Rich Habits Podcast - 71: The #1 Cause of Bankruptcy in the USA

Episode Date: July 1, 2024

In this episode of the Rich Habits Podcast, Robert Croak and Austin Hankwitz get personal with their own life situations and past traumas. We share our own perspectives on aging parents, as well as how to prevent the #1 cause of bankruptcy in the USA. ---Learn more about long-term care insurance & term life insurance by visiting Suriance's website: suriance.com/richhabits---Sign up for your 30-day free trial of the all-in-one personal finance app, Monarch Money! Visit monarchmoney.com/habits---Join over 43,000+ other investors who read the Rich Habits Newsletter! We're growing by +150 subscribers every day and can't wait for you to join us :)---Don't forget to check out NEOS Investments' new ETF, $IWMI -- their Russell 2000 High Income ETF. Click here to read more about it!---⭐ Download our FREE Budgeting Template – ⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⭐ Earn 5.1% on your savings with a High-Yield Cash Account – ⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⭐ Trade stocks, options, music royalties and crypto on Public – ⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⭐ Get a $35 bonus when you start saving & investing with Acorns – ⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⭐ Automatically buy stock where you shop with Grifin – ⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⭐ Protect your family with term life insurance from Suriance – ⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⭐ Use code “Spotify” for 15% off our 4-module video course – ⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⭐ Optimize your portfolio with Seeking Alpha – ⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠---👤 Explore everything Austin does – ⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠👤 Explore everything Robert does – ⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠❓ Ask us questions for our Q&A episodes – @richhabitspodcast on Instagram📬 Inquire about working together – [e-mail]---Hankwitz Group LLC has an existing business relationship with NEOS Investment Management LLC. The opinions expressed are those of the author, and the author owns several NEOS ETFs.

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My name is Austin Hankwitz and I'm joined by my co-host Robert Croke. Robert is a seasoned entrepreneur in his 50s with lifetime revenues of over $300 million and I'm an entrepreneur in my late 20s with a background in finance and economics. Since quitting my full-time job in corporate finance a few years ago, I've built a seven-figure media business and actively advise some of the most well-known fintech companies around the world. As the show name might suggest, every episode. We talk about rich habits as they relate to business, finance, and mindset. However, we try and bring you two unique perspectives.

One from an industry veteran, which is Robert and the other myself, someone who's still in the process of building wealth and figuring it all out. Robert, what are we going to be talking about in today's episode? In this episode of the Rich Habits podcast, we're diving deep on some very boring but heartfelt topics like life insurance. We've already done an episode with George Camel about term life insurance versus whole life versus indexed universal life. And the clear winner is, of course, term life insurance. So we're going to trust that all of you have learned about that and we're on the same page.

And this episode is going to touch on term life insurance, but more importantly, focus on long-term care insurance. We've talked about the specific situation with my mother in the past and why this topic is so near and dear to my heart. And joining us today to share their expertise is Russ and Todd from Surience, are trusted term life insurance providers. And so as a way of introduction, Russ, we know each other. We've known each other now for about, gosh, 7, 8, 9, 10 years. But introduce yourself as well as Todd here. And then we'll kick off this interview as a very curious, informative-focused type interview

for people who are trying to figure out, is this something I need? Is this something that's right for me right now? How does this fit into my long-term wealth-building journey? But introduce yourself. My background's a little different. I'm a 26-year health care veteran and spent the last six of those in senior care services on the front lines of what we now call the care crisis. That's where I had the opportunity to work with and alongside Austin.

About two years ago, our founder, Robin McVeigh, asked me to partner with him in the boring life insurance industry. My response was absolutely not. I have zero desire to sell life insurance, but Robin was a visionary and realized that this market was prime for disruption. And going into a typically stale industry like life insurance, we had the opportunity to bring simplified solutions to bear and newer products that have recently hit the market over the last few years and marry that with technology to then serve our clients. So in the midst of that, realized we needed a seasoned veteran in the industry, especially related to long-term kids. care. And so we reached out to one of our top carriers and he introduced us to Todd Russell, who's joining us today and is now the president.

Sure ends. Well, hey, my name is Todd Russell. I'm in Nashville, Tennessee also. I'm happy to join you. And as Russ said, I've been in the insurance business a long time. And my story is similar to his. The only thing that I said I would never do when I graduated college was enter the insurance world. And 22 years later, here I am. And I actually helped my first client, in 2002 with a long-term air plan. So I've seen this industry evolve. And so I'm excited to just share some thoughts with you guys and your listeners today on that subject. I'm going to kick it off right here and discuss my situation and why this episode is so important.

