Rich Habits Podcast - Q&A: $9M In One Stock, Cash-Flowing Real Estate & Direct Rollovers

Starting point is 00:00:00 This spring, denim gets a softer, lighter update. Introducing Old Navy's drapey denim wide leg, a new fit that moves with you. It's everything you want denim to feel like for summer. Easy, breathable, and effortlessly cool. With a fit that creates natural movement and a wide leg that feels modern, not overwhelming. Plus, that signature, wait, for this price, moment. Old Navy's drapey denim wide leg. Spotify, it's Jay Shetty.

Starting point is 00:00:28 are you one of those media strategy people? Scrolling through spreadsheets, searching for an audience that pays twice as much attention to your ads than they do on social? Let me introduce you to fans. And they're here with me on Spotify. Trust me, I know fans. They don't skip, they stay for hours.

Starting point is 00:00:47 They don't move on, they manifest. They're not a demographic group, they're fans. Spotify advertising. You're among fans. Hey everyone and welcome back to the Rich Habits podcast question and answer edition. These are our Thursday episodes, which, in my opinion, what are my favorite episodes of the week, Robert, where we get to answer your questions as if we were going through, whatever you're going through with you, alongside you

Starting point is 00:01:13 in your shoes. Robert and I are off the dome here, just kind of talking about in real time through everything that you might have to share with us. If you have a question you want to ask us, You can email us at Rich Habitspodcast at gmail.com or you can DM us on Instagram at Rich Habits Podcast. Before we jump to the episode, I think this is a really, really cool thing we're doing, Robert. We are hosting a webinar alongside Publix C.O. Stephen Sykes all about their new AI agents. A lot of people have been saying, hey, I just got off the wait list. I'm on Publix AI agent access, but I don't know how to build one.

Starting point is 00:01:52 I don't know what strategies to use. I don't know what it is capable, what it's not capable of. Can you guys please share some your own AI agents, how you guys are thinking about this? And we've done a pretty good job of sharing some ideas inside the Rich Habits Network. But we wanted to open this up to every single person that listens to the Rich Habits podcast. So join us Friday, July 10 at noon Eastern time. There's going to be a link in the show notes below. And it's going to be a lot of fun there.

Starting point is 00:02:21 and join us to get all your questions answered. Join us to get off the wait list if you're still on the wait list. Join us to build your own AI agent in real time. We'll have Stephen create agents from prompts that you submit to us in the chat. We're going to walk through maybe public's even most compelling pre-built agents to hedge against inflation or repositioning with what the fed's deciding or reinvesting dividends or whatever. right like this is going to be a workshop this is going to be the masterclass this is going to be the coolest webinar we've hosted to date because we're literally going to be building these agents

Starting point is 00:02:59 these ai trading agents and investing agents on public dot com right in front of you in real time so come again friday july 10 at noon eastern time there's going to be a link in the show notes below here or it's going to be everywhere so just you'll find some information about it you're going to join us it's going to be a blast you've got me hyped but if there was ever a day to skip going to get the Poke Bowl. Friday, July 10th, noon Eastern, we are going to be building these live

Starting point is 00:03:27 right before your eyes with Stephen from Public, and it's free. You're going to get all the sauce, like Austin said. It's going to be incredible. It's free. So put it in your calendars now. July 10th, we're super excited, and we want to teach all of you what

Starting point is 00:03:43 all the talk is about these AI agents through public.com. And we're super excited about this one. so make sure you're there. Speaking of public, got to give a shout out to public, the investing platform for those who take investing as seriously as we do here on the Rich Habits podcast because on public you can build a multi-asset portfolio

Starting point is 00:04:01 of stocks, bonds, options, cryptocurrency, and now they've also got generated assets which allow you to turn any idea you have into an investable index using AI. And it all starts with your prompt from renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20% year over year. You can literally type any prompt and put the AI to work.

Starting point is 00:04:25 It screens thousands of stocks, builds a one-of-a-kind index, and even let you back-test it against the S&P 500, all with just a few clicks. Generated assets can be thought of as ETFs, but with infinite possibilities. They're completely customizable. They're based on your thesis, not someone else's. So go to public.com slash rich habits

Starting point is 00:04:44 and transfer your portfolio to public. That's public.com slash rich habits and transfer year portfolio. Paid for by public investing, full disclosure in the podcast description. As you can tell, public is a very AI forward company. They've got their AI generated assets, their AI agents. All things AI public is doing, they're doing a really good job of building out an awesome product. And we're super excited to be hosting again this webinar with their C.O. Stephen Sykes on July 10 at noon Eastern, all about A.

Starting point is 00:05:16 agents. Now, our first question comes from Calvin S. via email. Calvin says, hey, Austin and Robert, we'd love to have you guys give your feedback on this situation. I'm 21 years old. I'm working a blue-collar job making $65,000 a year. I didn't discover you guys before making the decision, but I currently own a four-unit property in Pittsburgh, Pennsylvania, and living in one of the units. When it's all said and done, it cash flows about $1.70 a month. I've been maxing out my Roth IRA for years and I currently have $55,000 in there into the ETFs you guys talk about. That's crazy. First off, pause, 55,000 in a Roth IRA at 21 is wild.

