remember I lost him out in the backyard for like two weeks and I it was like I was devastated and then when I found it, it was like a reunited um it was an incredible thing.

[39:47] So, that's an easy one. I hate what Disney I love Disney, but y'all know I hate what they did to that character through the series. through the series. >> Luke Skywalker. [laughter]

[40:00] >> That [laughter] was so fun. >> That's so mean for me. you realize that I felt like we were all over back on the church softball field and Bo is playing pitcher, he's playing shortstop, you know, he's calling which side of the

[40:14] then they throw me out in right field and then when the tournament comes they We're not going to let you play anymore." So, I felt like I was just a fish out of water. >> Part about the live streams is you being

[40:27] you and telling us all your stories and taking all the time. So, that was just because you know too like you hear a question you have too much experience. >> You can't unwind the thing. >> I think we literally if the content team

[40:41] if my editors had chance to put it you could see where my brain broke You could actually see where the blue screen came up and I did feel bad. I was like oh no I've broken him. >> No the blue screen came up. You're like

[40:55] altdelete this thing. >> Okay. Well okay financial mutants watching and listening. Let us know what you thought. I'm thinking 20 seconds minute. >> We I do think 30 I think we could do 20

[41:07] seconds felt I felt pressure, but I think I could do 30 seconds in the >> Yeah. So, let us know if you like doing this kind of thing uh to change. had since I've already self-proclaimed that maybe in my younger years I drank

[41:21] too much. Um I used to have friends that I would drink one beer to their their moving at faster speeds than me back in in those days. So B could be the same way. We could restrict B to 10 seconds or 20 seconds and me 40 seconds because

[41:37] at. >> It's like handicapping, right? That's probably that's a healthier thing than drinking [laughter] golf handicap. >> Oh no, that was fun. Okay, so now in do

[41:52] we need to have our maybe it does depend segment. Is there anything else you need like either responses to the game or >> No, this is one I do want Brian to speak on. Uh because I get this all the time.

[42:04] with a potential client, someone who's reaching out, thinking about working what's going on? What are your issues?" And I'm like, "Hey, tell me about your the stuff you got going on." And I'll be amazed. I'll be like, "Hey, I make a

[42:16] super big income and I got my 401k and I got my after tax account and you know, like an old rollover or something. I'm like, "Oh, you're what? You're not doing backdoor Roth IAS." Oh, no. I don't you and I'm like I'm like, "Why? Why not?"

[42:31] And I think it's because people fall into that trap of, "Well, do I really Why would I just do if I'm going to do Roth, why would I just do Roth 401k? I think it does matter. Explain why doing a backdoor Roth versus opting to do a

[42:47] thing. >> You'll see. And it's also I mean one of the things I was also cuz I love mega backdoor Roth but I don't do mega backdoor Roth because it doesn't fit for my situation. And what I mean by that is

[42:59] my situation. And what I mean by that is is that if you're in a in a really high marginal rate say you know because the federal rate is 37% but then you you also lose some other things in the background. So it's just like when I do

[43:14] my taxes I don't it doesn't say I'm paying 37%. the effective rate is actually closer to 40%. And then because of all the search charges and those type of things and then if you live in a state that has an income tax, I mean we

[43:26] can get over 50% really quick >> and and so you can you understand very quickly that man taking a deduction right now is valuable. Cool. If I can your the government is funding half of your contribution. And then the thought

[43:41] that is down the road when you retire, especially if you retire before 75 years of age, you might have an opportunity where your income goes way lower, much lower tax bracket. Now, we can control the taxation and do a Roth conversion at

[43:56] that point. That's why you're going to want to do traditional 401k probably want to do backdoor if you could structure your accounts in the ideal way. You'd then want to consider doing backdoor Roth contributions,

[44:09] meaning doing traditional IRA contributions, then convert them if you have the right account structures. Uh there's a lot that we're leaving unsaid there. And then the reason I don't do like for myself a mega backdoor Roth

[44:21] convert because we could easily add after tax is it's back to the same thing. I'm in such a high tax bracket and I have the ability to structure the way my a lot of self-employed people can do cash balance plans and other things

