Risk Management: Cautionary discussion on YOLO trading, margin use, and concentration risk, emphasizing the dangers of leverage and the potential for margin calls.
MicroStrategy (MSTR): Extensive breakdown of MSTR as a leveraged Bitcoin proxy with extreme drawdowns and volatility, highlighting why using margin on such positions can be catastrophic.
Bitcoin: If bullish on Bitcoin, prefer owning Bitcoin directly over proxies like MSTR; recognize high volatility and avoid excessive leverage or revenge trading.
Information Technology: Addressed concentrated Big Tech positions and tax-aware diversification, including staged selling, hedging, exchange funds, and options as tools to manage bubble concerns.
Roth Strategy: Strong endorsement of Roth 401k contributions and planned Roth conversions in low-income years to optimize lifetime after-tax wealth.
Housing Finance: Compared HELOCs (floating rates and flexibility) versus cash-out refis (fixed rates and predictability) for funding home improvements without sacrificing valuable low-rate mortgages.
HSAs: Supported long-term HSA compounding as a tax-advantaged bucket with flexibility to reimburse past medical expenses later and function like a traditional IRA at age 65.
Market Outlook: Brief take on Nvidia earnings not being a make-or-break event for markets and reinforcement of diversified, disciplined investing over single-name bets.
Transcript
Welcome to Ask the Compound, the show where you ask and we answer. I am Ben Carlson. Let's say you have a friend who's a yolo trader. It's not just speculation this person is into. They're concentrating into a yolo trade on one stock using leverage. How do you talk them off the ledge? What would you tell them? How do you help them make their money back after they lost it? We're going to help yolo traders and more on today's show. Please stick around. Our [music] email here is ask the compound show@gmail.com. If you're watching live on YouTube or on Twitter, please send us a question. We'll take it live on the air. As always on today's show, we will be answering questions straight from our compound viewers and listeners on fixing your friends who are terrible investors, selling tech stock winners into retirement, when a Roth 401k makes the most sense from our trusted tech expert, uh how to pay for home renovation, how to pay no taxes in retirement. People love that one. And [music] how much is too much in an HSA. Today's Ask the Compound is sponsored by Exhibit A. Exhibit A was started by our own chart kid, Matt, who came to us and said, "I got this idea." Advisers love good charts, but they don't have time to make them. They don't know how to make them. I'm going to help make the charts. I'm going to provide the talking points. The adviser just signs in. They put their firm logo, their firm colors. It works great. Um, so if you go to exhibit aforadvice.com, you can sign up there. Look at all these great charts you can do. Again, your logo, your color scheme. It's beautiful. He has chart blasts every week. They have explainers. You have talking points. You send these out to your clients. Help them explain the markets. Put things into context. And again, you can sign up at exhibit A4.com. Free 7-day trial. If you're an adviser, you need this. Your clients will love it. Uh it'll make your life easier. Exhibit aforadvice.com. >> It's kind of like we're sharing chartmat with the world. You know, really, >> you get your own Yeah. You get >> people love his charts. I got a I got a message from some guy the other day on LinkedIn. I don't ever check LinkedIn messages. Started people messaged me there. I checked him for the first time and his guy said, "Hey, how do I get your charts?" He said, "Exhibit A. It's easy." >> There you go. >> All right. Lots of questions today. >> Ben, before we jump into it, are you excited about Nvidia earnings? >> I don't care. >> All right. >> Yeah. >> It's not a make or break moment for the market. >> I own Nvidia. I actually own it. This is like one of the few stocks I own. Um, but yeah. Uh, we'll see. >> All right. I was just trying to get you to say a bite we could use on social media or something. >> Yes. No, this is the most important earnings call in history of earnings calls. If Nvidia fails, the stock market is going to go down. They do well, it might go up. I don't know. >> Or it might not. All right. >> There we go. Love it. >> Okay. Up first, we got a question from mix of names here, so I'm not going to say name. Maybe it's supposed to be anonymous. >> This might be an anonymous one because of the information. >> Yeah, I see multiple names, so I'm just not going to say one. Okay, let's say I have a brother. Let's say he was on a lucky hot streak this year, yoloing into the most speculative plays in the market, quantum, crypto, meme stocks, etc., and was up 100% year-to date. Pressing his luck, he thought it was a good idea to put nearly all of his portfolio into MSTR. That's Micro Strategy or now just strategy, right? >> Yep. >> Michael Sailor Bitcoin vehicle. >> Okay. So, he put uh put nearly all of his portfolio into Micro Strategy using margin when it was trading in the 300s. He's now down 50%. I told him not to touch Micro Strategy with a 10-ft pole and if he was bullish Bitcoin to just buy Bitcoin. I also told him to never use margin, especially on high-risisk stocks. He is at risk of losing half of his net worth and has a home purchase on the horizon that's in jeopardy. Now, he suddenly wants my advice on how to get out of this mess. I told him that I don't know and I honestly don't. How do you deal with people that consistently ignore your advice and then want your help to get out of a mess? I suspect there are many yoowers out there facing this situation but too ashamed to admit it. >> Is this one of those fight club things where we get the Edward Norton Brad Pitt and the brother is really the same person >> that I mean that's what I thought when I Yeah. But >> wink wink. Um listen I'm sure he's right. There's plenty of people out there in the current environment who have slowly but surely like turned up the risk dial from aggressive to degenerate. And the >> hard% of net worth is a lot. >> Yes. Here's the thing. It's hard once you've it's hard to see when you've morphed from I'm a really aggressive investor to I'm a degenerate gambler when you're making money. When things are going up, you don't realize like, oh no, I'm a den now. So, I think there's people who have taken on excessive level of risk. They've been compensated for it in a lot of this stuff. And now it's turned on some of these stocks. And so, man, listen. Putting half of your net worth into Michael Sailor's leveraged Bitcoin play, right? Using your own leverage on money that needs to be used for a house. This is like you have a problem. We need to do like the, you know, when when they take cousin Christopher and give him like the, you know, intervention on Sopranos cuz he sat on the dog after doing drugs. Um, this is like intervention level stuff. Um, okay. So, his brother got into the stock in the 300s. Let's do the first chart. It's now sub $200 a share. And I'm not a technical analyst, but this doesn't look like an uptrend to me. This is like a waterfall or what do you recall it? Um, so next one shows a draw down profile. This is just this year. The stock is down nearly 60% from the highs that really weren't that long ago. This is a few months ago. I'm sure he was feeling great. Like this thing's awesome, right? I think it peaked at like $470 something dollars a share. Um, all right, chart off. Uh, so this is like a 2008 level crash in a matter of months. So here's the thing. I'm not even going to make a judgment on the stock. I don't know if Michael Sailor's Bitcoin experiment will work or not, right? They're getting a premium now. The premium's gone away. I think if Bitcoin keeps going up over time, this thing not is not going to get crushed at least, right? Um so I think it really is tied to Bitcoin. It's like, but can the leverage play last until then and will investors still keep getting the money? I don't know. Um it's already worked better than anyone expected, right? Cuz like but this stock has got huge gains, thought huge losses. So let's [snorts] zoom out a little bit. Go to the past 10 years of draw downs. So, here's what I spy on this chart. You're looking at a 20% draw down to start. Um, then we got a 50% draw down. These are all separate draw downs. A 90% draw down in after the 2022 bare market, which is insane. And then a 46% draw down and now 60% draw down. And the crazy thing is despite all that volatility, chart off please, the stock is up more than 900% in total in that time in the last 10 years despite all those different bone crushing crashes. >> Not bad. The problem is the brother did not take part in the 900%. He bought near the top. Maybe held on for 25% 30% gains. Um and he bought on margin. Holy cow. Um >> and he's going to be buying. Keep in mind a lot of people are watching this show and are completely new to finance. So when people say margin or leverage, they mean they borrowed money to invest. >> He's borrowing money. Yes. So they're paying gains. Amplifies losses. This is a dumb and dumber moment for me. Do you realize what you've done? Um, [laughter] but there's not a bus full of beautiful women waiting at the end of this one. Um, here's the thing. You could try to offer this kind of person advice. Sell now before it gets worse and you get a margin call. You don't want to do a margin call and throw good money after bad. Um, invest in something far more reasonable and diversified. When I first started my blog, A Wealth of Common Sense, I had this dream and my dream was that I'm going to somehow save people from making illogical financial decisions. That's the whole premise of common sense, right? Just use your common sense. Now, don't be an idiot. And after creating financial content for more than a decade now, I've come to realize that some people cannot