Rich Habits Podcast - Q&A: Texas Stock Exchange, International Stocks, & Investing While in School

Episode Date: November 21, 2024

In this week's episode of the Rich Habits Podcast, Robert Croak and Austin Hankwitz answer your questions!---⭐️ Open a Bond Account on ⁠⁠⁠Public⁠⁠⁠ to lock in your 6% or higher yield today, ⁠⁠⁠Click Here!⁠⁠⁠---🚀 Sign up for the Rich Habits Network so you don't miss out on the next big investment opportunity, ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠click here!⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠---⭐ 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⭐ 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]---Disclosure: A Bond Account is a self-directed brokerage account with Public Investing, member FINRA/SIPC. Deposits into this account are used to purchase 10 investment-grade and high-yield bonds. As of 11/20/24, the average, annualized yield to worst (YTW) across the Bond Account is greater than 6%. A bond’s yield is a function of its market price, which can fluctuate; therefore, a bond’s YTW is not “locked in” until the bond is purchased, and your yield at time of purchase may be different from the yield shown here. The “locked in” YTW is not guaranteed; you may receive less than the YTW of the bonds in the Bond Account if you sell any of the bonds before maturity or if the issuer defaults on the bond. Public Investing charges a markup on each bond trade. See our ⁠⁠⁠⁠⁠⁠⁠⁠Fee Schedule⁠⁠⁠⁠⁠⁠⁠⁠. Bond Accounts are not recommendations of individual bonds or default allocations. The bonds in the Bond Account have not been selected based on your needs or risk profile. See ⁠⁠⁠⁠⁠⁠⁠⁠https://public.com/disclosures/bond-account⁠⁠⁠⁠⁠⁠⁠⁠ to learn more.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.

Hey, y'all, it's Kelly Clarkson with Wayfair. Ever order furniture online and wonder, what if? Like, what if it doesn't hold up? That sofa was four days old. You should have ordered from Wayfair. With Wayfair, there's no what if. Just style you love and quality you can trust. Visit Wayfair.com.

Wayfair, every style, every home. Hey, everyone, and welcome back to the Rich Habits podcast. At the moment, we are number six, Robert, five or six. Top Business podcast on Spotify, feeling good. It is go time. Back to number one. We deserve it. We've put in the work.

We've been crushing it for our audience. So I'm excited. Well, everyone, this is our question and answer edition of the podcast, which means you ask us questions and we answer those questions as if we were in your shoes. You can send us questions via Instagram DMs. We've got a handful of those here. You can email us questions. We actually have a handful of those in this episode as well. Or you can ask us questions inside of the Rich Habits Network, which is preferred because we always get back to the questions that are asked over there.

There's a link in the show notes below to join and learn more about the Rich Habits Network. Now, Robert, this is going to be a fun Q&A episode because we're talking about the Texas Stock Exchange. We're talking about cryptocurrency inside of Roth IRAs, different allocations as it comes to international stocks. We'll be talking also about how to buy a $1.1 million home and then finally round things off with a little bit of inheritance tax information. So this episode's going to be super informative. We're all over the place. I think that's what's so fun about these episodes, Robert, is you never know what question you're going to get next because we have such a diverse audience. base of listeners that are always just going through some really interesting financial situations.

Yeah, I love it because we have an audience of people that are at all different spectrums and different levels of their personal finance journey or their business journey. And I love that because we can help everyone, whether they have $10,000 or $10 million, kind of figure it all out because you say that a lot in your opening and it's just really critical and important because personal finance is personal. So I love the fact that each nugget that we provide can be different for each person. And so that's what makes this so rewarding for us to write. And these Q&A episodes are just so much fun for me because, like you said, they are all over the board.

So before we get into it, though, just a quick heads up, folks. Interest rates are falling, but you can still lock in a 6% or higher yield with a bond account at public.com. That's a pretty big deal because when rates drop, so can the interest you earn on the investment. A bond account allows you to lock in a 6% or higher yield with a diversified portfolio of high yield and investment grade corporate bonds. So while other people are watching their return shrink inside of their high yield savings accounts and other accounts, you can sit back and enjoy regular interest payments inside of a bond account on public.com. But you might want to act fast because your yield is not locked in until you actually invest. The good news, it only takes a