Insurance is so important for me. So when my mother became ill, let's call it 12 years ago, I was doing very well financially. She was doing okay financially. and we ended up in this situation where she was very ill for a long period of time. And I ran into the exact situation that we're going to discuss here today where her care, her Medicare and Medicaid, whatever was called back then ran out. And I was put into a situation where between long-term care and then her going into hospice, I had to come out of pocket for quite some time.

And I believe back then 12, 13 years ago, it was like $2,800. a month that I had to pay out of pocket. So that's why this episode is very special for me is kind of getting to the bottom of what is long-term care, who is it for, and why is it important for those of you that might make sense to have it? And so this is a special episode for me, bringing Russ and Todd on to kind of go through it,

give you the pros, give you the cons, and why sure-eance is different. I think we should start right out of the gate. Who is long-term care for? Is it for people with pre-existing conditions? Is it people that have elderly parents that might be having problematic health issues? Who is it for? Let's start there.

So our audience could know, should we be considering long-term care now or in the future for our family's needs? The long-term care in the past has really been for people who are getting close to 60 and getting into those years where they begin to think about what's going to happen when I need to be taking care of and I might not have someone there to take care of me. And the reality is that times have changed and the policies have changed along with that time. So over the last few years, there are newer policies that appeal to a younger age. The average age of someone who buys a long-term care policy today is 57. But that number is going down because the policies are now constructed in a way where they actually offer a death benefit through a life insurance product. They offer a long-term

care benefit and then they also have a return of premium to them. So they really different in how they're constructed and a feel to someone who's younger. And so just as we're kind of digging into this, a death benefit means when you die, your beneficiary gets paid a lump sum of cash. And so the long-term care benefit that you mentioned, that means obviously it pays for your medical needs. And then there's a return of premium to it. So the premiums you're paying are not what you call that use or lose it. We've talked about in the past where like your car and insurance or your home insurance or your premiums are only going to be utilized if you need to go on claim. There's actually a cash value built over time. Got it. And does that cash value, it just

goes straight back to you if you don't use it? How does that work? The cash value a lot of the times is really just a component if you quit the policy before you pass away. So sometimes as you pay premiums in it for 10, 15 years, let's say, and then your financial circumstances change and you just decide you don't want it or don't need it anymore, you can cancel it and get back a portion of the premiums that you have paid in. Yeah, what is that portion? Let's dig into that so we can understand because I think one of the biggest things to really flush out here is the use it or lose it because one of my biggest frustrations when we talk about new products and insurance is so many people are pushing IULs. It really bothers me because they have extremely high

commissions and fees. So the person paying for that IUL, you know, to me is getting screwed. But then also they never tell the person that it is used it or lose it because with an IUL, if you miss two or three payments, your money's gone no matter how long you've been paying on it. So clarify that for us, Todd, because I think it's a very important factor in the economics of is this right for someone or not. It depends on a lot of different factors. And so one of the things I'll always say to people is because we work with people who may consider this, they may be 35, and their plan would look a lot different than someone who's 65. So anytime we're working with someone, we have customized proposals that we put together and show people if this is the plan that you put in

place, here's what happens in the future if you quit, if you need care when you pass away. So it's hard to flesh it out because it'll be different for everyone, but that's the importance of a customized proposal for everyone and walking through it. in detail. And Robert, another thing that I'll hit on is a lot of the times I've been in the insurance world for over 22 years and there's appropriate ways to design things and there's not appropriate ways to design things. You know, you mentioned earlier, you know, what makes sure it's different. We don't have just one solution where, you know, everyone's a nail and we're a hammer. Everything's customizable based on what people's goals, needs, budget, desires are.

So I know that doesn't really give us specific numbers, but it's hard to answer that question without a customized proposal based on an individual. Yeah, one of the most important things that you'll learn from Austin and I and what makes us different is that we are here for our audience, full stop. And we are here to flush out all issues that arise in a person's life while building but also maintaining financial freedom. because this is one topic that a lot of people want to avoid and it's kind of a taboo topic because no one wants to think about who's going to give long-term care to them or their parents if they're not financially sound enough to do so. And so all of these questions coming from me are not to put you on the spot in any way. It is to help our audience best understand, is this a product that makes sense for their situation

because it is different for every person. And does it make sense financially because that would be the next thing I'd want to talk about is as an average person, what makes it make more sense economically for them to pay into this long-term care versus taking the money that they would be using towards these premiums and just putting it into a traditional brokerage account

and putting the money away and invested into a basket of index funds because then it's growing regardless and they don't lose a portion of it if they don't need it for long-term care. So walk the listeners through that of how it makes sense in the pros and cons of that scenario. But before you answer that question, Russ, Robert, as you know, my girlfriend and I are on this sort of personal finance journey together, and I'm not going to lie. She's a better budgeter than me. I don't believe it. Well, something she recently started doing that leveled up her budgeting was figuring out the specific days of the month. her subscriptions are supposed to hit her checking account so she can get ahead of them from a spending perspective.