Starting point is 00:05:53 Good for you. Holy smokes. He says I also have $66,000 in an individual brokerage account saying he got lucky on a few individual trades, but have since rolled into the ETFs you guys talk about. I've also got $20,000 in an emergency fund, high yield savings and another combined high yield savings with my fiance where we've got $20,000 in there. we're saving up for our property together. All right, we get it.

Starting point is 00:06:15 You are loaded here at 21 years old. Congratulations, Calvin. That is awesome. So Calvin says, my fiancee is graduating her undergrad in the wintertime. Then we'll move to a different state for her grad program the following school year, which is why we're saving for another place. But the only issue is we don't know where we're going to end up, meaning I don't know what the market's going to look like because I don't know where I'm going.

Starting point is 00:06:38 So my main question is, do you guys think it makes sense to keep saving money to this high-yield savings account for another house that we can house hack in knowing that we're going to move in a year but not know where we're going to move or should we just not purchase one of these altogether and do something other than house hacking with this $20,000. Long question, I know, but greatly appreciate your advice. Robert, what should take here? Because it seems like Calvin is crushing it. Oh, my goodness.

Starting point is 00:07:04 This guy is just printing money at 21 years old. Blue-collar job, $65,000 a year. $65,000 a year? like that's that's a solid amount of money for a 21 year old. So kick us off, Robert. Yeah, I think Calvin is crushing it. It reminds me of me at 21 years old because I was super focused and dialing in all of these things while all my friends were going out and spending their money on the weekends, drinking and having fun. So Calvin, if you weren't who you are, I would say don't buy another property and house hack, but because you've proven already that you know how to invest and

Starting point is 00:07:38 you know how to be diligent and stick to the plan. I absolutely love the idea, not ahead of the time. Get there, learn the lay of the land. So if you're going to move out of state, I would probably get a six-month lease in the new area where she's going to go to school. And I would learn the lay of the land, learn the areas, learn what neighborhoods are best to buy in. And I would certainly then, after that six-month or a year period and you know what you're doing, then I would buy another property and house hack and do it all over again. There's just so many great programs out there for house hacking people to be able to invest in these two, three, four unit properties. So I think you're spot on. It's exactly what I would do. I just wouldn't do it ahead of moving there because then you put yourself in a situation.

Starting point is 00:08:24 You might not like the neighborhood. There might be barking dogs. There might be issues you don't like. Get there. Learn the lay of the land and then house hack again. I love that. Keep the one in Pittsburgh. So since it's cash flowing, probably doing pretty well for you.

Starting point is 00:08:38 and keep doing what you're doing. Yeah, that's what's so interesting about this is the four unit in Pittsburgh cash flows 170 a month while they live in one of the units. Correct. So if they start renting out one of the units for, I don't know, $2,000 or $1,500 a month, whatever it might be, that cash flow is going to skyrocket, which is really, really cool. What advice do you have for, maybe, you know, not Calvin, because he's figured it out right now, but maybe for someone who wants to start house hacking. You mentioned parking dogs. You mentioned, you know, know, living and being familiar with the area. If someone wants to go and house hack in a new area for the very first time, what are maybe like three things they need to always consider before they

Starting point is 00:09:18 sign the dotted line and close on their first, you know, multi-unit property? I love this question because so many people get it wrong. They tour these places, these properties on a weekend. Everything is staged by the real estate agent. They're in and out in 20 minutes. They're happy. They got a cookie from the agent when they did the tour, whatever it was. I like to tell people, go there during the week when everyone's home, when everyone's around, when the companies in the neighborhood are up and running. I remember we were getting ready to buy, and this is two different stories.

Starting point is 00:09:51 I was getting ready to buy a property one time. It was a four unit. And we didn't realize the neighboring property across the alley was running an illegal kennel operation with all these barking dogs. And it was loud. and we couldn't figure out why this property sat on the market too long, so long, and it was that. But another time I looked at a property on a weekend, it was magical. I went back during the week, and this is what I always recommend, go to the property, sit in the neighborhood,

Starting point is 00:10:20 whether you sit outside, sit on the hood of your car for an hour or so, and see what's going on in the neighborhood and really take a look. And we found out this property, and this was a waterfront property, was across the bay from a machine plant. So all day long, you could hear this equipment hammering away from 9 to 5 Monday through Friday. And I wouldn't recommend living there for anyone. So just always make sure you're not in a rush, especially if you're buying out of state. You see all the fake gurus talking about, oh, you can buy the property and do it remotely.

Starting point is 00:10:53 You don't even have to ever see the property. That's ridiculous. Go see the property if you can. Go look around or have somebody there that you trust that can really check out all these things because you just want to make sure it's really good. good for you. And the other thing that's kind of long-winded, but I'll keep it short, is also understand if you're doing this for investments, make sure you're finding a property that's near a Starbucks, that's near a Target, that's near a Home Depot. Because trust me, if you're

Starting point is 00:11:20 renovating a house and you're using subcontractors and the nearest home depot is 45 minutes away, it's going to add thousands of thousands of dollars to your labor and your bottom line when doing the renovation because you can't get materials quickly. So I hope that helps. Calvin, I love what you're working on here. You obviously got your base built, right? 55,000 in your Roth IRAs, 66,000 in a bridge account, 20,000 in an emergency high yield savings account. You're crushing it at your age. I think the next big thing that you need to consider, seriously consider, is having those conversations with your fiancé, now that you are obviously the person maybe in the relationship who's really good with money, who's been house hacking, who's, you know,