couple minutes to sign up at public.com. Lock in a 6% or higher yield with a bond account only at public.com forward slash rich habits. This was brought to you by public investing, member FINRA and SIPC, and this is only as of November 16, 2024. The average annualized yield to worst across the bond account is greater than 6% at the moment. Yield to worst is not guaranteed. This is not an investment recommendation. All investing involves risk. Visit public.com slash disclosures slash bond dash account for more information. Now with the disclosures out of the way, Robert, I do want to linger on this bond account just a little bit longer because if I am right, I'm pretty sure the public.com bond account is paying a 7% yield, right? Not just six, but we're back to 7%

yields right now inside this bond account. And it's so interesting too because like you look back and you think, okay, well diversified portfolio, you build your base to $100,000. What are other ways I can diversify my portfolio? Historically speaking, bonds have been pretty boring. You get it for your snotty kid on their birthday and say, hey, good job. Like, go cash this in in 30 years. There's nothing boring about a 7% yield, Robert. So I just want people to kind of rethink about how bonds might fit, especially now at a 7% yield, corporate bonds might fit inside of a well-diversified portfolio. Yeah, I think you bring up a great point because I see it on our private lives in the Rich Habits Network where people's interest really peaks when we're

talking about cryptocurrency or the navidias or the palanteers of the world or the next great company, but they don't get peaked when we say bonds are making 7%. And that's because everyone looks at investing like it's supposed to be this big party and foray and emotions and all that. And it really isn't. We want you to look at it that it's just kind of this boring, you know, methodical. You have your plan. You stick to it. Your dollar cost average. And right now bonds are paying so well that everyone should just consider having a portion of their portfolio in these kind of boring sectors and products because you want to have that money growing over time and you can't have everything in these high flyer stocks and cryptocurrencies.

I'm right there with you, Robert. Now, let's take our first question. This one's coming from Michael F. Michael says, how will the Texas stock exchange affect the overall stock market? Now, Robert, I don't think we've talked about the Texas Stock Exchange on the podcast before. I'm pretty sure the timeline for this stock exchange is 2025 and 26. So maybe let's take a moment to kind of introduce what this might mean for our listeners as it relates to the traditional New York Stock Exchange and the NASDAQ, why they did this, how much they're spending

on it, some of the backers, right, some of the investors that are involved. So I'll kick off this conversation. The Texas Stock Exchange is a planned stock exchange intended to be headquartered in downtown Dallas, Texas. It has attracted significant investment with about $120 million raised over two dozen investors, including BlackRock in Citadel Securities. This makes the Texas Stock Exchange one of the most well-capitalized new entrants to file for SEC regulation. Now, what's so interesting, in my opinion, Robert, about the Texas Stock Exchange is their whole idea for competition against the New York Stock Exchange in the NASDAQ comes from offering a more

business-friendly environment. So they seek to attract companies. who are being frustrated with the increasing compliance costs and like the politically influenced sometime listing rules inside of New York. I read that this exchange intends to have all national securities, right, fully electronic. They've got the primary listings, dual listings, exchange traded products, ADRs, non-U.S. firms, all that other fun stuff that comes with listings.

And the goal is to start facilitating trades in 2025 and then to host the first listing in early 26. Yeah, I love it. And whenever you can add competition to a market that is as big as the New York Stock Exchange and NASDAQ, I think it is great and it's long overdue. There's been whisperings in some of the articles and some of the stuff on X where this is going to be the BlackRock Exchange and they're going to have more control, et cetera, et cetera. But I think the biggest takeaway for me in what I've read up about this is the offering a more business friendly environment. We have heard for decades that the New York stock.

exchange is very difficult to deal with and that is just overly laborious and expensive to be able to even file with them for an IPO. So I think having another alternative is going to be great for innovation in the United States, especially if it ushers in a new era of more IPOs, because then it lets these companies, a lot of these tech companies that have stayed private longer, it lets them get in the mix, raise the capital they need to grow fast. And I think it is going to be an incredible, incredible era in stocks, IPOs and just the markets in general when this gets live. Yeah, and I didn't know this, Robert, when I was doing some research, but Texas is an economic powerhouse. They're home to more Fortune 500 companies than any other

state in the United States, which that's just unreal to me. Now, the skepticism, right? What could go wrong with this? So what I've found on the Internet, Robert, as it relates to the skepticism, if this is a real thing, is they will only be able to truly compete with the NIC, with the NASDAQ, and these other exchanges if they have substantial trading volume and market acceptance, right? So you're only in exchange if people are using your exchange, right? Which is now going to be interesting as we already have these powerhouse exchanges that everyone trades, you know, their stocks and equities on. So how's I going to impact it?