[44:34] to where let's get that money out of the the 40% tax bracket. But if you work for we've seen it a lot of the car manufacturers that we've done 401k consulting for, they have really good 401ks. they're in good tax situations to

[44:49] where a a mega backdoor Roth makes a lot of sense for them um because of the way their compensation is not so high and they don't have any ability to to control cash balance and all these other things that yeah they ought to get in

[45:03] there and get those those huge Roth conversion opportunities. included >> I'm a good financial planner. I just my brain works at a different speed. I mean it's just I can't

[45:16] >> You're good. I don't know. It ties into my my slow storytelling draw. You know, you just you can't make this stuff. You can't bake a cake in five minutes. You want that chocolate cake, it's going to take a while for it heat up in the oven

[45:30] >> True words. >> I love it. >> should have said country. I should have said biscuits. >> Biscuits. Very on brand. All right. Want to do another um just normal ask money

[45:44] guy question. It's going to be hard to talk for more than 20 seconds. >> But can can we talk about the caper that I pulled off last week? >> Sure. Why not? >> Y'all know Nashville was a hot mess.

[45:56] >> Cold. No, it was a freezing day. It was literally zero degrees. >> Could not be a worse. >> The public school system was still closed yesterday. So, I went up the main road to take my daughter to school um

[46:10] because and and I had no trouble. Today, the public school system's back in. And so I will try to go my back roads to avoid all the traffic of the school traffic and halfway to work roads are still closed. There are trees literally

[46:24] everywhere. If you live in Now Bo somehow he lives in a part of the county that all their utilities are buried under the ground and they had no trouble whatsoever. But in my neck of the woods, I mean it was catastrophic. I mean, my

[46:37] neighborhood was without power for three days. And the caper I pulled off is that I saw the storm and and this is, by the way, this is part of my my heritage. we when we lived in Atlanta. No, >> was that 2014? I can't remember, but it

[46:52] Night Live was making fun of us for because it said we just go to the safest place and go on Interstate 75 because the whole city just was a hot mess in Atlanta um for that because just in the South, we're just not wired for ice and

[47:06] y'all everybody >> I was about to make fun of my Yankee friends, but um I won't say what they tell me. Um, but it I back then in Atlanta, my wife woke me up at 5 in the morning and said, "I got a crazy idea.

[47:22] This snowstorm is going to probably take out school for the week. Why don't we go down to Florida, go to Orlando?" And and we had such a great time doing it and we had such a great time doing it back in 2014, 2015 that this year when

[47:35] that storm proposal came through, >> I said, "Why don't we fly, do it again?" we totally felt like we were getting away with something when we were down in Florida while everybody was struggling. Even called my college daughter and

[47:49] said, "Hey, you can't come home and wash laundry this weekend because um we're we're shutting off the water to the house." And she says, "Well, can I go?" >> And we're like, "Yeah, come on. We'll redo." And I think it's because she had

[48:01] 2014 and because we really did feel like we were getting away. And once again, we got down to Florida and I'm not saying this to rub it because I mean, our our neighbors in Tennessee were like, "You guys are nuts." But on day two or

[48:15] struggling, they're like, "Can we come?" And we did bring we had some neighbors come stay with us um down in Florida, too. But it was um it was I felt like we making with family members. My kids will never forget what we got to do last

[48:30] >> Well, we're happy that worked well. We missed you here, though. Well, I felt bad for Andy because I was planning I couldn't. Kudos. Andy's a trooper because all through I told Reby when because everything went bad here in

[48:42] >> and I called Rebe cuz I don't trust no matter cuz he's got a [laughter] monster truck. You know, Bose's got this macho truck that can go anywhere. And I think he gets excited when the weather

[48:54] turns a certain way cuz he feels like he you don't have to lock the hubs anymore, getting with it. He told me he got brand new tires. He's really excited to see what these things could do. So, I trusted Reebie and I called her and I

[49:07] I was like, "Surely Andy's not coming in town still cuz you know, we've had all getting on a plane." And I was like, "God bless him." But I was like, "I for the rest of the week and us still not even having power at the house, you

[49:22] know, I'm not I'm not coming back with no power cuz I I love Andy, but I like electricity more." [laughter] Seriously. I mean, because you can't you can't do anything without electricity. >> I like Andy, but I love electricity.