Yeah, that really reminds me of the app Monarch Money that we've been toying around with. They're an all-in-one personal finance app that not only has a built-in manager for your recurring subscription expenses, but they help you easily track your net worth, keep tabs of your spending, and there's even a cash flow forecaster that will show you what you've spent during the month and how that will impact next month's savings, but I still don't believe she's better at it than you because I've watched how you spend and you're very good at tracking what you do.

Well, I appreciate the kind of words. And Robert, as you know, before this episode, I was logged into my Monarch Money app. I showed you how I was tracking my own net worth and how I was showing the forecasting, the cash flow, all the fun stuff. I mean, I'm over here on Monarch money myself. And what's cool again is that Monarch is this top-rated

all-in-one personal finance app. It gives you a comprehensive view of all of your accounts, your investments, your transactions, and everything in between. You can create custom budgets. You can track the progress toward financial goals. And you can collaborate, ding, ding, ding with your partner. And now you can get an extended 30-day free trial when you go to monarchmoney.com forward slash habits. Yes, we always say how important it is for you to be tracking your investments and it's never been easier with monarch money.

investments, budgeting, cash flow, subscriptions, and everything in between. There's a huge amount of people that use Monarch money to manage their finances as a couple too. My friend Jeff is saving for a car with his significant other with Monarch, and it's also great for saving for a house, larger investments, or whatever you're building towards. So check them out at Monarchmoney.com slash habits. That's M-O-N-A-R-C-H-M-O-N-E-Y.com slash habits for the extended 30-day free trial. We appreciate them supporting the show and our listeners, Monarch Money. All right.

Let's hear what Russ has to say. Listening, being a fan of your podcast, I've heard you make the comment that people fear the unknown. And so sometimes they don't jump to the bet. Well, there's a lot of unknown about long-term care. And one of the things we should probably do to really lay the foundation. is define long-term care because I think that's where a lot of confusion comes. So long-term care refers to a range of services that support individuals who are unable to perform basic what the industry calls activities of daily living.

Okay, so think about everything you do when you get out of bed in the morning from bathing, dressing, feeding yourself, also cognitive impairment, not being able to perform two out of the six activities of daily living, that's what enables you to go on claim for long-term care. And to set the stage, and I'll let Todd answer the question on the financial piece, here are some facts and figures, I think, that most people don't understand. Number one, 70% of Americans 65 and over are going to need long-term care. We're just living longer. 43% of those long-term care claims are for people under 65 and only 3% 3.1 to be exact of Americans have long-term care coverage. It's the number one reason for bankruptcy today. Most people think that, well, my health insurance or Medicare will cover it.

It will not. And so what happens to most people is they spend through their assets. Their assets fall below $2,000 and they end up on Medicaid. Or 20% of them fall in a bucket like you experienced with your mother where they rely on their adult children to carry that burden. That's the bad news. So go ahead. I'll let Todd share the good news. I think to get to the question, you know, why not just invest the money in investment accounts and let it grow? And, you know, a lot of the people that I've worked with in the past are, well, I guess I've seen people put together proposals that seek to fully ensure a potential long-term care risks. And the premiums on that are fairly outrageous. So one of the things that is a good consideration, I think for people sometimes, is partially ensuring the potential

long-term care risk. And so when you think about the income that people's portfolios are going to be generating in retirement, if they need long-term care, that's typically going to increase their draw rate of their portfolio. So what the long-term care policy would do, it would just take some pressure off of the retirement portfolio by providing reimbursement for long-term care or cash flow to help cover some of those long-term care risks. That's one of the reasons, I think, and using insurance as part of the plan, you're not fully insuring it, but also you don't want to run without coverage necessarily. So I guess what I'm hearing is, you know, it's hard enough to retire at 65, 70 years old with $2, 3, 4, 5, 6 million dollars. You know, it's hard enough

to achieve that. And so what you're arguing is that with long-term care insurance, you can make sure you have your nest egg, your retirement, and then win and if, if and when, actually, because you know, 70% right? So when you get old enough where you do need some additional care and you need to come up with the extra $8,000, $12,000 a month, you don't have to take that entirely out of this $2 or $3 million nest egg that you've been using to supplement your lifestyle. You sort of have a separate piggy bank that's getting paid out from. Is that correct? Yeah, that's right. And the other benefit too today on someone like nationwide is a great example. We write a lot of nationwide.

