How Do You Invest a Lump Sum of Cash In This Market?
Summary
Lump Sum vs DCA: The hosts emphasize that markets rise most of the time, favoring lump-sum investing statistically, but recommend choosing a plan (lump sum or DCA) and sticking with it to avoid regret-driven changes.
Roth Conversions (TSP): With TSP in-plan Roth conversions coming in 2026, the advice is to monitor marginal tax brackets, avoid jumping from 24% to 32%, consider future higher income and state taxes, and potentially convert in stages.
Kids’ Accounts: Compared “Trump accounts” to 529/UTMA; 529s remain the best for education, while Trump accounts may only make sense if employer matches or seed money apply due to ordinary-income taxation and loss of control at 18.
Health Insurance Before Medicare: Early retirees should weigh COBRA, ACA marketplace, spouse coverage, or part-time roles with benefits; spouse plans with pre-tax premiums often win despite rising healthcare costs.
Retirement Planning: There is no secret sauce—define spending and goals, then build everything off those; plan for purpose and structure post-retirement, including volunteering or flexible work.
Risks and Behavior: Avoid market timing and stick to written plans; manage tax brackets during conversions; budget for persistently high healthcare inflation; no specific stock picks were made.
Transcript
Welcome back to Ask the Compound, the show where you ask and we provide the answers. I am Ben Carlson. Let's say you decided to frontload your contribution to max out your IRA in January. You're ahead of the game, but now you're sitting on a pile of cash. How do you invest a lump sum like that in today's market? Put it all in at once, maybe wait for a correction, dollar cost average. I'm going to answer this question and more questions straight from our viewers on the show today. Duncan, play the music. All right, our email here is ask the compound show@gmail.com. Chris in the live chat has said it's Ben going to wear flannel or a sweater today. Sweater day. Sweater weather >> sweater. >> All right, welcome to everyone in the live chat on YouTube for coming in. Also, people watching live on Twitter. We appreciate it. Fire your questions at us in the chat. We'll take them live on the show. On today's show, we have questions straight from our compound inbox about how to invest a lump sum in today's market. How to think about an inplan Roth conversion for retirement dollars. Roths are so hot right now. How the new Trump savings account vehicle for kids compares to 529 plans and other savings vehicles. What you should use for healthcare when you retire in your 50s. And finally, what is the secret sauce of retirement planning? But first, today's show is sponsored by our friends at Public, the investing platform for those who take it seriously. On public, you can build a multi-asset portfolio of stocks, bonds, options, crypto, and more. And now, generated assets, which allows you to turn any idea into investable index with AI. 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 in any prompt and AI will be put to work. It screens thousands of stocks, builds a one-of-a-kind index for you, and lets you back test it against the S&P 500. Then, you can invest in a few clicks. Generated assets like ETFs with infinite possibilities. Completely customizable and based on your thesis, not someone else's. Go to public.comc and earn an uncapped 1% bonus when you transfer in your portfolio. It's public.comc paid for by public investing. Full disclosure in the podcast description. All right, before we get to questions for today, I want to address a YouTube comment from last week. Throw it up here. Calling out my retirement withdrawal strategy honor. Uh people have very strong opinions about the 4% rule. This person says, "People continue to not understand the 4% rule." I think he's talking about me. Um, some think that it's a far too conservative rule, right? Some think it should be more like the 3% rule. Some people say, "No, it should be like the 4.75% rule." Personally, I think it's too conservative. Listen, I've read Bill Ben's original paper on the subject multiple times. I interviewed him last year. Okay? I read his book on the topic. I get it. All right? The goal of the 4% rule was to find the number that could get you through the worst poss worst case possible scenarios over 30 years in retirement. It's not like a baseline or an average number. It's meant to protect you against the ultimate worst case of number like really high inflation in the 70s or a huge crash like the Great Depression. That's why I think it's far too conservative because most of the time you end up with way more money and don't spend enough of your nest egg. That's why I like a more flexible plan. So there I defended my honor about retirement withdrawal strategies. Onto the questions. >> You know, you got to write a book on it now. That's the way to really >> Bill Ben already wrote the book. I don't need to. He did it. >> You're right. >> All right. >> It is confusing. >> Yeah. >> No, it's not. It's easy. It's just It's not It's not simple. Or what? How about this? It's simple, but not easy. >> We were talking about last week how confusing it is like if you're doing like CPI or your own inflation, stuff like that. >> Yeah. Yeah, you're right. There's a lot of decisions to make. >> There's variables. Yeah. >> True. All right. Let's do a question. >> Okay. Up first today, we got a question from Dylan. My partner and I are both 30 and operate a small business. We made the max SE IRA contribution in December 2025 of $70,000. Then another max contribution for fiscal year 2026 uh of $72,000 in January. The SE IRA has $365,000 of total market value and about $145,000 in cash. My question is psychologically, how do I invest this money? I know I can follow all of Ben's rules, lump sum over dollar cost average, diversify, manage risk tolerance, etc. But now I'm starting to feel the pressure given that the account is so large. I've always managed my brokerage, but that felt different because it's about half as much, and if I messed anything up, I would pay the price, not my partner. I joked with our adviser that they get paid a fee to deal with potentially taking the blame if things go wrong, not for their advice. Is it normal for people to manage this amount of money without an adviser? >> Okay, so Dylan and his partner obviously had a good year, so I'm guessing they made a bunch of money. They decided, hey, we got this huge sum of cash here from our profits. Let's backload our SE IRA in December, frontload in January. Boom. $140 something thousand dollars in cash. Um I wonder what the business is, but they did great. That That's a nice thinking. Yeah. What What business would Dylan run? You know >> that did so well. I don't know. That's a nice >> Yeah, maybe he's plowing roads right now. Uh it's a really nice text for determin that you created for yourself. So, I think before getting into the lumpsum cash part of this question, I want to talk about SE IAS because I think there's some people in our audience that might not be familiar with these accounts. So, the 2026 limit, as Dylan says, is $72,000 for a SE IRA. For a traditional or a Roth IRA, it's $7,500, not including the catch-up provision. Um, that almost doesn't seem fair. So, the reason they created SE IAS is for business owner. So, if you're self-employed, if you're a small business owner, even if you're a freelancer, someone who does Door Dash or whatever, doesn't have access to a 401k or pension, the SE IRA is for you. So, the way it works is you can contribute up to 25% of your compensation up to that $72,000 limit, right? And that's the cap that gets usually ratcheted up by the IRS. Um, so the high the whole idea here is that if people don't have people don't have the ability to make matching contributions, they don't have a 401k. There's no Roth option for these. So they're trying to make things even. But I still don't think it seems fair. I'm not going to lie. If you had a few other employees with you, it makes sense. But listen, I personally can put into a SE IRA because I am I technically have like freelance income from book sales and speaking gigs and some of these other things, stuff for my website. So I have the ability to put into a SE IRA and I do it. But it doesn't seem fair to me that the the limit is so much higher than the regular one. I don't get it. We're going to have a tech tax tech expert on today. He can maybe explain it to me. Anyway, onto the real question. Sitting on a huge lump sum, six figures, 40% of that IRA is now sitting in cash. That's kind of a lot. Okay, so this is an allocation question as much as it is a lump sum DCA question. Like, are you comfortable with that allocation for now in the short term? So, we've gone over the math before here and on my blog many times, right? A lump sum into the market makes more sense from a sheer probability perspective because most of the time, Duncan, what the stock market goes up, right? >> It's true. >> Since 1928, the US stock market is up 73% of all years. Since 1950, 80% of the time over 12-month periods, the stock market is up. That's an amazing win rate. So, most of the time putting your money into the market, it's going to be higher in 12 months, right? Most of the time. However, people with a lump sum always have the Murphy's law thing, right? anything if you put a lump sum to work people assume anything that can go wrong will go wrong if you put the money to work right it's going to fall the market's going to fall out of bed right away if I do this so we have a lot of these conversations with our clients and some sometimes they come to us with cash because they sold a business or they're sitting on cash from sale of stock or maybe they just tried to time the market and they were sitting cash and they need someone to help them with it right okay um some people are swayed by the math you show them the math you show them the numbers the win rates the probabilities and they say oh light bulb boom spreadsheet choice do it. Put it all in. I don't care that this makes sense to me. Maybe it'll work, maybe it won't. But most of the time it should work. The problem is you don't have like enough times to make the average, right? You have one choice with this lump sum, right? Other people see the numbers, they understand the numbers, and they say, "I don't want to do that. I I would rather make the psychologically driven decision of slowly but surely putting the money in because I'm scared or I want to wait for a correction or whatever." Neither of these choices are right or wrong. It really depends what's right for you. thing is if you're going to put that entire lump sum to work with no just do it with no regrets. Do it. Move on. Don't second guess. Most of the time the market goes up. Sometimes it goes down. You're going to be invested anyway. So what? This is the stock market. That's that's what that's the trade-off. >> You wouldn't feel a little better about waiting for a red day to lump sum. >> A red day. Yeah. But no one waits for a red day. people rate wait for a red month or you know like people are waiting for like >> I'm just if the if the S&P is up like you know a percent today like it's hard >> sure you want to put in a down hey today isn't today a down day put it in today um >> listen my only plan is and this is the advice we give our clients if you're going to dollar cost average in create a plan and stick with it come hell