be saved. And it sounds like a mean thing to say. Uh some people are just doomed to make money mistake after money mistake. There's nothing you can do about it. You know how you have those friends that you grew up with and you go, "Man, this person is kind of delusional, but they're going to figure it out eventually." And then you you hit middle age and you go, "Oh, this person's never going to figure it out." Right? We all have those people in our lives like, "Oh, this person's just always going to be going from crisis to crisis, bad decision to bad decision." And and some, listen, some people need to make a big mistake like this to have the realization like this aha moment like, "Oh gosh, what am I what was I doing? What was I thinking?" Just to change their behavior that does happen. I know an adviser who runs a solo practice who constantly turns people away that he knows will be bad clients. And he tells them like, "Nope, you're not ready for me yet. Go make some more mistakes, then come back and talk to me." Um, and he says, "Some people come back. Most people don't. So, can the brother here be saved? Maybe. I think he might need someone to take the steering wheel. Like, it's one thing if you're yoloing as a young person with without a lot of responsibilities, right? You don't have a lot of money. You're gambling, speculating, hoping to strike it rich on a lotto ticket. I I don't recommend that. I don't that's okay though at a young person. But when when you are talking about money that's meant for a house, which is a short-term thing, and you're putting margin on top of margin on top of margin on top of Michael Sailor, uh you have a problem. This is like I I don't know what to do. Um so either you put your portfolio on autopilot or you hand the keys to an adviser or a family member or otherwise you're going to not going to learn your lesson until you get margin called to death and then you're broke. That's the only thing here. The hard thing is he can't he can't go the opposite direction either though, right? Like he can't just go into treasuries. He's not going to like he has no chance of of you know even recovering some of >> Here's the thing though. You don't you don't want to revenge trade though because obviously you lose 50% you have to gain 100% to get just to break even. Everyone knows the math there, right? >> Um but you don't want to revenge trade and go like once I break even then I'll then I'll chill out. Like maybe you have to take your time to break even and because he was probably it sounds like he was sitting on big gains anyway, right? The answer is not triple levered S&P either. >> No, just something more reasonable. Listen, is this guy going to go in a target date fund? Probably not. Should he? Probably. >> Um, keep us posted. But, uh, I'm afraid this is going to end in tears. >> Yeah. I mean, so a lot of tax loss harvesting. Is that the silver lining? >> I I hope your net worth. >> All right. I I hope he I hope his house doesn't fall through. But yeah, but maybe if buying a house, the treasuries are the answer for right now. You know, >> T bills. >> All right. >> Yeah. I I feel I feel bad for them because I know that it's very easy personally speaking to get caught up in this. And there might have been a time when, you know, not that long ago, I was just buying whatever stock was going up the most on the day and then selling it after it went up 10%. And, you know, so I've I've been known to fall into some of these things. But but yeah, the the leverage part is the I think the the most the concentration too. If it's if you want to speculate >> like position size it correctly, take 10% of your portfolio and speculate your face off. I don't care. But 50% of your net worth. >> Yeah. >> That is and on margin that means guess what you're doing more than that. It's uh [sighs] yeah, someone in the chat says that the margin calls just don't answer. Uh you know, then they break your kneecaps. >> Also, why is it it's so often people that are into Bitcoin that that end up I guess it's just a risk appetite thing. like people who are really into >> I think people in in that if you've been in that asset long enough you are more comfortable with volatility. >> Yeah, you've seen crazy gains. >> So yeah, there there's Yeah, there's there's 10 20 time leverage in some of these people. That's why you see people get wiped out when Bitcoin falls 10% or something. So why would that >> wipe someone out? >> Yeah. >> All right, next question. >> Hey. Yeah. Good luck. Good luck to your brother though. I mean I hope hope they figure it out. Like you know it's it's there's a part of this I'm laughing because like some of it is funny like yeah putting all your money into something so speculative. Of course, you know, that's it's kind of comical, but like in in reality, I hope hope they're going to be okay because yeah, it's that's a lot of money to lose. >> Yeah. But but he's right. There's probably a lot of people who are in a similar boat who've gotten [snorts] way over their skis and then a stock falls 50 or 60%. You go, "Oh my gosh." >> Oh, for sure. >> What do I do? I I didn't expect this. No one does, obviously. >> Yep. All right. Up next, we've got uh another anonymous one. Wow, we got a lot of KG KG questions today. Okay. Uh, you have to answer my question because I'm a female listener. I love that this is a thing now that we started. >> This is extortion. No, we said it. We have to follow through. >> We Yeah, we said there's so few so few uh you know women in in finance and and listening uh to finance podcast. So here you got us. Um you have to answer my question because I'm a female listener. I've also unleashed Bill by saying his name three times. I've spent the last 15 years in big tech sales. I'm 55, have about a million dollars in two big tech stocks with a lowcost basis. I never really sold the vested stock and now over the last few years, it's a significant amount of my net worth. I'm still working and at the highest tax bracket, so I've been reluctant to sell. While I'm while I am partnered, we keep our money separate. My husband is retired and I would like to retire in the next two years. Part two. Uh, how should I think about my how should I think about asset draw down in taxes assuming I have no income except for what my portfolio casts off which is less than $48,000 a year. Could my capital tax rate be zero if I want to get out of this uh heavily leveraged tech position? Do I sell most of the tech stock in year one of my retirement? I'm worried about a bubble too. I have about $800,000 to a million of cash that needs to be reinvested. Since I have a margin of safety, should I write it out a few more years in soy we sell? >> All right, Beetlejuice rules apply here. Time to bring out Bill Sweet. >> Yeah, I ran it so fast to answer the call. My uh beard fell off. >> Oh my god. >> Yeah. On the way upstairs, so here we go. >> Nice. >> Looking good, Bill. Okay. Um, so we've got It's funny how taxes have seemingly kept a lot of people in these stocks over the years. It's like, hey, if it's keep it keeps going up, I know I probably should sell, but I don't want to because I got to pay taxes. We We get a million. We've gotten a million of these questions again. bull market questions, but still this this one is a little twist on it because it's asking about retirement, right? How do I does how does it differ in retirement if maybe my income falls to nothing and it's just portfolio income? Um, so what say you or is there any easy way because people want to know like I want to hit the easy button on this. I want to get out of this. I want to I want to keep my tax bill minimal and I want to spend the money. What do I do? >> Yeah, love love love this question from anonymous listener. Thank you very much. Uh but to me Ben moving from an accumulation portfolio which is where we've been to a distribution portfolio which what it sounds like that is not an event it's more of a process. So Ben I don't my argument there is no easy button. Uh this is the work of an adviser a CFP type adviser in conjunction with the responsible tax team. There are a couple of levers though that that you can hit and what I love about where the listener is. Uh there there were some additional details you received uh there there is a large off balance. So that was one thing that I was very very excited to hear. Um, but for the purposes of capital gains, the listener hits on something really interesting that there is no other income outside of some dividends, $48,000 a year, uh, for a married joint couple, you can you can take up to $130,000 of total income from capital gains and other and other and other sources and basically pay 0% on that on that transition. >> Wait, wait, she said they're partnered, but keep things separately. What if they filed what if they file separately? >> No, that's a great that's a great thing. So, I I specifically mentioned jointly, right? So, we would need to analyze, hey, are we filing jointly or not? But even if we're filing single bend, then ultimately you're still eligible for half of that, which limits I think if we're talking about this is one individual's assets, right? Filing a separate return. So big picture, it's complicated, but ultimately I I like where this is going. And it may not be a fact of hey, we want to we want to because Ben, you you correctly identify capital gains as an obstacle, right, to to a diversified portfolio. If you've been successful investing, taxes are the fruit of that labor. Like you're going to have to trim that tree eventually. And the question is, do you want to do that after a long bull run in the kind of market that we've been in now? I would argue, yeah, this is a great time to look at that versus, do you wait for a 20 or 30% draw down? And then the the nice thing about a draw down like that, Ben, is if you don't have your gains, you don't have to pay tax on that, right? So, so give me the taxes. I I would argue in that direction. I would