They're one of the few companies that provide cash indemnity is the benefit. So they actually, when you go on claim, it's not a reimbursement type where you're having to submit receipts for the different levels of care and get reimbursed. They send you a check. And you can use that check for whatever your biggest need is. If you want to pay a family member to take care of you, then you can do that. If you want to go to a different country and get alternative therapy, you can use it for that. So it's just really mitigating the risks and shifting the risk to the insurance company.

And then something I'd like to bring up is, and let's use my situation, what happens to people without long-term care if they don't have adult children or someone to step in and pay it? What do the providers do? Do they kick them out of long-term care? Do they cut off service? What happens there? Or does it get migrated to some state fund because someone's ill and just doesn't have the ability to pay? Well, that's a great question. So I'll tell you what we're doing as a country. There are not. 19 states that have raised their hands to say we would like to enforce a mandatory long-term care tax. One state has already gone live on that, and that's in Washington state, and it's not been a great experience. They're currently taxing 0.58% of every $100 that it's made on a W-2 income, and I believe that you have to pay that for 10 years to receive the benefit. The benefits only like $36,500 somewhere in there. It's a joke.

It's also not portable. And so each state will bring its own version of that legislation. It won't happen this year because we're an election year, but the wheel will begin to spend faster as we move into the coming years. The only way out of that tax is to have a private long-term care policy in place. And so the reason why these states are doing this is to mitigate, which you just said, Robert, the state-funded Medicaid. You know, look at California is a great example.

You can look at where they're at financially. You'll see why they're doing that. One other thing I'd add, too, Todd and myself have interesting stories. both are in similar situations. Much more important than my title of CEO of Suriance is I'm a primary caregiver to my mother who has dementia Alzheimer's. I'm so sorry. I still can't say that without getting emotional. That's why I do this business. And the reality is this. She got diagnosed four years ago and went into memory care. She was 74. Thank the Lord that she had an investment that did very well that's covering her costs right now. But let me share with you what those costs are today.

Today, over four years in memory care, she spent almost $400,000 we've spent, almost $400,000 of that money for her to be where she needs to be. Most Americans can't do that. They're not prepared for that. If she had a long-term care policy in place, it would have kicked in. Even if it was this $5,000 a month, that's a significant benefit that our family would see. And whatever obviously is spent for her care, which I'm thankful what's there for, just takes away from what she leaves. you know, moving forward. And so anyone looking at their financial plan, again, shifting that cost is really the reason why we do this. I love that story. And you're a hero, dude. You really are. I mean, as you know,

my dad bought my house next door because I'm his primary caregiver. I'm not as hands on. I'm sure as you are with your mom, my dad does not have dementia. Thank God. But, you know, he's got seven or eight comorbidities. He's, you know, he's your average American. That's 80 years old. And so, no, I'm right there with you and I think it's something I wish more people in their 20s and 30s would realize is like as your parents get older right like that either one gets passed to some sort of facility that is very expensive or two it's passed down to you and if your parent is still in their 60s or 70s and they've not yet you know you've not yet had to experience this it likely will come one day and I empathize with you because it's something that a lot of us do have to experience it's really cool though to see that

you guys are sort of creating a product that allows people to take the burden of the financial burden off their shoulders sooner rather than later. One other thing. One other thing is I'd add to 100% of the people we talk to on a daily basis have a story. Everybody has a story. Your mom, your dad, your loved one. And so the reality is, you know, with the way that long-term care structured today, a lot of people automatically associate long-term care with nursing home. This is not nursing home care. It will provide capital for nursing home care if it's needed. But where the majority of this care is warranted is in the early stages, people want to stay home. They don't want to go to a nursing home or assisted living. They want to age in place in their

homes and this really provides the opportunity to do that. Todd, I think you were about to add some. Yeah, I mean, you were talking about everyone's got a story and I'm in the same boat as Russ. And on my personal side, before my dad passed away, he bought a long-term care policy for he and my mother. And we are using that long-term care policy now to keep my mom at home. And the monthly benefit that the long-term care policy pays is about $9,900 a month. And in the town where my mother is, it is outside a suburb of Birmingham, Alabama, and the monthly cost for around-the-clock caregivers through private pay that we found, we didn't go through an agency, is 14,400 a month. And if we went through an agency, multiply that. And if we went to an area that's more costly,