I'm not sure. At the end of the day, I think it's really cool. I think it's a great idea for innovation. It's great allowing us to have sort of this like more business. friendly environment and maybe we'll see like smaller companies start listing because it's probably a little bit more cheaper which could be really cool right i mean amazon was a small company back in the day when they IPO in 1994 and now look at them now so there's a lot of really cool things to look forward to as it relates to the texas stock exchange so appreciate your question michael so our next

question comes from dana m inside of the rich habits network she says first i am so grateful for this podcast and the network that i'm inside of as i'm educating myself and my adult children about smart investing and now asking questions both here and with our Vanguard advisor. Our Vanguard advisor diversifies our portfolio based on our risk tolerance. So we have about an 80-20 split between stocks and bonds. Because the rally we've recently seen, our stocks are now about 85 versus 15, and we told them to leave it that way. They say we're taking on a really big risk. I'm not going to lie, that makes me nervous because I feel like they know more than me. So here's my question. Should I be diversified in not just stocks in the U.S., but also international stocks. And what do you guys think about

this 85-15 split in my current portfolio? Robert, I'll let you kick this one off. Yeah, Donna, it's a great question. I love that you're a little bit nervous. And I think it's important to understand. Austin and I talk about this all of the time and we see it on a daily basis that I believe people are over-diversified into international stocks. And the numbers really don't lie. If you look at the last five years of worldwide performance versus, let's say the S&P 500, the New York Stock Exchange, the top 500 companies in the United States. It has underperformed by 50%. So for me, I always feel I want to go where the money is. I want to look at the math. And I want to stay there because of the opportunity cost of watching my money grow. So in my opinion, I don't think you're at all wrong having this 85, 15,

lend because once you get international up to say 20% or higher, same with bonds, I feel that you're leaving too much money on the table by not betting on the top 500 companies in the U.S. And so that's my opinion on this. I'm so happy that you're keeping an eye on it because you're going to perform better than most people who just lead a blind eye and let some broker they barely know handle their money. So I think great work. And yes, I agree with what you're asking.

I love that perspective, Robert. Donna, does the Vanguard advisor know more than you? They probably do. They probably have some really cool letters after their name, some certifications, some different licenses, you know, stuff like that. And we don't mean any harm to them. But I would imagine that their job is more focused on capital preservation than capital growth at the moment. An 85-15 split between stocks and bonds, I think, is healthy. That's totally normal. Assuming you're in perhaps your 50s and 60s, the mistake people make, And I just want to make sure people understand like my perspective on this, which is unless you truly plan at 65 years old to sell all your stocks, go all in on cash, and then live off this cash for the next 20, 30 years of your life, you should stay invested. Now, you can balance that investment.

You can have a little bit less risk in your portfolio. But people, I think, make this mistake of, oh, my gosh, retirement's 10 years away. Like if we have a dip, we'll have a dip going into 65. And then it's like, then I'll lose all my money at 65. it's like, no, are you going to live till 70, 75, 80, 85? Probably, statistically speaking, you will. Therefore, you should stay invested into those years as well. And so by staying invested for me, that means having that 80, 85%, maybe 70 or 60, depending on your risk tolerance,

but having these stocks in your portfolio and these equities that are not international in the sense that they don't really have a track record, right? We want to lean into things that have a long track record of growth, which is American capitalism, them, the S&P 500, the NASDAQ, the total stock market as well. So I just want you to really think about Donna, like, how close are you to these retirement years? And then how do you want to spend these retirement years? Do you want to spend them kind of living in fear as to, oh my gosh, is my money just going to evaporate if I stay in the markets, which statistically it doesn't? Or two, do you want to allocate your portfolio in such a way that, yeah, you're going to see some protection from bonds

in risky environments, but you're also going to see some amazing upside. I mean, the S&P 500 is up 25% this year. It was up 28% last year, Robert. Like, if you're all in bonds or cash or whatever else in retirement, you won't realize that. Newsflash, that's a 60% gain year over year when you compound it. So it's just so important, I think, for people to stay invested throughout retirement in a risk-adjusted way that makes sense for them. And I don't think international is the answer here. And I want to add some more to this, and that was a great take. And that is, Donna and everyone else listening and following along. We're not saying bonds are bad. We're not saying. international is bad. Our message is always very clear. Without being too risk on, we want to make

