Afford Anything - Ask Paula: Am I On-Track for Retirement?

Episode Date: July 22, 2019

#205: Is it ever a good idea to use your 401(k) as an emergency fund? What's the best way to break up with your financial advisor so that you can move all of your funds to Vanguard? Should you put all of your Roth IRA money into index funds, or is there a better option for your money? A listener has a job offer working less hours for more money, but without a retirement plan. Is this a good move? When running a small business as a sole proprietor, are there tax advantages to incorporating or forming an LLC? If so, what should you consider? What's the best way to maximize the earnings on a large amount of savings while keeping the savings liquid? Can a robo-advisor help with this? Myself and former financial planner Joe Saul-Sehy tackle these six questions in today's episode. Enjoy! For more information, visit the show notes at https://affordanything.com/episode205 Learn more about your ad choices. Visit podcastchoices.com/adchoices

You can afford anything but not everything. Every decision that you make is a trade-off against something else, and that doesn't just apply to your money. It applies to your time, your focus, your energy, your attention, anything in your life that is a limited resource that you need to manage. That leads to two questions. Number one, what do you value most? Number two, how do you align your daily decisions in accordance with those values? Answering those two questions is a lifetime practice, and that's what this podcast is here to facilitate. My name is Paula Pan.

I am the host of the Afford Anything podcast. Every other week, I answer questions that come from you, the community. And today, former financial planner Joe Saul Seahy is with me on the show to help answer questions. What's up, Joe? I am so excited to hang out with you in the Afford Anything community. Ah, yes. And it's a wonderful community. And I would like to kick off today's episode with this amazing message from a woman named Anne. She has a success story that is so good, I can't not lead with it. it. So here's Anne. Hi, Paula. It's Anne in Virginia. Thanks to your work, we max the husband's TSP, 19,000, max my solo 401k, 19,000 employee side, around 20,000 more employer side. We max our IRAs,

6,000 each. We max our state's tax advantage college savings plan, 4,000 per account holder, 8,000 for the household. We paid off our rental home last year. We knocked out the final 60,000 on the loan. We decided my life energy, thanks Vicki Robin, was better spent building my business than managing property managers. So we sold our rental home. We're in the process of selling our primary residence and almost all of our stuff. And we're about to begin a digital nomad lifestyle for the next couple of years until our oldest daughter starts kindergarten. We're going to be renting Airbnbs around the country and world for around three months at a time, a nice slow travel lifestyle. We're not FI, although the semi-passive income from my business does cover all of our expenses.

We don't plan to RE fully. We decided to go live a semi-retirement lifestyle now while our kids are young. And when you factor in the cost of owning a home, taxes, utilities, insurance, repairs, furniture, it's actually a thousand dollars a month cheaper for us to rent Airbnbs than to live in our townhouse in the D.C. area. So we're going to go live in beachfront condos along the coasts or off-season ski rental condos in the mountains with all the amenities like gyms and pools and saunas and save a ton of money. I'm not expecting a response. I don't have a question. I just wanted you to know that your work is making a difference. Thank you, Paula. And congratulations. That is fantastic. And I wanted to lead with that because it's so inspiring. You know what's funny, Paula? We spend so much time as human beings

thinking about the 1% of things in our life that stink. If we spent more time celebrating wins, how great would life be? Exactly. So congratulations, Anne, and thank you so much for sharing that story. And now to move on to questions. Our first question comes from Drew. Hi, Paula. I love listening to your podcast.

My question is regarding work and retirement plan. I work for a school 40 hours a week. My monthly gross is $3,950. and I net at $2,800 a month. And to be vested, I have to be there five years. I've only been there three years. Another company has offered me a job working 25 hours a week. My salary will be at monthly of $4,335 with a net of $3,500.

However, the new company offers health benefits but no retirement plan. I would have to find a retirement plan on my own. Does it make sense to work for this new company? working 25 hours a week and have flexible time, or do I stay with my current job working 40 hours with CalPERS and 457 retirement plan? Also, if I do leave, what retirement plan would you recommend? In my current job, I travel 20 minutes one way while the new job will be five minutes from home. Thank you. Drew, that's a great question. Now, first of all, the difference in the hourly obligation 40 hours a week versus 25 hours a week adds a new dimension to this question.

But for the sake of simplicity, let's initially remove that consideration, look only at a comparison of income and benefits from job A to job B, answer that aspect of the question. And then once we do that, we can layer in the other elements as well. Because to analyze something is to break it apart. So let's break it apart, look at each constituent component, and then synthesize it all back together again. So with regard to the income and benefit comparison between the two jobs, now while there is a difference in income, I mean fundamentally the question that you would want to ask yourself, because the new job doesn't have retirement benefits, and the difference in net

income is $700 a month, the question at a purely quantifiable level is, is the value of the retirement benefits that you're getting from your current job, $700 a month or greater. I mean, since that is the income difference, you're comparing one option in which you have an income that is minus 700 but retirement benefits and another option that is an income that is plus 700 minus retirement benefits, then what is the value of the retirement benefits? It's a pure solve for X. And by calculating the value of your retirement benefits, you'll know which one pays more. Now, again, that's not taking the hourly obligation into consideration.

That's only purely looking at the compensation aspect. But that's how you can quantify which of the two is net higher paying for you. That being said, then when you layer in the fact that there are different hourly obligations and when you also layer in other harder to quantify elements, such as opportunities for future promotion, commuting, whether or not you're going to like your colleagues and your boss, whether or not you're going to enjoy the type of work, those all play roles in this as well. I actually think Paula, and I was going to tell you at the start,

I think that's all brilliant stuff as usual, but I don't start. Thank you, Joe. But I don't start with any of that. I start with the last thing that you said, which is this, what do you want to do? Because unless, you know, you don't know a lot of pop references, but do you know who Shirley MacLean is? A person?