fill up low tax brackets because I think that's that's the that's the gist here. And that's that, like I said, Ben, is the work of a competent planner over or a five or 10 year period, >> right? So, yeah. So ripping the band-aid off just means that's the trade-off between hoping the stock doesn't fall and then paying the taxes right away. >> Yeah, I think that's it. Taxes, like I said, some people hate paying taxes more than they like making money. I I would take the opposite tack here. And I think Ben, a great time to do that would probably be rolling over the calendar, right? January 1 or so. You realize your gains early in the year and then you can effectively deploy, let's say, a tax loss harvesting strategy, some other options that you might have to realize losses to kind of whittle down on that gain as the year progresses. I think that's an excellent way to rebalance over time. >> And we've talked to other clients too who have if they have a huge position. There's other opt there's other strategies you can use like options to sort of hedge against the stock falling, right? There's a cost to those options, but there are ways you can do that without completely selling the stock um as you slowly but surely get out of it and use tax loss harvesting and and all those other things. So, there are strategies you can employ, but you're right, you you it's not something that you take lightly. You need someone to help you with those. >> Yeah. And I I would go that route, Ben, if there was a a very concentration, let's say like half of the portfolio was in a single company, that didn't sound like this situation. This seemed more diversified, maybe concentrated in tech. Um, but Ben, a couple of things that we've been looking at recently, just to throw them rapid fire. We've been looking at uh options like section 351 exchange. Uh, that's something that you've seen a lot of platforms and products coming to market. That might be something to sit down and take a look at. We've been looking at exchange funds as an option. There's a seven-year holding period, right? So, it comes with trade-offs, but you do get a lot of instant diversification there or looking at plain old tax loss harvesting and that using the other assets in your portfolio, build those around those concentrated positions and and begin to whittle those down over time. >> So, someone in the chat says that she should just marry the micro strategy guy. He's going to have the losses, she's got the gains. Um, that could be a dating show on CNBC. We pair people based on their opposites attract, right? We take one person huge gains, one person huge losses. bill. Let's say they got married this year before the end of the year. Could they offset each other's gains by filing jointly or does it not work like that? >> Well, this listener seems like she's spoken for and I can say her investing acumen is top-notch. But in the event that we wanted to roll out a show, uh the answer is for other listeners uh yes, Ben, you could effectively uh take very successful uh female investors and match them with degenerate gamblers on their side. That's it. I'm making a thing. >> Sounds like a great deal for the response. wife right for losses in heaven. Yeah. So just to but to take it seriously at 12:31 is the date that sets your status, right? So if you happen to be married on 1231, whether you got married that day or the day before, that's the date that you can claim. >> Think about it. This is a dating app where the losers finally win. Like all these people have huge gains in their tech portfolios. If you're a loser who's got the big losses, everyone's going to be lining up to to get paid with you. Yeah, there there are other reasons to maybe consider entering holy matrimony, but uh yeah, t tax tax losses are definitely >> it does sound like this instance she has a lot of flexibility too with her other assets. Like you said, she provided us she has some Roth assets. She's sitting on a bunch of cash. >> Um so if there is a tax bill, she's going to be okay. >> Yes. So I think the trick for me would be have a plan obviously, but then yes, th those other accounts that you mentioned, Ben, are more flexible. they're more you can you could do different things to build around those positions and then sit down with a qualified planer and figure out okay what how do I prioritize these >> and it doesn't sound like she is really like beholden to just these two stocks like she has another whole portfolio she can tap so it's not like it's these two stocks are nothing right that's because that makes it even scarier >> yeah and furthermore Ben I I think everybody's got this bubble fever right now and I I again I I understand the the thought process here but we won't we won't know right what what the what what's going to happen until it happens and the the truth the reality is these companies are are highly valued for a reason, >> right? And and I love Ben the point that you've made and Josh has made this point and Michael has made this point that like we're getting better at investing and running companies like CEOs, CFOs, COOs are better today than they have ever been and they're better at managing a balance sheet and that to me gives me a lot of uh some some some some solace when it comes to margin compression, >> right? >> Sounds pretty toppy to me, Bill. >> Yeah. >> Yeah. [laughter] Just worriedish. Not worried, worried. >> Famous top tick words. But hey, if the market drops, great opportunity for Roth conversion. >> Speaking of which, let's do another one. >> And great job and and thank you for the question. Also, Christopher Flint in chat says, "I feel so poor reading these emails." Um, [laughter] yeah, we we get that a lot. But, uh, but, you know, larger stakes makes for more interesting questions and these are most of the questions we have. >> No, we we have a service model for every client, too. Yeah. >> Yeah, we do. But, but the thing is, too, like with a lot of this advice, take a zero off here or there. Like I used to say when I worked in the institutional world just for institutions um I'd say it's just a couple extra zeros like the the the building blocks are still the same, >> right? And so it's so it's the same thing if you've got a million dollar tech portfolio or $10,000 tech portfolio, right? Just uh think through things the same way. >> It's just a little more or less money. >> It's exactly it. >> All right, let's do another one. >> Okay, up next we got a question from Eric. My employer is adding a Roth 401k option starting in 2026. Uh right now I only contribute enough to my traditional 401k to get the full employer match. My plan is to keep contributing up to the match in the traditional 401k about $3,000 a year and then put the rest of my contributions toward the 401 the Roth 401k to max it out. My net worth is about 1.5 million. I have $550,000 in pre-tax retirement accounts, traditional 401k and traditional IRA, and about $80,000 in a Roth IRA. I ultimately want to roll Roth 401k contributions into my Roth IRA as I believe it's a bit light. Does this strategy make sense? Any issues I should consider? >> All right. Um, so first of all, good on the company for issuing the Roth 401k. I don't know what percentage, Bill, do you have any idea like how many actually do it? It can't be that much. I want to say it's somewhere in 15 to 20% today, Ben. >> Okay. Luckily, Rit holds Wealth Management does this, >> which I'm sure you're happy with. I am, too. Uh, and you you forcefully made me do this. >> Put the gun in my back and said, "No, you're doing a Roth 401k." >> Um, >> so I I think it seems to me that his Roth IRA is a bit light and going for the Roth 41k option makes a ton of sense. I can't imagine you would disagree here. >> Yeah, Eric, I want to welcome you to the dark side. I went with uh Ira Rothmax as my screen name here for a purpose. Ben, it might not surprise you. I fully endorse Eric's plan. Let's think about this for a second. Let's let's live in a world where Eric does not pursue this strategy. So, he's not putting an additional $21,000 a year or so, right? In addition to his matching contribution, traditional, that money is going to hit his checking account. Correct. >> Right. So, if he puts it into the retirement plan, he's probably going to invest it and and be successful. But if it's going into a non-qualified account, he's going to pay interest on the dividends in uh taxes on the dividends and taxes on the interest. And then if and when he liquidates that asset 10 20 years from now, he has to pay a capital gain. So Daniel, can we chart on? I did a quick analysis and this is not advice. Uh you need to consult with your tax professional. But the difference here, if you focus on the right side of this chart, it is about a 30% gap between what you would realize if you rolled 20 years of $21,000 contributions into a a Roth IRA from from a Roth 401k, you would roughly have a million dollar balance completely taxfree, assuming you're taking qualified distributions after age 60 versus roughly $715,000 on an after tax basis if it was a non-qualified account. So Ben, I ask you, is 30% tax savings, is this worth it uh for Eric? Looks pretty good to me. >> Yeah. >> And that's it. And again, back to Roth, this this mega super 401k, this is a huge opportunity to to to get funds into this space. And then we're going to answer a question later on what you do on the back end that that even ripens this. So when I when I procize Roth, it's exactly for people like Eric. >> All right. And I I got to do a PSA here since we're talking about retirement plans. So throw up my chart here. I looked at this. This is the annual 401k contribution limit going back to 2000. And Bill, I always complain to you, why don't they index things to inflation like the loss losses that you can use on your taxes, >> but with retirement contributions, they actually are doing a very good job. >> And this thing this century has more than doubled. >> And so now for 2026, we're