Starting point is 00:12:01 diligent and is always being as responsible and forward thinking as possible with their portfolio, ensure your fiancé is on the same page with you on that one. That's the only advice I can give you. Our next question comes from Ian N. Ian says, hey guys, my name is Ian. I'm 40 years old and I recently left a long career and built up a concentrated net worth position. It totals $9 million and the majority is in a single long-term stock from a former employer. What I'm trying to better understand is how to think about sequencing risk in situations like this. More specifically, when someone has a large, appreciated, concentrated position and wants to diversify over time, what frameworks do you use to balance tax efficiency versus concentration risks versus behavioral factors like overattachment

Starting point is 00:12:50 or waiting for the right time to act? In other words, how do you structure a transition plan so it's disciplined and durable through market cycles rather than reactive? Thanks for the podcast. It's a ritual for me. Awesome to hear it, Ian. Thank you so much for tuning in. I'll take this one off, Robert. I think the first realization Ian has to come with. And this is, I've done this, Robert's done this, and I guarantee you anyone that's made a ton of money or had a position, go up a ton, like, whatever it might be, also had to come to this conclusion, which is, I cannot time the market and the decision that I make to diversify away from might not be the perfect decision. Like a great example. I invested a ton of money into some cryptocurrencies back in

Starting point is 00:13:35 like 2017, 2019, and it made me hundreds of thousands of dollars. I did not perfectly time anything with that. I'm still very happy with the outcome, but I did not perfectly time anything. In Ian, I would argue the same thing is going to happen to you here. Let's say six, seven, eight million of this, nine million dollars is in a single stock. You're going to have and figure out a framework that we'll share with you here as to how I approach this and how Robert would approach this. And you're going to act upon it. And in 24 months from now, you're going to look back at this and be like, I just left $900,000 on the table. I should have just held it or whatever. But like at the end of the day, you have to come to the conclusion that there is no right answer.

Starting point is 00:14:18 You know, you've got to balance this sleep well at night mentality with upside potential. And the big key word there is potential because potential's not guaranteed, whereas sleep well at night very much is guaranteed. So here's how I'm approaching this. There's a couple really important things to consider with the framework. I don't have a specific framework to build out, but we can talk through it live here. The first consideration is tax efficiency. I'm assuming a lot of this is going to be tax efficient, considering you probably have held the stock for a long time, long-term capital gains, things like that. However, when we talk about millions of dollars, you have to be very thoughtful now as to what those

Starting point is 00:14:59 long-term capital gains look like. Depending on how much income you're taking in on an annualized basis, it might be between 15 or 20%. Another thing to consider here is, does that 5% actually matter if the stock is moving up and down more than 5% on a weekly or monthly basis? You might say to yourself, I'm going to stagger out the sales, so I'm not in that 20% tax bracket and I keep it under the 15. But maybe over the next half many years you do that, the stock falls by more than 5% and now you just shot yourself in the foot. It kind of goes back to my first point

Starting point is 00:15:31 of no matter what decision you choose here, it's going to be the wrong one. So let's just like come to that conclusion, Ian. The other thing that I think is a wonderful tool for people that are in your situation that I've done myself is covered calls. If you're able to say, hey, I've got thousands or tens of thousands of shares of this company stock, I mean, $9 million, who knows how many shares you have, I'm going to start selling covered call options against it at a strike price that I'm super comfortable selling at, even if that strike price is at or, you know, marginally below where it's currently trading at, at least you're locking in now premium income that, yeah, you're going to have to pay taxes on, but you can set that money aside and use that, all of that

Starting point is 00:16:13 premium income to help offset what your taxes might be on this entire gain itself. So you're kind of thinking about this as like a way to say, let me sell some covered calls against this specific stock position in my portfolio. Not as a way to generate income or build wealth, but as a way to help offset what the taxes might turn into on my position. Here's my thing. I do not enjoy, and then I'll flip it over to Robert, having a single stock make up more than 6, 10, 12% of my net worth. Now, I have exceptions. there are startups, privately held, multi-billion dollar companies that make up seven figures of my net worth, which is exciting because I believe in those companies and a lot of that is just appreciation.

Starting point is 00:17:00 And I also don't have the liquidity to get out of that, or I guess I would already start doing that. But when it comes to publicly traded single stocks, I don't like to have more than call it 6, 10, 12% of my net worth in one of those. Because what could happen is you see Tesla, which is a great example. From 2023, throughout 2004, Tesla was trading in the, you know, 200-ish range, 180s, 220s,

Starting point is 00:17:23 all around that. Then it spiked up to 421 share. Then it spiked to $450 a share, fell back to 260 a share. Now it's back to 409 a share. I mean, that is a recipe for emotional stress and disaster if you don't have the discipline around it.