or high water so it's every other week or every month or every quarter whatever your time frame is stick with it you could add another rule too some say, "Hey, if the stock market is down 10% or 15%." Duncan says if it's down 1%, he's going to do it. If it's down 20%, then I'm going to speed up the the dollar cost averaging, right? I'm going to pull some forward. That's fine. Whatever it is, write down your plan. Follow your plan. Don't make changes because you wish you would have done something else. We've had that question before from people. We lay out a plan. We have it all set out. This is what we're going to do. We're going to invest here, here, here, and here six times over the next nine months, whatever it is. Six times over the next 12 months. And then something happens in the market. it goes up or it goes down, they say, "Wait a minute. Should we change our plan?" No, this is the plan we set without knowing what's going to happen in the future. Okay? And I don't I'm not sure about the adviser part of this question. Maybe they have an hourly adviser or maybe sometimes the adviser is doing part of the portfolio, but they're managing the part themselves. If you do have a financial adviser, they should absolutely be helping you through this decision. That's what you're paying them for. That's what they're there to help you make better decisions because there is no right or wrong. Like sometimes you'll like the outcome, sometimes you won't like the outcome, but everyone is dealing with imperfect information about the future. That's just how investing works. So you make an informed decision and then you stick with it. That's it. >> This this is where the the actual investments matter a lot though, right? Like if he puts a ton of it into three times lever ETFs and and a bunch of single stocks and loses a bunch of money, no one's going to feel sorry and people are going to blame him, right? But like >> yeah, >> if yeah, no one's going to blame him for buying the market, you know, or index funds or, you know, >> and if you're and if you're in more of like a 60 40 70 30 8020 portfolio, maybe that's a little easier because it's more diversified, right? You're not going all in to the stock. So that's part of it, too, >> right? >> But yeah, I I would write it down so you know why you made the decision at the time and then stick with that plan. That's the thing. So you can you can go back and take a look at and have a little refresher. >> I like I like what he says though about I think that's probably true. A lot of people go to adviserss because they're like, I don't want my family blaming me or looking to me if things don't work out well. You know, >> advisers are used to that, right? >> Yeah. Yeah. >> But you can't blame the adviser of what happened to the market, right? The market is going to do what it's going to do, >> right? >> Just like it's the adviser isn't a isn't a better adviser because the market went up 20% last year. Right. >> Right. Unless they're trading individual stocks for you, I guess. >> No, then they're getting lucky, too, right? >> Yeah, it's true. >> All right. >> It's true. Next question. >> All right, up next we got one from Phil. Starting January 28th, 2026, the Thrift Savings Plan, TSP, will offer Roth in plan conversions, allowing you to move money from your traditional pre-tax TSP to your Roth after tax TSP within your account. I'm 37 and have been serving in the Army for 15 years. My wife works and our household income is $375,000. All of my contributions have been Roth, but the agency matching contributions are traditional. We have $400,000 Roth and $60,000 traditional plan assets with combined $300,000 in our personal Roth IAS and my wife has $50,000 Roth in her 401k. I expect my income to increase when I transition to a civilian career in 5 years, pension at 20. So, I've been planning to keep our contributions 100% Roth at least until then. Should we take advantage of this new TSP option? And if so, what is a winning strategy? >> All right. >> Thank you for your service and >> yeah, as always, uh we always we love these questions for our service members. Uh let's bring on everyone's favorite tax expert and a former service member himself, >> Mr. Roth IRA, Bill Sweet. >> Gentlemen, what's up? >> Good to be with you. I have a big problem. Yeah. With Phil. I got a big issue. >> Oh yeah. What's up? >> Six more weeks of this crap. Gentlemen, it was 27 degrees in Lake Placid, New York when I was there last week. -27. The high last week when I was there was -10. >> I've had enough of this. I think we need to go down to Pakatani. It's time for we put this groundhog in his place. >> RWM, Florida, Bill, >> I I agree. Yeah, I I keep saying like who why do people live up here again? I mean, >> yeah. >> Yeah. No, definitely definitely north of the wall. >> Every year in February, I love the snow in December. I love it when it's around the season and the holidays and the lights. I love snow and then it gets to January I'm like okay. Then February I'm I'm done with it. Yeah. >> Yeah. >> I I don't know how people do it without beards to be honest. You guys clean shaving right now. I mean >> hey I'm I'm getting there. I'm working on it for that reason. >> I mean I I get cold even with a beard. I can't imagine beardless. >> No it's it's punishing. Yeah it's punishing. >> Bill would you say that the TSP and the pension plan at 20 years are are pretty big perks of serving your country. Correct. >> Yes. Very very inexpensive. And Ben, as you know we are advocates. this the Carlson suite 2028 platform is open the TSP to the to the people. >> Yep. So, how many plans actually offer this in plan conversion option because it it has to be relatively because the Roth is still relatively new too. Not all plans offer this obviously. >> Yeah. So, not not a lot, Ben, but I think they're increasing. I don't know if the numbers with me, but yeah, the TSP covers government employees and this is a big one. Uh ultimately it's more flexibility I think for folks and I think that Phil is in a really interesting position. So, let's start. Phil did not go full Roth, gentlemen. Did any of you guys do the math on how how far Phil is down the Roth rabbit hole? Sounds like he's about about 93% about 93% Roth, which I think is awesome. Pretty high household income, too. Ben, did you pick up on that? 375. I was wondering how that fits into this conversation. >> Quite a big not to brag. Yeah, I I was going to follow up on that actually. Um, so he's saying that the match is not Roth, correct? So, he's putting in Roth, but the match is not. Okay. >> Yeah, that's correct. And that is typical Duncan with most plan. That's what our plan does. >> Exactly. Yes. Traditional. However, there are rules changing on that. 2027, I believe, uh there's a mandatory Roth for folks in Phil's income bracket. He doesn't split out what his income is versus his wife. But regardless, 93% Roth is pretty close, gentleman, to full Roth. Uh the only caveat I would say is that obviously Phil's got some pretty pretty hefty income right now. Can we just pull up a chart and look at where he is on the tax bracket realm? So, you know, two, >> this is your favorite chart right here, isn't it? >> It really is. This this if if you if you could do one thing for yourself thinking about Roth conversions, I would burn this chart into your retina. This includes this assumes a standard deduction. And as you gentlemen can see, Phil and Phil and Mrs. Phil are are pretty, you know, getting high up there in the 24% tax bracket. So, they're not going up to 32%. I I think if you're considering this type of inplane conversion, which effectively is a Roth IRA conversion similar to that concept, what you don't want to do is jump up to that 32% range and fill and Mrs. Phil about $60,000 from that. Uh can we chart off real quick? But the other factor that Phil laid out gentleman in the email is that he does expect income to increase post service. And the one thing that I would ask Phil to consider is if he is returning to a high tax state, there's a lot of rules about service members when they're stationed in other states where generally they're not subject to the state income tax of the state that they're stationed in. And so if Phil is going to return back to California, New York, or another high-income tax state like New Jersey, I would really strongly consider a conversion as long as he doesn't trip that 32% bracket, >> right? But or I mean, could he do pieces over time so he doesn't get too close to it? >> Yeah, that's a good point. So 15 years Phil is right now typical typically people are sitting down to think about retirement around 20. So yeah, over the next five years, absolutely. And one of the things we didn't ask, you know, do does Phil have any investment income? Are there dividends, interest? Right. We don't know the full picture. you really do need to sit down before you do any damage. >> Okay. But to your point, he's already pretty pretty close to that full Roth. Yeah. >> Like he's he's almost already there, >> right? And I think that again the key is if you expect income to go up, why not now? This might be the last five years, Ben, that Phil and Mrs. Phil in the 24% bracket in which case I think it would make some sense to consider. >> Yeah. Especially Yeah. Like you said, he's going into the private sector. He's got the pension income coming. >> Yeah. Yeah. Well, and because another wrinkle in this for, you know, our younger viewers and people that aren't as familiar, they are above the threshold of being able to actually put into like a Roth IRA or something, right? Correct. So, this is their only opportunity to to get >> Roth directly. Yeah. And it sounds like they do have a large Roth IRA balance outside. Again, Duncan, you answer that question, but yeah, again, I think Phil, you know, I take a look at it. I think it makes a lot of sense given the circumstances of Phil's situation. >> All right, next question. >> Okay, we got one from Shandra. I was hoping to get your thoughts on the Trump accounts relative to other saving options such as 529 UTMA and UGGMA. Can I say that? Uh or taxable saving brokerage accounts. When it was first announced last year, I assumed it was only applicable for children born between 2025 and 2028. Turns out parents of children who aren't eligible for the $1,000 seed contribution can still open the account and contribute up to $5,000 a year adjusted for inflation. The no withdrawal limitation and loss of control once the child reaches age 18 are disadvantages. But perhaps the tax treatment benefits and potential employer contribution could make it worthwhile. Uh while there are clear benefits of contributing towards 529 accounts, how should one consider it over UTMA or just standard taxable brokerage under the parents account? >> Just what we need more accounts, right? This is why >> it's so confusing. >> The Carlson sweet ticket is going to have just one big account. Right. Right. build like the SE IRA. Why do we need to have a SEP limit so high? And then we have the 529 and now we have the Trump account and then we have the UDMA and the UGGMAS and we have the HSA and the Roth IRA and the traditional IRA. >> Coverdale 451 457, right? You just keep going and going and going. >> I like the idea of the Trump account because it helps get people involved in the stock market early. But people are starting to think like, wait, does this make sense compared to some of the other accounts? And it seems to me, you can tell me if I'm wrong here, for education, the 529 plan is still still the best option, right? >> Yeah. >> To me, because that that makes the most sense >> for education. >> Yeah. So limited purpose, right? So you can only really use it for that thing. I I think you know, Shandra, just to boil it all down, Ben, for Shandra, I would say look, if you're not getting money from that seed contribution or money for your employer, this is one, Ben, to your point, I would I would I would avoid. I I think it's too many accounts. This one is is the the the the straw that broke uh Bill's back. It's just one more account that I don't think is is worth it. Is it good to your point, Ben, to incentivize savings? Absolutely. 