Shirley MacLean speaks a lot. She's an actress. She speaks a lot about reincarnation and believes, and there's probably people listening that believe in reincarnation. If they're right, then you do get to do this again. But if she's not right, we got one shot at this. And I don't want to be, I don't want to be beholden to a bunch of benefits and a cost benefit analysis. It is not what I want to do. So I like starting Paula with, which one of these do you,

want to do and then can we make my lifestyle work around it? Because I've seen too many people waste way too much time spending so much energy, I'm maximizing benefits in a job that they just don't want to work. So I'd start there. I'd agree with that. I would absolutely agree with that. Yeah. And then from there, let's talk about, though, the cost of this retirement benefit. That is huge. I mean, the fact that she has a pension and a retirement plan. Right. And she's not going to be self-employed, she's working for somebody else. It means the things that are available to her as retirement plans have much smaller contribution limits because she can now use either a traditional or a Roth IRA, depending on how much money she's making, the fact that she doesn't have a retirement

plan available at work. So her options are much, much more limited. And, you know, that pension fund is a lifetime income that she can't outlive. But I wouldn't stay there for that. If she's, She wants to go and she can make the budget work, I would not stay there for the pension. But I do like all of your points earlier about lay down column A. This is the value of all of my benefits here. And then column B, here are all the benefits of the new job. And then cost comparisons so that when you make the move to company B, because you like it better, you did so on an educated basis. Absolutely. I think oftentimes people fail to quantify the value of their benefits. And so it's easy to say, yeah, but I get health insurance or yeah, but I get a retirement plan. And the amorphous notion that you have this benefit keeps you in a job or leads you to take a job. But if you actually pause to calculate how much that benefit is worth in dollars, and, you're going to, and

sense, that can inform your decision making. Yeah, without knowing the exact numbers, which we'd have to dig into more with Drew, just the differences in pay that she gave us, difference in benefits. I think the benefits at job number one, the value those benefits make it much higher than the pay raise that she's going to get. Yeah, I suspect so as well. I'm taking a wild guess here, But I suspect that at her current 40-hour-a-week job, the value of the benefits is high. At the other job, her hourly income is higher because she's only going to be working 25 hours a week. So even though the net income is lower, the hourly rate is probably higher, but it doesn't have benefits. So I think I do agree with you, Joe, that a lot of this is going to come down to what does she actually want to do?

because it doesn't make any sense to spend your one short life in work that you don't enjoy. I love starting from there. It's the best place to start from. Thank you for asking that question, Drew, and good luck with whichever decision that you make. Our next question comes from Charlene. Hi, Paula, can you give me your thoughts on the best way to break up with the financial advisor? I've started using Vanguard products for my retirement accounts, and I'm very impressed with the 0.3% that they charge for the, the account that I have there now. I have another financial advisor that I've been used to for the

last 20 years who's managed a rollover account for me. I'm very happy with what he's done, but when I look at 0.3% of what Vanguard charges versus the 1.1% of what he charges, it just seems to be more advantageous to have my money to an account where I can use those savings and reinvest it into my retirement, considering what I'm trying to do for the next 10 years, before I retire. I love to get your thoughts on the best way to do this, particularly looking at tax consequences and other things that I may not be aware of.

I appreciate all that you do. Thank you so much for all your information. Charlene. Charlene, that's a great question. Now, there are a few layers to our answer. So before we get into that, the first thing that I want to say is that it sounds as though your motivation to break up with this advisor

is that you don't want to have assets under management because those assets under management fees are high. If that is the case, but you believe that you are still getting good advice, you might want to ask this person, is it possible to still get advice but not have assets under management? So in other words, is it possible not to have your investments managed by this person and not even to receive investment advice from this person, but rather to get high-level conceptual financial planning advice from this person? You're exactly right on point, Paula, because the first thing I thought when I heard Charlene's question is that she's talking about an asset manager, not what I think of when I think of financial advisor. My goal, and you and I have talked about this before, Paula, my goal is to surround myself with people who are smarter than me. I always want to be the dumbest person in my group, right? Because then I'm always learning and I'm always growing.

When I was a financial planner, I worked with very smart people that could do this. themselves, but knowing that I can't do everything all the time myself and also knowing that I have blind spots. I mean, I'm very, very conscious of the fact that I can't see the full 360 degrees. So I want to have smart people around me who help me make sure that I'm moving optimally all the time. So a real financial advisor to me is much more holistic than I have this fund and it's a high asset fee for the fund, and I want to move my money to a low fee. If you're getting phenomenal advice from somebody, this question doesn't even come up because you are Taylor Swift and your job is to go make music.

And everything that isn't your optimal talent, you delegate to other people so you can spend more time doing that optimal talent. And when you're telling me that it's a higher fee and you want to go to point three, I don't think that's a financial advisor, Paula. I think that's an asset manager. I might be wrong. And if it is, yeah, go to Vanguard. Because this asset manager sitting on it, maybe calling you once a year about it,

there's so many tools out there now like Morning Star, you can do all of that piece yourself. Investments over the past 20, 25 years especially, as we've moved from active funds, much more into passive fund territory, have become a commodity. So having somebody watch your index, the index is going to do whatever the market does. There's no reason to have that happen. Right. But in terms of, and again, I want to make a distinction between investing and financial planning.

Because financial planning involves taking a big picture look at every element of your life. Here's my mortgage. Here's my income. Here's my potential future income. Here are the mix of assets and liabilities that I have. And here are the major big ticket expenses that I can anticipate within the next six months, one year, three years, five years, 20 years. Right. And you take a look at all of that and then ask the question like, how do I strategize this chess board? Right. And that is financial planning. It's the strategy of playing chess. Not the tactics even, but the strategy.

I totally agree with all that. And that is who you want in your corner. My point, Paula, is. I don't think this is that guy. You know why? He's not that guy because if he was that guy, he would have presented that option to her already. She wouldn't be calling you about moving it because she's happy with this fun that this guy has. This person would have already presented themselves in a much more holistic way. If they're a holistic advisor, they present themselves as a holistic advisor. If she goes to him and says, hey, can I move this asset and hire you for financial planning advice?

Maybe he does. but if he hasn't presented that before, now he's splitting his time between being an asset gather on one hand and being something that he doesn't do full time on the other. If I'm going to have a good financial advisor in my corner, I wanted to be somebody

who they live and breathe holistic financial advice. I don't want it to be somebody who is doing it part-time and doing something else part-time. Give me somebody who's a rock star in that area to be my advisor. And so then that leads to, And I agree with you, Joe. And that leads back to her question. How does she break up with him? Yeah. So, frankly, it doesn't matter. I always wanted people to call me. But you know why I wanted people to call me when I was advised?

