Your 401(k) Might Be Costing You Thousands

A new study from the Department of Labor found over half of the 1,000 largest 401(k) plans had investment funds that shared revenue with the plan's administrator. We cover how you can optimize your 401(k) to avoid these fees and make sure you don't make a mistake that could cost you almost $200,000! Then we answer your financial questions, including a Rapid Fire Segment with a fun twist. ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Jump start your journey with our FREE financial resources⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Reach your goals faster with our products⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Take the relationship to the next level: become a client⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Subscribe on YouTube for early access and go beyond the podcast⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Connect with us on social media for more content⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Bring confidence to your wealth building with simplified strategies from The Money Guy. Learn how to apply financial tactics that go beyond common sense and help you reach your money goals faster. Make your assets do the heavy lifting so you can quit worrying and start living a more fulfilled life. ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠DRINKAG1.com/MONEYGUY Learn more about your ad choices. Visit megaphone.fm/adchoices

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• 0:01Speaker 00

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• 0:26Speaker 01

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• 1:02Brian Preston?

  Your 401k is likely costing you thousands of dollars.

• 1:07Speaker 03

  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 it can be, even though it's an amazing tool, it could be something that's potentially costing you and you likely have the ability to change that. And that's what we want to talk about today.

• 1:26Brian Preston?

  Well, I mean, let's, let's talk about why are these so powerful? First of all, we know even from our own millionaire studies that we've done, this is the first account that most millionaires cross into seven fingers 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 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 to make sure that you're doing it right.

• 1:52Speaker 03

  But not all 401ks and 401k plans are created equal. There's 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 plan's administrator. Meaning that there was 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, is that for sure a bad thing? Well, not necessarily in every circumstance, but can it be a bad thing? And can it be an expensive thing? And can it be a costly thing? Absolutely.

• 2:30Brian Preston?

  Well, I mean, let's, let's talk about what does this mean when we find out that there's extra fees in there? We, we've seen this in several different 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 find out somebody there's a money manager or there's something, but I've even been surprised that they have realized that a lot of investors want index fund.

• 2:53Speaker 03

  That's right.

• 2:54Brian Preston?

  So you even have to pay attention to the way the index fund of your 401k is structured to make sure you're truly getting the low cost variety because we even found there was a plan. I'm not going to say too many names, but there was a plan that was labeled as a Vanguard S and P 500. And then when we looked at the internal expenses, we looked at all the fine print, we found out that this thing had an internal expense ratio that was over half a percent.

• 3:18Speaker 03

  That's right.

• 3:19Brian Preston?

  When we know that the, the traditional Vanguard S and P 500 is less than 10 basis points. So you've got to pay attention to this because it could cost you a lot of money in the long term.

• 3:29Speaker 03

  Yeah. So you may see an expense ratio 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 because even though this is a hidden fee, it can really affect how many dollars stay in your back pocket. And there were some other really interesting findings in this study that was done by the Department of Labor. The average 401k of these thousand largest plans they looked at offered about 22 different investment options.

• 3:58Brian Preston?

  That's a lot.

• 3:58Speaker 03

  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 provider. Again, this is not inherently a bad thing. You're probably thinking, oh, I've got a fidelity 401k. I've got fidelity funds. I've got a Vanguard 401k. I've got Vanguard funds, but oftentimes when it's associated with the provider. Or when you see the same fund family there, there's a really good chance that those are not the best funds available. Those are not the lowest cost funds available and oftentimes those are not the best performing funds available.

• 4:31Brian Preston?

  Well, I think it's just you have to, it requires an extra step. When I see it proprietary funds, and like I said, you said a good one. Like if you think about the S and P 500 at fidelity, that's going to be low cost.

• 4:43Speaker 03

  Lowest cost.

• 4:44Brian Preston?

  And that would probably fall into this 40% and that doesn't necessarily mean it's bad. But it does mean you at least need to go follow all the asterisks, all whatever markings they put next to the internal expenses. So that you can figure out what are the fees and what are you 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 there's also be careful of the active managers that are essentially closeted index funds, but they're just way more expensive.

• 5:13Speaker 03

  Yeah, let's look at an example and that's the closet index funds, a great example, a fund that is doing the same 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 revenue share and the other's non-revenue sharing, just a low cost index. And let's say that both of these funds aim or goals to track the S and P 500. The S and P 500 return is 10%. Well, when you actually look at the underlying internal expense ratio, the fund that has a revenue share arrangement in place, might have an expense ratio of like 0.67% where the actual indexed non-revenue sharing version could be as low as 0.015%.

• 5:58Speaker 03

  So a fraction of a percentage point is what you're paying in a fee. Well, when you think about if the broad index itself is returning 10, the actual return that you receive via the non-revenue, non-revenue sharing index could be something like 9.985 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. When you 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.

• 6:42Brian Preston?

  Wow. I mean, that's why I look. Pay attention to what you're paying and 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, you know, price is what you pay, value is what you receive, and we just want to make sure that those things are connected.

• 7:06Speaker 03

  So what are some things that 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 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 great. It's a, it's a provider and the, I won't say the name of the company, but it's their sub account fees and it's very expensive and the employer match is not great and it's just, it's real, real clunky.

• 7:38Brian Preston?

  They're strict who can fund it, you know, because it's old school.

• 7:41Speaker 03

  And so we said, hey, why don't you ask your HR department these questions? Hey, why don't we have any low cost indices? Hey, why don't we think about a safe harbor plan? And we gave them basically these list of questions to ask. Well, they took it to the HR department and they said, yeah, sorry, honestly, we set this up 10 years ago and we haven't looked at it. It's been on someone's desk. Where'd you get this information? How do we improve? And we were actually able to come in and improve the plan, actually put in a low cost, safe harbor type plan. So if you can ask the right questions, even if you can't change the provider, if you can't change the custodian, you might be able to say, hey, can we just make some low cost index funds available rather than just having all these active funds? Can we get an S and 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

• 8:26Speaker 03

  in your plan is not as difficult as you might think.

• 8:29Brian Preston?

  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, and it's on, it's on the responsibility list of being a fiduciary provider of a retirement plan for many employees that they should be paying attention to how good these investment, investment options are. So empower yourself, empower your fellow employees, do it in a tactful way because nobody likes them. Employer doesn't want an employee that's out there just causing trouble for the sake of trouble, but if you truly can make things better for your coworkers and for yourself, let's go advocate for this.