100%. If you can start a contribution $1,000, median household income in the US right now is roughly $80,000 a year, right? >> Can you imagine the stream of income you could create by having one kid each year for the next 18 years, >> right? Because they're totally outside of that. You know, you just think about it. >> You don't have to worry about feeding or clothing them or anything else. Uh, no. But >> they just created a new Vince. >> I can't wait for the comments thinking you're being serious. >> I mean, the child tax credit, too. But anyway, but um no, but the problem is that these things basically are IAS. Like, that's what they are. They're IAS, but they're without a tax deduction. So, Shandra mentions potentially contributing $5,000 a year. That's great and wonderful. That's a non-qualified contribution. You're not able to take a tax deduction for that. And then when the earnings come out of the account at age 18 or later, then they're coming out at ordinary income rates at at usually the highest possible tax rate again for the kid, right? So we don't know. Typically people don't roll out of college with >> pucksatony gets the money at 18, right? That's the big difference too. >> So that's that's the other that's the other problem. The superpower here is the employer matching contributions. If you happen to have employer that matches these things, but they're just so new. >> Can you clarify that there there are employers who will match for Trump accounts? Some employers are saying that, hey, if you contribute to this, we'll match it. It's I think it's a handful of employers right now. But >> is this like a political thing like, oh, companies that consider themselves more aligned with the right will do it versus or is it just kind of >> It's just companies that that like the idea of trying to help. It's not a lot of companies now, I don't think. No. If your company does this, it's free money you're turning down. >> I've only seen a handful, Ben. And yeah, Duncan made to your point. It's about the press release right now, but the details really do matter. So, like again, if you have to open a Trump account to get $1,000 or $2,500 a year from employer, absolutely there's no there's no downside, right? However, again, I don't see the point of giving somebody at age 18 a large basically IRA and telling them, "Hey, you can use this money, but because it's an IRA, you have to pay the penalty and tax versus a non-qualified account where they're subject to capital gains rates." Or, Ben, to your point, the real the real bullet here, I want more kids to go to college. My kids are going to college. They have three. They can be whatever they want as long as it's doctor, lawyer, and engineer. And so their ass is going to college. You bet it. And I I'm I've got a 529 for that purpose for each of my kids. >> I can't wait for I can't wait for your son to go to school for painting. >> Again, if he's painting uh for attorneys, that's great. Yeah, I need to do that for a law firm or engineering firm. But yeah, to me, these these are a little too complex. They're a little too cute. And I'm very excited next year or five years from now when they're Casiocortez accounts or some other nonsense. So >> just lump them all into one. >> I agree. USA Patriot. That was actually something Ben uh in the in the last bill two years ago that was proposed. It was like a Patriot savings account where you could basically it was an IRA and a Roth IRA and you could put $1,000 a year withdraw any time taxree. That that type of thing makes a lot of sense to me versus this complex nightmare. >> At least they're not taking stuff away though like none of these accounts have been taken away yet. That's good. >> Is is someone benefiting like why why are there so many different accounts? Like are these being custodi off of this or something? >> If you happen to have Yeah. If you happen to be an investment professional and you're helping people navigate this stuff, uh I don't know, like the three of us, may maybe >> ask Bill why the tax code is so complicated. It's because they keep building on top of it. They can't like start with a clean slate. It's like we're going to latch this on and latch this on and >> yeah, that's it. And I'm letting my libertarian soul, you know, be bared here. But yeah, the the the goal here when politicians get elected is to do something, right? We have an action bias. And here we are. We're rolling out a new account. This is great. Let's ignore the 17 other accounts, right, that maybe are better than this one. It doesn't matter because their names on it and it's about optics, not a political statement. Every politician does this crap and nobody is there saying, "Hey, let's make this easier for people. Let's take this regulation away." >> Think about how many people will forget about some of these accounts and then they'll get to Grove over the years with no one messing with them and then they'll be surprised one day. >> Yeah. Per that great apocryphal Fidelity study that apparently doesn't exist where dead people and people who changed uh moved are the best performing investors in the United States. >> I still believe it. All right, next question. >> And we're being blown up in the chat by Dave Ary. He's saying about he wrote pretty much the same question in December. So I don't know how why you picked >> Don't diss my guy Dave. Yeah. >> All right. Dave, personal apology for me. >> Yeah. Yeah. We should answer five of Dave's questions on the next show. >> I promise we'll make it right. >> Yeah. Amen. >> Okay. >> Duncan's gonna send you a free hat, Dave. >> Very good. Sure. >> It's a mega hat. >> No, it won't be. Uh, okay. Up next, we got one from Jeff. I'm 58 and contemplating retiring from my corporate role this spring and the only real concern I have is health insurance. My options right now are Cobra, 18 months max, the ACA marketplace, not as good as Cobra, or move to my wife's. She's 51 and her insurance is not good at all. Uh the other option is to just go the barista fire route. That's new to me. >> Yeah, never heard of that. >> And get a job. >> You work at Starbucks just because it has uh benefits, right? >> I don't I don't hate it. I don't hate it. Yeah. >> Uh, but yeah, the other option is, yeah, barista fire and get a job with health insurance. Uh, what do you advise your clients who retire before they're eligible for Medicare to do about health insurance? BS. I'll be in Grand Rapids, Michigan for a weekend in March and would very much appreciate some guidance from Ben on the best breweries to visit. >> All right. So, we get a lot of questions from people um who want to return their 50s, right? That's a thing, >> right? >> Yeah. Very common. God bless him. Yeah, if you're lucky enough to >> and I joke that the age is almost always 55. Why is it 55? I don't know. It's a round number. >> Yeah. >> Right. >> That's it. >> Um Jeff wants to try 58. Bill, I sent you this question earlier this week and you went down a rabbit hole, so I want to pull this is Bill after we started talking about the healthare system in the United States. Pull my picture here. >> This is that that's Bill in the mail room. >> I lost my mind. Yes. >> What a sh. >> Um so I I think it's probably because you handle the the the health insurance numbers at Riddle. So, you understand these things and how expensive it is. And every year this happens, you go, I can't believe how much healthcare is costing us now and how much the increase was. And um I I think there's things that we can fix in this country that are relatively easy, right? Um social security we talked about in a recent episode. Like I think that's pretty easy to fix. Like health care system, I don't think we're ever going to fix it. Just like the tax system, I don't think it's ever going to be. We can't just start from scratch, right? Um but it seems like at least to you, Jeff has all his options covered here, right? what he's listing on the question, those are his options. There's nothing else he's missing. >> No, I think Yeah, I think Jeff is really sober about this. I think he's looking at it really smart. You know, the healthc care exchanges are are a decent option, particularly if you're income limited. They're just so complicated, Ben. So, and I think ultimately the the key the downstream of this, the reason I went completely insane in our in our internal message board, can we chart uh my first chart here, Daniel, for this question? It's that the cost of health insurance, gentlemen, is just way too damn high. like we're looking at $27,000 the average premium for a health insurance plan across the United States. And that's a combination of good plans, bad plans, the whole gamut. And it really varies tremendously by region. But $27,000 in excess of $2,000 a month in my opinion, completely unaffordable, right, for for a family making 40, 50, $60,000 a year. It's just too expensive. And I can't quite understand why outside of the impact of government regulation. Dan, can we flip on chart two? I'm going to pull some people behind the curtain. Ben, you're you're exactly right. I have watched our health insurance increase at roughly eight 8% a year for the last uh almost 10 years going at this point. And I've watched that happen via certified payroll employee organization that we're a part of. They're good people. They do good work. And it's not their fault that the costs are insane. But some of our employees, Ben, are opting into plans that cost them $50,000 a year. That is that is completely insane to me. It's completely unacceptable. I don't know what to do. But it does seem back to our politics point before every solution they've thrown at this problem unfortunately has just made it worse being the ACA repeal the ACA the whole thing just every like clockwork the cost go up wouldn't wouldn't making health care costs go down be more popular than than the credit card thing that the administration is looking at seems like this would be a huge win >> but this is really complicated stuff and very hard to fix because it's the healthcare providers and the hospitals and the insurance and >> um >> I mean it's like a third of the economy right now Like that's what's so insane to Ben's point. So many people rely on this system and the reality is these margins are paying people's jobs. Like it's not just a capitalist anti- capitalist point. >> Perhaps I but I think it's a symptom frankly gentleman of overregulation. Like if you take a look Mark Perry AEI, if you want to Google that chart has a great chart showing what happens when you cut regulations, you're able to outsource, you're able to get efficiencies, flat screen TVs. If you look at those costs there versus more regulated