Because you didn't like getting ghosted. Well, no, I didn't like getting ghosted. But let me tell you this. This is a horrible term, but it's the term everybody uses. It just became a pissing match. And the advisor starts filling your head with all the reasons you shouldn't go. Now, given, I wouldn't do that because frankly, I didn't want you in my corner if you didn't think I was doing the job. So please. go. I found early in my career when I tried to convince people to stay, it was horrible. It's just I didn't want to talk to you. You didn't want to talk to me. You know, it just, it doesn't, it doesn't work. But in many cases, the advisor will try to get you to stay, will fill your head full of a bunch of stuff. Here's what I like doing. You can decide on the other side. So let's say it's Vanguard. She goes to Vanguard. People at Vanguard are phenomenal. And by the way, this isn't Vanguard. It's everywhere. All these asset, management companies, very phenomenal helping you move money to them.

Huh, imagine that. So they can start the process on their end. If it's just a regular brokerage account, they have something called an ACAT transfer form where they will tell you if you can just transfer the asset as is. So you don't sell it, you actually keep it and move it there. If you want the asset, you want to just remove the advisory fee. So if you're worried about the advisory fee, but you like the fund underneath it, you might be able to keep the fund.

If you don't like the fund, I actually prefer selling it where it is first, turning it into cash. And by the way, Vanguard can facilitate that. There's a little checkbox on their form that says, do you want this moved over as cash? Yes.

The reason I like moving it is cash is because a lot of the time when you move from place A to place B, the tax information might get messed up. And I want to know before I sell what my cost basis was. that's the amount I paid for it and what it's worth now because there's going to be a tax on the difference between those two numbers. So I want to know that ahead of time. I want to have those files for tax day, turn it into cash and then move it over. If it's in an IRA, it's no big deal because it stays inside an IRA. There might be a cost to get out of your fund. You want to look

at the fund itself to see. And I'll tell you how I know if there's a fee on the back end to move money from your advisor if the type of fund you have has a B at the end or maybe a C at the end. A C may have a 1% fee to get out of it. And a B fund, depending on how long you've had it, might have anywhere from a 6% fee all the way down to zero if you've kept it generally industry standards, if you kept it about six years. So if there's a B, you might want to do some math about what the fund fee is before you get out. You don't even have to call your advisor for this, by the way. Your advisor's company, the company that actually holds the asset, because your advisor isn't allowed to hold it at their office. They work with a firm. So they might work with Fidelity or Schwab or somebody like that. You can actually

call that company and you'll find it on your statement. You'll find it on their online portal. Call that company and talk to a representative there about, hey, if I sold this, what would the back end Phoebe? They might call your advisor. Big deal. Then your advisor calls you. You can decide whether you talk to them or not. Like I said, I don't know that I would. Here's what I would do if you want to talk to your advisor. Wait until it's completely done, the move to Vanguard, then send them a nice note saying,

you know what? I mean, I love what Charlene said. He's done great by me for 20 years. Just time to move on. Say, you know what? It's been a wonderful 20 years. Thank you so much for all of your help. I'm going in a different direction now, Charlene.

Yeah. And do it by email. Oh, yeah. don't call. Or if you call, call it midnight and leave a voicemail so you don't do. Perfect. Well, Joe, I think that says it all. And I love what you said about harnessing the talent of the new brokerage, in this case Vanguard, because of course, since you're moving money into Vanguard, they're going to be tripping over themselves to help you facilitate this move. It's shocking, isn't it?

So, yeah, use them because that's their job and that's what they do all day. every day. Yeah. Thank you, Charlene, for asking that question. We'll come back to this episode after this word from our sponsors. Are you looking for a deodorant that's made without a bunch of scary ingredients? Native deodorant is made with clean, natural ingredients like coconut oil, shay butter, and tapioca starch.

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ZipRecruiter, the smartest way to hire. Our next question comes from Andrew. Hey, Paula. I had a question about using 401K loans as an emergency fund. Using the loan as an out-of-sight, out-of-mind, not easy to get to, and also an automatic way to have savings for an emergency fund. and what I mean by that is if I'm currently saving 10% for retirement and specified as retirement and also putting money into my savings account, really just moving that savings portion into my 401K. So let's say I'm putting 10% in for retirement and then I put another 10% into the savings, just moving that additional 10% into the 401k and then grabbing it from the loan if need be for emergencies. Let me know what your thoughts are.

Thanks. So let me restate your question. So you are suggesting contributing more money than you otherwise would into a 401k and then using this excess amount as money that you would be open to taking out as a loan in the event that you need it. Here's a suggestion. Rather than doing that, what if you made principal contributions to a Roth IRA? Because if you were to do so, then if you needed to access that money anytime, time in the future, you can withdraw principal contributions to a Roth IRA penalty-free. You can't

withdraw the capital gains, the growth, the dividends, but you can draw down those principal payments to the Roth, penalty-free. And if you are high-income such that you don't qualify for a Roth IRA, you can still process what's known as a backdoor Roth IRA. Totally agree with all that. I want to address this question, though, Paul, the pull ahead on. No, no, no, no. I this being diplomatic. I won't be diplomatic. No, please no, no, no, no. And by the way, I get where you're coming from. You're paying yourself back with interest. The interest on a savings account seems really low. Hey, if I need cash, why wouldn't I just borrow against my retirement? There are so many reasons not to do that. Number one is, is opportunity cost.

The market goes up 70% of the time. And there have been. times when it just goes sky high for no reason. And we don't know when that's going to happen. So this whole phrase that time in the market beats timing the market is because partly, we don't know when it's going to have this sudden upswing. And if you're paying yourself back a little bit of interest because you decided to go overboard on something or you had an emergency that you couldn't handle and you didn't have any money in a savings account, you're going to get much, much, much less interest and it could jeopardize to maybe even a small degree how much financial independence you have, how early you get it, how much money you can spend during

that time. We don't want to do that. Leave your retirement funds as retirement funds. Make your emergency fund, your specified emergency fund. Do not combine the two. Yeah, Paula, there's 50 other reasons. That's probably the number one reason. We can probably stop there. But there is there's an issue that people have. It's that we want to optimize everything. And the thing about an emergency fund that's frustrating for a lot of people is it's intentionally unoptimized money, right? It's money that's sitting in a spot where you know that it might not be keeping up with inflation. So you're just to get as close to possible. It would probably do better in the market, the issue is, if you don't have an emergency fund, you have to back down the risk on all of

your other assets. The way to really optimize those retirement assets is to have the unoptimized money sitting aside so that you can be much more aggressive with your retirement funds and you don't have to worry about them. Because you're like, you know what? Hey, if an emergency hits, I got all this cash sitting over here. So yeah, don't, don't. Please don't. Yeah, that's exactly what I do. In fact, I have what's known as the barbell allocation, where I have a huge cash allocation and then I'm all equities. And I don't recommend, I'm not saying that in order to recommend that to other people, but that's a perfect example of how having a ridiculously sized emergency fund allows me to be more aggressive in my investments. Yeah, you can sleep at night knowing that your, I'm going to use a technical term, your standard deviation on your funds, which means the amount they go up and down on a regular basis. for you, Paula, is going to be fairly high.