• 9:03Speaker 03

  Well, that what you're doing there is you're creating a win-win. If you can create the scenario where you say, hey, not only will this 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 coworkers. If we have a safe harbor plan, then maybe the ownership is going to be able to put 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 account. It's an incredible tool. And if you're going to work in employer, you want to make sure you have the best 401k possible, the best 401k available.

• 9:41Brian Preston?

  And I like, look, we already said, majority of plans, 22 funds, they add a lot of complexity. The win is typically keep it simple.

• 9:51Speaker 03

  That's right.

• 9:51Brian Preston?

  If you know what you can control, get out there and maximize those things and then set it, forget it, make it automatic for the people. That's how you win the 401k game.

• 10:01Speaker 03

  I love it. Brent, I love that we get to talk about this. I love that we can educate folks on things that they might not know. They might not be, they might know, hey, I need to, I need to save and I want to save, but man, there's little nuances to the 401k and to the investment options I didn't know about. I love that 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 a.m. Central to load you guys up. So if you have a question, if you want to get our 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 Rebe, I'm going to throw it over to you.

• 10:44Speaker 04

  A few questions queued up, but first I need your help with something. I want to try a new segment called It Doesn't Depend. It's a rapid fire segment where Brian and Bo answer questions rapid fire style. And the one rule is they have to do it in under a minute and they can't use the words it depends.

• 11:05Brian Preston?

  Oh, wow. Look at you.

• 11:07Speaker 04

  What I need you to do, if you are watching live and are active in our chat right now, if you have a rapid fire question, just put the initials RF in front of your question and then write out your question.

• 11:19Speaker 03

  We can't say it depends.

• 11:20Brian Preston?

  So here's what I think is funny. What y'all don't know, I love kind of sharing behind the scenes because by the way, I'm back in town. If y'all, if y'all didn't catch on, I'm actually here.

• 11:28Speaker 04

  I am happy you're back. It's so much more fun when you're here.

• 11:31Brian Preston?

  Bo, right before we went live, said, Rebi, we should do rapid fire. And I love that Rebi is so fast acting. She's like, okay, if he's gonna make this and push me to do this rapid fire, I'm gonna at least make it hard.

• 11:44Speaker 04

  So I was like, I want to try it out.

• 11:45Brian Preston?

  So let's take out it depends.

• 11:47Speaker 04

  Yeah, I said, I'll make you, I'll make you a rapid fire segment, Bo, let's go.

• 11:50Brian Preston?

  I love it.

• 11:51Speaker 04

  Let's go. So we are gonna do some normal tried and true Money Guy questions, but then we are going to do our it does not depend.

• 11:59Brian Preston?

  It does not depend.

• 12:00Speaker 04

  Rapid fire segment between the 30 and 40 minute mark of today's show. So get those questions in the chat because 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 J's question up first. It says, hi, Money Guy team. I love your content and 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 you think?

• 12:35Speaker 03

  It depends. I want to get them all out before we get to the rapid fire. I want to get them all out. We get this question a lot of times. Now yours is specific to the fact that you did a conversion, but a lot of times people will come into a large lump sum of money. Maybe they 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, and they come into a large sum of money. They want to think, man, I really want to put this money to work, but I'm so 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 in or is the answer? I should always dollar cost average, or for those of you don't know, dollar cost average means I'm going to buy

• 13:20Speaker 03

  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 and which one?

• 13:32Brian Preston?

  Well, this is what I love. At least our it depends. We give you some rules and because without a doubt, lump sum investing historically is the best choice.

• 13:42Speaker 03

  Markets up more often than it's down.

• 13:44Brian Preston?

  Markets make money eight out of 10 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 one off stuff that really throws you off. So I hate it when people go all of a sudden binary where it's either on or off is either we're going to be lump 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 making works is what's the risk of this transaction to my entire financial life? Because look, if you've got 45,000, 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,

• 14:29Brian Preston?

  90% of your holdings. We need to understand that there is some variation to what you need to do. And that's why it's called it depends, 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 a Goldilocks rule that works on trying to figure out whether you want to do lump sum versus dollar cost averaging. And it's all tied to what is this as a percentage of your total investable assets?

• 14:58Brian Preston?

  I was hoping that they were scrambling.

• 14:59Speaker 03

  And there it is.

• 15:00Brian Preston?

  This so impressed.

• 15:02Speaker 04

  Give them a couple of extra seconds.

• 15:03Brian Preston?

  I just need a little time. 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 total investable assets, put that money to work ASAP. Obviously, if this starts to get 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 it's protecting you from that 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. You're setting up the automatic behavior that gets the money working, but it's now protecting you from the risk of the transaction.

• 15:45Speaker 03

  Love it.

• 15:46Speaker 04

  That's great. Ryan J, appreciate your question.

• 15:49Brian Preston?

  By the way, is that, is the Goldilocks, I know now that we made the site so much more searchable, you probably can go to moneyguy.com and just search Goldilocks.

• 15:58Speaker 04

  You can.

• 15:58Brian Preston?

  But is this a resource also?

• 16:00Speaker 03

  It's gonna pull up an episode, but it's not a resource.

• 16:02Speaker 04

  It's not a resource yet.

• 16:04Speaker 03

  We have talked, we've talked about the rulebook, right? We've talked, the Money Guy Rulebook is on the, is on the docket team?

• 16:10Speaker 04

  They don't know it's on the docket.

• 16:11Brian Preston?

  But now, but the good news, the searchability of the website is so good now that you can go find this stuff just by us talking about it.

• 16:18Speaker 03

  That's right.

• 16:18Speaker 04

  You can.

• 16:19Speaker 03

  Are you seeing all these rapid fire questions?

• 16:21Speaker 04

  Oh, yeah.

• 16:22Speaker 03

  Man, we just, if we took a minute.

• 16:24Brian Preston?

  Are they all money based? Or are any of these like, you know, you know, was Bo's bicep, you know, curl?

• 16:32Speaker 04

  You'll have to wait and see.

• 16:33Speaker 03

  Of all the lifts, that's the weirdest one to come up with, but I like it.

• 16:36Brian Preston?

  I don't know.

• 16:36Speaker 03

  I like it.

• 16:38Brian Preston?

  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, because when Rebbie sent me the draft of it, and I was like, why is Bo flexing?

• 16:46Speaker 04

  It's our new podcast artwork.

• 16:48Speaker 03

  It's our new podcast.

• 16:48Speaker 04

  If you're an audio listener, you may be seeing it.

• 16:50Speaker 03

  As of today.

• 16:52Brian Preston?