industries, housing extremely highly regulated, right? what you can build. Few things are high more highly regulated than health insurance, right? Because it's the state level and there's so many requirements and so many barriers to entry. >> We would do it this way if we if we started from scratch. All right. So, but this is the kind of thing that the people who want to retire in their 50s, they almost never ask about this. And this is a big >> it's huge. >> This is a big thing. So, I think if if I'm looking at his options here, >> I would probably even if it isn't an optimal plan, I'd probably go on his wife's plan. >> Yeah. >> Don't you think? Because even if it's not a great plan, maybe he's got to cover some of it out of cost. But like I'm guessing her employer is covering some of that. I think if she's working, that makes the most sense to me. Unless he wants to get a part-time job at Starbucks just for the healthcare benefits. >> That's exactly right. And most jobs too, Ben, if you sign up for a family plan, they'll let you cover that cost pre-tax, right? So you're basically 30 40% potentially out of, you know, out of pocket because you're not paying income tax on that benefit versus using after tax dollars for healthcare exchanges even if you're narrowing hitting that window of the premium tax credit, which can go horribly wrong. We've seen it happen a lot uh with Bill Arts Everett and the team at RBM Attacks. Uh I would I would strongly look at that. I think Jeff that's Jeff's best option. >> All right. As far as the breweries go, we actually do get a lot of questions from people who come to Grand Rapids and one of because we are we've been named Beer City USA for like the last 10 years in a row. A lot of the stuff started here. So the staples are Founders of New Holland. That's Nick downtown. Bill, you're a big Founders guy, right? So you can go to the Founders that those are the ones that check off the list. >> KBS. I mean they do some heavy that's heavy duty beer, right? You like the stuff that's more like whiskey as opposed to >> like drinking maple syrup. Yeah. But >> you have to drink it when it's warm. That stuff's not for me. Um >> Mitten Brewery is pretty cool. It's like an old fire station. Solid pizza and beer. Brewery Vant. That's my favorite one. It's an old Belgian beer. It's an old church with like a big steeple in the middle. Like small church. Um really good burgers outside of the breweries. I'm I'm like a travel host here. >> So you have a god-shaped hole that you're filling with beer. Is that what you're >> Yeah. Uh Stella's Lounge downtown is a favorite. My kids love it. It's uh GQ named it the best burger in America at one point like 10 years ago. It's kind of like a punk rock theme. So you want to go like drink a PBR there or something, right? They have punk rock and uh video games. And then you find a cool cocktail place there. Uh a place called Miamo is an old house. There's all these really huge old houses from all the furniture barons back in the day in Grand Rapids. They turn the house into a restaurant. It's a cool restaurant. And then they have a place called Mo Cocktail Lounge in the back for a good cocktail. >> Nice. >> Ben, how far how far is Kalamazoo from you? I I couldn't >> 45 minutes if you want to go to Bells. >> Yeah, that's what I was going to say. So, Bells is my stuff. Big two-hearted guy. I think the hop slam ale in a can. That stuff is excellent. I mean, you're you're approaching 10% ABV, but that is an excellent excellent >> spring and summer Oberon is by far my favorite beer. And then I got to shout out Brewery 424 in Holland, Michigan. >> I was about to ask, how far is that from you? >> Probably 45 minutes as well. So, everything is 45 minutes from here. So, Dave in Holland, Michigan got his own brewery that he started and I've been there before. We we did an event there. Excellent beer. >> So >> nice. >> Let's go. >> You can't go wrong though. >> Road trip. Beautiful time of year. >> One more question. >> Before we jump to the next question, just one more thing on the health insurance. How much uh agency does the average employee at a company have to try to lobby for better benefits? He mentions his wife's insurance not being good. Like that sounds that sounds really bad. Like what company's offering insurance that is bad to their employee, you know? >> Well, probably what he's talking about, Duncan, is the company's passing on more of the cost to employees. It's like that's the most likely, you know, explanation for that. It's probably not that the insurance plan is bad. It's just extremely expensive. It's my guess. >> Yeah. You got No, Duncan. You're not going to make any changes? No. >> No. Okay. Yeah. I mean, I'm just wishful thinking for them, you know, but Yeah. >> Yeah. One more. >> Hey, last but not least, we got one from Jeff. I'm hoping to retire when the current school year runs out at the end of May. Right now, I'm putting together what my budget and net worth review process will look like. without giving away your secret sauce. What items should a a recent retiree be paying attention to in a year-end review? And you know what? I'm gonna go ahead and say give away the secret sauce. I want to hear it. >> Okay. >> What Jeff here? >> Uh the secret sauce is there is no secret sauce, right? So I'm guessing Rick is a teacher. He's waiting till the end of school year unless he just wants his kids to be out. Um I I'd say there's no secret sauce. It's a process, not an event. The two biggest things, and Bill, you can tell me if I'm wrong. Um how much do you spend or plan to spend in retirement? And what are your goals? every other decision is some sort of branch off of those questions. Bill, >> yeah, I'd agree. Uh Ben, I I think it's just take things slowly. Like that would be my take. I what I observe, Ben, and a lot of retirees is that they're they're building up to this moment, right? And they get they get that gold watch, they get the high five, they have the party, and everything's great. They do everything they wanted to do, right? They travel, they get the garage clean, they just have a lot of fun. It's about two, three month process. >> You would probably clean your garage. I can definitely see that. I I have a total mess right now because it's disgusting outside and I don't want to be outside. This is negative 27. But moving forward, yeah, with with our guy Rick, they get that three, four month mark and they're like, "Okay, now what?" And and I know it sounds trit. I know like like everybody's looking forward to this moment, but it is really disorienting, right, to have worked for as long. I'm sure Rick has, maybe 25, maybe do with myself, what do I do with my time? >> Exactly. And I think I think people burn what I observe is people burn through all that and then roughly six months later they're like, "All right, well, what the hell am I going to do? My kids, >> I did my trip to Italy. I saw the coast, Malfy Coast, now what do I do?" >> Exactly. So I I mean, I wouldn't like immediately search a job, but or like look to volunteer, but but I just thinking through what you're actually going to do with your time is extremely important. Obviously, you're going to get in shape. Obviously, you're going to do all the things that you've been wanting to do, but then I think that the cold hard reality sets in that, hey, if we're retiring in our 50s, if we're retiring in our 60s, you got 30 years in front of you. And I think that people really do want to to provide a meaningful part of life. Like they want to participate in society in some way. And I don't think sitting around, you know, scrolling through Twitter, watching our show on YouTube is a great way to participate in society. I think you have to go out and figure that out. But I and I I talked about this a few weeks ago on the show, how like in the past, you know, 100 years ago, you might live for like five years in retirement and that the average life expectancy meant you probably didn't have a lot of time. Now 20, 30, 40 years for some people in retirement. Like you have a whole another life. >> Yep. >> Right. And and that's that's you're right. That's the big thing most people don't consider is what do I do? >> Yep. That's 100% it. And what I see a lot, Ben, is folks, particularly if they retire early, they're back doing something similar, like I said, in six months or a year and they have more flexibility, like maybe they can still draw on their pension, but ultimately again, I think there's there's this need to be a part of like society and culture. And again, even if your if your friends aren't retired, it's even worse. So, I think just having that plan of like, hey, I'm going to maybe go do this, maybe a consulting project, right? The thing I'm pushing uh Mrs. Bill to do is like figure out how to use language models to teach kids how to read. I think that's like a big a big place where you could do a lot of work in the education sphere. So that'd be my advice to Rick. >> I think the volunteering thing is big too, right? Because yeah, sense of purpose is so big. I think people retire and sometimes feel like they have no sense of of purpose anymore. >> Yeah. >> My parents both do that. My my dad uh does tax returns at Goodwill >> and you can imagine, Bill, those are really easy tax returns because you use some software and people don't have a lot of inputs. Uh my mom uh volunteers at like the local place that people come to give all their stuff. Another Goodwill kind of place. And it's funny because she's constantly looking for diamonds in the rough there too of people bringing in. >> Yeah. I mean big shouts for Ed Carlson. Big shouts to Ed Carlson because he his his hand gets hurt this year. It gets read from all the high fives from getting people their refunds. >> So that that's just an awesome thing to do. But yeah, I I think Ben there there's a big need out there in society and particularly you've been fortunate. If you've worked hard, if you do have that pension, finding a way to give back is is an amazing thing to think about for Rick. >> Uh, so Sodak Jason in the uh chat ask about best coffee shops. Ben, >> you got any coffee shop? >> You think I know the answer to that? >> It's the wrong guy to ask. >> You you talk about your wife drinking lots of coffee. >> Yeah, might as well ask for the wheat dealers. >> She goes to to Starbucks. Okay. Well, >> come on. Yeah. >> Great for retiring healthcare, though. for for giving. >> Yeah, we're looking we're looking for a good Ethiopian roast. Come on. >> Yeah, I got uh I got nothing. Um Okay. All right. >> Greenwood Lake Coffee in New York. That's where I'd send them. Uh it's great great roaster. >> All right. >> Support your local roaster. >> By the way, someone in the Someone in the chat said that I'm bougie. They tried to spell bougie, but they spelled it boogie. Um and uh I'm definitely not bougie with my beers. Come on. >> It is. It's a hard It's a hard word to spell. >> It said Ben is boogie, which actually that's pretty boogie. Ben. That's pretty good. Um ask the compound show@gmail.com for all your questions. I think last week might be a new record for most questions in a single week. We got like a dozen questions last week, so keep them coming. >> The doc is getting chaotic. >> Yeah, we got we got way many. Way too many. >> I love it. Stay warm out there, friends. >> Thanks, Duncan. Thanks to everyone on the production team as always. We'll see you next time. >> See you everyone.