Absolutely. And it's fine because I don't care about what's happening in those funds because I know that if I've got bills to pay, I've got this cash reserve that I can pull from. And I know that if there's a market opportunity, I've got cash to be able to act on it. Yeah. Do not try to play a shortcut game, Andrew. Yeah. Because it's not really a shortcut. It's a trap.

So, Joe, last week, we had Gabriel Weinberg. and Lauren McCann on the show. They wrote a book called Super Thinking, which is all about creating mental models or frameworks for addressing problems, issues, questions that you have within your life. One of the recommendations that they made is that whenever you are grappling with an issue and you've come to a conclusion about it, take the devil's advocate position so that you can better understand it. And so I'm going to do that right now. Let's take that devil's advocate position. Andrew's suggestion is that he contribute more money to a 401k than he otherwise would. So rather than having an emergency fund, he puts that emergency fund into a 401k knowing that he has

the option to borrow against it. Why would he not do that? Yeah, it's, I mean, it sounds great, doesn't it? I'm putting more money away and knock on wood. Nothing happens, right? Because how often do you really access that money in your emergency fund, not often. So there's a lot of people out there that go, well, you know, most of the time nothing happens. So let's do it that way. Here's the problem, Paula, is that if you have that fairly aggressive allocation that you and I like, and we would suggest to a lot of people that have an emergency fund, keeping that allocation fairly high means that the investment swings are going to then be fairly high on a regular basis.

If you have to get at that money, when the market goes down, you're forced into a position where you have to sell investments that are low and then pay them back at a fixed interest rate instead of letting them go back up. And that is the big time, big time worst case scenario that would be a horror story. You have something bad happen at the same time that the market's down. You go, well, what's the chance of that happening? Oh, let me give you one. More people lost their homes during 2008, 2009 than any time in recent history.

By far, good, smart, hardworking people, probably some of them listening to this show, lost their house because they got over leveraged. And at the same time, you and I know people that during that period, they lost their job. The auto industry was shrinking. You saw a lot of engineering firms that were going. belly up because of that. I mean, it went downstream in a big way in a lot of different industries during that period. So not only did you have a lot more pressure on your house, you also had credit cards. Remember during that period? Credit card all of a sudden you got you

looked online and your credit card limit used to be 5,000. All of a sudden, the company made it 4,000, then 3,000. As banks tightened lending, they started taking back some of that. So you had less ability to get credit. The credit that you already had that you already qualified for, banks are actively taking away from you. The chance that you're going to lose your house is better than ever. And oh, by the way, if you have a mortgage and you feel fine with your house, the chance you're going to lose your job was bigger. And at the same time, the stock market's hitting these monster lows. You take a 401k loan at that time. You lose your job. You can't pay the 401k loan back. all of a sudden that becomes, instead of a loan,

you know what they do with that, Paula, then they call it income. You end up with this incredible cluster of misery, this domino effect, because one thing went bad and then 40 things go bad because we potentially wanted a shortcut. Yep.

I'm like, sing it. That's very, very well said, Joe. And that is exactly why it frustrates me sometimes when I find people who want to, as you already mentioned, Joe, over-optimize every single component of their financial life. 80-20 and move on. Over-optimizing often becomes counterproductive.

Yeah. Optimize something else, Paula. Optimize your income streams. Absolutely. Thank you, Andrew, for asking that question and for sparking that discussion. Our next question is from Ina. My name is Inna. I'm a longtime listener, first-time caller, located in California.

I'm calling because I've been running my own business for about a year now, and I had it set up as a solar proprietorship. It's going really well. I would like to incorporate because down the line, I think I'll be hiring individuals and that I also would like to protect personal assets that I have. So my question is, what makes sense most in terms of tax advantages and any other considerations? in terms of LLC or S-Corp for a small boutique consulting business. It's a consulting and recruiting business. And then I also wanted to hear your opinion about incorporating out-of-state for cost purposes, but also the corporate fail.

What would be the pros and the cons of that? Thank you so much, Paula. I look forward to hearing back from you, and I'll be following the podcast. Ina, as a father of twins, God bless you. I absolutely love Paula the baby in the background because when Cheryl and I with our kids did anything, you never, we called our kids the time bombs, Paula. I remember one time we went to dinner and the waiter was taking a little time and I called this nice man over and I said, you got to bring this stuff quick. He goes, what are you talking about? I said, these kids are wonderful, but they might not be in two minutes.

So please bring our food. Please, please, please. But let's get to the question about sole proprietor. I love the idea, and I'm sure you do, Paula, of setting herself up with more protections. I think that's a great idea. Generally speaking, I like following how these systems were made. And generally also, for a lot of people, the one that was created last, the entity was created last is best in most cases. Not in all cases, which is going to be, spoiler alert,

the end of this, but let's go from the beginning. We started off with C corporations and now only really big companies use that. Then to make it simpler for people like you and I, they came out with the S corporation, which is for a very, it's a very simplified small company will usually use an S corp. But then they came out with the LLC and the LLC simplified things even more. So generally speaking, when I was advising people, I would, my bet was usually to the LLC. Then if that didn't work, I'd go to the S corporation, but then, you know, then this, let's face it, we'd never use the C. Right. But this is important enough issue, Paula. I don't think that we should be answering this question. I think, you know, this is the time when you want a pro who knows a lot about your business to help you set up

that business in the best way possible. And also, you know, you're question around doing it in your state versus doing it in another state as a guy who's had companies that are based in Wyoming, in Texas, in Michigan, and in Oregon, tons of differences between those states. And the reason we did those things depended on the circumstances with that business, I seriously would highly recommend finding a professional that helps people set up businesses and working with them closely on this question. Yes, Joe, I agree with you, Ina, should seek a professional, but for educational purposes, there are also things that would be good to know. So first of all, I think that forming an entity is a great idea. It's good

for legal protection. If you're sued, then your exposure might be limited to your company assets rather than your personal assets. So I fully support the decision that you are making. In terms of tax treatment, because that is part of your question, if you have an LLC, That LLC has what's referred to as pass-through income, which means that the money that the LLC makes is passed through to you as an individual. And so when you file your own individual tax return, you will be taxed not just on the compensation that you pay yourself, but also on the profits that that LLC has made.