sure that everyone has a portfolio that's built for their risk tolerance. When you go into this financial advisor's office, they don't know anything about you. And if you don't properly tell them where you're at and where you feel from a risk tolerance perspective, then they're going to put you in a really safe spot. And sometimes that's okay, especially if you're in your 50s and 60s and you're edging towards retirement where you want to take some of the risk off the table, take your foot off the gas a little bit. But for those of you following along that are in your 20s, 30s and 40s, if you take your foot off the gas too much too early,

then you leave millions of dollars on the table that you didn't earn because you were so risk off. So I just want to make sure everyone understands that from the different age categories because we have a very wide audience here to understand the when of how you, you make these adjustments? 100%. And I will die on the hill, but you should stay invested throughout retirement. Turning 65 is not a milestone of woo-hoo. I get to cash out everything and sit in cash for the next 30 years. That's a terrible idea. You want to stay invested. Risk adjusted returns. Understand that risk profile for you. Couldn't agree more, Robert. Now jumping to our next question from Marie N. Marie says, hey, everyone, I'm 55 years old and I've reached my personal limit on investing in crypto in my

bridge account. But I have a sizable nest egg in a traditional IRA and a Roth IRA in Vanguard. Unfortunately, Vanguard's not allowing any crypto purchases. I've got room left in my backdoor Roth conversion for the year. So I'm thinking if there is a Roth out there that will allow me to invest in crypto, I can open an account on that, transfer money in and then throw it into some of my crypto favorites like Bitcoin, Ethereum, Solana, Chainlink, XRP, and others over the coming week. Now, I've seen that there's some online IRAs that'll allow for only Bitcoin, but that's all I've been able to find. So how have you all been able to add cryptocurrency to your own Roth IRAs? Really good question, Marie. In my experience, the only

cryptocurrencies I have in my Roth IRA is Bitcoin. It's about $15,000 worth. It makes up about 20-ish percent now, because it's increased so much over the last two years of my account, which I think is pretty cool. And, you know, once Bitcoin kind of does its thing, I'll probably shave some off the top and move it back into the S&P 500. But Bitcoin is the only way I have crypto in my IRAs. Right. I want to remind everyone that, you know, the IRA is sort of this like never touch money, right? The Roth IRA, the traditional IRA, even the 401K, these accounts are money you don't want to be too risky with. Money you don't want to gamble with. You don't want to trade options inside of these accounts, right? Allowing your money to have undue risk that could pull down its value tremendously,

inhibiting you from retirement. So in my opinion, having a little bit of big. Bitcoin in a Roth IRA is great. Call it 5 to 15% is the rule that Robert and I like to say. That is a little bit less than what I have again because my Bitcoin's gone up. But again, I'll rebalance here pretty soon. But yeah, I really encourage you, Marie, not to think about, you know, having a 19 different crypto portfolio in your Roth IRA. So having a little bit of Ibit, having a little bit of ether, right, which is the I shares Ethereum trust ETF. Having some of these in your portfolio in a very normal ETF structured way, I think is the best way to do it versus opening up a new account, rolling stuff over, having to do some

different forms and different tax stuff, like just buy some ETFs and ride the way with the rest of us. That's my advice. Yeah, and I'm going to take a little bit different approach, Marie. I love that you're thinking like this, but I think you're overcomplicating it. I don't think you should be worried that every little piece of what you're building in your crypto part of your portfolio needs to be in some special tax efficient fund. I think I would look at it. Get that public.com account set up.

If you like Coinbase instead, use Coinbase. Build your account. Do your investing there. Make sure you understand how to use the platform and forget about it. Because right now the importance in the crypto market at least is that you should be dollar cost averaging. You should have done all the work over the last year. But if you still have more work to do, dollar cost average in, get the money working,

get these amazing gains and ride the wave of this cryptocurrency. adoption over the next few years and then reevaluate. That's it. Just keep it simple. You know, you might find that one coin is available on Coinbase. It isn't somewhere else. That's okay. You can have multiple platform accounts. I have so many of them because I buy more cryptos than most people. So keep it simple. You've got the right list. I love Bitcoin, Ethereum, Salana, ChainLink, XRP, Sui. It's a great start. And just keep it simple because I think you're trying to overcomplicate it to get tricky and find better ways to do it, which I love that you're thinking like that, but it's not always necessary. I couldn't have said it better myself, Robert. I'm right there with you, man. Now,