How Do You Invest a Lump Sum of Cash In This Market?
Summary
Transcript
Welcome back to Ask the Compound, the show where you ask and we provide the answers. I am Ben Carlson. Let's say you decided to frontload your contribution to max out your IRA in January. You're ahead of the game, but now you're sitting on a pile of cash. How do you invest a lump sum like that in today's market? Put it all in at once, maybe wait for a correction, dollar cost average. I'm going to answer this question and more questions straight from our viewers on the show today. Duncan, play the music. All right, our email here is ask the compound show@gmail.com. Chris in the live chat has said it's Ben going to wear flannel or a sweater today. Sweater day. Sweater weather >> sweater. >> All right, welcome to everyone in the live chat on YouTube for coming in. Also, people watching live on Twitter. We appreciate it. Fire your questions at us in the chat. We'll take them live on the show. On today's show, we have questions straight from our compound inbox about how to invest a lump sum in today's market. How to think about an inplan Roth conversion for retirement dollars. Roths are so hot right now. How the new Trump savings account vehicle for kids compares to 529 plans and other savings vehicles. What you should use for healthcare when you retire in your 50s. And finally, what is the secret sauce of retirement planning? But first, today's show is sponsored by our friends at Public, the investing platform for those who take it seriously. On public, you can build a multi-asset portfolio of stocks, bonds, options, crypto, and more. And now, generated assets, which allows you to turn any idea into investable index with AI. 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 in any prompt and AI will be put to work. It screens thousands of stocks, builds a one-of-a-kind index for you, and lets you back test it against the S&P 500. Then, you can invest in a few clicks. Generated assets like ETFs with infinite possibilities. Completely customizable and based on your thesis, not someone else's. Go to public.comc and earn an uncapped 1% bonus when you transfer in your portfolio. It's public.comc paid for by public investing. Full disclosure in the podcast description. All right, before we get to questions for today, I want to address a YouTube comment from last week. Throw it up here. Calling out my retirement withdrawal strategy honor. Uh people have very strong opinions about the 4% rule. This person says, "People continue to not understand the 4% rule." I think he's talking about me. Um, some think that it's a far too conservative rule, right? Some think it should be more like the 3% rule. Some people say, "No, it should be like the 4.75% rule." Personally, I think it's too conservative. Listen, I've read Bill Ben's original paper on the subject multiple times. I interviewed him last year. Okay? I read his book on the topic. I get it. All right? The goal of the 4% rule was to find the number that could get you through the worst poss worst case possible scenarios over 30 years in retirement. It's not like a baseline or an average number. It's meant to protect you against the ultimate worst case of number like really high inflation in the 70s or a huge crash like the Great Depression. That's why I think it's far too conservative because most of the time you end up with way more money and don't spend enough of your nest egg. That's why I like a more flexible plan. So there I defended my honor about retirement withdrawal strategies. Onto the questions. >> You know, you got to write a book on it now. That's the way to really >> Bill Ben already wrote the book. I don't need to. He did it. >> You're right. >> All right. >> It is confusing. >> Yeah. >> No, it's not. It's easy. It's just It's not It's not simple. Or what? How about this? It's simple, but not easy. >> We were talking about last week how confusing it is like if you're doing like CPI or your own inflation, stuff like that. >> Yeah. Yeah, you're right. There's a lot of decisions to make. >> There's variables. Yeah. >> True. All right. Let's do a question. >> Okay. Up first today, we got a question from Dylan. My partner and I are both 30 and operate a small business. We made the max SE IRA contribution in December 2025 of $70,000. Then another max contribution for fiscal year 2026 uh of $72,000 in January. The SE IRA has $365,000 of total market value and about $145,000 in cash. My question is psychologically, how do I invest this money? I know I can follow all of Ben's rules, lump sum over dollar cost average, diversify, manage risk tolerance, etc. But now I'm starting to feel the pressure given that the account is so large. I've always managed my brokerage, but that felt different because it's about half as much, and if I messed anything up, I would pay the price, not my partner. I joked with our adviser that they get paid a fee to deal with potentially taking the blame if things go wrong, not for their advice. Is it normal for people to manage this amount of money without an adviser? >> Okay, so Dylan and his partner obviously had a good year, so I'm guessing they made a bunch of money. They decided, hey, we got this huge sum of cash here from our profits. Let's backload our SE IRA in December, frontload in January. Boom. $140 something thousand dollars in cash. Um I wonder what the business is, but they did great. That That's a nice thinking. Yeah. What What business would Dylan run? You know >> that did so well. I don't know. That's a nice >> Yeah, maybe he's plowing roads right now. Uh it's a really nice text for determin that you created for yourself. So, I think before getting into the lumpsum cash part of this question, I want to talk about SE IAS because I think there's some people in our audience that might not be familiar with these accounts. So, the 2026 limit, as Dylan says, is $72,000 for a SE IRA. For a traditional or a Roth IRA, it's $7,500, not including the catch-up provision. Um, that almost doesn't seem fair. So, the reason they created SE IAS is for business owner. So, if you're self-employed, if you're a small business owner, even if you're a freelancer, someone who does Door Dash or whatever, doesn't have access to a 401k or pension, the SE IRA is for you. So, the way it works is you can contribute up to 25% of your compensation up to that $72,000 limit, right? And that's the cap that gets usually ratcheted up by the IRS. Um, so the high the whole idea here is that if people don't have people don't have the ability to make matching contributions, they don't have a 401k. There's no Roth option for these. So they're trying to make things even. But I still don't think it seems fair. I'm not going to lie. If you had a few other employees with you, it makes sense. But listen, I personally can put into a SE IRA because I am I technically have like freelance income from book sales and speaking gigs and some of these other things, stuff for my website. So I have the ability to put into a SE IRA and I do it. But it doesn't seem fair to me that the the limit is so much higher than the regular one. I don't get it. We're going to have a tech tax tech expert on today. He can maybe explain it to me. Anyway, onto the real question. Sitting on a huge lump sum, six figures, 40% of that IRA is now sitting in cash. That's kind of a lot. Okay, so this is an allocation question as much as it is a lump sum DCA question. Like, are you comfortable with that allocation for now in the short term? So, we've gone over the math before here and on my blog many times, right? A lump sum into the market makes more sense from a sheer probability perspective because most of the time, Duncan, what the stock market goes up, right? >> It's true. >> Since 1928, the US stock market is up 73% of all years. Since 1950, 80% of the time over 12-month periods, the stock market is up. That's an amazing win rate. So, most of the time putting your money into the market, it's going to be higher in 12 months, right? Most of the time. However, people with a lump sum always have the Murphy's law thing, right? anything if you put a lump sum to work people assume anything that can go wrong will go wrong if you put the money to work right it's going to fall the market's going to fall out of bed right away if I do this so we have a lot of these conversations with our clients and some sometimes they come to us with cash because they sold a business or they're sitting on cash from sale of stock or maybe they just tried to time the market and they were sitting cash and they need someone to help them with it right okay um some people are swayed by the math you show them the math you show them the numbers the win rates the probabilities and they say oh light bulb boom spreadsheet choice do it. Put it all in. I don't care that this makes sense to me. Maybe it'll work, maybe it won't. But most of the time it should work. The problem is you don't have like enough times to make the average, right? You have one choice with this lump sum, right? Other people see the numbers, they understand the numbers, and they say, "I don't want to do that. I I would rather make the psychologically driven decision of slowly but surely putting the money in because I'm scared or I want to wait for a correction or whatever." Neither of these choices are right or wrong. It really depends what's right for you. thing is if you're going to put that entire lump sum to work with no just do it with no regrets. Do it. Move on. Don't second guess. Most of the time the market goes up. Sometimes it goes down. You're going to be invested anyway. So what? This is the stock market. That's that's what that's the trade-off. >> You wouldn't feel a little better about waiting for a red day to lump sum. >> A red day. Yeah. But no one waits for a red day. people rate wait for a red month or you know like people are waiting for like >> I'm just if the if the S&P is up like you know a percent today like it's hard >> sure you want to put in a down hey today isn't today a down day put it in today um >> listen my only plan is and this is the advice we give our clients if you're going to dollar cost average in create a plan and stick with it come hell or high water so it's every other week or every month or every quarter whatever your time frame is stick with it you could add another rule too some say, "Hey, if the stock market is down 10% or 15%." Duncan says if it's down 1%, he's going to do it. If it's down 20%, then I'm going to speed up the the dollar cost averaging, right? I'm going to pull some forward. That's fine. Whatever it is, write down your plan. Follow your plan. Don't make changes because you wish you would have done something else. We've had that question before from people. We lay out a plan. We have it all set out. This is what we're going to do. We're going to invest here, here, here, and here six times over the next nine months, whatever it is. Six times over the next 12 months. And then something happens in the market. it goes up or it goes down, they say, "Wait a minute. Should we change our plan?" No, this is the plan we set without knowing what's going to happen in the