[49:37] >> No, it was a hot mess in my neighborhood. I mean, I don't I didn't crew come stay at y'all's house. >> You're welcome at the Hansen household >> I didn't think you wanted to. You were >> I was I was in a good place down there

[49:49] >> M. I still owe you one. Honestly, I owe you a few months rentree stay at the I didn't want to truth. Bo had his own You had your own issues, pools leaking and all kind of other stuff. It was it's it was rough. It was really really water

[50:03] >> Okay. I didn't mean to take but it's just that it feels crazy in a moment in time. So much crazy stuff happened last week in Nashville not to share it with really we had even talked about all that stuff with you guys either.

[50:16] where Brian was last week. >> Did y'all Did we not put any pictures on >> I guess No, we did. We actually put in our email list already. >> Yeah, we did. [snorts] My wife actually said, "Don't post those

[50:31] >> She's like, "That's going to seem mean with everybody struggling through stuff." And look, my neighbors were struggling, but it's one of those things. Us our little bit of happiness was not meant to be negative. It was

[50:44] >> It's all good. >> And we'll probably do it again next >> Next ice storm comes through in 15 years, we'll be probably on a plane headed to Florida. >> Noted. We'll plan ahead.

[50:57] >> Yeah. >> We've got one from decide Andy was from? He's from Michigan. Detroit. >> So, they're wired differently. He's just like, "Oh, I stom."

[51:09] >> Yeah. No big deal. >> It's a big deal down here. >> that mess up. >> I'm gonna butcher this username, but we're going to go for it.

[51:22] Edu Bristenor. Ed Ubers asks, "Hi you all. Thanks for what you do. I'm 28, married with one kid. Our mortgage is a 30-year at

[51:34] 6.625%. Does it count as high interest debt or is it further down the FO? No debt except the mortgage? Thank you." >> Uh, Edub, this is a pretty it's a pretty easy question in my mind because oftent

[51:49] mortgages are going to count as low interest debt. I think they're going to they're going to be step three high interest. And even [clears throat] 6.625% isn't even high relative to some new

[52:03] years. A lot of folks still have mortgage rates at like seven, seven and mortgage rates at like seven, seven and a half%. Uh for a 28-year-old at that interest. >> No, I I agree. Mortgages are kind of a

[52:16] unique thing in the fact because you have the option to refinance >> and you even have the option. Now, we're not quite there yet with 6.6, but once we get below 1%. Um, you can start refinancing with no

[52:30] cost, meaning that the lender, you take a little bit of a premium on the rate, >> and when you get in a falling interest rate environment, which some indicators are that we might be headed that headed that way. You don't refinance once, you

[52:43] times. So, that way you don't if you feel like you missed it, you can do it again as long as the rates are still going down. With this exception though, a math thing is that just because you refinance to take advantage of a lower

[52:57] interest rate, do not reset the term of your loan. Meaning that you don't go from a 30-year mortgage that you've been paying for four years, refinance into another 30-year and then >> pay the terms like it's 30 years. No,

[53:10] you need to pay this at least like it's a 26 year mortgage or 25 or even a 20, whatever you is fits into your financial situation. The resetting of the amorization is the biggest mistake people make and sometimes it even makes

[53:24] sense to pay the closing cost. You have to do the math. We have a and we website to where you can figure out the break even analysis of whether you should take a premium on the rate or if you should just pay the closing cost on

[53:37] the refinance. I think that over the coming year to 18 months, this is going to be a hot hot issue that we're going to keep you front and center on is when refinancing your mortgage? >> Yeah, we have um we do have a

[53:51] If you go to moneyguy.com/resource or if you just go to moneyguy.com and you can search in our search bar refinance, you'll find a lot of our uh content that want to make sure you make that decision. Well,