Starting point is 00:17:41 Microsoft's another great example. Microsoft has been trending up into the right, was as low as 350 in April of 2025, got as high as 550 in August to 2025. Now it's 371. So like these single stocks go all over the place. So the goal here is to diversify away from them as it makes up a bulk of your net worth and now move a bulk of your net worth into index funds and big ETFs that are operating in secular growth trends that we all talk about and believe in, not because you think they're going to outperform the single stocks, but because they do, yes, swing 10, 15%, but they don't have these violent 40% swings like a Microsoft is down,

Starting point is 00:18:25 38% from its recent all-time highs in a matter of half a year. Index funds will move and groove up until the right. That is a great way to preserve that net worth that you've made here. Concentration helped you make the net worth. Index funds and diversification helps you preserve your net worth. So I like how you've kind of done this here, Ian, but those covered calls might help a ton as you think about taxes. Robert, what did I miss? You didn't miss anything.

Starting point is 00:18:50 That was a masterclass for this situation. But I'm just going to add a couple little doses of insight. For me, hope is not a financial strategy. And you mentioned that you have this, you know, risk behaviors and all these things you're worried about over time here because you have this high concentration in one stock. And you got here by doing that, but now you have to diversify. You have to take it out of your mind that you're going to leave money on the table or pay these taxes. Because if you don't, you could find yourself in a really bad place where, let's say it goes down. This stock over the next two years goes down 50%, and then you're going to kick yourself for not doing something.

Starting point is 00:19:36 So I think you're on the right track. Everything Austin said is exactly what I would do. you've got to get out of it. You don't necessarily have to sell it all at once, whatever you want to sell down to to get the diversification. You could take it over one, two, three years, but just be careful there as well because you don't know what the markets are going to do with that individual stock over the next three years. But the main thing is getting over what you said is the behavioral factor. Because right now you're operating more emotional and less tactical because of the fact you're fearful of leaving money on the table. because you've built so much wealth from this one stock. But remember, this is not real gains until you do something with it. This is unrealized gains, and you have to get that diversification. So you do have protection against one single stock that could go down at any given time. And I think, I know another mental model here to think about is I had a really good friend.

Starting point is 00:20:34 I don't want to name his name because he's very rich now. But he started a really cool company in college. And he got a windfall in his mid to late. 20s of 25, 30 million dollars. And he looked at me and we talked about this. It's like, wow, man, that's a lot of money. Like, what are you going to do with it? And he goes, I'm going to put it all in index funds because literally if I do nothing in American capitalism and the rule of 72, like all that stuff continues to happen, this will be worth hundreds of millions over my lifetime. Versus, I'm going to get cute with it and buy some single stocks. I'm going to get cute and try and do this venture

Starting point is 00:21:11 investment. I'm going to get cute and do whatever, whatever. Just taking this money, Ian, and saying after taxes, you have $6 million or whatever the number is here. I don't know. You said $9 million total. Let's say it's $6 million after taxes. In seven years, that's $12 million. In 14 years, that's $24 million, Ian, by just sitting in index funds. And another way to think about this. And this is actually a mental model that Dave Ramsey popularized, which was every day that you own so much of the single stock, you have to flip it on its head and ask yourself, would you take $8 million today and buy that stock with it right now at this price? Because that's what you're doing. If whatever the stock price is for this company, would you say, I'm going to go take $8 million and 92% of my net worth and buy this specific stock at this specific price right now today? If the answer is no and you would not do that and you're like, whoa, that's actually crazy. I would not do that right now. Then that's another kind of like, flashing red light to say maybe I should not be holding this position. There's a lot of little different ways to think about owning a very concentrated position that makes up a ton of your net worth.

Starting point is 00:22:20 And again, do some covered calls, do what you can to help with the taxes there. Oh, last point, Robert, maybe you can talk toward this. Any financial advisor, any online guru, any, anyone that's going to say, let me take that, I can perfectly time the market for you. I'll make sure you get out of this with as much tax efficiency, as much upside potential. You're going to have all this. They are lying to you. No one can time the market. So please be weary of someone trying to take this $8 million, $9 million from you and say, put it in this whole life insurance policy.

Starting point is 00:22:52 You can then borrow from it here. And then you can not pay taxes on the gain here. What are you going to say? Just be careful, my friend. Just be careful. I live this exact moment. And to this day, and this was 16 years ago, still is a defining moment of my financial career and my life. my cousin Tim walked in unannounced during the heat of silly bands when everything was going crazy.

Starting point is 00:23:16 He walked in and I'm like, do we have a meeting? And I said, he said, no. I said, what do you hear for? He goes, write me a check for $5 million right now so I can get it out of your mind and out of your coffers. And I'm going to put it into the S&P 500 and the NASDAQ. And you're going to forget about it. So you never have to think about money again. And I didn't do it.

Starting point is 00:23:39 I gave him $1 million on the spot. I think it was $1 million or $2 million. And that is this exact story. You have to take money out of high concentrated risk and get it somewhere else so you can let it grow and compound over time without being in that high risk bucket any longer. So Austin, that's a great, great call out.

Starting point is 00:23:58 So our next question comes from an anonymous listener. They say, hey, Robert and Austin, I love the show and I listen every week. My wife and I on our mid-30s and we invest 10% of our paychecks into our respective Roth 401Ks. After all bills and expenses are paid, we have an additional $2,000 a month surplus. And would love your breakdown as to how to prioritize this extra cash across five competing options.