listen up, guys. Time could be running out to lock in a 6% or higher yield at public.com. You can lock in a 6% or higher yield with a bond account at public.com, but remember your yield is not locked in until the time of purchase, so you might want to act fast. Lock in a 6% or higher yield with a diversified portfolio of a high yield and investment grade corporate bonds only at public.com forward slash rich habits. Don't forget the rich habits part because a lot of people I've seen in the school community and across our emails and our DMs are like, hey, just open up this account on public and I found it on the internet because you guys just typed it in Google. No, head over to public.com slash rich habits because you get some extra free money. I think it's like 10 or 15

bucks if you open an account with us, get some free money to fund your account with. You're off to the races automatically. That's the power of the rich habits podcast, Robert. Well, and it also shows us some love because we're always providing all of these great platforms and investment ideas and ways to do things. And those links help us as well because it supports us and lets these platforms know that we're doing a great job to get them the right type of audience onto these platforms because, you know, we only talk about the platforms that we use and that we like and trust. So it's just important to try and use that link when you can.

We appreciate it. So don't forget, lock in at 6% or higher yield at public.com with their bond account. Now, our next question comes from Danielle E. Daniel says, I just started a new job at a new company, and I'm wondering what I should do with my traditional 401K from my old company. Should I take it out and put it into an after-tax Roth IRA? I know I'll have to pay taxes on it because it's a pre-tax 401k, but it seems better to pay taxes now versus later and then put it into another traditional pre-tax IRA instead.

My new company doesn't offer a 401k match either. They are more of a startup, so they're offering equity in the company with stock options. Let me know what you all think about this. You are completely right, Danielle. So let's just make sure we lay the groundwork here for everyone listening and kind of what Daniel's figuring out. Daniel has, let's call it, $50,000 in this 401k from her old employer. You want to make sure you don't just leave money sitting around an old 401k's.

Robert and I are big proponents of active management and being able to have autonomy of your investments, especially if you can do it. So now that she's on to bigger and better things, she has that autonomy and she can definitely go do that. So she could either leave it over there, which we don't want to do, or she can take it and put it into a traditional IRA. So 401K to traditional IRA, they are completely the same thing. You can just move the money over. No taxes are involved. It's a very simple process.

I've done that myself. Or you can take the 401k and then roll it over to a Roth IRA. And as a reminder, everyone, the Roth variant of these retirement account. means it's after-tax dollars. And this 401k is pre-tax dollars, which means if she would roll the money over from the 401k into the Roth IRA, she'll be paying taxes on the amount that's rolled over. So, Danielle, I totally agree. Roll it over to the Roth. If you can afford it, make sure that you are doing this in such a way, heck, I would even consider doing this next year in 2025, giving you an entire 12 months to save up for that tax bill that will be due then April of 2026. If you roll it over here in 2024, you're going to have to owe those taxes in just like three or four months here in April. So wait two months, especially if it's invested correctly already in that 401K. Give yourself a little bit more time to perhaps save up that money you need to make sure you can take care of that tax bill in April. But that's definitely a great idea, rolling it over to the Roth, ensuring that you are able to now grow this money tax-free throughout the rest of your life.

Yeah, I think that was a great takeaway. And for everyone listening, we just always want to see tax-free growth. and that's why we are a big proponent of the Roth IRA. So I think it's always better in a situation like this. And Austin, you spelled it out great, is for people, take the tax hit now. You're going to pay taxes at some point, and we assume taxes are going to be much higher 5, 10, 20 years down the road.

So I love that strategy. I think it's the best strategy the way you laid it out. And then that money is tax free for life. And it grows and grows and grows. And you don't have to worry about paying the tax man later. So our next question comes from Austin G. Austin says, hey guys, I currently have a Roth IRA with $3,000 in it, but it's not accrued much over the last five years. I've not been contributing to it because I've been utilizing my Roth 401K instead.

My employer matches what I put in, and then I've been using the rest of the money and my budget every month to save up for a house. We just had our second child, and I'd like to transfer this $3,000 out of my Roth IRA and into a $529 college savings plan. Is this possible to do without taking a penalty, or is this money just stuck in my Roth IRA? until I eventually start to contribute to it. Thanks for all you do. Your podcast is awesome. Couple things, Austin, G. One, what do you mean it's not accrued much over the last five years?

The S&P 500 is up like 100% over the last five years. So maybe you didn't have it invested right? I don't know. But just make sure, quick reminder, everyone, if you have a Roth IRA, you have money inside of it, make sure it's actually invested. The Roth IRA is not the investment. It's the account you invest through.

So if you have money in your Roth IRA, Make sure it's invested. Shout out to Century. One of my friends who had like 18 grand in her Roth IRA like two years ago. She's like, yeah, I'm doing great. And it wasn't invested. I had to invest some money for her. I see that all the time.