[54:07] refinancing. >> You think so? >> That's another one. Yeah, I think that would be a powerful calculator. >> Rey's like, you guys love coming up with the ideas. I'm actually the rubber who

[54:19] meets meeting the road most. >> That's what I'm here for. That's what I'm here for. All right, let's go to another question from Assorn. It says, "I'm starting a job at a large private tech company. A good percentage of my

[54:33] pay is in these private RSUs with yearly tenders. How would should I hedge tenders. How would should I hedge against this income risk that comes >> um save like a banshee outside of the

[54:48] private shares, right? So when you think about your comp package, right, I right? So I'm just going to use round numbers because it's easy to think. Let's say you get a $100,000 salary, but let's say that another big chunk of your

[55:01] Let's say it's another $100,000. You have $100,000. So on paper, on your tax return, you look like a $200,000 a year income earner or most likely it's

[55:13] it's not going to be the full, but you get the idea. Realistically, when it saving, when it comes to you thinking about how you structure your financial life, I don't want you to behave and act like someone who makes $200,000 a year.

[55:28] someone who makes $100,000 a year, assuming those private shares are not with them. Even though you might be saving them and they might be going towards your future, with private companies, we never know exactly how

[55:42] that story is going to end. So, what I want you to be careful of is having all wealth built up in this private enterprise where also your human capital is because if things go bad, you could

[55:56] lose your job. You could uh lose the value of your portfolio and be in a want to see you doing is following the financial order of operations, building your assets and your accounts outside of the private shares. And then if you hit

[56:11] a liquidation event or if the company goes IPO, well, that's all going to be gravy and that's then going to become part of your financial life that's >> Yeah. I mean, the big biggest takeaway because I'm thinking of all of our

[56:24] clients that we've dealt with, you know, RSUs are grants. So, you made the decision to probably take less pay so that you could because you were building in that these RSUs were going to hopefully have some value for you. Um,

[56:36] what but we've had clients that had stock option choices too where they could defer up to a very high percentage and some of these really paid off. The big takeaway I always share with people is don't have all of your human capital

[56:50] tied into the exact same place where you're trying to build investment capital. the concentration can create huge huge wealth over term. So it's a balancing act and that's why I would at least make sure that you had 15%. I'd

[57:04] prefer 25, but you but you might have taken a lower pay structure because of the RSUs, but that's why I have to give you a bottom threshold there, a minimum you a bottom threshold there, a minimum of at least 15% that you're saving and

[57:17] then if they, you know, but then try to get that to is 25% as fast as possible. Um because you you know out of you have the win-win or the best of both worlds is where their company hits you you turn into a huge windfall wealth opportunity

[57:33] with the RSUs but then also you're protected over here with your other savings that you get both. Now if it goes bad and sideways at least if you're doing the 15 to 25% outside of your employer when when it goes bad um if it

[57:49] lost everything. >> That's right. >> It's a balancing act. It really is. And and we've helped clients with those type of situations because we try to take into account the math of the moment

[58:02] give you incredible opportunities with how you structure these things. So, we try to maximize that, but also not just put ourselves out there completely >> Assaorn, thanks for the question. We're glad that you're here asking it and

[58:17] financial situation because personal finance is personal and that's why we love answering your questions live every Tuesday at 10:00 a.m. Central. And we then, be sure to go to moneyguy.com/resources.

[58:32] Take advantage of all of our free stuff, our calculators, our downloads, plus our articles, episode archives, and ultimate guides that will deep dive on a lot of be sure to check out moneyguy.com. We tried to make it really searchable and

[58:47] useful just for you so you can continue these conversations in your own life. >> Guys, glad to be back in the saddle here. We have a blast doing this this live content. Um, thank you for being a part of it. We don't take it for

[59:00] granted. Um, we just had a big planning session off offsite planning session yesterday. Can't wait to share some of the great stuff. You have no idea how excited I am to share some of the things that we've come up with for 2026.

[59:13] >> You guys make it all possible. I'm your host Brian, joined by Mr. Bo, joined by that you can't even see that's sitting all around here. And we have a blast making this type of content. Money guy out.