talking 24,500. I think if you're 50 or older, what do you get? 8 grand extra. >> Yeah, it's an additional 7,750. Yep. >> And if you're like 60 to 63, you get an extra 2,000 bucks or something. >> Yeah. That jumps up all the way to 12,750. Yeah. So, chart off here. So, like this is a great thing. And then if you do it with a Roth 401k, right? Yes. You're paying the taxes up front, but you can actually the way I look at it is you're able to put more in because it's a Roth 401k. >> I know it's not really that way because but no one ever invests the difference. >> Yeah. >> Right. So, you can put 24,500 in the Roth or the traditional, >> right? But that Roth is after tax money. So I I think it to me in my brain it means I'm putting more money in because it's a Roth 401k. >> Yep. And then you can even do Ben these really crazy plans have these ability to fund all the way up to the 414 limit which is uh last year was 70,000. I want to say it's 72,0007. So that's like a SE IRA $72,000. >> You can do it that way. But again what you can do is contribute dollars on an after tax basis. And then if you can convert those after tax dollars to Roth, you effectively can supercharge that up to like like I said in in excess of $70,000 a year uh per year. So that that's a great way to do it. >> Dave in the chat said that IAS have not kept up. Throw my next chart on here which I got IAS on here too. >> They have not kept up, but they have kept up this century, Dave. So not since the 70s, but look at the increases this century. They've gone from $2,000 in the early 2000s to $7,500 now. And you can see there's a lot more plateaus in the IAS for some reason. I don't know why that is. Um, but they have increased it a decent amount this decade and uh, so we're doing better. We're getting we're getting there. >> Yeah, it's great. It's great. But I think Ben, you and I are on team uh, yeah, team TSP. Uh, opening that up to the masses. And frankly, like I don't understand why your $70,000 contribution limit for this this year, last year should be tied to your employer, right? Why not open that up to everybody? >> Yes, exactly. All right, got another one. >> Okay, up next we got a question from Travis. I'm 47 and we have $45,000 left on our 2.875% mortgage. We would like to tap some of our $500,000 of home equity to complete substantial home improvements, kitchen remodel, basement remodel, and lots of landscaping. I'm thinking we'll need around $250,000 to do everything we want to do. I hear a lot on your show about Hilocks, uh, which is home equity line of credit. And of course, your stance is, uh, to never touch a low interest mortgage. Here's my question. >> Someone's paying attention. Yeah. >> Mhm. >> Uh here's my question. Instead of a 7.25% HELOC or a 7.5% HH home equity loan, >> Yep. >> Uh what about a cash out refinance? I would be exchanging a 2.875% rate for a 5% rate for a refi. Is it a no-brainer to do a cash out refi? Maybe when my 2.875% loan is almost gone, uh like less than $10,000 left instead of a heliloc in that situation. you know on this math so this is on you guys. >> We got it. So people who have a low rated mortgage are will happily bring out to three decimal points. Instead of saying 2.9% he had to say [laughter] 2.875, right? >> The one a few weeks ago was 2.625. That's that's when you got to use all the death just that's a total not to brag like hey I got 2.875. I'm way lower than three. >> Um okay. Uh so here's the thing. >> Uh great congratulations on the renovation. That's a lot of money. I I guess it's uh it makes sense. These things are not cheap. But, uh, you're >> Are they building a golf course in their yard? >> This is your forever home. Landscaping is expensive. Kitchens are expensive. This this actually does not surprise me that it's that much. >> Um, and listen, if if they have this low rate and it's almost paid off and they want to stay in this, make it a forever home, I I get it. I understand why people are doing this. So, here's the thing. Helocks are floating rate. Um, so that's one thing to consider. So, taking on a heliloc, yes, it's like seven and a half now. I looked at mine this morning. Mine is 6.75 and it was way more than 8% at the heights of so if the Fed keeps cutting I would imagine that these things will fall. So that's one thing to consider. The heliloc could fall whereas if you do a cash out refinance then you're locking it in. But you said it's like a 5% rate right now. So that that's not terrible actually. Um so I don't really mind that. Plus you know with with that one you're locking it in right. You're locking in the rate you're locking in the payment. With HELOC, it could fluctuate. If if inflation comes back and rates go back up, then your HELOC payment could go up. >> The the one thing I do like about the HELOC is it offers you a lot more flexibility because you have usually the way it works is you have 10 years of interest only. You have no principal payments and then from that point on then you have 15 years to pay off the principal, right? So it gives you a little more flexibility on when to pay and how much to pay. anything I'm not thinking of here, Bill, that they could do. Obviously, we haven't talked about like a borrowing against a stock portfolio or something, but is there any anything else that you would consider here in terms of like getting this done? >> Yeah. No, Ben, I think you hit it all. Travis, this is a time value of money question. I think Ben, a cash out refinance is a great option. It allows you to leverage the asset, right? A lot of equity is tied to that to that house, right? Your loan to equity value is like 10% which is fantastic. Uh and ultimately, you could you got a couple of options. You could just take out a brand new loan, right? en roll your existing balance into the new one. I did some quick back of the envelope math. Uh on for a 15-year loan, we're looking at about $2,300 a month. So, that's going to be about $414,000 over the life of the loan, which would start at roughly 295 because keep in mind, we have that existing balance. Um or we could go all the way up to $1,600 a month for a 30-year payment, right? And that would increase the total. >> You're effectively taking out a new mortgage. And the thing is, that's the whole point of the house is that like if you're putting this much money in, hopefully you're increasing the value of the home, correct? Well, you're adding equities. It might not be a one for one. Yeah. deal, but you're hopefully adding some value. >> Usually isn't, but yeah, but I think there would be some reasonable expectation as you share house, you'll get it back on the back end. But I think Ben, you correctly identified it. If we're planning on staying this house forever, like I probably would sit down and consider the 15 the 30-year option uh just based on your cash flow needs because ultimately, I'm guessing the mortgage just where you are, like you probably don't have a large mortgage payment. So, if a $1,600 a month mortgage is kind of shocking, like I I don't know that I would go all the way, you know, go all the way out uh there. And then you can if if rates go back to 3% for some reason, if we get a nasty recession, you can refinance. >> Yeah. And you can even start out with the heliloc, right, to get everything paid and financed and and then and then ultimately talk to the bank afterwards. So yeah, you got a lot of flexibility here. Uh I don't think any of these options are bad. There's just trade-offs. >> Yeah, I think you're thinking about it the right way. I think they're they're go approaching this in the right manner. >> Correct. Yeah. But I don't see any reason, Ben, not to lever the house. I mean that that sometimes people, like you said, borrow from a stock portfolio, something else. You are you are introducing a little bit of risk there and particularly like I said with a 10% loan to value why not why not use the equity that you already have. >> Yes. Exactly. That that's what it's there for. What else is it going to do for you if you're going to stay in the house? >> Yep. Exactly. >> Uh so I got something from the chat going back to the previous question. They say uh I still don't understand the benefits of a 401k. Qualified dividends are already taxed at a beneficial rate. Why roll that into a 401k when it counts as ordinary income when it comes time to withdraw >> a traditional IRA? Duncan, we were talking about Roth IAS. Do you gentlemen know what's the distribution tax on a qualified Roth distribution? >> It is zero. Zero. >> So, I understand the qualified dividend rate is 15%, but you know what beats that? Zero. Zero beats 15 just about every time. >> All right, we got more Roth stuff in the next one. >> Of course. >> And a local Michigan question, too. >> Yeah, I love the curveball. This next question is called cracking the Roth Code. Uh, I've always wanted to submit a not to brag question and a bill question, so I'll check both boxes with one. Uh, I'm a 50-year-old surgeon married to a 45-year-old surgeon living on the shores of Lake Michigan. Combined, we have 2.5 >> This guy won the game of life. >> Sounds like it. >> Uh, combined, we have $2.5 million in tax deferred accounts, $1.5 million in a traditional taxable account, 600,000 in 529s for our young boys, and surprising even to me, we have over $600,000 in Roth accounts. We should have well over a million dollars in Roth accounts by the time we retire. Here's the plan I've been contemplating, and I would love to hear Bill tell me where I'm wrong. If we supported all our initial retirement spending from our Roth account with appropriate dividend planning, we would have almost no taxable income, this would allow us an enormous buffer, $96,000 in today's dollars for Roth conversions from our 401ks with essentially no tax implications. We would then simply rinse and repeat every year, partially refilling the Roth bucket until we have to take mandatory distributions from our 401ks or start social security at age 