Now, if you have an S-Corp, that S-Corp also has passed through taxation, but there's something special that happens here. With an S-Corp, you may be able to avoid some FICA taxes. And here's how that works. If you have an S-Corp and you are a W-2 employee of your own company, then you will receive a salary from your own company. You are the owner-employee, right? So your salary will be taxed as ordinary income

and you will pay FICA taxes on your salary compensation, which is Social Security tax and Medicare tax. However, if there's additional money, additional net profits left over in your S-Corp, beyond what you have paid yourself as a salary, then you can take that as an owner distribution. Now, these S-Corp owner distributions, these are functionally dividend payments, but here's the cool thing is that they've been taxed as ordinary income for the business. And so you will pay income tax but not FICA tax.

on your S-Corp owner distributions. So in other words, if you have an S-Corp, then you as the owner-employee, you'll pay ordinary income tax on both your pass-through income and on your salary that you collect from the company, but only the salary portion is subject to FICA taxes. The owner distribution portion is not. And so that's a great tip if you have a company that is making enough money that you can pay yourself a reasonable salary and then also have additional profits left over that you could collect as an owner distribution. Now, there are two ways that you could do this. You could either

literally form an S-Corp or you could form an LLC that elects for S-corp tax treatment. This is referred to as S-Election. So those are a couple of options that are on the table in terms of optimizing the tax treatment of the entity that you set up. So thank you. So thank you. Thank you, Ena, for asking that question. We'll come back to the show in just a second, but first, do you run a business or do you know someone who does? If so, as you know, when you run a small business, you have to fill a lot of different roles. And one of those roles is filing taxes, running payroll. You are your own HR support.

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Listeners get three months free when they run their first payroll if you use my link. So go to gusto.com slash paula. That's g-u-t-o.com slash paula to try a demo and see for yourself. Again, three months free, gusto.com slash paula. You know those old all-purpose cleaners that your parents used to use? Those things are full of harmful chemicals that have been linked to everything from respiratory problems to cancer. and they're bad for the environment. You don't need to use a bunch of toxins to have a clean home,

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you provide for folks. like me. Currently my wife and I have individual Roth IRAs and the current balance is 32,000, all invested in a total stock market index fund and we try to max out every year. Apart from this, we have 401ks from work and the balance on them is about 60,000 now. In addition, we have about $200,000 in real estate, basically they don't generate any income is just a piece of land. And that $200,000 investments in real estate doesn't count the equity of the house we live in. So all the money in our Roth IRAs are invested in U.S. Total Stock Market Fund since I like the low-cost factor. And I read many books saying over long term, most actively managed mutual funds don't beat the index.

I also want to say I have over 25 years to retire. So I just want to explain my situation and ask you, am I doing the right thing to put all the money in index funds or should or could I do any better? Thanks for your help. Sanjay, thank you so much for being a longtime listener and a fan. So it sounds as though you have a net worth of approximately $292,000 plus the equity in your personal residence. for somebody who is 25 years away from retirement, depending on cost of living, that's a pretty good place to be in. So keep it up. A couple of things stood out to me. First, I'm curious as to why you have such a big component of your net worth tied up in bare land, given that bareland is not an income producing asset. A bareland investment is a speculative asset. So I'm curious as to why 200 out of your 292,000 in net worth is, being held in bare land. That's the major thing that popped out at me. As to what you asked about

the total stock market index fund, I am a huge fan of that. I think the total stock market index fund is fantastic. You are seeking beta. You will do as well or as poorly as the overall U.S. economy, no better, no worse. And that's a great place to be in. Now, in addition to holding the total stock market index fund, I would want you to have some type of other allocation that reduces the volatility just a little bit, that could be a total bond market index fund, or it could be a heavy cash reserve. Because if you have, as we talked about in a previous answer on this episode, if you have a barbell allocation, meaning an all equity's portfolio coupled with a heavy cash reserve, that's great. If you don't want to do that, then total stock market counterbalanced with total bond market, that's great too. So one of those two is what I would like to see.

Yeah, I feel very similarly. There's one word, Sanjay, that always gives me pause. And it's this idea of better. Because at the end, you asked Paula, if you could do better. And I always wonder, better than what? Because I think what a lot of people mean by that is, is there a more, we talked about optimizing, Paula? I think they're looking for a more optimal way to manage. And yet, so when I think of better, I'm hoping what you're asking is better toward reaching my individual goal.

And the answer to that is, I don't know, because I don't know what the goal is. And so if we start with, you said it's 25 years away, but I don't really know what lifestyle you want. I'd want to know more about you. And then I do the Stephen Covey thing, where I begin with the end of mine. And I set up that goal at the end. And I work toward today. and then I get this math equation that works like this. Sanjay needs to save X amount of money and get Y rate of return to equal whatever that goal is. And that gives me a very simple math

equation. And now that I know all three of those pieces, I can start playing with them. If I can't save the amount of money that I presented at the start of that is X, I save less money, but then to reach the goal, Paula, I have to raise that rate of return expectation. Or if I look at that rate of return expectation, I look at assets that have done that historically, and I can't take that type of risk. My gut just won't withstand it. Then I know I lower that, but then I have to raise the amount of money that I save. So better for me depends on risk tolerance, the amount of money you have to save, and then what the end goal is. It's those three easy things. That's why I look at this holistically. The thing I think also, though, is this. I don't worry about it. I don't worry

about that total stock market allocation, because that's gonna get you there. Here's the only thing that bothers me about a 100% total stock market allocation approach. It's that I've been through two huge stock market downturns during my career. In both of those cases, 50% of the advisors out there washed out of the business.

Why? Because they didn't know what to do, and they weren't able to do. hold on to clients. Imagine the number of people that blew up their own strategy. And I also know that people that took more risk blew themselves up far more often than people that took a lot less risk. So when I see somebody use a total stock market strategy, you have to know going in that that thing is going to bounce around a lot. It could go down a ton when the market goes down And you have to be able to withstand that and be able then to work back back as it comes up.

Because as fast as it goes down, it can come back up. That's the way that strategy is designed. So I would say you need to be very, very true to yourself about your ability to withstand that risk level. And if so, that is a great way to do it. That's a fantastic way to reach your goal. So, Paula, I'm more concerned about people than I am about that strategy. Self-knowledge is the ultimate investing strategy. Yeah, absolutely.