Starting point is 00:24:19 Option one is we have a car loan of about $39,000 at 7% interest. Option two is we've got some short-term debt of $5,000 on a 0% interest deferred until July of 2007. Option 3 is retirement acceleration, maxing out both of our Roth IRAs. Option 4 is a car. college savings fund. We've got a couple kids. We can do a 529, ages 1 and 3. Or option 5, our low interest debt, which is our mortgage at a beautiful 2.5% interest rate. Mathematically, the 7% car loan and the 0% deferred interest deadline seem urgent. But we want to balance aggressive debt payoff with building wealth. How would you rank these five buckets? Good question.

Starting point is 00:25:00 So I kind of want to start over because it all comes back to our phrase of match beats Roth beats taxable. So up to the match with your 401K, I think you guys are going above that. I don't know if your 401k is giving you a 10% match. So up to the match, which in your case is probably 3, 4, maybe 5% if you're lucky. Then you max out the Roth IRA because you have complete autonomy over it and you can make sure it's invested into the right things like VO or QQ and then back to that 401k if you have autonomy in that and you want to put more money into those retirement accounts and get a lot more invested. And then if you even have more money, that's when the bridge account comes into play. So I would reimagine how you're prioritizing your Roth IRA, the third thing there,

Starting point is 00:25:42 retirement acceleration, maxing out both of our Roth IRAs. I want to make sure that's done. You guys have $2,000 more a month? Like, figure out where that fits into the equation because you guys both need to max out these Roth IRAs. That is a great, great, great idea. However, you mentioned high interest debt of a car loan here at 7%. Now, I would argue that 7% is right on that cost.

Starting point is 00:26:04 of it's not high interest credit card at 28%, but it's also not a low interest mortgage at 2.5%. So I'm not mad about wanting to get rid of that car loan, but there is another thing jumping out at me that's a little scary, which is this short-term 5,000 home remodel loan. I can appreciate the 0% interest deferred until July 27, but I got a funny feeling that this might be on an intro credit card, 0% whatever, that after 18 months is going to jump to 20%, 27 and a half percent or whatever's going on, and you're going to be up to your eyeballs in high interest debt now from this home remodel. So let's do this. Let's figure out how to start putting $500, $600 a month toward this Roth IRA of this $2,000. So you're maxing it out now on an

Starting point is 00:26:51 annualized basis going forward. Let's also figure out how to get rid of this home remodel loan as quickly as possible, but absolutely before this July 27 number kicks out. And then, you know, I'm not mad about the car loan. I'm not trying to pay it off aggressively per se. I'd like to see, you know, a couple hundred bucks maybe into funding that 529 account. You can do this on Vanguard. That's what I do for my nieces and nephews. I think it's like 200 or 250 a month I put in there. It's already worth like $20,000. And I've been doing it for like three years. It's just, it just sits in the S&P and it grows. It's really, really cool. So go do that. And then if you really got some extra here and you want to get, you know, aggressive on the car, be my guess.

Starting point is 00:27:29 But don't touch that mortgage. That's the last thing. Don't touch it. Don't touch it. Don't touch it. Yeah, I love that breakdown and it's really this simple. Max out to two Ross, that's $1,250 a month. Take the $750 a month that's left over after that, and you're going to take that and put that towards that $5,000 short-term debt, even though there's zero interest, because you don't want to wait till June of next year and then all of a sudden you're like, oh, no, we forgot, we got to come up with five grand all of a sudden and you're pulling it out of something that's making money. you're going to do those two things to get the Roth maxed out, get that ahead of it so you can pay it off, and then the rest you can put somewhere else into your traditional brokerage account or whatever.

Starting point is 00:28:11 But you guys are crushing it. You just need to make a couple little adjustments here like Austin said, and you'll do just fine. Hey, and you mentioned the kids ages one and three. I love this 529, but don't forget, too, about that Invest America account, the Trump accounts going on right now through the Treasury. I think they get funded here in the next couple weeks. gets on July 4, the $1,000 gets dropped in there. Plus, depending on your zip code, you get an extra $250 from billionaire Michael Dell. I was also talking to my fiance.

Starting point is 00:28:39 And some of the companies, for example, the company that she works at, IHeartMedia, they offer a contribution. So like, figure out if where you work at is a perk to get a contribution to the Invest America account. This is free money that your kids are going to be able to take and now use. It flips into a traditional IRA by the time they're 18. It's really cool stuff. Go check out those Trump accounts. Invest America accounts, they're really, really important, especially from a free money perspective.

Starting point is 00:29:04 Now, before we jump to our next question from Joseph, got to give a shout out to equitable shares and their hedged equity ETF, ticker HEDG. If you've been thinking about how to balance market exposure with a discipline risk approach, HEDG could be the right fit for you. It's an actively managed ETF that combines large-cap U.S. equity exposure with an options hedging strategy, that seeks to mitigate your downside risk with a partial put spread and covered call writing. So in plain terms, it's an equity strategy that just doesn't sit there hoping the markets go up. It is built-in tools that seek to manage risk and create more disciplined, low-volatility strategy for long-term investors. To learn more about Equable Shares, hedge equity ETF, HEDG, visit equitable shares.com slash fun slash HEDG.

Starting point is 00:29:58 And as with all investments, investors should carefully consider their investment objectives, risk, charges, and expenses before investing. Prospectus contains this and other important information and can be obtained at ecloshares.com. Please read it carefully before investing. Investing of all is risk, including possible loss of principle, distributed by Kassar, distributors, LLC. HEDG could be an interesting alternative for our friend Ian to consider, who has now that $9 million net worth.