future. Okay? And I don't I'm not sure about the adviser part of this question. Maybe they have an hourly adviser or maybe sometimes the adviser is doing part of the portfolio, but they're managing the part themselves. If you do have a financial adviser, they should absolutely be helping you through this decision. That's what you're paying them for. That's what they're there to help you make better decisions because there is no right or wrong. Like sometimes you'll like the outcome, sometimes you won't like the outcome, but everyone is dealing with imperfect information about the future. That's just how investing works. So you make an informed decision and then you stick with it. That's it. >> This this is where the the actual investments matter a lot though, right? Like if he puts a ton of it into three times lever ETFs and and a bunch of single stocks and loses a bunch of money, no one's going to feel sorry and people are going to blame him, right? But like >> yeah, >> if yeah, no one's going to blame him for buying the market, you know, or index funds or, you know, >> and if you're and if you're in more of like a 60 40 70 30 8020 portfolio, maybe that's a little easier because it's more diversified, right? You're not going all in to the stock. So that's part of it, too, >> right? >> But yeah, I I would write it down so you know why you made the decision at the time and then stick with that plan. That's the thing. So you can you can go back and take a look at and have a little refresher. >> I like I like what he says though about I think that's probably true. A lot of people go to adviserss because they're like, I don't want my family blaming me or looking to me if things don't work out well. You know, >> advisers are used to that, right? >> Yeah. Yeah. >> But you can't blame the adviser of what happened to the market, right? The market is going to do what it's going to do, >> right? >> Just like it's the adviser isn't a isn't a better adviser because the market went up 20% last year. Right. >> Right. Unless they're trading individual stocks for you, I guess. >> No, then they're getting lucky, too, right? >> Yeah, it's true. >> All right. >> It's true. Next question. >> All right, up next we got one from Phil. Starting January 28th, 2026, the Thrift Savings Plan, TSP, will offer Roth in plan conversions, allowing you to move money from your traditional pre-tax TSP to your Roth after tax TSP within your account. I'm 37 and have been serving in the Army for 15 years. My wife works and our household income is $375,000. All of my contributions have been Roth, but the agency matching contributions are traditional. We have $400,000 Roth and $60,000 traditional plan assets with combined $300,000 in our personal Roth IAS and my wife has $50,000 Roth in her 401k. I expect my income to increase when I transition to a civilian career in 5 years, pension at 20. So, I've been planning to keep our contributions 100% Roth at least until then. Should we take advantage of this new TSP option? And if so, what is a winning strategy? >> All right. >> Thank you for your service and >> yeah, as always, uh we always we love these questions for our service members. Uh let's bring on everyone's favorite tax expert and a former service member himself, >> Mr. Roth IRA, Bill Sweet. >> Gentlemen, what's up? >> Good to be with you. I have a big problem. Yeah. With Phil. I got a big issue. >> Oh yeah. What's up? >> Six more weeks of this crap. Gentlemen, it was 27 degrees in Lake Placid, New York when I was there last week. -27. The high last week when I was there was -10. >> I've had enough of this. I think we need to go down to Pakatani. It's time for we put this groundhog in his place. >> RWM, Florida, Bill, >> I I agree. Yeah, I I keep saying like who why do people live up here again? I mean, >> yeah. >> Yeah. No, definitely definitely north of the wall. >> Every year in February, I love the snow in December. I love it when it's around the season and the holidays and the lights. I love snow and then it gets to January I'm like okay. Then February I'm I'm done with it. Yeah. >> Yeah. >> I I don't know how people do it without beards to be honest. You guys clean shaving right now. I mean >> hey I'm I'm getting there. I'm working on it for that reason. >> I mean I I get cold even with a beard. I can't imagine beardless. >> No it's it's punishing. Yeah it's punishing. >> Bill would you say that the TSP and the pension plan at 20 years are are pretty big perks of serving your country. Correct. >> Yes. Very very inexpensive. And Ben, as you know we are advocates. this the Carlson suite 2028 platform is open the TSP to the to the people. >> Yep. So, how many plans actually offer this in plan conversion option because it it has to be relatively because the Roth is still relatively new too. Not all plans offer this obviously. >> Yeah. So, not not a lot, Ben, but I think they're increasing. I don't know if the numbers with me, but yeah, the TSP covers government employees and this is a big one. Uh ultimately it's more flexibility I think for folks and I think that Phil is in a really interesting position. So, let's start. Phil did not go full Roth, gentlemen. Did any of you guys do the math on how how far Phil is down the Roth rabbit hole? Sounds like he's about about 93% about 93% Roth, which I think is awesome. Pretty high household income, too. Ben, did you pick up on that? 375. I was wondering how that fits into this conversation. >> Quite a big not to brag. Yeah, I I was going to follow up on that actually. Um, so he's saying that the match is not Roth, correct? So, he's putting in Roth, but the match is not. Okay. >> Yeah, that's correct. And that is typical Duncan with most plan. That's what our plan does. >> Exactly. Yes. Traditional. However, there are rules changing on that. 2027, I believe, uh there's a mandatory Roth for folks in Phil's income bracket. He doesn't split out what his income is versus his wife. But regardless, 93% Roth is pretty close, gentleman, to full Roth. Uh the only caveat I would say is that obviously Phil's got some pretty pretty hefty income right now. Can we just pull up a chart and look at where he is on the tax bracket realm? So, you know, two, >> this is your favorite chart right here, isn't it? >> It really is. This this if if you if you could do one thing for yourself thinking about Roth conversions, I would burn this chart into your retina. This includes this assumes a standard deduction. And as you gentlemen can see, Phil and Phil and Mrs. Phil are are pretty, you know, getting high up there in the 24% tax bracket. So, they're not going up to 32%. I I think if you're considering this type of inplane conversion, which effectively is a Roth IRA conversion similar to that concept, what you don't want to do is jump up to that 32% range and fill and Mrs. Phil about $60,000 from that. Uh can we chart off real quick? But the other factor that Phil laid out gentleman in the email is that he does expect income to increase post service. And the one thing that I would ask Phil to consider is if he is returning to a high tax state, there's a lot of rules about service members when they're stationed in other states where generally they're not subject to the state income tax of the state that they're stationed in. And so if Phil is going to return back to California, New York, or another high-income tax state like New Jersey, I would really strongly consider a conversion as long as he doesn't trip that 32% bracket, >> right? But or I mean, could he do pieces over time so he doesn't get too close to it? >> Yeah, that's a good point. So 15 years Phil is right now typical typically people are sitting down to think about retirement around 20. So yeah, over the next five years, absolutely. And one of the things we didn't ask, you know, do does Phil have any investment income? Are there dividends, interest? Right. We don't know the full picture. you really do need to sit down before you do any damage. >> Okay. But to your point, he's already pretty pretty close to that full Roth. Yeah. >> Like he's he's almost already there, >> right? And I think that again the key is if you expect income to go up, why not now? This might be the last five years, Ben, that Phil and Mrs. Phil in the 24% bracket in which case I think it would make some sense to consider. >> Yeah. Especially Yeah. Like you said, he's going into the private sector. He's got the pension income coming. >> Yeah. Yeah. Well, and because another wrinkle in this for, you know, our younger viewers and people that aren't as familiar, they are above the threshold of being able to actually put into like a Roth IRA or something, right? Correct. So, this is their only opportunity to to get >> Roth directly. Yeah. And it sounds like they do have a large Roth IRA balance outside. Again, Duncan, you answer that question, but yeah, again, I think Phil, you know, I take a look at it. I think it makes a lot of sense given the circumstances of Phil's situation. >> All right, next question. >> Okay, we got one from Shandra. I was hoping to get your thoughts on the Trump accounts relative to other saving options such as 529 UTMA and UGGMA. Can I say that? Uh or taxable saving brokerage accounts. When it was first announced last year, I assumed it was only applicable for children born between 2025 and 2028. Turns out parents of children who aren't eligible for the $1,000 seed contribution can still open the account and contribute up to $5,000 a year adjusted for inflation. The no withdrawal limitation and loss of control once the child reaches age 18 are disadvantages. But perhaps the tax treatment benefits and potential employer contribution could make it worthwhile. Uh while there are clear benefits of contributing towards 529 accounts, how should one consider it over UTMA or just standard taxable brokerage under the parents account? >> Just what we need more accounts, right? This is why >> it's so confusing. >> The Carlson sweet ticket is going to have just one big account. Right. Right. build like the SE IRA. Why do we need to have a SEP limit so high? And then we have the 529 and now we have the Trump account and then we have the UDMA and the UGGMAS and we have the HSA and the Roth IRA and the traditional IRA. >> Coverdale 451 457, right? You just keep going and going and going. >> I like the idea of the Trump account because it helps get people involved in the stock market early. But people are starting to think like, wait, does this make sense compared to some of the other accounts? And it seems to me, you can tell me if I'm wrong here, for education, the 529 plan is still still the best option, right? >> Yeah. >> To me, because that that makes the most sense >> for education. >> Yeah. So limited purpose, right? So you can only really use it for that thing. I I think you know, Shandra, just to boil it all down, Ben, for Shandra, I would say look, if you're not getting money from that seed contribution or money for your employer, this is one, Ben, to your point, I would I would I would avoid. I I think it's too many accounts. This one is is the the the the straw that broke uh Bill's back. It's just one more account that I don't think is is worth it. Is it good to your point, Ben, to incentivize savings? Absolutely. 