  And I know Bobby doesn't, I hope, I don't, I hope I don't start a fight. But Rebbie goes, if you think that one looks flexing, you should have seen the other ones that we looked at.

• 16:59Speaker 04

  He said, why is Bo flexing? I was like, that's all the photos, Brian?

• 17:03Speaker 03

  I'm not.

• 17:03Speaker 04

  We should have stopped it. We should have stopped him in the moment.

• 17:06Brian Preston?

  So swole, so swole that you just can't help but hide those muscles anymore.

• 17:09Speaker 03

  I don't know what to tell you.

• 17:11Speaker 04

  Oh, man. All right, 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 is income. In Foo Step 6, 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.

• 17:38Speaker 03

  Yeah, Jacob, this is a great question because so many people, so many financial mutants out there. They think, guys, I'm going to put you on the spot, content team, if y'all can 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 course of your career, it just goes straight from bottom left up to top right. But in reality, that's not how it often works. Life happens. We have things where 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 change and we have a, fill in the blank on all the things. And so a lot of people get so wound up thinking, man, I can never go back. I can never not be exactly where I'm at, where I am. And you have to remember that money is nothing more than a tool that allows us to achieve and

• 18:22Speaker 03

  accomplish our goals. Money is not the goal in and of itself. And so the Foo is supposed to be a guideline that helps move you towards your goals. The Foo itself is not a goal. So Jacob, if you find yourself in a situation where you're about to have baby number two, congratulations, that's amazing. Your wife's car won't fit two car seats. You have to upgrade and the way that 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? Absolutely. Now, what I love is at $81,000 saved up at age 26,

• 19:04Speaker 03

  You're already like well ahead of the curve. Like you're doing awesome already.

• 19:07Brian Preston?

  Yeah, you're you know, the rules. We talk about by 30, you want to have one times. You're already well above that. What I would do to keep yourself motivated, just a little little facets 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. 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 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.

• 19:50Brian Preston?

  And I think that will keep you motivated, but being a CPA, 26, crushing it. I think this will just be a hiccup in your long, successful life.

• 20:00Speaker 03

  And congrats on baby number two.

• 20:02Brian Preston?

  Congratulations.

• 20:03Speaker 04

  Great answer. Thank you for the question, Jacob the CPA. We've got a question from Jeff P. next. It says, question for the team. Does it make sense to move my traditional IRAs back into my 401k to free up the backdoor Roth opportunity without triggering the pro rata rules? I'm male, 50, retiring at 65.

• 20:27Brian Preston?

  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.

• 20:38Speaker 03

  So what I'll do is I'll explain what the backdoor is, what the strategy doing. I'd love for you to think, Brian, times that it would make sense or would not make sense. Like, what would you 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 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 deduction, that makes it a non-deductible contribution, and then you can convert that to Roth. Well, if you do that and you don't have any other outside IRA assets. So no IRA rollover, traditional IRA, SEP IRA, simple IRA. You don't have any of those hanging out.

• 21:21Speaker 03

  When you do that conversion, if all you're converting is after tax dollars and after tax dollars are all you have in your IRAs, then it is a completely tax-free backdoor conversion. And so what Jeff is saying is, hey, I have these traditional IRAs that have pretax money. Rather than having them sit there, I'm going to roll them into my 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 make that movement so they can do backdoors. But his question, I think, was, does this make sense? So I'm trying to think about, Brian, times when it would not make sense to do that and implement that strategy.

• 22:03Brian Preston?

  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 additional on top of this. Easy low-lying fruit is you have a horrible 401k with really expensive funds, really high fees, and other things that way outweighs the, the, the putting the money in there. That, so that's the first thing. But if you work for a big company and you have a great 401k with low-cost index funds, lots of options. Yeah, I think it makes a lot of sense at that point. There's also, what if your income is not high enough to where you even need to do a backdoor Roth conversion contribution? You know, a lot of people, if your income, and that's why I was scrambling, because we're in a brand-new tax year.

• 22:48Brian Preston?

  So I don't want to give out bad numbers. But on the spot, I should have already flipped over to this. You know, you can make contributions up to a Roth IRA. But this is back in 2025, so I'm sure this has gone up for incomes. We're, oh, here we are, here we are. For a 2025, $236,000 to $246,000 for a married couple. For single, it's $150,000 to $165,000. So if your income is under those thresholds, you don't have to worry about the structure. You can just contribute directly to the Roth accounts.

• 23:28Brian Preston?

  But if you're in a higher income situation and you have a really clean 401K with lots of opportunities, I kind of like it. I mean, this is why I resemble this in some ways is that I love the Roth conversion strategies.

• 23:41Speaker 03

  I'm going to give you one from experience where you just want to think through this. You know, oftentimes traditional IRAs are just sort of this kind of weird account that like it used to have your attention and then it loses your attention and then 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 much to do a deductible contribution or I make too much, I already have a 401K, so I can't deduct. But I'm just 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 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 of money in there.

• 24:26Speaker 03

  It's not uncommon, if you have a traditional IRA, that there might be some, what we call basis in that.

• 24:32Brian Preston?

  Good call.

• 24:32Speaker 03

  There, I'm literally thinking about two clients. We were going to do this strategy where we were going to roll their traditionals back into their 401Ks. And we just asked them the question, hey, where'd the traditional money come from? Like, oh, well, it was a smattering. We used to contribute. And I was like, well, you guys have always worked for large companies. When you contributed, were you doing deductible contributions? Like, no, we were just looking for like a 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 it was something like $60,000 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.

• 25:16Speaker 03

  401k, leaving behind just the basis, so like 60, 70,000 dollars a basis, and immediately convert that basis that was already after tax to Roth. Had they not recognized it, had they not caught 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 to be taxed two times, and missing out on tons of Roth opportunity and 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 traditional dollars came from, because you don't want to mix up after-tax dollars and pre-tax dollars, because there's a big planning opportunity otherwise.

• 26:00Brian Preston?

  Well done.

• 26:01Speaker 04

  Wow, that was a high five.

• 26:03Brian Preston?

  That was awesome. I mean, because I knew he was going to, I was like, there's something I'm probably not coming up with, and the basis is a big, big determinant. That's going to help somebody, and somebody's going to be like, "Thank goodness I listened to that third point that Bo just shared."

• 26:16Speaker 03

  It was literally like hundreds of thousands of dollars of Roth.

• 26:19Brian Preston?

  That's a big one.

• 26:19Speaker 03

  It was a big one. It was a big, big one.

• 26:21Speaker 04

  That's good stuff. Jeff P., I hope that really helps you think through your question. Your question got a high five on the answer.