And I'm so glad you're touching on this. I was like, I got to say it. So here's the deal, right? You've been contributing to the Roth 401K. That's awesome. Again, just want to encourage you match beats Roth, beats traditional. So if you invest up to that match and get the free money in your 401K

and your Roth 401K is allocated. correctly into, you know, these awesome index funds that Robert and I talk about all the time, that that's great. That's a wonderful way to build wealth for retirement. If it's in target date funds or international or cash or bonds or all these other crazy things, you probably shouldn't have too much money inside of, but it takes up your entire portfolio, then you should probably sit down and figure out, okay, wait a second, maybe the Roth IRA is a good option for me and figure it out from there. But to the question, can you take out this $3,000 and put it into a $529 college savings plan? You can. Now, Robert, something people

say about the Roth IRA that I don't agree with is that it's also kind of like a savings account where you can put money into it and you're right these contributions up to $7,000 a year. And you can also take out your contributions at any time, tax free, penalty free, because again, you've already paid taxes on this money. So yeah, Austin, if you want to take out the $3,000 out of your Roth IRA and put it into a $529 plan, which I think is a great idea, go for it. Like that's totally cool. Just really want to encourage you to reevaluate your sort of entire retirement. portfolio as it relates to the Roth 401k, figure out how do I now begin to invest toward my Roth IRA again. Congrats on buying the new house and the new baby. Yeah, I agree with it. I think

everyone that has a Roth should look at it as that is my future. Don't look at it as a savings account. I think that's a mistake. Even though you can take out your initial investment over time without penalties, you shouldn't do it. You have to have an account. I promise you as you get older and you get to my age. You have to have an account that you think of as I don't touch it. I'm not going to touch it. That's going to make sure I'm safe in retirement. No matter what is going on, you have to put that mindset to work on that Roth and that retirement account. And then if you want, have the bridge account, have the other account, the public.com account for the money that you might want to play with, make money with, but you could look at it as taking in and out as you're growing,

but don't do it with the Roth. Right there with you, Robert. Our next question comes from B. I hope I pronounce it right. Spelled B-H-E. I'm a big fan of your podcast and I never miss listening to an episode and I've shared it with a lot of my friends. Before I jump into my question, I want to share my financial background. I'm 42 years old and my wife and I take home $325,000 a year. We have an $800,000 home with a mortgage of $250,000 left at a 1.65% interest rate with a 15-year fixed mortgage. We have about $550,000 invested in our 401ks, $50,000 and $1,000, and $1,000, and our HSAs, 350,000 in our bridge account, another 110,000 in cash sitting in our bank. We have an investment property worth $360,000 with a $270,000 mortgage on it. It's leased for two years,

and it brings in about $2,400 per month in rent. Now, my question is this. We want to buy a new home for personal use, which will cost us $1.1 million. Is it good to buy this house with a 30-year mortgage as the house will likely be ready December 2025 or 2026 with a 10% down payment. Or is it a better idea to sell our current home of $850,000, take the $500,000 of profit, and then use that as our down payment? Or is it a even better idea to hold onto our current home, use it as an investment property, and lease it for $3,500 to $4,000 per month? You guys have my whole financial picture, so please let me know your thoughts. Robert, do you want to kick this one off? Yeah, I love it. This is pretty complex, but let me take a stab at it. I think personally, in your situation, being high earners, you're always looking for write-offs,

you're buying real estate, you're adding it to your portfolio, so that gives you some balance against your income. But in this situation, I would keep the $800,000 home. You have a ton of equity in it, and you have a very low interest rate. I would turn that into a rental as well. I think having $110,000 in cash is way too much. And based on how you set it cash in bank, I don't think you have that in a high interest account. So that's a little scary to me. So I would use the cash, some of that cash, towards the new home. I would keep the current home, make that a rental as well. So then you have the two rentals working for you. And because you're in such a great equity position on both properties, I personally wouldn't sell them. Looking forward and having to be a lot of, you're in having to

having that high capital appreciation, which it seems you have on these properties, I would want to keep them letting them grow, letting me gain more equity in those properties, and then worry about it again down the road maybe in two, three, four, five years because you just don't want to be in a situation where you're taking all these tax hits all at once while you're buying the new house, but also giving up such a great situation with that 1.65% mortgage. Oh, Robert, I'm torn. I'm so torn right now. So let me just like, walk you through my brain. You have an $800,000 house, $250,000 mortgage. That's $550,000 of equity you're sitting on. Sometimes, Robert and I would call that $550,000 dead money, considering how