Starting point is 00:30:24 So, Ian, maybe that's something to check out. Also, don't forget, we've got that public. dot com AI agent webinar July 10 it's a Friday at noon eastern you guys are going to want to definitely sign up and be there it's going to be so much fun we've already got a couple hundred people that are signed up just from inside the rich habits network so be sure to get your seats live live live it's going to be so much fun we can't wait to have you all there's a link in the show notes below be sure to go check that out now robert let's jump to our question from joseph joseph p says hey guys i hope you're doing well i got a question i recently got engaged

Starting point is 00:30:57 now my fiance and I are going to start saving for a wedding. Where do you recommend we put our cash, the stock market or high-yield savings? Robert, what should take? Well, it depends on when the wedding is. If they're saving for a wedding that's in the next, let's call it, two years, then I would definitely go to public.com, the sponsor of this show. I would open up that high-yield cash account, and I would rock and roll there, get it up and running right away.

Starting point is 00:31:22 I think that'd be a great place to start. The only way I would go elsewhere and put it in the market, the stock market is if you say, we're not going to get married for three or four years, we're just trying to get ahead of this. Then I might say that you could do 50% in some of these ETSs. We talk about like V-O-O-O and QQQ and 50% in high-yield savings. You just want to make sure you're not trying to time the market

Starting point is 00:31:46 because the worst thing that could happen is you're getting married in two years. There's a down market cycle in 18 months, and all the money you saved is down 30% when you need it. That is why you need to look at it from a lot. long-term perspective. So that would be my breakdown. If it's two years, around two years, do the high-yield savings, save yourself all the stress, make that three, four percent, and you'll be good to go. Couldn't agree more. I'm getting married May of 2007, and it's all in a high-yield savings. It's about one year away from here. Sitting in a high-yield

Starting point is 00:32:16 savings, I'm making my three and a half percent, whatever it is, every single month paid to me an interest, and it's just rolling and having a good time. So totally agree, Robert. What a great breakdown. Our next question comes from Jeff B. Jeff says, I'm a new listener as of a couple weeks ago, and I'm eating your podcast up. Thanks, Jeff. Appreciate it, man. Jeff says, I've been listening nonstop, love the advice and topics, and really appreciate the Q&A. So here's my scenario. My wife and I are both 41 years old. We own four rental properties that net us $20,000 to $25,000 per year and have about $600,000 in equity all together across the four of them. I'm a W-2 employee making a salary of 135 a year, and I get up $30,000 to $40,000 bonus per year as well. I'm also a real estate agent

Starting point is 00:33:00 on the side and manage our own properties and another one. My wife owns a small business. It's projected the net $200,000 this year and growing. We have $650,000 in invested retirement assets, 80% of that in the S&P 500, 20% in big tech stocks. So my question is, how do you factor real estate into your net worth in terms of being prepared for retirement? With our incomes increasing, we intend to keep investing in real estate to help with the tax benefits and such. But how do you think about investing in real estate and calculating that as it relates to early retirement? Really good question. So Robert and I have been talking about the 4% rule in the Trinity study for quite some time. All that means is a couple decades ago at Trinity University, there was a study that took place

Starting point is 00:33:48 that essentially said if you have 60% of your money invested in the equities, in 40% of your money invested into bonds, that portfolio, it is fine, in quotation marks here, to withdraw 4% of that portfolio's value every single year. And if you do that, history tells us that you shouldn't run out of money for about 30 years. And so that has been sort of the way and the kind of cookie cutter retirement portfolio for a lot of people as they get closer to retirement age 60. 65, 70 years old. So they do the 60, 40 equity to bonds. They withdraw 4% of that. And then they cross their fingers and hope that they don't run out of money for decades to come. As it relates to calculating

Starting point is 00:34:37 your freedom number, we had a whole episode about this. Highly recommend going back and finding that or maybe just Google Rich Habits Podcast freedom number. But essentially what the episode does is it breaks down. What do you have today in your retirement accounts? What do you spend today? What do you spend today, what do you think you're going to spend in retirement? What's the difference there? How do we make sure that your retirement spending is now inflation adjusted? And then how much money do you need invested into your stock market, whatever it might be there? So that 4% of that figure in that portfolio reflects the inflation adjusted annual spending you plan to have in retirement. Inflation's been hot lately. Call it 3%, 4%. So a lot of people's 4% withdraws had to go up a little bit because

Starting point is 00:35:28 of this inflation spending. So here's how I personally would think about this. Maybe Robert has a different take on it. I would include that 20 to 25,000 per year in your portfolio income as it relates to what you need in that retirement because that's what you're spending. So this is a real number, Robert, $75,000 of after-tax money spent today in 2006, that same buying power, assuming 3% inflation. Remember, we're at 4.2 right now and have been as low as like 2.6, 2.7 recently, but let's call it 3% inflation. In 25 years when our friend Jeff is, let's call it 66 years old, to have the same buying power in 25 years as $75,000 is today, Jeff is going to have to spend $157,000 a year. So now Jeff has to ask himself, I need, if I want to spend $75,000 a year as in

Starting point is 00:36:22 2026 money, and I want to have that exact same buying power in the future, assuming a 3% inflation, that's going to be $157,000 in future money that I'm going to have to spend every single year. What amount of portfolio size do I need to be able to afford 4%? $3,925,000. So just take that number, multiply it by 25. So now you have $3,925,000 that our friend Jeff needs to have invested 6040 to peel off that 4%. That's going to be that $157,000. Now, how I think about this, Jeff, is that 157 could be supplemented by that 20 to 25,000 per year. So now in this situation, just to kind of really dig into this, Jeff right now is making 20 to 25% net per year with his rentals, but let's call it in 25 years from now, he's going to net maybe closer to $40,000 or $50,000 per year, about double.