• 26:29Brian Preston?

  That's what you want out of your financial advisor, and this is why we say your life starts off financially so simple, because building wealth is not necessarily hard, or even complicated in the beginning. It's just a matter of making the things as simple and automatic as possible. But then as you have more and more success, 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 you can tell we got the chops to make sure you navigate this well.

• 27:01Speaker 03

  Love it.

• 27:02Speaker 04

  That's good stuff. All right. 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 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 sinking funds?" We have a six-month emergency fund. Plus funds for a new car, repairs, travel, et cetera. Combined, this puts us at 140K plus in cash. Household income is 225K. They're 32 years old, 400K saved in retirement.

• 27:43Brian Preston?

  They are crushing it.

• 27:44Speaker 04

  They are crushing it. So what do you think about?

• 27:47Brian Preston?

  Hang on, before you all take that off, let me just get, because there's some lots of data here.

• 27:53Brian Preston?

  Income. I know you're faster, but go ahead and talk.

• 27:56Speaker 03

  Well, the answer to the question is, can you have too many? Absolutely. We've actually, we did a making a millionaire episode. If you've not, if you've not checked it out, make sure you subscribe right now to the channel. So you can get updates every other Monday when we do one of these. Cause a lot of people do this. They say, all right, I've got my emergency fund and I know that I need my three to six months of living expenses. But in addition to that, I might need to replace my car, so I'm going to have an additional sinking fund. But then I might have some home repairs and I have that, then I've got this travel, then I've got, and all of a sudden you have these eight, nine, 10, 12 different sinking funds. And you get yourself in the situation like Leah where your household income is $225,000 and you have well over half of that amount in cash,

• 28:38Speaker 03

  which is likely way bigger of a cash cushion than you need because odds are not all of those things are going to hit at once. I'm gonna buy a new car and I'm gonna get the repairs and I'm gonna have to travel and I'm gonna need to tap into my emergency fund. You're not recognizing that dollars inside of sinking funds can be used for multiple purposes at different times. But I think financial mutants, we like to compartmentalize. We like to have our little nice little chunks. But it does get you in the situation where even though you guys are absolutely crushing it, you're probably in way more conservative of a posture than you actually need to be in.

• 29:13Brian Preston?

  Well, I think you're, you're focusing on the minutia of it instead. Really, you're, you're focusing on the, on with a fine, like you need to pull the microscope back. Like you're, you're looking at, at 10 times magnification where maybe you just need one times and just look at it as a whole. So you can get the, the overview that, hey, what is really, do I need the next three years? And then the Let's look at our emergency funds slash sinking funds in that scope of three years. And then, yes, let's keep that money. But if this is now, this thing is starting to get where we have a full year's salary and we don't need that much. Especially six figures, multiple six figures, the way it's headed.

• 29:56Brian Preston?

  Yeah, we've probably turned a good behavior into a hyper focus. And 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, got to have the why, understand what is the purposes. Cause what I don't want you to do, especially, did we get the age here?

• 30:15Speaker 03

  I think 32 is how old they are.

• 30:18Brian Preston?

  If you're in your early 30, yeah, there it is, 32. I mean, your wealth multiplier at age 32.

• 30:23Speaker 03

  Huge.

• 30:23Brian Preston?

  Is it's 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 away from your future self, having

• 30:38Speaker 03

  Hundreds of thousands of dollars.

• 30:39Brian Preston?

  Hundreds of thousands of dollars, um, working out there in your army of dollar bills. So, and especially if you're not at step eight, you know, cause sometimes if you read Millionaire Mission, I share that cash can be a kind of a contrarian wealth builder, but that's well beyond the, you know, steps one through seven. That's when you are, you're stacking it 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 know, any upcoming downturns. But if that's not, and you're young, um, let's make sure we're not leaving those army of dollar bills sitting on the sidelines.

• 31:16Speaker 03

  32 with 400,000.

• 31:18Brian Preston?

  Oh yeah, we definitely, work with us is definitely in your future. Yeah. I mean, cause that's incredible. Y'all, well done. Um, golf clap. I mean, that's just really good stuff.

• 31:29Speaker 04

  A golf clap. I like that. It is true.

• 31:31Brian Preston?

  Well, you know, I don't have the handshake, you know, cause was it Paul Hollywood has the handshake? We got to figure out what, what we can do. I mean, I guess Bo high fives everybody. So maybe, maybe he's a high five too much, you know, around here. I think.

• 31:44Speaker 03

  No.

• 31:45Brian Preston?

  You know, but so we got to figure out what our, what our, what our money guy thing is when somebody's done something so well that we, golf clap doesn't sound right either, but we'll, we'll figure it out.

• 31:55Speaker 03

  We'll workshop it. We'll keep workshop it.

• 31:56Brian Preston?

  I got some really smart, creative people around us.

• 31:59Speaker 04

  I don't know. We'll think about it. But as I was saying, it is true that if you ever are at that level of complexity where you just don't know what you don't 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. All right, we have reached that time in the show.

• 32:23Brian Preston?

  Oh, boy.

• 32:24Speaker 04

  When it is time for our It Does Not Depend Rapid Fire segment, where Brian and Beau will answer a series of questions submitted by our live chat today in under a minute. And they are not allowed to use the words "it depends."

• 32:38Speaker 03

  All right, and so I want to make sure our production team, you're going to get that timer going for us.

• 32:41Speaker 04

  Yes, they are.

• 32:42Speaker 03

  It's a minute combined, right? Like, the both of us have to answer inside of 60 seconds.

• 32:46Brian Preston?

  So I can't hog it, because we know I'm the one that's going to hog the time if we're not careful.

• 32:50Speaker 04

  I say yes. And here is what I will, I will throw you a bone here. At the end of our questions, we will have a "Maybe It Does Depend" segment, where you can say all the things that you were just dying to say that you couldn't for the sake of time.

• 33:06Speaker 03

  Love it.

• 33:06Speaker 04

  Okay?

• 33:07Brian Preston?

  Be careful what you ask for.

• 33:08Speaker 03

  We'll ping pong back and forth who starts.

• 33:10Speaker 04

  So do it, be short. I want to see you do rapid fire.

• 33:13Brian Preston?

  You go first? I'll let you go first.

• 33:14Speaker 04

  All right.

• 33:14Speaker 03

  Okay.

• 33:15Speaker 04

  Here we go. First question from Miris Rant says, "Best strategy if employer does not offer a 401k?"