quickly the house is appreciating or not appreciating. So if you keep the $800,000 house and you use it as an investment property, you are essentially saying, I am paying $550,000 of my hard-earned cash to earn $3,500 per month in top line rental income. And I ran the numbers on this house. I could be wrong here, but I think you're all-in mortgage cost at this 1.65 rate for your 15-year fixed is around $2,000. So if you have a $2,000 all-in cost, that means you're profiting about $1,500 a month in rental income off this $800,000 home. $1,500 a month is about $18,000 a year. So you're getting an $18,000 per year cash flow against your $550,000 investment, which is only 3%, a 3% yield on your money, which is why I'm going to lean towards selling the home. Take that $550,000. I'm not a tax

accountant, so I don't know the tax situation of selling this home, but assuming the taxes aren't terrible, you now have $500,000, $450,000 that you could do a couple things with. The stock market's up 60% over the last two years. 60% of $450,000 is $200,000, right? I just think about the opportunity cost here of holding onto that home, despite it being at a 1.65% interest rate, which is incredible. It's just so much money. So if I were in your shoes, you guys already have $900,000 invested in your retirement accounts and your bridge account and everything else. So you're good to go from an investment perspective. You guys are going to continue to build this portfolio. You all want to now, you're in your 40s. You want to have this forever home, this dream.

home. It seems like, you know, talking about be ready by 25 and 26, seems like maybe you're building it. Maybe you're having a custom built. If I were you, I would take a portion of this 450,000, 500,000, if not all of this 450,500, and use it as a down payment on this $1.1 million home. Maybe you take, you know, much less, right? You mentioned the 10% down. So maybe you do only 110,000 and invest the rest. Because I think this is important for everyone.

And I do this myself with my own rental property and how I kept it, right? Because, like, if you are saying I'm keeping this property and using it as a rental from the outside in, you are saying, okay, would I have $500,000, the conscious decision of having $500,000 tied up in this to only make $18,000? Like, that's what you're doing here. Just like if you sell it, you're making the conscious decision of taking that $500,000 and parking it in the markets and having it double every seven years. So just got to understand the opportunity cost about what the questions are that you're asking and, you know, how this all shakes out. But I would use some of that money. Go buy this $1.1 million forever home and enjoy it. You guys are making a ton. You've

a big portfolio and you deserve it. Congrats. So here's one more thought process to add to Austin's math to help you decide. Let's say this house, we don't have the term of how long you've had it to get all of this equity, but let's assume right now that your capital appreciation on this house every year is 6%. And you make that 3% based on where you're at right now in Austin's math. You're at a 9% return. It's not the same. It's a little different because it's not in stocks and ETFs, it's in your home. But one thing to look at that I would add, just one final point is right now mortgage rates are high. So a lot of people are sitting on the sideline and we thought with these Fed cuts, we would see mortgage rates drop. They have not done that yet. So one way you could look at this

is sell the house, but just not yet. I would wait until the market is more favorable and it becomes a buyer's market in their opinion because rates are down because I believe you'll get more more money for the house then and be able to capitalize as much as you can on the sale. So it's always going to be a slippery slope because right now the stock market and the crypto markets are ripping. So having that 500K would be great. But then also, you're not in a situation where you're going to get max value for your house, I don't believe, given the current environment for mortgages. So that's just one last thought process. Now our next question comes from Abby. Abby says, how do you continue investing early and often if

you are in grad school. For example, I'm in medical school and I'm not making any money. Robert, what's your take on this? It's a tough one, Abby, and I feel your pain, but you have to find a way. I don't know what that looks like. I don't know if it's a side hustle on nights. I don't know if it's a job on weekends because let's assume you're at a break-even standpoint with your life right now. Medical school's getting paid. You have your rent. You have your car payment. All of that's taken care of. If you're at a zero sum right now and you could go out and get a side hustle one or two days a week and make three, four, five hundred dollars a week and get all of that invested and get started, then I think that would be a fantastic move. I know that's not what you want to hear,

but I also don't think you can sit around for two, three, four, five more years before you start building for your future because a lot of times you're just leaving so much money on the table because you're not investing early and often. Right. They're with. you Robert. I just did the math. Abby, assuming you might be like 25, for example, I just made that number up. You might be a little older, a little younger. But if you're 25 years old and you plan to retire at 65 years old, right, so 40 good years of investing at 8 to 12 percent, which is the normal market returns here, just $100 a month for 40 years invested, right? $100 a month. How easy for you, Abby, is it to make and invest $100 a month? I'd argue pretty easy, right? So you just invest, invest, invest,