multiply that. And so for just in our family, there is, you know, fortunately, mom has a retirement, Social Security and some other forms of income through her portfolio. And her net worth is just basically staying level. But in the absence of the long-term care policy, that is a big problem. I want to do some math here looking at it from Austin and I's lens as non-insurance people. We talked about earlier Austin mentioned that it's tough for people to get the $3, four, five, six million dollars in savings and investment into their retirement. but if we took the simple math of a $3 million retirement fund that a person would want to have,

and if they lived off of the 4% rule, which would be $120,000 a year, which would be pretty standard, that's only $10,000 a month. So then if we blend this math that as of this year in May, only 3% of Americans pay for long-term policies, although over 70% of people, 65 and older, need critical services before they die. So if you blend what we teach that people need to get to XYZ number to live off the 4%, and then these stats, and what it costs monthly for long-term care, it just doesn't work. There is no mathematical scenario where it makes sense for people, unless they are truly wealthy and have the money to burn to help their elderly parents or themselves in retirement.

So it's a very, very slippery slope. I'm not saying that long-term care is for everyone, but it certainly is exciting to do this episode because of what I went through, what you're currently going through, and what Austin's going through. It's definitely very near and dear to my heart because the worst thing is to think about it from a macro level of life. And that is you work 40, 50 years to get into retirement. You get sick. And then all that money gets eaten up just to stay alive. That's not fair.

And so I love what you guys are doing. And we appreciate you being on the episode. It's a pleasure to be here. And as a part of partnering with you, you know, we want everybody to be able to go through a consultation for free. So for Rich Habits listeners, you can go to sureyance.com backslash rich habits. I think we have the link in the post for the podcast, and we're providing free consultations for your listeners. I appreciate that very much for us and Todd and both you guys are heroes. You really are. And back to Todd's example here, I was doing some math too, Robert.

$9900 a month. Five years worth of care is $600,000. That is unreal. And to even pay for that, back to what Robert was saying, you need a portfolio of $3 million just dedicated for that. I mean, that's the type of stuff that you guys are solving for here. And we encourage all of our listeners who are, you know, in this stage, maybe you're in the 30s, 40s or 50s. You've got some children you're starting to think about sort of your long wealth-building journey ahead of you and kind of where you want to be in 10, 15, 20 years. You know, maybe it is a good idea to explore with Russ and Todd. Have a conversation. So, you know, I know that I will be old enough where I need to have some additional support if it's from a family member or from some sort of facility or some sort of caregiver.

You know, help me understand what that might cost me. on a monthly or even annual basis. And, you know, are you going to try and self-insure? You could totally try and do that. Or do you want to try and have a policy through Sherriens here who we love and trust where they can help you offset some of that financial burden? So I would definitely encourage us everyone to really think about that. Of course, you know, do your own research.

We're not over here trying to tell you to do anything with your own money. But instead, introduce to you the experts and the people who are going through it, who have gone through it like Robert certainly has, who are going through it. like people myself, Brian, going through enough to my dad, and make the decision for yourself. Keep this in your back pocket. Maybe you act today. Who knows what it might be? But we just want to be here to educate you so that you can make an informed decision. Hey, Austin, just to echo one other thing that we love that you are big proponents of term life insurance. And we really kind of focus on two pieces, term life and long-term care. So for your listeners as well, we're happy to have that discussion.

Big topics for term life or instant issued term life insurance in less than 20 minutes today with technology. Many people can get approved in one phone call. In some cases, you know, get up to $2 million in life insurance for, you know, sometimes $40 a month. It's extremely affordable. I love that. Yeah, term life insurance, we're big believers in that. If anyone is relying on your income right now for their well-being and you die in a car accident tomorrow, got to make sure you have a term life insurance policy that's going to have a debt.

death benefit that you can put in the stock market that's going to pay them to supplement your income. That is how term life insurance works. Russ, Todd, thank you so much for joining us on this episode of the Rich Habits podcast and we'll talk to you guys very soon. Thank you. Our pleasure. Thanks. Wow.

What a heavy but much needed conversation with Russ and Todd. You know, Robert, I've talked about my dad a lot and I do think that if he had some sort of long-term care policy that maybe he would be a little bit more comfortable right now, right? But, you know, I think what's most important here for everyone listening is you should do your own research. Figure out for yourself. Is this something that you think you might need in the future? And if that's the case, we hope that this episode of the podcast allows you, again, to make an informed decision. We want to be the connector of opportunities, ideas, and ways that you can build and preserve your wealth over a long period of time between those opportunities and you.