• 33:23Speaker 03

  No 401k, best strategy would be saving to a traditional IRA, assuming that you could deduct it. If not, then Roth IRA, traditional IRA, then after-tax brokerage account.

• 33:33Brian Preston?

  God, I loved it. I mean, you crushed it, because that's exactly the order I would do that as well.

• 33:37Speaker 04

  He's already used up all his time.

• 33:40Speaker 03

  What?

• 33:41Speaker 04

  He just took so long to say, "I loved it. I loved it."

• 33:44Brian Preston?

  No, we didn't even hit a minute, because I mean, it was totally the Roth IRA. I mean, and by the way, let me shake it like it's hot, like it's supposed to be. Because Andy Hill did a great job, but he didn't shake that thing like it was supposed to. When you get the foo, you shake this thing. And that's what, so you got to hit that Roth, just like Beau said. And then when you get out to retirement, since you don't have an employer match, you go hit the traditional IRA. And if you don't have that, you go down here to step seven, and you go start doing the after-tax account.

• 34:10Speaker 04

  Starting off strong. You give Brian the minute, he will use the minute.

• 34:14Speaker 03

  No, we have 50 seconds.

• 34:15Brian Preston?

  We still have 50 seconds.

• 34:16Speaker 04

  Next up, BP6685 says, "529 or Trump account?"

• 34:22Brian Preston?

  Well, I mean, I think you take the free money from the Trump account for sure because free money is good, but we're finding out because these things are going to be treated just like normal IRA accounts. So there's might be a Roth conversion opportunity in the future. We still think that 529s, go get the free money because we love free money, but then we still love 529s as long as there's a Y that education is going to be in the future.

• 34:43Speaker 03

  Yeah.

• 34:44Speaker 04

  Yeah. Fred D. asks, DCA Roth IRA contributions or lump sum them in January?

• 34:53Speaker 03

  Lump sum in January, assuming your portfolio has reached the size to where the Roth contribution is immaterial relative to your total portfolio.

• 35:00Brian Preston?

  Yeah. If you've got, and I'll put numbers to it. If you've got over $60,000 of investable assets, then you probably should just have the strategy of just lump summing it in there. Unless, now know thyself. If you're one of these person because it's an annual thing, I love setting up dollar cost averaging. If your income is nowhere near the tippity top of the exclusion of you make too much, then I like setting up automatic behaviors to just buy every month when you get paid.

• 35:28Speaker 04

  Zach P. says, would you rather a $188 beer or 88 $1 beers?

• 35:38Brian Preston?

  What?

• 35:40Brian Preston?

  First of all.

• 35:41Speaker 03

  I have to know what an $88 beer tastes like.

• 35:42Brian Preston?

  I would need.

• 35:43Speaker 04

  Honestly, I had the same thought.

• 35:44Speaker 03

  That's like a fancy beer. That's like, that's like top tier. $188 beer.

• 35:48Brian Preston?

  I would, I could do 88 beers at this age. Now, college age would have been different. That would have been my beer that I could do, I could last me an entire year. So it'd be option two. 88 $1 beers would probably be all of my 2026 beer needs.

• 36:04Speaker 03

  I would have not drank.

• 36:05Brian Preston?

  I would, yeah. Truthfully, that could probably been 2026 and 2027. Now, college, that might have made it, you know, two weeks.

• 36:13Speaker 04

  Oh my goodness.

• 36:15Brian Preston?

  Maybe I shouldn't say it out loud.

• 36:18Speaker 04

  I'm just not gonna ask any more questions on that.

• 36:20Brian Preston?

  Remember, I did go to Spinnakers in Club Avila back when I was in high school. So, things were a little different. I grew up feral.

• 36:27Speaker 04

  Amber62654 asks, is it okay to pull 2,000 from the emergency fund to max out my Roth IRA for 2025?

• 36:37Speaker 03

  Yes, because one of the little-known secrets about Roth is you can get to your basis penalty-free, tax-free, if you have to, assuming that you have more in your emergency fund than just 2,000.

• 36:48Brian Preston?

  But don't turn it into a crutch behavior. This needs to be a one-off thing that, yeah, and that when 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 year, your emergency fund is big enough that these things don't cross paths as easily.

• 37:06Speaker 03

  Love it.

• 37:06Speaker 04

  All right, for these last five, we're going to shorten the time to 20 seconds.

• 37:11Brian Preston?

  Wow, look at y'all. We're doing too good with one minute.

• 37:14Speaker 04

  Doing too good. I just wanna see what will happen. So, you have 20 seconds. You can't say, "It depends," and then I will give you a follow-up at the end.

• 37:22Brian Preston?

  We're not gonna need it.

• 37:23Speaker 04

  You have to say what you need to say. MaximBkenCamp3342, that was a serious username, says, "Why do you say that Roth 401K depends on your marginal tax rate, but still encourage backdoor and mega-backdoor Roths?"

• 37:39Speaker 03

  Backdoor and mega-backdoor come at different times. We encourage mega-backdoor because whenever you can do Roth tax-free, you should do it. Doing Roth 401K is not tax-free.

• 37:49Brian Preston?

  Well, because, look, if you're in a high tax bracket, God, I'm seeing...

• 37:56Brian Preston?

  I just self-regulate myself. I need more time on that one.

• 37:59Speaker 03

  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 saved you 30 cents in taxes. Backdoor Roths is not. You can do pre-tax contributions and still do backdoor Roth.

• 38:11Brian Preston?

  Steve Harvey is making fun of me right now because I couldn't get that one right.

• 38:14Speaker 04

  See, I did stress you out there. Sorry, Brian. Next is from Anshay11. What's Brian's favorite movie?

• 38:22Brian Preston?

  I mean, the classic answer is like a Shawshank Redemption is like one. But then there's also, like, we were talking yesterday, it came up in a Princess Bride.

• 38:32Speaker 03

  Dude.

• 38:32Brian Preston?

  Is a good one. I mean, so it depends on what your flavor of what you consider awesome. Thank you for smoking. I mean, that was a good one. Do you remember that one from a few years ago? There's, I could come, I could give you a list of five. I know Bo's gonna say probably Dark Knight.

• 38:46Speaker 03

  I'd like to say Star Wars is Brian's favorite movie.

• 38:49Brian Preston?

  Well, I mean, that's.

• 38:49Speaker 04

  Well, which one, Bo? Come on.

• 38:51Brian Preston?

  What's yours?

• 38:52Speaker 03

  The Star Wars.

• 38:54Brian Preston?

  Yours is not Star Wars.