$100 a month, you're in grad school, you're working hard, that turns into $1.1 million in retirement. So $100 a month for 40 years, starting at $25 to $65 to $1.1 million. Now let's pretend, Abby, that you didn't start investing this $100 a month until 35 years old, right? So you didn't invest at all, you're focused on your schoolwork. At $1.1 million is now only worth $300,000. So every year that goes by this amazing nest egg that you can be. be building with only $100 a month in your Roth IRA shrinks dramatically. So start investing anything early and often, right? Anything you have, is it 10, is it 30? Is it 100? Is it more? Is it less?

It doesn't matter. But just, I mean, heck, Robert, let's just do the same thing with 50 bucks. $50. $50. Abby, I bet you have $50. I bet you can do that. That's still half a million dollars. Half a million dollars in 40 years off just $50 a month. Like, come on now. So Abby, I hear you. I'm right there with you. I was broke in college. I was washing cars at a car dealership. I was cleaning car headlights as a side hustle. I was working in the mall, fixing iPhones. I mean, I was doing a bunch of stuff in college to make just a couple hundred bucks,

pay my rent and my utilities and stuff like that. But I just, I did have that 50, 25, 75. I don't make $500 a month, right? That's all it takes. So just really want to encourage you that no amount of money is too little when it comes to investing early and often. 100%. I did a TikTok like a month ago talking about how to,

become a millionaire in how little money you really need to be able to do it in retirement. I had all the haters saying the math is wrong, you're never going to become a millionaire with $100, $200 a month. They just don't understand being consistent, investing early and often and letting compound interest do its job are the most important things to building wealth. And imagine as she gets out of school and as she starts making real money, then that $100 a month becomes 200, the 200 becomes 500, the 500 becomes a thousand. Then all of a sudden in retirement, you have no fear because you've got two, three, four million dollars put away to be

able to allow you maybe to retire early, but definitely retire comfortably. I'm right there with you, Robert. Now, our last question comes from Sonia. Sonia says, hi, Robert and Austin. I love the podcast, and I've been listening since the first episode. Wow. That's crazy. Heck yeah. Thanks for listening. That's amazing. Thank you. Sonia says, my husband and I own a piece of property. worth around $500,000 that was gifted to us. The debt we hold on our home that we built in 2019 and a second mortgage that we have is around $400,000 total.

The loan to build the home is locked in at 3.75%, but the second mortgage, which is a little bit over $100,000, just jumped to 8%. We have the option to sell the land, pay off our debt of at least the second mortgage, and then invest the remains. What would you do in this situation?

Our household income is also about $100,000 a year. Robert, what do you think about this? I love this, Sonia, and I think you already know the answer. I would sell the property. You're going to have some tax implications. You'll figure that out. And then I would just pay off the second mortgage, because the first mortgage at 3.75% is amazing. You want to keep that as long as you can because you can always make more than 3.75% in the markets.

we just touched earlier on in this episode about making 7% with the bond product through public.com. So we always want to make sure the positive arbitrage is in our favor for our money. And at 3.75%, I would sell the property, keep the first mortgage, pay off the second mortgage because it's creeping up to be that high interest debt and then invest the rest and you are in great shape. I'm right there with you, Robert. Mike drop a moment.

That's exactly what I would do. I would sell the property. I'd pay off the second mortgage because to your point, Robert, she is creeping up now that 8%, 9% who knows how high this might go. 100% agree. This is exactly what to do. Yeah, I love it. This is one of those.

We're definitely on the same page together. And Sonia, great question. Great situation to be in. And we wish you the best. Everyone, thank you so much for listening to this week's episode of the Rich Habits podcast question and answer edition. Again, if you have a question for the show, email us at richhabitspodcast at gmail.com. DM us at Rich Habits Podcast on Instagram or join the Rich Habits Network and get your questions answered all the time.

Plus unlock access to our weekly live streams. Robert and I host those. It's like two hours that we sit down with y'all every single week to answer your questions and share our biggest market moving updates, our portfolios, our investments, everything. So you can learn more about the Rich Habits Network and our newsletter, the Rich Habits Newsletter, in the show notes below. Thanks, everyone for coming to this week's episode. Don't forget to check out Publix Bond account. And with that being said, have a great rest of your time. your week.