70. Have I cracked some kind of code or am I completely wrong? >> People love to figure out how to not pay any taxes in retirement. Obviously, >> I'm picturing uh always sunny, you know, Charlie, like with the the math like this, that's what I'm picturing here. >> Um, so Bill, you're a big Roth guy, but does it make sense for these to do these conversions in retirement? Is that just like is that too much? >> Ben, Ben, and the questioner is Ben, too. So, Benjamin, I don't like this idea. I love this idea. This is brilliant. This is winning the game. As we said before, gentlemen, uh the tax rate on assets that are uh let's say your first $130,000 for a maritime joint this year, that's taxed on ordinary income rates at 12%. Right? So, we're not talking about capital gains. it won't be zero, but 12% the effective tax rate up to around that amount is about eight or nine%. It's actually very very low. It's less than double digits. Furthermore, uh, one of the things that Benjamin didn't do was analysis. He mentioned $96,000. That doesn't include a standard deduction, right, which this year is jumping up for 2026, even higher. So, I love this because ultimately what Benjamin could do with Mrs. Benjamin is sit down at the end of each year and decide, hey, I don't this is let me total up all my income, right? I got this amount from from bank account, this amount from whatever. and ultimately do that Roth conversion every year and then just spend down from the Roth, right? Because the first thing you get back, even pre-age 60 qualified distributions is your tax basis, which for for Benjamin and Mrs. Benjamin are already $600,000. So effectively what you're doing is you're paying the lowest possible tax rate on a guaranteed amount of conversion every year that you can pre-calculate, you can predetermine, and then you just draw money out of the Roth portfolio to to effectively live your life. And you can do that almost up to your b your basis completely taxree at any age. And then once you hit 59 and a half, completely taxfree. I'd love to. >> So he cracked he cracked the code. >> This is great. Yeah. In fact, I'd even say I'm not sure, Ben, shores of Lake Michigan. Where are we when you say that? Because Lake Michigan is a relatively large lake. What state are we in? >> Uh Dave in the chat after Wisconsin or Michigan. He's definitely in Michigan. Come on. >> Okay. Michigan. I was going to say, yeah, I'll take a look at Wisconsin. But uh the nice thing about Illinois, Illinois does not tax distributions at all. Like they have a they have a a complete exemption. So, if we're talking Lake Michigan, north of Chicago, uh, yes, you could effectively do this completely state taxfree. This is a brilliant idea, Benjamin. I've never really sat down to consider this, but I but I love it. >> So, I need to retire in Chicago. >> Yeah, we have people there. We have good people there. Yeah, >> that's right. >> Sounds like it. >> All right, we got one more question. >> I wonder uh I wonder if they're like I'm picturing Todd. That was his name on Scrubs, right? The surgeon. >> I wonder if they have a lot in common with with Todd. [laughter] >> H good pull, Duncan. All right, got one more. Last but not least, we got a question from Paul. My wife and I are 38 with kids ages 19 and seven. We've been on high deductible insurance plans for a while and have been paying expenses out of pocket to allow the balance in the HSA to compound. Uh our income is high enough that paying out of pocket is not a strain on us financially. We have $74,000 in the HSA today. Uh, sorry, I'm just laughing because it is dawning on me what like 1enter show today's [laughter] show is. Uh, okay. Assuming no major medical issues, uh, further contribution. >> I'm just trying to make young people really angry today. >> Yeah, there you go. Further contributions and compounding seems to save by the time I'm 65, we could have a million dollars in this account. Assuming I stay covered with my employer, my max family out of pocket is $15,000 a year, and eventually Medicare would cover a lot. How would you advise me to balance ensuring adequate funds for the future without overdoing it? How much is too much in an HSA account? >> So, they're going to make some decent cont. So, they're going from 74,000 a day to a million at retirement. Um, I don't know what's >> compound compound math, Ben. Yeah. >> Yeah. Compounding and then making additions like >> um not an HSA guy. Okay. One too many accounts for me. I've mentioned this before. Is there any is there any downside to having too much in this account? >> I don't see it, Ben. I think at a minimum we have a tax shield. Any assets for Paul and spouse would compound there uh completely outside of taxation. Paul would have the opportunity to take distributions for let me say major surgeries. I'm not sure if we have any, you know, family stuff going on, but two kids need some braces. Maybe two kids, a seven-year-old maybe, you know, something could happen surgery wise. >> Maybe I could have used an HSA because my son George has broken his braces seven times for a month. >> Oh, that hurts. Yeah. Yeah. So, I don't I don't see the problem building up just falls out. >> I don't see the problem with building up a bucket because the worst case scenario is you hit age 65, that HSA effectively becomes a traditional IRA uh at that age. So, I I don't see any problem having that amount of assets in an HSA. I think I just treat it as part of my retirement plan and I'd be no rush to take any distributions. It's there if you need it. It's a great great compounding device. >> Right. And obviously, I'm assuming he's filling up the other buckets already, too. >> Yeah. And Ben, you mentioned uh in prior episodes, there's this neat thing of HSAs that the the year you take a distribution does not have to match the year that you have a qualified expense. So, let's say you do sit down with with Young George and you need a $2,000 distribution for medical bills, you just print that invoice, stick into a tax folder, you can take that distribution 10 years from now, >> save those receipts, right? >> Exactly. And so, like, yeah, rule of seven, like $10,000, 5K turns into 10, you effectively had the market pay half of your your orthodontist bill in the future. So, that that to me is a great use of an HSA. I would be in no hurry to wind it down. >> And now you're you're stuck with the HSA your employer provides, right? Because like my wife has an HSA and there's a lot of fees. Like I look at the statements that come and there's a lot of fees, but there's like nothing we can do about that, right? That's the way it is. >> It it all depends on the employer, Duncan. But ultimately, what I would recommend for a situation like that is take a look at the fees, ask if the plan has a rollover option. Can I roll this money out while I'm still working? You have to make the contributions to that plan, particularly if your employer is providing support, but you don't have to remain in that account forever. It's not a death pact. And ultimately, you can set up an HSA roller to a lowerc cost provider. Major providers have HSA options. >> Public and Robin Hood don't vote, do they? Now that I think about it, I don't think they have HSA. >> I'm not certain. Yeah, the major custodians we work with at Rit Holtz do. Uh, but yeah, but they're both bespoke and plan specific. But yes, if it Duncan, if you're paying a lot of fees, uh, you know, you you there in Connecticut, I would definitely look at a rollover option like what if the plane allows it and I know the CFO over there, let's make it happen. [snorts] >> So, Sean in the chat says his his back hurts. Uh, what over-thec counter meds do Ben and Bill use? Um, this is not a medical advice show, but I say rub some dirt on it. Dirt on it and drink some whiskey. >> That'll make you feel all better. >> Whiskey is a good one. I'm a I'm a couple of beers guy. [laughter] >> Couple of beers. Couple of beers will take care of that one. Yeah. Um, >> yeah, that's that's my only health uh health advice for today. >> Yeah. Wow. Not not medical advice. I uh Yeah, I skipped over that that that episode. >> All right. So, we cracked the code for Roth Retirement today. >> Benjamin, big ups. >> Thanks to Bill as always. >> Nicole asked me to to promote our our new Animal Spirits mug. So, let me get that right.com. There's a bunch of them in the office. Yeah, we're repping hard holiday party tomorrow. It's great. >> They're very nice. They're like diner style. They're that really thick kind of ceramic. I like it. >> I don't drink coffee, so I don't have one yet. Um, email us ask the compound showgmail.com. Thanks to everyone in the live chat as always for bringing it. Uh, thanks to Bill, thanks to Duncan, all the whole production team, and we'll see you guys next time. >> See you everyone. [music]
How to Recover From a 50% Loss
Summary
Transcript