I would agree with that as well. But, Sanjay, it sounds as though you are doing a great job. You're on track. You're still 25 years away from retirement, so you've got a lot of time on your hands. But I don't know if he's on track. Yeah? Yeah, I would take that. I mean, myself, the only place, and this is nitpicky, I don't know what the end goal is.

I mean, I know there was a study that we just did over on stacking benjamins. are, but we didn't do the study. We didn't do the study. We reported on a study. I read a study. Yes, I read, I'm a reader. 1.7, you know, the average number for a lot of people is $1.7 million, and a lot of people can make it on that number. Do I believe that? Absolutely. Do I think Sanjay is going to be above that? Absolutely. So, yes, he probably is, but Paula, I just, I would much rather not use a number like that. I would rather that Sanjay starts from the end and figures out, kind of closer where his, and is that, by the way, going to be the right number? No, but using your

own number is way, way, way closer than using just a rule of thumb. It doesn't take that much longer either. Yeah. I mean, we don't know what that end number is. Yeah. But there's time to get there. Yes. Sanjay, you've got time on your side. The bare land thing, again, I'll just reiterate, that's the one question that's in my mind. Why have so much of your net worth tied up in non-income-producing speculative land. Unless there's some sentimental value attached to it, maybe it's a piece of land that's been in your family for a long time. I mean, that's the only thing that I can think of

that would justify holding two-thirds of your net worth in a piece of bare land. Yeah, for investment purposes. Right. Questionable. Exactly. Exactly. Family purposes or other extenuating circumstances.

Okay. Yeah, exactly. So thank you, Sanjay, for asking that question. Our last question comes from Brian. Hello from Minneapolis, and thank you for taking my question. I recently discovered you through several blogs and podcasts that I listened to, and thank you for your great work. My question pertains to savings accounts, financial advisors, and robo advisors. I'm married, we're both 40 years old, and together my spouse and I have an income of about $250,000 annually. Our only real debt is our mortgage, which has a balance of $320,000, and our monthly payment is roughly $2,400 a month. We also want to pay off our mortgage early, so we're currently contributing $1,000 extra to the principal each month.

We're also both maxing out our 401Ks. At the moment, we have around $100,000 in cash savings, and this is currently sitting in a few different savings accounts where we've tried to get the best interest that we can, roughly 2.2%, give or take. I'm not sure if that's the right place for this money or not. I've heard that high interest savings accounts don't have the highest return available, and they may not have favorable tax consequences. We have no major plans or needs at the moment. I just want to maximize my savings, the earnings that I'm getting from it. We don't want to tie up all of our savings into retirement, and we definitely want an option that's fairly liquid and accessible if we were to need some of

that money. I'm reading some various online financial journals, and it sounds like index funds might be the way to go, but really, I just want to know where to put the savings. I hear about things like Vanguard index funds being a good option, and I've also researched Robo-Advisors, which seem to look positive. I'm wondering if I should buy funds directly from a company such as Vanguard if I decide to invest my cash savings. And should I put some money into one or more of the popular Robo Advisor Services? And is it in my best interest to speak with a fee-only advisor? Thank you. Brian, thank you for asking that question. Now, first of all, I want to make a note about money in a savings account versus money that you put in index funds. Money that's in a savings account

or being held in cash is money that you don't want exposed to the risk of investing because it's money that you might have to access within the next, possibly within the next three months, six months, one year, even two years. That's money that you don't want to subject to risk. So keep it in a savings account, get a good interest rate on the money that you're holding in that account, and leave good enough alone. Money that you put into index funds is money that you don't need to access for a much longer timeline or time horizon, as it sometimes called. So that means that if you need to access money in five years or 10 years, then sure, you can put that into an index fund. In fact, five might even be a little bit questionable.

Certainly seven to 10 years. Sure, absolutely. Put that money in an index fund because you can subject it to the ups and downs of the market and still ride out any lows. You have time on your side. But if you've got money that you're saving as cash reserves as a rainy day fund, then don't put that money in index funds because your goal is not to optimize returns. Your goal is to reduce volatility. Oftentimes, I think in the world of finance, people believe that there's only one singular goal and that's optimize returns. That is not the case. returns are a piece of the pie, but the reduction in risk, knowing that risk has multiple dimensions and managing all of those, those are also incredibly important considerations that

cannot be overstated. When it comes to optimizing, Paula, the word optimized to me brings up another word, which is optimize toward. And I get that David said there really isn't a goal. He's like I just want to optimize. I don't think you can have the word optimize without the word hoard because optimize immediately is optimized to what? Are you optimizing for a set date like a target date fund tries to do? Are you optimizing for some opportunity, which is, by the way, and that's optimizing your emergency fund, right? Optimized emergency fund means how do I get a decent return where I don't have to worry about it so that if there's an emergency whenever I can safely pull it out. An optimized emergency fund is kind of exactly what he's doing now,

which is this high interest savings account. I don't think he should do anything bigger than that. I don't think it should be more complicated than that. So that part probably is optimized. So my first question would be what you already brought up, which is how much money do we leave in that emergency fund? And then the rest certainly take out if it's for longer term goals. And I get that there's no specific goal, but there probably are directional goals, right? Within X amount of years, we want to do this thing. Within Y amount of years, we think we want to do this other thing. And we take that general range and we figure out about how much money we think that's going to cost. And then to optimize that, we solve for the rate of return that I mentioned later in my X plus

y equals the goal. So we optimize them for that rate of return. So optimal is going to depend on the goal. And I hate answering that because I get it. I get the fact that the goal might be nebulous, but that also, Paul, is why we call it planning and not a plan, because we start off with it optimized toward this range. And as the goal gets closer, it gets less foggy. It comes more into view. And as it gets more crystallized, then we can optimize better at that point. And as the goal, So I think the idea of index funds doesn't hurt him as long as, as we said to Sanjay, those funds fit the timeframe and they fit his risk tolerance. I'm totally with you, Joe. So let's talk about robo advisors.

Yeah, I'm not at all against robo advisors. Do I think you can do better? Yes. Do I think, do I have some problems with robo advisors? Absolutely. But I believe what my mom taught me is don't let perfect be the enemy of good. And I think I've said that here before. Robo advisors directionally for somebody just starting out, you're going to get a portfolio

that's probably over diversified. It's going to be a little more expensive than if you did it yourself. However, you've got some training wheels on there that you're paying for. I also, by the way, if you're going to look at robo advisors, I also like a service like Bloom, if I can call out just one company. Bloom kind of does the same thing that a robo advisor does, but they do it with your money sitting wherever it already is. So I'm a fan of that type of thing if you're going to look at robos. And people don't often include them, which is why I wanted to make them a part of the discussion.