100%. If you can start a contribution $1,000, median household income in the US right now is roughly $80,000 a year, right? >> Can you imagine the stream of income you could create by having one kid each year for the next 18 years, >> right? Because they're totally outside of that. You know, you just think about it. >> You don't have to worry about feeding or clothing them or anything else. Uh, no. But >> they just created a new Vince. >> I can't wait for the comments thinking you're being serious. >> I mean, the child tax credit, too. But anyway, but um no, but the problem is that these things basically are IAS. Like, that's what they are. They're IAS, but they're without a tax deduction. So, Shandra mentions potentially contributing $5,000 a year. That's great and wonderful. That's a non-qualified contribution. You're not able to take a tax deduction for that. And then when the earnings come out of the account at age 18 or later, then they're coming out at ordinary income rates at at usually the highest possible tax rate again for the kid, right? So we don't know. Typically people don't roll out of college with >> pucksatony gets the money at 18, right? That's the big difference too. >> So that's that's the other that's the other problem. The superpower here is the employer matching contributions. If you happen to have employer that matches these things, but they're just so new. >> Can you clarify that there there are employers who will match for Trump accounts? Some employers are saying that, hey, if you contribute to this, we'll match it. It's I think it's a handful of employers right now. But >> is this like a political thing like, oh, companies that consider themselves more aligned with the right will do it versus or is it just kind of >> It's just companies that that like the idea of trying to help. It's not a lot of companies now, I don't think. No. If your company does this, it's free money you're turning down. >> I've only seen a handful, Ben. And yeah, Duncan made to your point. It's about the press release right now, but the details really do matter. So, like again, if you have to open a Trump account to get $1,000 or $2,500 a year from employer, absolutely there's no there's no downside, right? However, again, I don't see the point of giving somebody at age 18 a large basically IRA and telling them, "Hey, you can use this money, but because it's an IRA, you have to pay the penalty and tax versus a non-qualified account where they're subject to capital gains rates." Or, Ben, to your point, the real the real bullet here, I want more kids to go to college. My kids are going to college. They have three. They can be whatever they want as long as it's doctor, lawyer, and engineer. And so their ass is going to college. You bet it. And I I'm I've got a 529 for that purpose for each of my kids. >> I can't wait for I can't wait for your son to go to school for painting. >> Again, if he's painting uh for attorneys, that's great. Yeah, I need to do that for a law firm or engineering firm. But yeah, to me, these these are a little too complex. They're a little too cute. And I'm very excited next year or five years from now when they're Casiocortez accounts or some other nonsense. So >> just lump them all into one. >> I agree. USA Patriot. That was actually something Ben uh in the in the last bill two years ago that was proposed. It was like a Patriot savings account where you could basically it was an IRA and a Roth IRA and you could put $1,000 a year withdraw any time taxree. That that type of thing makes a lot of sense to me versus this complex nightmare. >> At least they're not taking stuff away though like none of these accounts have been taken away yet. That's good. >> Is is someone benefiting like why why are there so many different accounts? Like are these being custodi off of this or something? >> If you happen to have Yeah. If you happen to be an investment professional and you're helping people navigate this stuff, uh I don't know, like the three of us, may maybe >> ask Bill why the tax code is so complicated. It's because they keep building on top of it. They can't like start with a clean slate. It's like we're going to latch this on and latch this on and >> yeah, that's it. And I'm letting my libertarian soul, you know, be bared here. But yeah, the the the goal here when politicians get elected is to do something, right? We have an action bias. And here we are. We're rolling out a new account. This is great. Let's ignore the 17 other accounts, right, that maybe are better than this one. It doesn't matter because their names on it and it's about optics, not a political statement. Every politician does this crap and nobody is there saying, "Hey, let's make this easier for people. Let's take this regulation away." >> Think about how many people will forget about some of these accounts and then they'll get to Grove over the years with no one messing with them and then they'll be surprised one day. >> Yeah. Per that great apocryphal Fidelity study that apparently doesn't exist where dead people and people who changed uh moved are the best performing investors in the United States. >> I still believe it. All right, next question. >> And we're being blown up in the chat by Dave Ary. He's saying about he wrote pretty much the same question in December. So I don't know how why you picked >> Don't diss my guy Dave. Yeah. >> All right. Dave, personal apology for me. >> Yeah. Yeah. We should answer five of Dave's questions on the next show. >> I promise we'll make it right. >> Yeah. Amen. >> Okay. >> Duncan's gonna send you a free hat, Dave. >> Very good. Sure. >> It's a mega hat. >> No, it won't be. Uh, okay. Up next, we got one from Jeff. I'm 58 and contemplating retiring from my corporate role this spring and the only real concern I have is health insurance. My options right now are Cobra, 18 months max, the ACA marketplace, not as good as Cobra, or move to my wife's. She's 51 and her insurance is not good at all. Uh the other option is to just go the barista fire route. That's new to me. >> Yeah, never heard of that. >> And get a job. >> You work at Starbucks just because it has uh benefits, right? >> I don't I don't hate it. I don't hate it. Yeah. >> Uh, but yeah, the other option is, yeah, barista fire and get a job with health insurance. Uh, what do you advise your clients who retire before they're eligible for Medicare to do about health insurance? BS. I'll be in Grand Rapids, Michigan for a weekend in March and would very much appreciate some guidance from Ben on the best breweries to visit. >> All right. So, we get a lot of questions from people um who want to return their 50s, right? That's a thing, >> right? >> Yeah. Very common. God bless him. Yeah, if you're lucky enough to >> and I joke that the age is almost always 55. Why is it 55? I don't know. It's a round number. >> Yeah. >> Right. >> That's it. >> Um Jeff wants to try 58. Bill, I sent you this question earlier this week and you went down a rabbit hole, so I want to pull this is Bill after we started talking about the healthare system in the United States. Pull my picture here. >> This is that that's Bill in the mail room. >> I lost my mind. Yes. >> What a sh. >> Um so I I think it's probably because you handle the the the health insurance numbers at Riddle. So, you understand these things and how expensive it is. And every year this happens, you go, I can't believe how much healthcare is costing us now and how much the increase was. And um I I think there's things that we can fix in this country that are relatively easy, right? Um social security we talked about in a recent episode. Like I think that's pretty easy to fix. Like health care system, I don't think we're ever going to fix it. Just like the tax system, I don't think it's ever going to be. We can't just start from scratch, right? Um but it seems like at least to you, Jeff has all his options covered here, right? what he's listing on the question, those are his options. There's nothing else he's missing. >> No, I think Yeah, I think Jeff is really sober about this. I think he's looking at it really smart. You know, the healthc care exchanges are are a decent option, particularly if you're income limited. They're just so complicated, Ben. So, and I think ultimately the the key the downstream of this, the reason I went completely insane in our in our internal message board, can we chart uh my first chart here, Daniel, for this question? It's that the cost of health insurance, gentlemen, is just way too damn high. like we're looking at $27,000 the average premium for a health insurance plan across the United States. And that's a combination of good plans, bad plans, the whole gamut. And it really varies tremendously by region. But $27,000 in excess of $2,000 a month in my opinion, completely unaffordable, right, for for a family making 40, 50, $60,000 a year. It's just too expensive. And I can't quite understand why outside of the impact of government regulation. Dan, can we flip on chart two? I'm going to pull some people behind the curtain. Ben, you're you're exactly right. I have watched our health insurance increase at roughly eight 8% a year for the last uh almost 10 years going at this point. And I've watched that happen via certified payroll employee organization that we're a part of. They're good people. They do good work. And it's not their fault that the costs are insane. But some of our employees, Ben, are opting into plans that cost them $50,000 a year. That is that is completely insane to me. It's completely unacceptable. I don't know what to do. But it does seem back to our politics point before every solution they've thrown at this problem unfortunately has just made it worse being the ACA repeal the ACA the whole thing just every like clockwork the cost go up wouldn't wouldn't making health care costs go down be more popular than than the credit card thing that the administration is looking at seems like this would be a huge win >> but this is really complicated stuff and very hard to fix because it's the healthcare providers and the hospitals and the insurance and >> um >> I mean it's like a third of the economy right now Like that's what's so insane to Ben's point. So many people rely on this system and the reality is these margins are paying people's jobs. Like it's not just a capitalist anti- capitalist point. >> Perhaps I but I think it's a symptom frankly gentleman of overregulation. Like if you take a look Mark Perry AEI, if you want to Google that chart has a great chart showing what happens when you cut regulations, you're able to outsource, you're able to get efficiencies, flat screen TVs. If you look at those costs there versus more regulated industries, housing extremely highly regulated, right? what you can build. Few things are high more highly regulated than health insurance, right? Because it's the state level and there's so many requirements and so many barriers to entry. >> We would do it this way if we if we started from scratch. All right. So, but this is