• 38:55Speaker 03

  No, no, no.

• 38:56Brian Preston?

  Christopher Nolan, Dark Knight for you.

• 38:58Speaker 03

  The Dark Knight trilogy was fantastic. It was a good one.

• 39:01Speaker 04

  Manny G. asks how to determine when enough money is enough money?

• 39:08Brian Preston?

  I mean, it's a personal, I will tell you, this is, gosh, that, look at you. This.

• 39:16Speaker 04

  He wants to say it so bad. He wants to say the words. He wants to know what.

• 39:22Speaker 03

  When you know who you are, what you value, and what brings you purpose and your money allows you to be that person.

• 39:27Brian Preston?

  Good. That's the abundance definition right there on the levels of wealth. You're so smart.

• 39:32Speaker 04

  All right, two more. What's y'all's general quote unquote rule for sudden extra money? Like an inheritance, bonus, or a raise? Spend versus saving versus investing?

• 39:43Brian Preston?

  Spend a portion of it. If you have something that you felt like you've been deferring in life. We love you saving. Pay attention to how much you need to save. We have resources for you. And then, um,

• 39:57Brian Preston?

  know if, well, I was gonna say the Goldilocks rule, but I'm going to, this is, I'm not good at this.

• 40:03Speaker 03

  Uh, give, save, spend, and I think you should do all three of them when you have inflows of money. Where you are on your journey depends on how much you put in each.

• 40:12Speaker 04

  Last but not least, FebreezeMeUp asks, who's your favorite Star Wars character?

• 40:18Brian Preston?

  Oh, that's, that's Bubba Fat. I mean, I hate what they did with the show. Cause 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 sleep with that little, little figurine. I mean, I had, and 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. 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.

• 40:51Speaker 03

  Lou Skywalker.

• 40:55Speaker 04

  Great pick.

• 40:56Brian Preston?

  I'm not good at this.

• 40:58Speaker 04

  That was so fun.

• 40:59Brian Preston?

  That's so mean. You realize, 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 field he's gonna hit the ball. And then they throw me out in right field. And then when the tournament comes, they say, Brian, we brought some ringers in, we're not even gonna let you play anymore. So I felt like I was just a fish out of water.

• 41:20Speaker 04

  My favorite part about the live streams is you being you and telling us all your stories and taking all the time. So that was just sheerly for fun.

• 41:29Speaker 03

  It's because you know too much, it really is because you know too much. You hear a question and you can't.

• 41:32Speaker 04

  You have too much experience.

• 41:33Speaker 03

  You can't unwind the thing.

• 41:35Brian Preston?

  I think we literally, if the content team, if my editors had chance to put it, you could see where my brain broke. Some of those questions, you could actually see where the blue screen came up.

• 41:45Speaker 04

  Mid 20 seconds, I did feel bad. I was like, oh no, I've broken him.

• 41:49Brian Preston?

  No, the blue screen came up, you're like, oh heck, we're gonna have to Ctrl+Alt+Delete this thing.

• 41:54Speaker 04

  Okay, well, okay, financial mutants, watching and listening, let us know what you thought. I'm thinking 20 seconds might have been too short, but one minute felt a little long.

• 42:03Brian Preston?

  I think we could do 20 seconds felt, I felt pressure, but I think I could do 30 seconds in the future.

• 42:08Speaker 04

  Yeah, so you guys let us know if you like doing this kind of thing to change it up, keep it fresh.

• 42:13Brian Preston?

  This might be, like, you know, we've all had, since I've already self-proclaimed that maybe in my younger years I drank too much. I used to have friends that I would drink one beer to their, their three beers. So there was people even moving at faster speeds than me back in those days. So Bo could be the same way. We could restrict Bo to 10 seconds or 20 seconds and me 40 seconds, because know thyself and know what we're good at.

• 42:36Speaker 03

  It's like handicapping, right?

• 42:37Brian Preston?

  Yeah, exactly, like a golf stroke. That's probably, that's a healthier thing than drinking. Golf handicap.

• 42:44Speaker 04

  Oh no, that was fun. Okay, so now in do we need to have our maybe it does depend segment? Is there anything else you need to say to wrap that up that you feel like either responses to the game or responses to the question?

• 42:57Speaker 03

  No, this is one I do want Brian to speak on, because I get this all the time. It's amazing. I'll have a conversation with a potential client, someone who's reaching out, thinking about working with us, and I'll tell them, hey, what's going on? What are your issues? And I'm like, hey, tell me about your, tell me your story. Tell me about all the stuff you got going on. And I'll be amazed. They'll be like, hey, I make a super big income, and I got my 401k, and I got my after-tax account, and you know, that's pretty much it. Or maybe I have like an old rollover or something. I'm like, oh, you're not doing backdoor Roth IRA? He's like, oh, no, I don't. And I'm like, why? Why not? And I think it's because people fall into that trap of, well, do I really need to? Because that was the question. Why would I just do, if I'm going to do Roth, why wouldn't I just do Roth 401k? I think

• 43:38Speaker 03

  it does matter. Explain why doing a backdoor Roth versus opting to do a Roth salary deferral are not the same thing.

• 43:46Brian Preston?

  You'll see. And it's also, I mean, one of the things I was also, because 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, is that if you're in a really high income tax bracket, you know, high marginal rate, say, you know, because the federal rate is 37%, but then you, it's truly more than that because you also lose some other things in the background. So it's just like when I do 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 surcharges and those type of things. And then if you live in a state that has an income tax, I mean, we can get over 50% really quick. And so you can, you understand very quickly that, man, taking

• 44:29Brian Preston?

  a deduction right now is valuable if I can save 50 cents on the dollar. Essentially, the government is funding half of your contribution. And then the thought 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 that point. That's why you're going to want to do traditional 401k contributions, but you still would 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, meaning doing traditional IRA contributions, then convert them if you have the right account structures. There's a lot that we're leaving unsaid there.

• 45:14Brian Preston?

  And then the reason I don't do, like for myself, a mega backdoor Roth 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 to where, let's get that money out of the 40% tax bracket. But if you work for, if you're an executive, because 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 where a mega backdoor Roth makes a lot of sense for them because of the way their compensation, it's not so high and they don't have any ability to control cash balance and all these other things.

• 45:58Brian Preston?

  But yeah, they ought to get in there and get those huge Roth conversion opportunities.

• 46:03Speaker 03

  Love that.

• 46:04Speaker 04

  Good stuff. Good follow-up. Glad we included.

• 46:06Brian Preston?