First, pause. In the interest of full disclosure, Bloom is a former sponsor of your podcast, Joe? Stacking Benjamins? No, they're not, but they did sponsor our three city tour. So yes. And they did that specifically after I asked them to because I was interested. interested in including them, and I like that model. Cool.

Yep. No relationship with them currently, though. So I don't think it's bad, but then again, Paula, you still have the same problem, which is this. You still have to know your time frame. So you're going to have to optimize towards something because whether it's a betterment, wealth front, emperor, whoever it might be, they're going to ask you for what time frame do you want to optimize towards.

So you're still going to have to do some basic goal setting before you do that. Right. That's the thing about personal finance is that more is not really a goal or it's not a sufficient goal. Right. Because more has to be contextualized with your risk tolerance. It has to be contextualized with when you might want to draw down the money. I mean, if you think about it at a conceptual level, savings is simply deferred spending. So when do you want to spend that money?

It might be in retirement. It might be for some big ticket purchase or big ticket item down the line. it might be to buy a different house or to start a business or to open a nonprofit. It could be for any number of things, but savings is nothing more than spending that happens in the future, either by you or by your beneficiaries. So when do you want that to happen? Yeah, absolutely. And by the way, when you said more, to your point about more, not being a time frame, more is also the strategy that I saw that blew itself up the quickest. Because if you're just chasing more, you're incredibly afraid of less, right?

And unfortunately, the stock market sometimes give you less. But if you're attached to a goal and not attached to the means to that goal, just the money, if you're attached to a goal, you can hang on to that goal and go, you know what? I know historically, based on this time frame, even though it's down right now, this money is going to reach that goal. Like historically, that's what it's always done. If the economy's going to continue, that's what it does.

But if my goal is simply more, the second it goes, goes down and I have less, that's when I question my, my game plan and I pull the plug and everything becomes a mess. So I don't like that either. The issue of hiring a financial advisor, I wouldn't hire a financial advisor just to make the asset decision. The reason for that is this. There are people that are fee only advisors where their fee is still in a percentage of assets. They're asset gatherers. Their goal is to have them manage your money. Their goal isn't necessarily just comprehensive, holistic advice. I believe a great advisor is somebody that lets you focus on what you do best and works with

you as a partner. I don't want you to delegate your money decisions to somebody. Nobody cares about your money more than you do. I like having someone who's a smart person in your corner that will help you build milestones so that as you're on the road to reaching your goal. you can meet with them, you can call them, whether you're buying a new car or you get a raise at work or you have a new member of the family, the goals change, whatever it might be. There's somebody who's very smart in this area that you can call so that you get an opinion

that's not you. It's not all, it isn't always, Paula, by the way, about having a better opinion. It's about having a smart opinion that's not you. It's hard to read the label when you're inside the jar. Wow. That is awesome. I love that phrase. Thank you. But yes, absolutely. Other people have perspective on your life that you yourself cannot have by virtue of the fact that you are inside of it. Not everybody has good judgment. So be careful about who your advisors are. And I mean advisors in a broad context. Be careful about who your mentors and your teachers are because there are many people who have poor judges. judgment or even mediocre judgment and their opinions can lead you astray. There is a distinction between opinion and wisdom. But if you can find those people who are smart, who are informed,

and who have wise perspective, they can enhance your life in ways that you previously found unimaginable. I was reading online. Someone said the other day that they had hired two financial advisors and they both stunk and they realized that financial advisors are bad. I believe, though, Paula, what they should have realized is they're horrible at interviewing for that job. And they were way too liberal about who they hired. And I think if you take more time finding that person who's really going to be your partner slash mentor in that area and less time listening to sales pitches, I don't think all mechanics are bad.

I don't think all financial advisors are bad. I don't think dietitians are bad, right? It's like I hired two different dietitians. I realize dietitians stink. No, they don't. No, no. But there are bad ones, I'm sure. I love that because that is super locus of control.

That is direct all responsibility inward. If you have hired two financial advisors and they are both bad, the common denominator is you. Right. And by the way, financial advisor, I like it in the terms that you and I are talking about, which kind of blows up the industry, right? The industry wants it to be. asset manager, wants it to be insurance salesperson, wants it to be whatever. We use it much more liberally.

It doesn't have to be somebody who is licensed. It doesn't have to be somebody who is a, it doesn't know, do I like those things? Absolutely. Of course I do. But if you just surround yourself with smart people are great at money, I remember talking to an NFL star who found someone who was a multi-millionaire entrepreneur. and he went out to breakfast with this guy once a week. This gentleman mentored him. Man, to me, that's a financial advisor, right?

Our good friend, Coach Carson, Chad Carson, Chad tells a great story about when he first got involved in real estate, he found somebody in his hometown that was phenomenal in real estate and he helped that guy. And he did some of the running around for that guy. That guy became his financial advisor. I think looking at financial advisors that way opens the field up. it also, I think, helps you interview better people. I'm with you, Joe.

So thank you, Brian, for asking that question. And best of luck as you proceed forward. Joe, before we close out, I want to play one more success story. This comes from Ed, who has been investing since the 1990s and is now financially free. Here's Ed story. Hi, Paula. My name is Ed. I just recently have started listening to your podcast.

I heard you on Bigger Pockets, Money. and one of these episodes is requesting for people who are not bloggers. I didn't know anything about blogging. I started my real estate investing in the early 90s and got myself financially free within a couple years. And my whole purpose of it was so I could do volunteer work. And I do a lot of volunteer work still to this day. And I'm still active in real estate investing. So I don't know if that's something that anybody wants to hear or not, but that's my story quickly.

Thanks. Ed, congratulations. That is fantastic that now you get to spend your time volunteering and investing in real estate. Good for you for putting in that work in the 90s so that now you can live the way that you want to. You're living your best life. Do you know what I love, Paul, about what Ed's doing? What's that? I love the fact that he's thought about something that a lot of people don't spend a lot of time with.