the kind of thing that the people who want to retire in their 50s, they almost never ask about this. And this is a big >> it's huge. >> This is a big thing. So, I think if if I'm looking at his options here, >> I would probably even if it isn't an optimal plan, I'd probably go on his wife's plan. >> Yeah. >> Don't you think? Because even if it's not a great plan, maybe he's got to cover some of it out of cost. But like I'm guessing her employer is covering some of that. I think if she's working, that makes the most sense to me. Unless he wants to get a part-time job at Starbucks just for the healthcare benefits. >> That's exactly right. And most jobs too, Ben, if you sign up for a family plan, they'll let you cover that cost pre-tax, right? So you're basically 30 40% potentially out of, you know, out of pocket because you're not paying income tax on that benefit versus using after tax dollars for healthcare exchanges even if you're narrowing hitting that window of the premium tax credit, which can go horribly wrong. We've seen it happen a lot uh with Bill Arts Everett and the team at RBM Attacks. Uh I would I would strongly look at that. I think Jeff that's Jeff's best option. >> All right. As far as the breweries go, we actually do get a lot of questions from people who come to Grand Rapids and one of because we are we've been named Beer City USA for like the last 10 years in a row. A lot of the stuff started here. So the staples are Founders of New Holland. That's Nick downtown. Bill, you're a big Founders guy, right? So you can go to the Founders that those are the ones that check off the list. >> KBS. I mean they do some heavy that's heavy duty beer, right? You like the stuff that's more like whiskey as opposed to >> like drinking maple syrup. Yeah. But >> you have to drink it when it's warm. That stuff's not for me. Um >> Mitten Brewery is pretty cool. It's like an old fire station. Solid pizza and beer. Brewery Vant. That's my favorite one. It's an old Belgian beer. It's an old church with like a big steeple in the middle. Like small church. Um really good burgers outside of the breweries. I'm I'm like a travel host here. >> So you have a god-shaped hole that you're filling with beer. Is that what you're >> Yeah. Uh Stella's Lounge downtown is a favorite. My kids love it. It's uh GQ named it the best burger in America at one point like 10 years ago. It's kind of like a punk rock theme. So you want to go like drink a PBR there or something, right? They have punk rock and uh video games. And then you find a cool cocktail place there. Uh a place called Miamo is an old house. There's all these really huge old houses from all the furniture barons back in the day in Grand Rapids. They turn the house into a restaurant. It's a cool restaurant. And then they have a place called Mo Cocktail Lounge in the back for a good cocktail. >> Nice. >> Ben, how far how far is Kalamazoo from you? I I couldn't >> 45 minutes if you want to go to Bells. >> Yeah, that's what I was going to say. So, Bells is my stuff. Big two-hearted guy. I think the hop slam ale in a can. That stuff is excellent. I mean, you're you're approaching 10% ABV, but that is an excellent excellent >> spring and summer Oberon is by far my favorite beer. And then I got to shout out Brewery 424 in Holland, Michigan. >> I was about to ask, how far is that from you? >> Probably 45 minutes as well. So, everything is 45 minutes from here. So, Dave in Holland, Michigan got his own brewery that he started and I've been there before. We we did an event there. Excellent beer. >> So >> nice. >> Let's go. >> You can't go wrong though. >> Road trip. Beautiful time of year. >> One more question. >> Before we jump to the next question, just one more thing on the health insurance. How much uh agency does the average employee at a company have to try to lobby for better benefits? He mentions his wife's insurance not being good. Like that sounds that sounds really bad. Like what company's offering insurance that is bad to their employee, you know? >> Well, probably what he's talking about, Duncan, is the company's passing on more of the cost to employees. It's like that's the most likely, you know, explanation for that. It's probably not that the insurance plan is bad. It's just extremely expensive. It's my guess. >> Yeah. You got No, Duncan. You're not going to make any changes? No. >> No. Okay. Yeah. I mean, I'm just wishful thinking for them, you know, but Yeah. >> Yeah. One more. >> Hey, last but not least, we got one from Jeff. I'm hoping to retire when the current school year runs out at the end of May. Right now, I'm putting together what my budget and net worth review process will look like. without giving away your secret sauce. What items should a a recent retiree be paying attention to in a year-end review? And you know what? I'm gonna go ahead and say give away the secret sauce. I want to hear it. >> Okay. >> What Jeff here? >> Uh the secret sauce is there is no secret sauce, right? So I'm guessing Rick is a teacher. He's waiting till the end of school year unless he just wants his kids to be out. Um I I'd say there's no secret sauce. It's a process, not an event. The two biggest things, and Bill, you can tell me if I'm wrong. Um how much do you spend or plan to spend in retirement? And what are your goals? every other decision is some sort of branch off of those questions. Bill, >> yeah, I'd agree. Uh Ben, I I think it's just take things slowly. Like that would be my take. I what I observe, Ben, and a lot of retirees is that they're they're building up to this moment, right? And they get they get that gold watch, they get the high five, they have the party, and everything's great. They do everything they wanted to do, right? They travel, they get the garage clean, they just have a lot of fun. It's about two, three month process. >> You would probably clean your garage. I can definitely see that. I I have a total mess right now because it's disgusting outside and I don't want to be outside. This is negative 27. But moving forward, yeah, with with our guy Rick, they get that three, four month mark and they're like, "Okay, now what?" And and I know it sounds trit. I know like like everybody's looking forward to this moment, but it is really disorienting, right, to have worked for as long. I'm sure Rick has, maybe 25, maybe do with myself, what do I do with my time? >> Exactly. And I think I think people burn what I observe is people burn through all that and then roughly six months later they're like, "All right, well, what the hell am I going to do? My kids, >> I did my trip to Italy. I saw the coast, Malfy Coast, now what do I do?" >> Exactly. So I I mean, I wouldn't like immediately search a job, but or like look to volunteer, but but I just thinking through what you're actually going to do with your time is extremely important. Obviously, you're going to get in shape. Obviously, you're going to do all the things that you've been wanting to do, but then I think that the cold hard reality sets in that, hey, if we're retiring in our 50s, if we're retiring in our 60s, you got 30 years in front of you. And I think that people really do want to to provide a meaningful part of life. Like they want to participate in society in some way. And I don't think sitting around, you know, scrolling through Twitter, watching our show on YouTube is a great way to participate in society. I think you have to go out and figure that out. But I and I I talked about this a few weeks ago on the show, how like in the past, you know, 100 years ago, you might live for like five years in retirement and that the average life expectancy meant you probably didn't have a lot of time. Now 20, 30, 40 years for some people in retirement. Like you have a whole another life. >> Yep. >> Right. And and that's that's you're right. That's the big thing most people don't consider is what do I do? >> Yep. That's 100% it. And what I see a lot, Ben, is folks, particularly if they retire early, they're back doing something similar, like I said, in six months or a year and they have more flexibility, like maybe they can still draw on their pension, but ultimately again, I think there's there's this need to be a part of like society and culture. And again, even if your if your friends aren't retired, it's even worse. So, I think just having that plan of like, hey, I'm going to maybe go do this, maybe a consulting project, right? The thing I'm pushing uh Mrs. Bill to do is like figure out how to use language models to teach kids how to read. I think that's like a big a big place where you could do a lot of work in the education sphere. So that'd be my advice to Rick. >> I think the volunteering thing is big too, right? Because yeah, sense of purpose is so big. I think people retire and sometimes feel like they have no sense of of purpose anymore. >> Yeah. >> My parents both do that. My my dad uh does tax returns at Goodwill >> and you can imagine, Bill, those are really easy tax returns because you use some software and people don't have a lot of inputs. Uh my mom uh volunteers at like the local place that people come to give all their stuff. Another Goodwill kind of place. And it's funny because she's constantly looking for diamonds in the rough there too of people bringing in. >> Yeah. I mean big shouts for Ed Carlson. Big shouts to Ed Carlson because he his his hand gets hurt this year. It gets read from all the high fives from getting people their refunds. >> So that that's just an awesome thing to do. But yeah, I I think Ben there there's a big need out there in society and particularly you've been fortunate. If you've worked hard, if you do have that pension, finding a way to give back is is an amazing thing to think about for Rick. >> Uh, so Sodak Jason in the uh chat ask about best coffee shops. Ben, >> you got any coffee shop? >> You think I know the answer to that? >> It's the wrong guy to ask. >> You you talk about your wife drinking lots of coffee. >> Yeah, might as well ask for the wheat dealers. >> She goes to to Starbucks. Okay. Well, >> come on. Yeah. >> Great for retiring healthcare, though. for for giving. >> Yeah, we're looking we're looking for a good Ethiopian roast. Come on. >> Yeah, I got uh I got nothing. Um Okay. All right. >> Greenwood Lake Coffee in New York. That's where I'd send them. Uh it's great great roaster. >> All right. >> Support your local roaster. >> By the way, someone in the Someone in the chat said that I'm bougie. They tried to spell bougie, but they spelled it boogie. Um and uh I'm definitely not bougie with my beers. Come on. >> It is. It's a hard It's a hard word to spell. >> It said Ben is boogie, which actually that's pretty boogie. Ben. That's pretty good. Um ask the compound show@gmail.com for all your questions. I think last week might be a new record for most questions in a single week. We got like a dozen questions last week, so keep them coming. >> The doc is getting chaotic. >> Yeah, we got we got way many. Way too many. >> I love it. Stay warm out there, friends. >> Thanks, Duncan. Thanks to everyone on the production team as always. We'll see you next time. >> See you everyone.