Right. That's what we're trying to do here with this podcast. And hopefully that conversation helped aid on that. Yeah, I think one of the most important things that we get to do through our education process is providing people just that. All of the what ifs because so many people are like, oh, I'll worry about retirement later. Oh, I'll worry about this later. And they kick the can down the road. And, you know, this is one of those things I live through. I personally live through my mother not having long term care, her Medicaid running out, me having to pay for it out of pocket

every single month thousands and thousands of dollars and not everyone has a son like me that could afford it and so it's just another way for people to digest information that may seem boring and even sometimes useless to understand that it could happen to them and how to be prepared for it because there's nothing worse that if your parents have to live in fear because you have a parent or parents that are sick and don't have the proper financial situation or long-term care to care for themselves. Or worse, you then can't pick up the pieces because you're not prepared either. So I think this episode really kind of attacks that taboo topic of what could be really important down the road. And we always say don't borrow from your future self to

pay for things now that aren't important. And this really illustrates that that this episode just highlights a topic that most people never want to talk about, including myself, but just get you prepared for the what if so you don't get caught in a situation similar to what we're talking about. I want to make sure people understand too. I was talking to someone the other day and it was actually a good friend of ours, Robert, and this person has like $15,000 in a high yield savings account and they're like, yeah, I'm trying to build my base and this 15K is like part of that investment. I'm like, no, no, no, no. Let's make sure we're very clear about the difference between investing and insurance. Your high-yield savings account is insurance so that if a bad thing happens,

you don't have to sell your investments, right? And so as we think about insurance, this type of insurance is so that if something bad happens to you, like dementia at 74 years old, you don't have to sell $400,000 worth of your retirement nest egg so that you can simply survive, right? So there's a big difference between insurance and investments. And I think this was a good episode to help people understand the difference of those things and that they're both needed as it relates to building wealth over a long period of time. Yeah, I think that's a great point in a way to kind of close this episode out. And it is important and kind of an interesting dichotomy, if you will, of thinking about our 30-year age difference. So if you think about it from that perspective,

most people in your age group aren't considering the what-ifs for 30 years down the road. Whereas if they were and they were putting away for a rainy day and taking retirement and these types of topics that can come up in life seriously, they would be better suited and better prepared for it. Whereas now I'm at the age that we're talking about and I have to start thinking of the what ifs. And God knows I don't want to think about if my health starts to fail ever. So I'm very cognizant of it of a daily basis and making sure that I do all the right things. one of those things is making sure you're covered financially. So this is a great, great episode for both ends of the spectrum for age groups. Well, Robert, speaking of investments, this episode of the Rich Habits podcast is brought to you by NEO's investments. They just launched a new addition

to their high income ETF lineup. It provides exposure to the 2000 small cap stocks that make up the Russell 2000 index while aiming to provide tax-efficient monthly income to its investors. Their ETFs may be especially interesting for folks looking to generate passive income inside of their investment portfolio. As you've probably heard us mentioned recently, small-capped stocks have historically performed well when rate cuts begin after a long period of high interest rates. And if you're looking to add passive income-focused ETFs to your portfolio, especially as the Federal Reserve may begin cutting interest rates in the coming months, consider learning more about NEOS ETFs at NEOSF Funds.com.

As with all investments, investors should carefully consider their investment objectives, risks, charges, and expenses of NEOS exchange traded funds before investing. To obtain a prospectus containing this and other important information, please visit neosfunds.com and please read the prospectus carefully before you invest. An investment in NEOS ETFs involves risk, including possible loss of principle. The equity securities purchased by the fund may involve large price swings and potential for loss. Past performance is no guarantee of future results. Yeah, Robert, literally last week, IWMI is the ticker of this new ETF that Nios funds just launched of the Russell 2000 index.

And why this is important and why they chose to launch it now is because as we look historically, We talked about this actually on a live stream we did, which was as we look back through history, the number one outperforming type of stock that outperforms the large S&P 500 and the NASDAQ indices is the Russell 2000, because these are the small cap stocks that have been sort of beaten down by higher interest rates, kind of eating away at their valuation multiples. And as interest rates get lower and lower, right, the Fed's going to cut rates here in September, fingers crossed. Historically speaking, small cap stocks outperforming.