Starting point is 00:37:19 And so you can then take that 157, subtract, let's call it $45,000 per year net. And now Jeff needs to come up with the other $112,000 per year from his portfolio. So now Jeff, you'll need $2.8 million, assuming the $40,000 to $50,000 delta there came from your investment portfolio and that 2.8 is invested again in the 6040 equities bond split with the 4% rule withdrawal rate all that fun stuff so you can kind of see how like the portfolio is going to go do this assuming you can also go make a little bit here with your rental income you don't need as much portfolio income because you've got some other rental income over here and they kind of offset each other there so that's how I would think about it but I think a lot of people Robert and this is

Starting point is 00:38:02 worth really harping on for a second are not thinking through how big their portfolios might need to be in 30, 40 years from now, like my age people. I just turned 30 this year. I've got 35 more years till I'm 65. We're talking about $200,000 of spending power is equivalent to 75,000 today. And don't get me wrong, 75,000 is a lot of money to spend, but it's not as much as you might think. And so, like, I just, you should really think through if we have a consistent two and a half to three percent inflation for the next 10, 15, 20, 30 years, Robert, how does that impact? How does that impact my retirement planning. I want to spend so much per year. Do you have that actually calculated in your own Trinity study 4% withdrawal there? Really do some research around that. Yeah, that's a really

Starting point is 00:38:49 good breakdown. And I think there are a lot of holes in people's strategies when trying to figure all of this out because you think about this situation here with Jeff and his wife in the four rental properties. I guarantee you if they go in front of their CPA or, you know, their local financial advisor, he's going to give them all these glowing numbers from these rental properties, but he's not going to take into consideration real conservative, moderate numbers of what the capital appreciation is per year. He's going to Google it and be like, yeah, these are going to go up 8% a year forever. So you're going to have all this extra equity and money to go towards retirement. And generally that's a mistake. And it's also people need to understand their total

Starting point is 00:39:34 net worth versus their liquid net worth because a lot of people want to look at their net worth and include their primary home. And I think a lot of times when you're calculating to get to the Trinity study and what that 4% rule is, you shouldn't include your primary home as an asset because I think it gives you misleading numbers. And then the last thing I'll add is people never put the numbers in of what it actually cost to sell these properties 20, 30 years down the road for all the fees for closing costs and commissions and all the things that go into, they just say, okay, this house is going to be worth X, Y, Z, and we're going to own this, but they forget about all that money in that appreciation that's going to go out the door in closing fees and

Starting point is 00:40:19 other fees. So I think you did a really good job, but there is always a lot to consider in this situation. I personally think people should not use their primary home. They should use their liquid net worth. they should be moderate with their upside on numbers and calculations for the long term over that 10 or 20 years because we see market pullbacks all the time. The real estate market is up down and sideways every 5, 6, 8 years. So that's how I would do it because you want to make sure, like you said, people are living longer.

Starting point is 00:40:49 They're going to need more money than they think, especially people your age, Austin. So I think they need to be more conservative with what they're saying things are going to be and what they actually need to retire comfortably and maintain the lifestyle that they want. Now, here's the good news. Our friend here has $650,000 already invested in the markets, and that's going to continue to double every seven years, assuming the S&P continues to return about 10%.

Starting point is 00:41:14 So, like, everything's cool there. You're going to have millions of dollars in retirement, so like don't even sweat this stuff. This was more of a mental exercise. I guess to Strawman, the other side of this, against what I was saying, you know, the 157,000 in 255 years equivalent to 75,000 of spend is, and this is proven to be true, as time goes on, things become deflationary.

Starting point is 00:41:38 Like, there are things that are deflationary in nature. And so I'm not saying that that's like going to be the exact kind of apples to apples comparison, like groceries and fuel and like things absolutely go up in value over time, medical care, transportation, stuff like that. But there are parts of the equation that do go down over time. So, like, I'm not saying that this 3%, like the 75 to 157 is going to be a linear line and that's exactly how much you need. Like, all of this is up for grabs. They can be very different.

Starting point is 00:42:05 But the point of me sharing all that was so I don't want people listening to this episode to say, okay, I spend $60,000 a year or $5,000 a month. And that means I need to come up with $5,000 a month and I can retire forever. Sure, you could retire in today's money, but as inflation continues to trend up into the rest. right, as other things begin to happen as the years and decades tick by, that's when you have to say, wait a second, $5,000 of 2026 is not $5,000 of 2036. And I need to now have a portfolio that can reflect that appreciation. And you make sure I'm earning a little bit here, stashing away stuff here. It's a very tricky thing. And no one has the right answer here. And I'm not pretending that we do. But I do think it's very important to think about that as you are doing your retirement planning.