  No, I'm a good financial planner. I just, my brain works at a different speed. I mean, it's just, I can't.

• 46:12Speaker 04

  You're good. You're good.

• 46:13Brian Preston?

  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 just can't do it. No matter how much you want that chocolate cake, it's going to take a while for it to heat up in the oven and rise and do all the things it does.

• 46:29Speaker 04

  True words.

• 46:29Speaker 03

  I love it.

• 46:31Speaker 00

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• 47:26Speaker 04

  Someone in the chat was like, you need to give Brian time to think.

• 47:29Brian Preston?

  I should've said biscuits.

• 47:30Speaker 03

  Biscuits, there you go.

• 47:31Speaker 04

  Biscuits, very on brand. All right, wanna do another, um, just normal Ask Money Guy question?

• 47:37Speaker 03

  It's gonna be hard to talk for more than 20 seconds.

• 47:40Brian Preston?

  But can, can we talk about the caper that I pulled off last week?

• 47:45Speaker 04

  Caper, oh, sure, why not?

• 47:47Brian Preston?

  Y'all know Nashville was a hot mess.

• 47:49Speaker 03

  Cold, no, it was freezing here.

• 47:50Speaker 04

  It was a freezing mess.

• 47:51Speaker 03

  It was literally zero degrees.

• 47:52Brian Preston?

  I took my daughter to school today.

• 47:54Speaker 03

  Could not be a worse.

• 47:55Brian Preston?

  The public school system was still closed yesterday, so I went up the main road to take my daughter to school, um, and, and I had no trouble. Today, the public school system's back in, 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 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 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

• 48:36Brian Preston?

  part of my, my heritage, I've done this before, because I remember, when we lived in Atlanta, it was that 2014?

• 48:43Speaker 03

  I can't remember, but it was.

• 48:45Brian Preston?

  You know, it's the one when Saturday Night Live was making fun of us for, because it said, we just go to the safest place and go on Interstate 75, because this whole city just was a hot mess in Atlanta for that. It's because he's just, in the South, we're just not wired for ice and snow and all the other stuff. I know y'all, everybody on, I was about to make fun of my Yankee friends, but, um, I won't say what they tell me. But it, I, back then, in Atlanta, my wife woke me up at 5:00 in the morning and said, I got a crazy idea. This snowstorm is gonna probably take out school for the week. Why don't we load up the kids and the pets and let's go down to Florida, go to Orlando? And, and we had such a great time doing it back in 2014, 2015, that this year, when

• 49:27Brian Preston?

  that storm proposal came through, I said, why don't we fly down to Florida?

• 49:32Speaker 03

  Let's do it again.

• 49:33Brian Preston?

  And do it again, because we've already got a history that we, 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 said, hey, you can't come home and wash laundry this weekend because. 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 such warm memories of us doing this in 2014. Cause 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 neighbors were making fun of us. All of our neighbors in Tennessee were like, you guys are nuts. But on day two or three, when the power was still struggling. And they're like, can we come? And we did bring, we had some neighbors come stay with us.

• 50:14Brian Preston?

  Down, down in Florida too, but it was, um, it was, I felt like we got away with something and the memory making with family members. My kids will never forget what we got to do last week.

• 50:23Speaker 03

  Well, we're happy that worked well. We missed you here though.

• 50:25Brian Preston?

  Well, and I felt bad for Andy because I was planning, I couldn't, kudos. Andy's a trooper because all through I told Rebe when, because everything went bad here in Nashville pretty quick. And I called Rebe because I don't trust Bo's opinion because I knew he was going to tell me he was going to be here. And I'm like, cause he's got a monster truck, you know, Bo's got this macho truck. That can go anywhere. And I think he gets excited when the weather turns a certain way because he feels like you, you don't have to lock the hubs anymore. But he likes getting out there and getting with it. He even told me he got brand new tires. He's really excited to see what these things could do. So I trusted Rebe and I called her. And I was like, look, this is the situation. I was like, surely Andy's not coming in town still because you know, we've had all kinds of crazy.

• 51:05Brian Preston?

  She's like, no, Andy's getting on a plane. And I was like, God bless him. But I was like, I don't think that with school being out for the rest of the week. And us still not even having power at the house, you know, I'm not, I'm not coming back with no power. Cause I, I love Andy, but I like electricity more.

• 51:22Brian Preston?

  Seriously. I mean, cause you can't, you can't do anything without electricity.

• 51:26Speaker 03

  I like Andy, but I love electricity.

• 51:29Brian Preston?

  No, it was a hot mess in my neighborhood.

• 51:31Speaker 03

  Oh, yeah.

• 51:32Brian Preston?

  I mean, I didn't hear you guys offering to let me and my crew come stay at y'all's house.

• 51:36Speaker 03

  You're welcome at the Hanson household anytime.

• 51:38Speaker 04

  I didn't think you wanted to. You were.

• 51:40Speaker 03

  Anytime.

• 51:40Brian Preston?

  I was in a good place down there with the mouse.

• 51:42Speaker 03

  I still owe you one, honestly. I owe you a few months of rent-free stay at the Hanson house.

• 51:47Brian Preston?

  Truthfully, Bo had his own. You had your own issues. Pools leaking and all kind of other stuff.

• 51:52Speaker 03

  It was, it was rough. It was really, really, water and cold temperatures is not great.

• 51:57Speaker 04

  Fun times.

• 51:57Brian Preston?

  Okay, I didn't mean to take, but it's just that it feels crazy the moment in time so much crazy stuff happened last week in Nashville, not to share with the audience, because I didn't even really, we hadn't even talked about all that stuff with you guys either.

• 52:08Speaker 04

  Right. Well, there you go. Now you know where Brian was last week.

• 52:11Brian Preston?

  Did we not put any pictures on social media? I guess not.

• 52:14Speaker 04

  I guess, no, we did. We actually put in our email list already.

• 52:19Speaker 03

  Yeah, we did.

• 52:21Brian Preston?

  My wife actually said, don't post those pictures.

• 52:24Speaker 03

  Why?

• 52:25Brian Preston?

  She's like, that's gonna 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 just our caper.

• 52:38Speaker 03

  You're just on a caper.

• 52:39Speaker 04

  It's all good.

• 52:40Brian Preston?

  And we'll probably do it again next year. Next ice storm comes through in 15 years, we'll be probably on a plane headed to Florida.

• 52:46Speaker 04

  Noted. We'll plan ahead. All right. Do you want to do one more question? Or maybe a couple? We'll see.

• 52:52Speaker 03

  Yeah.