large indices by 6% over the next 12 months. And so if you can get that 6% outperformance both from a price perspective and an income perspective, IWMI sounds like an awesome, awesome addition to your portfolio. I just added it to mine. I've got about $7,000 of it and I'll definitely be adding more of it in September when the Fed cuts rates. All right, let's jump into the question and answer edition of the show. Our first question coming from Haley M. Haley says, hi Austin and Robert. First off, I just want to say I love, love, love the podcast. I got my dad set up with a trust at Dynasty for his real estate company because he has 83 rental properties. And we've diversified my husband's Roth and our own brokerage accounts. I also love KKQI and SPYI. They pay me income every single

month. I always tell my friends about them. So here's my question. My husband and I are 33 and 30 years old. We have a Roth IRA for him, which we started contributing to later in life, that now has $22,000 inside of it. I know you say not to contribute over the match to your 401k, but as of right now, my 401k has $200,000 inside of it, and it's 100% invested into FXAIX, which is the Fidelity 500 index fund. All of the choices inside of this 401k were for like target date funds and they all underperformed the S&P, and I looked at the expense ratio and FXAIX seemed pretty reasonable. So what do you guys think, is it okay if I contribute beyond the match of my 401k, assuming this is invested into FXAIX? Robert, what do you think about this question?

I think that you're kind of in that similar situation where you just don't have the autonomy or the options to be able to get that bag of, you know, different index funds that we talk about and we like to get you a well-rounded portfolio. So if that's the case, I'd rather see you in the S&P 500 over these target date funds. So I think it's fine, but I'd like to hear your thoughts, Austin, of a different way to get the performance we would want to see out of this

rather than just having all of their eggs in one basket. I think it's fine to have, if you want to do 100% into FXAIX, I mean, you're really just putting it all in the S&P 500. Of course, it does 8 to 12% per year over a long period of time. I don't think it's anything to be ashamed about. It's definitely a lot better than target date funds

that might be offered by your employer's sports. And so if the real question here is, can I contribute beyond the match? So what Robert and I say is up to the match, assuming you do get a match, then the Roth, max out the Roth, use the awesome ETFs and index funds we talk about. And then back to the 401k to max it out, assuming you have autonomy. You have a little bit of autonomy, right? You do have the ability to put it inside of the S&P 500, but you don't have the wonderful autonomy that you might have in a brokerage account where you can get more of like VT,

or VGT or QQQQ even, right? So I'm leaning toward you can go max it out. If you're going all in on the S&P, I think that's a fine index to ride the wave on, especially at 30 years old, 33 years old. You guys are rocking and rolling here. So I think that's totally cool. If you can max it out, be my guest.

But you did say it was a Roth 401K. So don't think that you can deduct your contributions against your income. I know some people have made that mistake in the past. They say, oh, wait a second, I contributed 20,000 to my 401k. K this year. That's going to be 5 or 6,000 in tax savings because you can, you know, write it off. But with a Roth 401k, there is no tax savings. You do, though, get that tax advantage growth over time and pull the money out tax free in retirement. So I'm on your team. I think you could max it out. I think you can rock and roll back to it. The goal here, though, is to make sure that you are not deviating away from the plan. You're not actually adding any of those target date funds or anything else like bonds and things like that at such a young age. Yeah, I agree. Go where the performances. Go where the history. historical math is in your favor. And in this instance of what your options are, the S&P 500 is definitely the way to go. So our next question comes from Mac. Mac says I'm 59 years old and I'm a few years from retirement age, but I'm wondering if it's too late to even try to increase my financial

situation. I have $16,000 in a Roth IRA, $26,000 in a 403B, and I can invest about $5 to $600 a month now, but I'm still trying to pay off some debt. What can I do at the same? point with my money and how do I approach retirement with such little of a nest egg? Robert, this one's sad, you know? I'll let you take a first stab at this. I got a couple thoughts, but I'll let you go first. Yeah, I'm going to rip it for Mac. I mean, the bottom line is, yes, you're behind. It happens every single day. So I want you to beat yourself up, but not too bad because it's not too late. I mean, Ray Kroc founded McDonald's at 54 years old. I think Sam Walton founded Walmart at 57 years old. It's not too late. So I look at it this way. The first thing I

would do if I were you is you've taken the steps to learn and figure out what to do or you wouldn't be here in our podcast asking questions. So that's a big hurdle. You're not ignoring your plight. You are saying, oh shit, what am I going to do and how am I going to fix it? So I applaud you for that Mac. So here's what you're going to do first and foremost. As soon as you're done listening to this episode and you high five the monitor because we answered your question, you're going to get a note pad out and you're going to do a deep, realistic, honest dive with yourself and go, okay, where am I screwing up? Where can I cut back? And where can I get more money to squirrel away immediately to get my savings and investments built up to a better level over the next few years? That is what you're going to do first and foremost because Rome wasn't built in a day and you do