Welcome to Ask the Compound, the show where you ask and we answer. I am Ben Carlson. Let's say you have a friend who's a yolo trader. It's not just speculation this person is into. They're concentrating into a yolo trade on one stock using leverage. How do you talk them off the ledge? What would you tell them? How do you help them make their money back after they lost it? We're going to help yolo traders and more on today's show. Please stick around. Our [music] email here is ask the compound show@gmail.com. If you're watching live on YouTube or on Twitter, please send us a question. We'll take it live on the air. As always on today's show, we will be answering questions straight from our compound viewers and listeners on fixing your friends who are terrible investors, selling tech stock winners into retirement, when a Roth 401k makes the most sense from our trusted tech expert, uh how to pay for home renovation, how to pay no taxes in retirement. People love that one. And [music] how much is too much in an HSA. Today's Ask the Compound is sponsored by Exhibit A. Exhibit A was started by our own chart kid, Matt, who came to us and said, "I got this idea." Advisers love good charts, but they don't have time to make them. They don't know how to make them. I'm going to help make the charts. I'm going to provide the talking points. The adviser just signs in. They put their firm logo, their firm colors. It works great. Um, so if you go to exhibit aforadvice.com, you can sign up there. Look at all these great charts you can do. Again, your logo, your color scheme. It's beautiful. He has chart blasts every week. They have explainers. You have talking points. You send these out to your clients. Help them explain the markets. Put things into context. And again, you can sign up at exhibit A4.com. Free 7-day trial. If you're an adviser, you need this. Your clients will love it. Uh it'll make your life easier. Exhibit aforadvice.com. >> It's kind of like we're sharing chartmat with the world. You know, really, >> you get your own Yeah. You get >> people love his charts. I got a I got a message from some guy the other day on LinkedIn. I don't ever check LinkedIn messages. Started people messaged me there. I checked him for the first time and his guy said, "Hey, how do I get your charts?" He said, "Exhibit A. It's easy." >> There you go. >> All right. Lots of questions today. >> Ben, before we jump into it, are you excited about Nvidia earnings? >> I don't care. >> All right. >> Yeah. >> It's not a make or break moment for the market. >> I own Nvidia. I actually own it. This is like one of the few stocks I own. Um, but yeah. Uh, we'll see. >> All right. I was just trying to get you to say a bite we could use on social media or something. >> Yes. No, this is the most important earnings call in history of earnings calls. If Nvidia fails, the stock market is going to go down. They do well, it might go up. I don't know. >> Or it might not. All right. >> There we go. Love it. >> Okay. Up first, we got a question from mix of names here, so I'm not going to say name. Maybe it's supposed to be anonymous. >> This might be an anonymous one because of the information. >> Yeah, I see multiple names, so I'm just not going to say one. Okay, let's say I have a brother. Let's say he was on a lucky hot streak this year, yoloing into the most speculative plays in the market, quantum, crypto, meme stocks, etc., and was up 100% year-to date. Pressing his luck, he thought it was a good idea to put nearly all of his portfolio into MSTR. That's Micro Strategy or now just strategy, right? >> Yep. >> Michael Sailor Bitcoin vehicle. >> Okay. So, he put uh put nearly all of his portfolio into Micro Strategy using margin when it was trading in the 300s. He's now down 50%. I told him not to touch Micro Strategy with a 10-ft pole and if he was bullish Bitcoin to just buy Bitcoin. I also told him to never use margin, especially on high-risisk stocks. He is at risk of losing half of his net worth and has a home purchase on the horizon that's in jeopardy. Now, he suddenly wants my advice on how to get out of this mess. I told him that I don't know and I honestly don't. How do you deal with people that consistently ignore your advice and then want your help to get out of a mess? I suspect there are many yoowers out there facing this situation but too ashamed to admit it. >> Is this one of those fight club things where we get the Edward Norton Brad Pitt and the brother is really the same person >> that I mean that's what I thought when I Yeah. But >> wink wink. Um listen I'm sure he's right. There's plenty of people out there in the current environment who have slowly but surely like turned up the risk dial from aggressive to degenerate. And the >> hard% of net worth is a lot. >> Yes. Here's the thing. It's hard once you've it's hard to see when you've morphed from I'm a really aggressive investor to I'm a degenerate gambler when you're making money. When things are going up, you don't realize like, oh no, I'm a den now. So, I think there's people who have taken on excessive level of risk. They've been compensated for it in a lot of this stuff. And now it's turned on some of these stocks. And so, man, listen. Putting half of your net worth into Michael Sailor's leveraged Bitcoin play, right? Using your own leverage on money that needs to be used for a house. This is like you have a problem. We need to do like the, you know, when when they take cousin Christopher and give him like the, you know, intervention on Sopranos cuz he sat on the dog after doing drugs. Um, this is like intervention level stuff. Um, okay. So, his brother got into the stock in the 300s. Let's do the first chart. It's now sub $200 a share. And I'm not a technical analyst, but this doesn't look like an uptrend to me. This is like a waterfall or what do you recall it? Um, so next one shows a draw down profile. This is just this year. The stock is down nearly 60% from the highs that really weren't that long ago. This is a few months ago. I'm sure he was feeling great. Like this thing's awesome, right? I think it peaked at like $470 something dollars a share. Um, all right, chart off. Uh, so this is like a 2008 level crash in a matter of months. So here's the thing. I'm not even going to make a judgment on the stock. I don't know if Michael Sailor's Bitcoin experiment will work or not, right? They're getting a premium now. The premium's gone away. I think if Bitcoin keeps going up over time, this thing not is not going to get crushed at least, right? Um so I think it really is tied to Bitcoin. It's like, but can the leverage play last until then and will investors still keep getting the money? I don't know. Um it's already worked better than anyone expected, right? Cuz like but this stock has got huge gains, thought huge losses. So let's [snorts] zoom out a little bit. Go to the past 10 years of draw downs. So, here's what I spy on this chart. You're looking at a 20% draw down to start. Um, then we got a 50% draw down. These are all separate draw downs. A 90% draw down in after the 2022 bare market, which is insane. And then a 46% draw down and now 60% draw down. And the crazy thing is despite all that volatility, chart off please, the stock is up more than 900% in total in that time in the last 10 years despite all those different bone crushing crashes. >> Not bad. The problem is the brother did not take part in the 900%. He bought near the top. Maybe held on for 25% 30% gains. Um and he bought on margin. Holy cow. Um >> and he's going to be buying. Keep in mind a lot of people are watching this show and are completely new to finance. So when people say margin or leverage, they mean they borrowed money to invest. >> He's borrowing money. Yes. So they're paying gains. Amplifies losses. This is a dumb and dumber moment for me. Do you realize what you've done? Um, [laughter] but there's not a bus full of beautiful women waiting at the end of this one. Um, here's the thing. You could try to offer this kind of person advice. Sell now before it gets worse and you get a margin call. You don't want to do a margin call and throw good money after bad. Um, invest in something far more reasonable and diversified. When I first started my blog, A Wealth of Common Sense, I had this dream and my dream was that I'm going to somehow save people from making illogical financial decisions. That's the whole premise of common sense, right? Just use your common sense. Now, don't be an idiot. And after creating financial content for more than a decade now, I've come to realize that some people cannot be saved. And it sounds like a mean thing to say. Uh some people are just doomed to make money mistake after money mistake. There's nothing you can do about it. You know how you have those friends that you grew up with and you go, "Man, this person is kind of delusional, but they're going to figure it out eventually." And then you you hit middle age and you go, "Oh, this person's never going to figure it out." Right? We all have those people in our lives like, "Oh, this person's just always going to be going from crisis to crisis, bad decision to bad decision." And and some, listen, some people need to make a big mistake like this to have the realization like this aha moment like, "Oh gosh, what am I what was I doing? What was I thinking?" Just to change their behavior that does happen. I know an adviser who runs a solo practice who constantly turns people away that he knows will be bad clients. And he tells them like, "Nope, you're not ready for me yet. Go make some more mistakes, then come back and talk to me." Um, and he says, "Some people come back. Most people don't. So, can the brother here be saved? Maybe. I think he might need someone to take the steering wheel. Like, it's one thing if you're yoloing as a young person with without a lot of responsibilities, right? You don't have a lot of money. You're gambling, speculating, hoping to strike it rich on a lotto ticket. I I don't recommend that. I don't that's okay though at a young person. But when when you are talking about money that's meant for a house, which is a short-term thing, and you're putting margin on top of margin on top of margin on top of Michael Sailor, uh you have a problem. This is like I I don't know what to do. Um so either you put your portfolio on autopilot or you hand the keys to an adviser or a family member or otherwise you're going to not going to learn your lesson until you get margin called to death and then you're broke. That's the only thing here. The hard thing is he can't he can't go the opposite direction either though, right? Like he can't just go into treasuries. He's not going to like he has no chance of of you know even recovering some of >> Here's the thing though. You don't you don't want to revenge trade though because obviously you lose 50% you have to gain 100% to get just to break even. Everyone knows the math there, right? >> Um but you don't want to revenge trade and go like once I break even then I'll then I'll chill out. Like maybe you have to take your time to break