• 52:52Speaker 04

  We've got one from.

• 52:53Brian Preston?

  Is Andy from Detroit? Where did we decide Andy was from? He's from Michigan, Detroit?

• 52:57Speaker 04

  Michigan, yeah. You know, I'm forgetting the city.

• 52:59Brian Preston?

  So they're wired differently. He's just like, oh, it's an ice storm.

• 53:02Speaker 03

  Yeah, no big deal. It's a big deal down here.

• 53:06Speaker 04

  Okay.

• 53:09Brian Preston?

  I messed up your chain of thought.

• 53:10Speaker 04

  I'm gonna butcher this username, but we're gonna go for it. Edu Brissinor?

• 53:18Speaker 04

  Edubrisnor asks, "Hi, you all. Thanks for what you do. I'm 28, married with one kid. Our mortgage is a 30-year at 6.625%. Does it count as high-interest debt? Or is it further down the foo? No debt except the mortgage. Thank you."

• 53:36Speaker 03

  Edub, this is a pretty, it's a pretty easy question in my mind because oftentimes with mortgages, I think the mortgage is going to count as low-interest debt. I think they're going to fall into step nine. I don't think they're going to be step three, high-interest. And even 6.625% isn't even high relative to some new homeowners over the last two or three years. A lot of folks still have mortgage rates at like 7, 7.5%. For a 28-year-old, at that rate, I do not consider that to be high-interest.

• 54:06Brian Preston?

  No, I agree. Mortgages are kind of a 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%, you can start refinancing with no 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 way. You don't refinance once. You might be able to refinance two or three times. So that way, 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, I need you, everybody to understand, it's a math thing. Is it just because you refinance to take advantage of a lower interest rate?

• 54:50Brian Preston?

  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, you need to pay this at least like it's a 26-year mortgage, or 25, or even a 20, whatever you, fits into your financial situation. The resetting of the amortization is the biggest mistake people make. And sometimes it even makes sense to pay the closing costs. You have to do the math. We have, and we probably have some resources on the website 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 costs on the refinance. I think that over the coming year to 18 months, this is going to be a hot, hot issue that we're

• 55:35Brian Preston?

  going to keep you front and center on is when should you take advantage of refinancing your mortgage?

• 55:41Speaker 03

  Yeah, we have, um, we do have a deliverable, a tool out there for you if you go to moneyguy.com/resources, or if you just go to moneyguy.com and you can search in our search bar, refinance, you'll find a lot of our,

• 55:54Speaker 03

  content that we've released on that, um, because you want to make sure you make that decision well.

• 56:00Speaker 03

  We should do a calculator for refinancing.

• 56:03Speaker 04

  You think so?

• 56:03Brian Preston?

  I think so. Yeah, I think that would be a powerful calculator. Rebe's like, you guys love coming up with the ideas. Yeah, I'm actually the rubber meets meeting the road moment.

• 56:13Speaker 04

  That's what I'm here for. That's what I'm here for. All right, let's go to another question from Asorn. It says, I'm starting a job at a large private tech company. A good percentage of my pay is in these private RSUs with yearly tenders. How would, should I hedge against this income risk that comes?

• 56:38Speaker 03

  Save like a banshee outside of the private shares, right? So when you think about your comp package, right? I imagine you get some sort of salary, right? So I'm just going to use round numbers because it's easy for me to think. Let's say you get a hundred thousand dollar salary. But let's say that another big chunk of your comp comes in these private shares. Let's say it's another hundred thousand dollars. You have a hundred thousand dollars. So on paper, on your tax return, you look like a $200,000 a year income earner, or most likely it's going to vest over a couple of years. And so it's not going to be the full, but you get the idea. Realistically, when it comes to budgeting and it comes to saving, 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.

• 57:21Speaker 03

  I want you to behave and act like someone who makes a hundred thousand dollars a year, assuming those private shares are not liquid and there's nothing you can do 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 that story is going to end. So what I want you to Be careful of us having all of your wealth tied up and all of your wealth built up in this private enterprise where also your human capital is because if things go bad, you could lose your job, you could lose the value of your portfolio and be in a really, really rough spot. So what I 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,

• 58:02Speaker 03

  if you hit 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 actually tangible that you can use.

• 58:13Brian Preston?

  Yeah, I mean, the biggest takeaway, because I'm thinking of all of our 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. 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 tied into the exact same place where you're trying to build investment capital, but concentration can create huge, huge wealth over term. So it's a balancing act. And that's why I would at least make sure

• 58:54Brian Preston?

  that you had 15%. I'd prefer 25%, 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 of at least 15% that you're saving and investing outside of the company. And then if they, you know, but then try to get that to as 25% as fast as possible, because you know, I don't know if you have the win-win or the best of both worlds is where their company hits, you turn into a huge windfall wealth opportunity 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

• 59:35Brian Preston?

  25% outside of your employer, when it goes bad, if it went bad, you wouldn't be just left holding the bag and feel like you lost everything.

• 59:45Speaker 03

  That's right.

• 59:47Speaker 04

  That's great.

• 59:47Brian Preston?

  It's a balancing act. It really is. And we've helped clients with those type of situations because we try to take into account the math of the moment because some of these employers really 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 naked.

• 1:00:05Speaker 04

  Asorn, thanks for the question. We're glad that you're here asking it and helping you think through your personal financial situation because personal finance is personal and that's why we love answering your questions live every Tuesday at 10 a.m. Central. And we will be back next Tuesday, but until then, be sure to go to moneyguy.com/resources. 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 the topics that we touched on today. So be sure to check out moneyguy.com. We tried to make it really searchable and useful just for you so you can continue these conversations in your own life.

• 1:00:45Brian Preston?

  Guys, glad to be back in the saddle here. We have a blast doing this live content. Thank you for being a part of it. We don't take it for granted. We just had a big planning session, off-site 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. You guys make it all possible. I'm your host, Brian, joined by Mr. Bo, joined by Rebi and the rest of the content crew 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.

• 1:01:18Speaker 03

  The Money Guy Show is hosted by Brian Preston and Bo Hanson. Brian and Bo are partners with Abound Wealth Management. Abound Wealth Management is a registered investment advisory firm regulated by the Securities and Exchange Commission in accordance and compliance with the securities laws and regulations. Abound Wealth Management does not render or offer to render personalized investment or tax advice through the Money Guy Show. The information provided is for informational purposes only, may not be suitable for all investors, and does not constitute financial, tax, investment, or legal advice. All investments involve a degree of risk, including the risk of loss.

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