have some catching up to do. But you have to have a serious, serious, serious sit down with yourself and figure out where the weaknesses are other than income. You might have saving issues. You might have spending issues, income issues, all of the above. But you're going to figure that out. And then if you have to go get a side hustle, if you have to go get a second job just to take that money and invest it, you're going to have to do these things. So over the next four, five, six years, you can get yourself to a place of stability and safety by having enough money put away that's making money for you in retirement. Robert, I love that perspective and I'm right there with you, right? Mac needs to have a plan. And specifically here, just kind of thinking on the fly,

give yourself a 10-year plan, Mac. Make the goal of retirement be 70 years old. Okay? Give yourself a 10-year plan. So from 60 to 70, this is what you're going to want to do. You already have $42,000 invested in the markets. Okay? The first thing I would do is I would want to figure out what that money is invested into. At this point in time, you need some growth. You need some, I mean, well, also have a long investment horizon, 10 years. That's long enough where, you know, the S&P 500 on average doubles every seven years. So, Mac, if you are invested into some good growth stock mutual funds and ETFs, the index funds we talk about, you're going to see some real growth in your portfolio. So also assuming here, as you pay off some high interest debt, you pick up a side hustle,

you listen to last week's episode of the podcast where we talk about finding an extra $2,000 a year to invest, you're now investing $800, $900 a month toward these ETFs like VOO, VGT, and QQQQ. You're doing that from 60 to 70. Congrats. You've been consistent. You've been very focused. And now you have a about $300 to $350,000 of a nest egg at 70 years old that you are now going to begin to live off of. So on one side of the equation, I'm assuming that you have some sort of social security. I don't know, maybe that's $1,500 to $2,500 a month with, let's call it, $350,000 in this retirement account.

You could park that in, you know, like an SPYI or some sort of other income producing asset that's going to pay you three, maybe $4,000 a month on top of the two, thousand you're already making. Now, with inflation where it's been, I don't know exactly how easy it's going to be to live off of $5,000 a month in 10 years, but it's better than nothing and it's a lot better than where you are today. So all you need to do, Mac, is sit down, have a plan and maybe even have that tough conversation of maybe retirement isn't going to be sitting on a beach drinking margaritas all day long. Retirement for me might be finding a passion, finding that Encore career where you might really, really love working with, you know, leaders in the space that

you've worked in your whole life or coaching or maybe you love being a, you know, a youth past or something going on in your life that you can spend 15 to 25 hours a week doing in your 60s and maybe early 70s as a way to supplement your income. That doesn't feel so much as work because you really, really love doing those things. But I'm just trying to figure out better ways here that you can go from just relying on social security and maybe this nest egg to now you have an extra two or three thousand because you're doing this extra work on the side that doesn't feel like work because you really really love it my dad for example is 79 years old he loves healthcare and he's a healthcare consultant still for some random healthcare hospital systems in america he eats it up

he doesn't do it for the income but it keeps his brain sharp and he loves doing it right and so it's a way for him to stay active still at 79 years old and share more of what he loves to do what is really shaped as a professional career, which was healthcare. So find that thing for you, Mac, and maybe that's something that you consider as you begin to age into your 70s. Yeah, I love it. And Austin, that was very eloquent and softly put. And I love that. But Mac, you've got a serious conversation to have with yourself because if you take what has been answered here for your question in the Rich Habits podcast and you really enact on it and take it seriously, you can get yourself back on track and get yourself to a little.

a place of comfort going into retirement. You just have to take it seriously now to really take advantage of the years that you do have to be able to multiply your money and make a dent in your situation. So, Mack, we're rooting for you and we wish you the best of luck. Everyone, thanks so much for tuning in to this week's episode of the Rich Habits podcast. If you learn something about insurance, specifically long-term care insurance that you want to share with a friend, send them this episode. Maybe you know someone who's going through this stuff right now with their family. If you just like the podcast, share it with a friend. We love that. You guys sharing this is our marketing strategy. And we really appreciate it because tens of thousands of you come back every single week to listen to the show. And don't forget, if you've not signed up yet for the Rich Habits newsletter every Thursday morning, we send you a nice email with pretty pictures and good headlines about what's moving your portfolio this week in the markets. So be sure to subscribe to that using the link in the show notes below. Again, thank you all for joining us each and every week. We are so excited for the months to come.

and all of the great things we're going to be launching for all of you. Thank you again for joining us. Have a great start to your week.