even and because he was probably it sounds like he was sitting on big gains anyway, right? The answer is not triple levered S&P either. >> No, just something more reasonable. Listen, is this guy going to go in a target date fund? Probably not. Should he? Probably. >> Um, keep us posted. But, uh, I'm afraid this is going to end in tears. >> Yeah. I mean, so a lot of tax loss harvesting. Is that the silver lining? >> I I hope your net worth. >> All right. I I hope he I hope his house doesn't fall through. But yeah, but maybe if buying a house, the treasuries are the answer for right now. You know, >> T bills. >> All right. >> Yeah. I I feel I feel bad for them because I know that it's very easy personally speaking to get caught up in this. And there might have been a time when, you know, not that long ago, I was just buying whatever stock was going up the most on the day and then selling it after it went up 10%. And, you know, so I've I've been known to fall into some of these things. But but yeah, the the leverage part is the I think the the most the concentration too. If it's if you want to speculate >> like position size it correctly, take 10% of your portfolio and speculate your face off. I don't care. But 50% of your net worth. >> Yeah. >> That is and on margin that means guess what you're doing more than that. It's uh [sighs] yeah, someone in the chat says that the margin calls just don't answer. Uh you know, then they break your kneecaps. >> Also, why is it it's so often people that are into Bitcoin that that end up I guess it's just a risk appetite thing. like people who are really into >> I think people in in that if you've been in that asset long enough you are more comfortable with volatility. >> Yeah, you've seen crazy gains. >> So yeah, there there's Yeah, there's there's 10 20 time leverage in some of these people. That's why you see people get wiped out when Bitcoin falls 10% or something. So why would that >> wipe someone out? >> Yeah. >> All right, next question. >> Hey. Yeah. Good luck. Good luck to your brother though. I mean I hope hope they figure it out. Like you know it's it's there's a part of this I'm laughing because like some of it is funny like yeah putting all your money into something so speculative. Of course, you know, that's it's kind of comical, but like in in reality, I hope hope they're going to be okay because yeah, it's that's a lot of money to lose. >> Yeah. But but he's right. There's probably a lot of people who are in a similar boat who've gotten [snorts] way over their skis and then a stock falls 50 or 60%. You go, "Oh my gosh." >> Oh, for sure. >> What do I do? I I didn't expect this. No one does, obviously. >> Yep. All right. Up next, we've got uh another anonymous one. Wow, we got a lot of KG KG questions today. Okay. Uh, you have to answer my question because I'm a female listener. I love that this is a thing now that we started. >> This is extortion. No, we said it. We have to follow through. >> We Yeah, we said there's so few so few uh you know women in in finance and and listening uh to finance podcast. So here you got us. Um you have to answer my question because I'm a female listener. I've also unleashed Bill by saying his name three times. I've spent the last 15 years in big tech sales. I'm 55, have about a million dollars in two big tech stocks with a lowcost basis. I never really sold the vested stock and now over the last few years, it's a significant amount of my net worth. I'm still working and at the highest tax bracket, so I've been reluctant to sell. While I'm while I am partnered, we keep our money separate. My husband is retired and I would like to retire in the next two years. Part two. Uh, how should I think about my how should I think about asset draw down in taxes assuming I have no income except for what my portfolio casts off which is less than $48,000 a year. Could my capital tax rate be zero if I want to get out of this uh heavily leveraged tech position? Do I sell most of the tech stock in year one of my retirement? I'm worried about a bubble too. I have about $800,000 to a million of cash that needs to be reinvested. Since I have a margin of safety, should I write it out a few more years in soy we sell? >> All right, Beetlejuice rules apply here. Time to bring out Bill Sweet. >> Yeah, I ran it so fast to answer the call. My uh beard fell off. >> Oh my god. >> Yeah. On the way upstairs, so here we go. >> Nice. >> Looking good, Bill. Okay. Um, so we've got It's funny how taxes have seemingly kept a lot of people in these stocks over the years. It's like, hey, if it's keep it keeps going up, I know I probably should sell, but I don't want to because I got to pay taxes. We We get a million. We've gotten a million of these questions again. bull market questions, but still this this one is a little twist on it because it's asking about retirement, right? How do I does how does it differ in retirement if maybe my income falls to nothing and it's just portfolio income? Um, so what say you or is there any easy way because people want to know like I want to hit the easy button on this. I want to get out of this. I want to I want to keep my tax bill minimal and I want to spend the money. What do I do? >> Yeah, love love love this question from anonymous listener. Thank you very much. Uh but to me Ben moving from an accumulation portfolio which is where we've been to a distribution portfolio which what it sounds like that is not an event it's more of a process. So Ben I don't my argument there is no easy button. Uh this is the work of an adviser a CFP type adviser in conjunction with the responsible tax team. There are a couple of levers though that that you can hit and what I love about where the listener is. Uh there there were some additional details you received uh there there is a large off balance. So that was one thing that I was very very excited to hear. Um, but for the purposes of capital gains, the listener hits on something really interesting that there is no other income outside of some dividends, $48,000 a year, uh, for a married joint couple, you can you can take up to $130,000 of total income from capital gains and other and other and other sources and basically pay 0% on that on that transition. >> Wait, wait, she said they're partnered, but keep things separately. What if they filed what if they file separately? >> No, that's a great that's a great thing. So, I I specifically mentioned jointly, right? So, we would need to analyze, hey, are we filing jointly or not? But even if we're filing single bend, then ultimately you're still eligible for half of that, which limits I think if we're talking about this is one individual's assets, right? Filing a separate return. So big picture, it's complicated, but ultimately I I like where this is going. And it may not be a fact of hey, we want to we want to because Ben, you you correctly identify capital gains as an obstacle, right, to to a diversified portfolio. If you've been successful investing, taxes are the fruit of that labor. Like you're going to have to trim that tree eventually. And the question is, do you want to do that after a long bull run in the kind of market that we've been in now? I would argue, yeah, this is a great time to look at that versus, do you wait for a 20 or 30% draw down? And then the the nice thing about a draw down like that, Ben, is if you don't have your gains, you don't have to pay tax on that, right? So, so give me the taxes. I I would argue in that direction. I would fill up low tax brackets because I think that's that's the that's the gist here. And that's that, like I said, Ben, is the work of a competent planner over or a five or 10 year period, >> right? So, yeah. So ripping the band-aid off just means that's the trade-off between hoping the stock doesn't fall and then paying the taxes right away. >> Yeah, I think that's it. Taxes, like I said, some people hate paying taxes more than they like making money. I I would take the opposite tack here. And I think Ben, a great time to do that would probably be rolling over the calendar, right? January 1 or so. You realize your gains early in the year and then you can effectively deploy, let's say, a tax loss harvesting strategy, some other options that you might have to realize losses to kind of whittle down on that gain as the year progresses. I think that's an excellent way to rebalance over time. >> And we've talked to other clients too who have if they have a huge position. There's other opt there's other strategies you can use like options to sort of hedge against the stock falling, right? There's a cost to those options, but there are ways you can do that without completely selling the stock um as you slowly but surely get out of it and use tax loss harvesting and and all those other things. So, there are strategies you can employ, but you're right, you you it's not something that you take lightly. You need someone to help you with those. >> Yeah. And I I would go that route, Ben, if there was a a very concentration, let's say like half of the portfolio was in a single company, that didn't sound like this situation. This seemed more diversified, maybe concentrated in tech. Um, but Ben, a couple of things that we've been looking at recently, just to throw them rapid fire. We've been looking at uh options like section 351 exchange. Uh, that's something that you've seen a lot of platforms and products coming to market. That might be something to sit down and take a look at. We've been looking at exchange funds as an option. There's a seven-year holding period, right? So, it comes with trade-offs, but you do get a lot of instant diversification there or looking at plain old tax loss harvesting and that using the other assets in your portfolio, build those around those concentrated positions and and begin to whittle those down over time. >> So, someone in the chat says that she should just marry the micro strategy guy. He's going to have the losses, she's got the gains. Um, that