I mean, we spent today talking about the money. He's thought about the emotional piece of what am I moving toward? And is somebody who's lucky enough to have been in the spot where I got to watch maybe 250, 300 people crossed this line, the Ed crossed. Not many people get to sit in that seat. What I see people grapple with more that we don't talk about enough, frankly, is the loneliness, wondering about who am I now that I, now that I'm financially. free. But on this quest for so long and I'm finally there, all of the emotional roller coaster

that comes next, you have to think about what Ed's thought about. What am I going to do now? What am I moving toward? Not what am I moving away from? Like a lot of people listening to this are probably trying to get rid of the horrible job that they hate. It's about what you're going to. That's the key thing I love about Ed. Absolutely. Exactly. He's living these passions. He's volunteering. he's investing. This is following your curiosity at its finest. Yeah. Nice job, man.

Absolutely. Absolutely. So thank you so much to Ed and Ann for calling in and sharing their success stories. And thank you to everybody who called in and left a question and all of you who are listening and being part of this community. Joe, where can people find you if they would like to know more about you? Well, people can find me Monday, Wednesday, Friday at the Stacking Benjamin Show. And if you don't mind, Paul, I want to say a little bit about that if you

don't mind. Absolutely. Tell us about stacking Benjamins. I love that. We said this on stacking Benjamin's last week when somebody called in and they said they listened to you and they listened to us and that's always very flattering. We love it when Paula, you're on our show on most Fridays, by the way. But I have to tell you, there's a reason

we call it a one-two punch. It's because stacking Benjamins is all about surround sound and our goal, and don't tell anybody this, because if you listen to the show, it sounds like we're clowning around a lot. Our show is based on the science of play and the show is incredibly playful and we're not about nuggets. And I really, I feel bad if someone

comes here from the Afford Anything podcast and they're looking for a lot of nuggets, you might find them, but that's not what we're about. Our show is based very much on Car Talk. And Car Talks this show that people may or may not know about. It was an NPR show for a number of years. They still play reruns. I realized when I heard Car Talk, I was learning nothing about a car, Paula. I wasn't learning anything. But I was loving car culture, and that's what stacking Benjamin's is. And certainly if you want nuggets, afford anything's the place to get that. If you just want surround sound, come hang out with us and on Fridays hang out with Paula and Len and OG and I, my mom's neighbor, Doug. And we'll have a good time.

So I always feel bad, though, when somebody comes from here where you give them so many great nuggets, it's not our mission. Our mission is much more just surround sound. Right. And at the risk of sounding like a nerd, there's huge niche. differentiation between us, right? Even though we are both podcasts in the personal finance space, afford anything is a show that embraces intellectual rigor. Stacking Benjamins is a show that's playful. It's financial entertainment. And that's what I like them. And I noticed, by the way, if you look on iTunes like you and I have, you can see that we share a number of listeners. And I think

it's because a lot of people see it as a one-two punch. Because we ask such different questions in such different ways on those two shows that while there is a little a little overlap of guests, even we have the same guest on the show. I've had so many people tell me that they love listening to you go deep with people and I ask much different questions of them. So, so yeah, please, please come listen to the show, but but don't, don't come listening for nuggets because as, as we say often on the show and you've heard to say this before, Paula, if you learn anything listening to Stacky Benjamin's, keep it to yourself because you'll ruin our reputation otherwise. Right. Your whole schick is that yours is the show where nobody learns anything.

It's not a schick. It's for ridg. Yeah. But anyway, thank you for letting me take a second because I don't want to let people down if they come listen to us. Absolutely. Anytime, Joe. And thank you for sharing your brain with us here at the Afford Anything podcast. Every time we do this, Paula, I have a blast, but I don't know if you feel the same way. This was more blasty. Yes. This was a blast off. It certainly was. Yeah, I had a great time recording this episode. Sometimes I just can't believe this is my job.

Really? I know. Right? How cool is that? And the quality of questions that the Afford Anything community asks, hooray to you guys. And the wins that you have, it's just, it's so inspirational. I love it.

Yeah, this community is amazing. The people in this community inspire me so much. I get emails oftentimes, or, you know, I get Instagram. Instagram messages from people who tell me that I've inspired them. And I'm like, well, thank you. But the truth is, you inspire me a lot. Like this audience, this community. Wow. The brilliant, hardworking, amazing people who are committed to living a better life. Like, you all could be watching keeping up with the Kardashians right now, but you're listening to a finance podcast instead. And that means that you are inherently someone I admire. So I really admire our community. It's so fun. It is so uplifting. And I don't think people think about that, you know, about how And of course you shouldn't think about that, that it's uplifting for you and me. Like I wouldn't listen to a podcast because I really want to make sure that podcaster's uplifted.

I'm not really concerned about that, but it is totally a two-way street, guys. Absolutely. It completely is. Absolutely. If you want to hang out with other people in the Afford- Anything community, you can go to our Facebook group. You can find it at afford anything.com slash Facebook. That will redirect you to the proper page. We are also behind the scenes building out a presence on a different platform where you will be able to hang out as the Afford Anything community. I can't say anything more about it yet, but stay tuned for that announcement.

If you want to connect with me personally, you can find me on Instagram at Instagram.com slash Paula P-A-A-A-N-T. We have an e-book called SevenExplained. rental property investing mistakes to avoid. You can download that at affordanything.com slash real estate. If you enjoy today's show, please do three things. Number one, share this with a friend or a family member.

Number two, leave us a review in whatever app you're using to listen to this show. And number three, make sure that you hit the follow or subscribe button. Thank you so much for tuning in. Coming up next week, we have an interview with David Epstein. He is a New York Times bestselling author, and he's going to join us to talk about why, generalists thrive in a world that seems increasingly geared towards specialization. So tune in next week.

Make sure you hit subscribe so that you don't miss that episode. This is the Afford Anything podcast. My name is Paula Pan. I am the host. Thank you again for tuning in. And I'll catch you next week. By the way, my lawyer says that I need a disclaimer. So here we go.

This is purely for entertainment purposes. Basically, imagine that this is the least funny comedy show that you've ever listened to. We are not professionals. we barely can brush our teeth in the morning. And so we don't hold ourselves out to be experts or really for that matter even adults. Give us the same amount of respect that you would give, say, a goldfish. And always, always consult with a real grown-up

before you make any decisions. That means consult with a tax advisor, consult with a lawyer, consult with a financial planner, consult with people who actually have credentials and who know what they're talking about, because that is definitely not us. All right, you've been warned. Yeah, I don't think I have anything to say. Yes, those are the rules.

Thanks for woman splitting that to me, Paula. Can I return her on Paula, she has to like slow talk at me? Joe, let me explain pass-through tax treatment.