Starting point is 00:42:52 because inflation has reared its little head back up, and we have a 4.2% inflation rate right now, and the Fed, it's been six years, five or six years since inflation came in 2021, late 2020, and it's not really gone away, right? Yeah, it was 9 or 8%. Now it's closer to 2, 3, 4%, but it's still much higher than that long-term average of just 2%, which a lot of these retirement planners use that 2% model in their own. So if you have a financial advisor, ask them, Hey, with the stuff that you've shared me recently, what's the inflation rate on this? What are we assuming? Is it 2%? 2.5? 3, 3.5? How can we make sure we have a buffer in this plan to assume that inflation might be stickier for however many years like it was maybe in the 70s and 80s?

Starting point is 00:43:38 Wow, what a great call out. So our last question here is coming from Fresh Water Hustle on Instagram. I love it. They're saying, hey, Austin and Robert, I discovered a podcast a few months ago after a client randomly mentioned QQQ, I thought they were speaking gibberish, and I googled it and somehow found your podcast, and the show has completely changed my life. That's cool to hear. If you Google QQQQ, maybe you stumble upon the Rich Habits podcast. What an honor that would be, right? So, cool to hear that. They said, I just turned 40 and thanks to you all, I'm currently building my base aggressively from scratch with the goal to have 100,000 invested by the end of 2027. Right now, my net worth's 50 grand, and I've got about 8,000 in checking, 12,000 in ETFs, 10,000 in a high

Starting point is 00:44:21 yield savings, $2,500 in a pension in 16,500 sitting in my teaching retirement system pension from days teaching public school. The TRS rate of return is very low, and I'd love to get this money out of there if it's possible, and into a traditional IRA where I would have so much more control over how it's invested. I opened up a Roth and a traditional IRA, and I can do a direct rollover, not partial rollovers, but the problem is the amount of money that's in the TRS is above the acceptable IRA contribution limit for me. How should I think about rolling this money over? Do I need to do something special here? Am I forced to keep it in the TRS? I'm not sure how to proceed. So, Robert, this is a great opportunity for us to remind everyone the difference between contribution

Starting point is 00:45:06 limits and rollovers. So all you got to think about here is when it comes to contributions, this is net new dollars that you are contributing from your checking account into this retirement account. You can only contribute so many net new dollars into retirement accounts every year. Right now, the maximum you can contribute to a Roth IRA is $7,500. The maximum you can contribute net new dollars into a traditional IRA is $7,000. That's up from $7,000. Then it was like $6,000 something a couple years ago. But like it goes up a little bit every year. But that's net new dollars that you can contribute to these accounts. Rollovers are very different because that's money you already contributed in the past. It does not impact your contribution limit.

Starting point is 00:45:50 So you can roll over all of this money into a traditional IRA, all 16,500, and you're off to the races. Everything's fine because it's not a contribution. It's a rollover. You've already contributed the money. You've already, you know, done the stuff. Now it's just moving it from one account to another. I recently did this with a SEP IRA. I had about $85, $90,000 sitting in a SEP IRA that I rolled over into a solo pre-taxed.

Starting point is 00:46:17 4-1K. I've also done this with other accounts in the past. Like it's just you can move money just fine, roll over, roll over, roll over, all good vibes and not have to worry about that contribution limit because as it kind of sounds, you're not contributing net new money to the account. You're simply rolling it over from one account to another. Now, I'm no expert when it comes to the TRS, the teaching retirement system here, the pension you've got. So make sure you're following the rules there. Make sure you do a little bit of research on like what those rollovers look like. You mentioned you can do a no partial rollovers so make sure you're rolling over all of that amount just make sure you're doing all the normal stuff there don't want to get a weird tax bill or a penalty or something weird

Starting point is 00:46:56 with that so just do a little bit of research but regardless i love how you're you're thinking about this you're auditing your portfolio you're seeing some low returns in one spot and you want to get it rolled over open up a public dot com account open up a traditional iera on public roll it over into there you might even get a bonus if you're lucky and then with that money get it working for you in the index funds and ETFs we talk about like V-O-O-D-I-A-Q-Q-Q-Q and all the other fun stuff. Austin, what an incredible episode. So many great questions. And I just want to give a quick reminder, July 10th, Friday, noon.

Starting point is 00:47:31 We are going to be building AI agents live with public.com. It's a free webinar. Make sure you guys add it to your calendar. It's in the show notes below. And one more call out that we don't talk about enough is Wall Street, If you guys are trying to figure out what stocks you own, are they the right stocks? Are they performing as good as Wall Street thinks they should? All of the above, make sure you guys check out wallstreetfavorits.com.

Starting point is 00:47:58 Yes, Wall Street favorites, the easiest way to know what Wall Street thinks about your own portfolio. And to learn more about what Wall Street is buying with their own money. Wall Streetfavits.com, there's a ton of cool stuff over there. Be sure to go check it out. Everyone, thanks so much for joining us on this week's episode of The Rich Habits podcast question and answer addition and we'll see you tomorrow on friday for our episode of the rich habits radar.

Rich Habits Podcast - Q&A: $9M In One Stock, Cash-Flowing Real Estate & Direct Rollovers

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.