could be a dating show on CNBC. We pair people based on their opposites attract, right? We take one person huge gains, one person huge losses. bill. Let's say they got married this year before the end of the year. Could they offset each other's gains by filing jointly or does it not work like that? >> Well, this listener seems like she's spoken for and I can say her investing acumen is top-notch. But in the event that we wanted to roll out a show, uh the answer is for other listeners uh yes, Ben, you could effectively uh take very successful uh female investors and match them with degenerate gamblers on their side. That's it. I'm making a thing. >> Sounds like a great deal for the response. wife right for losses in heaven. Yeah. So just to but to take it seriously at 12:31 is the date that sets your status, right? So if you happen to be married on 1231, whether you got married that day or the day before, that's the date that you can claim. >> Think about it. This is a dating app where the losers finally win. Like all these people have huge gains in their tech portfolios. If you're a loser who's got the big losses, everyone's going to be lining up to to get paid with you. Yeah, there there are other reasons to maybe consider entering holy matrimony, but uh yeah, t tax tax losses are definitely >> it does sound like this instance she has a lot of flexibility too with her other assets. Like you said, she provided us she has some Roth assets. She's sitting on a bunch of cash. >> Um so if there is a tax bill, she's going to be okay. >> Yes. So I think the trick for me would be have a plan obviously, but then yes, th those other accounts that you mentioned, Ben, are more flexible. they're more you can you could do different things to build around those positions and then sit down with a qualified planer and figure out okay what how do I prioritize these >> and it doesn't sound like she is really like beholden to just these two stocks like she has another whole portfolio she can tap so it's not like it's these two stocks are nothing right that's because that makes it even scarier >> yeah and furthermore Ben I I think everybody's got this bubble fever right now and I I again I I understand the the thought process here but we won't we won't know right what what the what what's going to happen until it happens and the the truth the reality is these companies are are highly valued for a reason, >> right? And and I love Ben the point that you've made and Josh has made this point and Michael has made this point that like we're getting better at investing and running companies like CEOs, CFOs, COOs are better today than they have ever been and they're better at managing a balance sheet and that to me gives me a lot of uh some some some some solace when it comes to margin compression, >> right? >> Sounds pretty toppy to me, Bill. >> Yeah. >> Yeah. [laughter] Just worriedish. Not worried, worried. >> Famous top tick words. But hey, if the market drops, great opportunity for Roth conversion. >> Speaking of which, let's do another one. >> And great job and and thank you for the question. Also, Christopher Flint in chat says, "I feel so poor reading these emails." Um, [laughter] yeah, we we get that a lot. But, uh, but, you know, larger stakes makes for more interesting questions and these are most of the questions we have. >> No, we we have a service model for every client, too. Yeah. >> Yeah, we do. But, but the thing is, too, like with a lot of this advice, take a zero off here or there. Like I used to say when I worked in the institutional world just for institutions um I'd say it's just a couple extra zeros like the the the building blocks are still the same, >> right? And so it's so it's the same thing if you've got a million dollar tech portfolio or $10,000 tech portfolio, right? Just uh think through things the same way. >> It's just a little more or less money. >> It's exactly it. >> All right, let's do another one. >> Okay, up next we got a question from Eric. My employer is adding a Roth 401k option starting in 2026. Uh right now I only contribute enough to my traditional 401k to get the full employer match. My plan is to keep contributing up to the match in the traditional 401k about $3,000 a year and then put the rest of my contributions toward the 401 the Roth 401k to max it out. My net worth is about 1.5 million. I have $550,000 in pre-tax retirement accounts, traditional 401k and traditional IRA, and about $80,000 in a Roth IRA. I ultimately want to roll Roth 401k contributions into my Roth IRA as I believe it's a bit light. Does this strategy make sense? Any issues I should consider? >> All right. Um, so first of all, good on the company for issuing the Roth 401k. I don't know what percentage, Bill, do you have any idea like how many actually do it? It can't be that much. I want to say it's somewhere in 15 to 20% today, Ben. >> Okay. Luckily, Rit holds Wealth Management does this, >> which I'm sure you're happy with. I am, too. Uh, and you you forcefully made me do this. >> Put the gun in my back and said, "No, you're doing a Roth 401k." >> Um, >> so I I think it seems to me that his Roth IRA is a bit light and going for the Roth 41k option makes a ton of sense. I can't imagine you would disagree here. >> Yeah, Eric, I want to welcome you to the dark side. I went with uh Ira Rothmax as my screen name here for a purpose. Ben, it might not surprise you. I fully endorse Eric's plan. Let's think about this for a second. Let's let's live in a world where Eric does not pursue this strategy. So, he's not putting an additional $21,000 a year or so, right? In addition to his matching contribution, traditional, that money is going to hit his checking account. Correct. >> Right. So, if he puts it into the retirement plan, he's probably going to invest it and and be successful. But if it's going into a non-qualified account, he's going to pay interest on the dividends in uh taxes on the dividends and taxes on the interest. And then if and when he liquidates that asset 10 20 years from now, he has to pay a capital gain. So Daniel, can we chart on? I did a quick analysis and this is not advice. Uh you need to consult with your tax professional. But the difference here, if you focus on the right side of this chart, it is about a 30% gap between what you would realize if you rolled 20 years of $21,000 contributions into a a Roth IRA from from a Roth 401k, you would roughly have a million dollar balance completely taxfree, assuming you're taking qualified distributions after age 60 versus roughly $715,000 on an after tax basis if it was a non-qualified account. So Ben, I ask you, is 30% tax savings, is this worth it uh for Eric? Looks pretty good to me. >> Yeah. >> And that's it. And again, back to Roth, this this mega super 401k, this is a huge opportunity to to to get funds into this space. And then we're going to answer a question later on what you do on the back end that that even ripens this. So when I when I procize Roth, it's exactly for people like Eric. >> All right. And I I got to do a PSA here since we're talking about retirement plans. So throw up my chart here. I looked at this. This is the annual 401k contribution limit going back to 2000. And Bill, I always complain to you, why don't they index things to inflation like the loss losses that you can use on your taxes, >> but with retirement contributions, they actually are doing a very good job. >> And this thing this century has more than doubled. >> And so now for 2026, we're talking 24,500. I think if you're 50 or older, what do you get? 8 grand extra. >> Yeah, it's an additional 7,750. Yep. >> And if you're like 60 to 63, you get an extra 2,000 bucks or something. >> Yeah. That jumps up all the way to 12,750. Yeah. So, chart off here. So, like this is a great thing. And then if you do it with a Roth 401k, right? Yes. You're paying the taxes up front, but you can actually the way I look at it is you're able to put more in because it's a Roth 401k. >> I know it's not really that way because but no one ever invests the difference. >> Yeah. >> Right. So, you can put 24,500 in the Roth or the traditional, >> right? But that Roth is after tax money. So I I think it to me in my brain it means I'm putting more money in because it's a Roth 401k. >> Yep. And then you can even do Ben these really crazy plans have these ability to fund all the way up to the 414 limit which is uh last year was 70,000. I want to say it's 72,0007. So that's like a SE IRA $72,000. >> You can do it that way. But again what you can do is contribute dollars on an after tax basis. And then if you can convert those after tax dollars to Roth, you effectively can supercharge that up to like like I said in in excess of $70,000 a year uh per year. So that that's a great way to do it. >> Dave in the chat said that IAS have not kept up. Throw my next chart on here which I got IAS on here too. >> They have not kept up, but they have kept up this century, Dave. So not since the 70s, but look at the increases this century. They've gone from $2,000 in the early 2000s to $7,500 now. And you can see there's a lot more plateaus in the IAS for some reason. I don't know why that is. Um, but they have increased it a decent amount this decade and uh, so we're doing better. We're getting we're getting there. >> Yeah, it's great. It's great. But I think Ben, you and I are on team uh, yeah, team TSP. Uh, opening that up to the masses. And frankly, like I don't understand why your $70,000 contribution limit for this this year, last year should be tied to your employer, right? Why not open that up to everybody? >> Yes, exactly. All right, got another one. >> Okay, up next we got a question from Travis. I'm 47 and we have $45,000 left on our 2.875% mortgage. We would like to tap some of our $500,000 of home equity to complete substantial home improvements, kitchen remodel, basement remodel, and lots of landscaping. I'm thinking we'll need around $250,000 to do everything we want to do. I hear a lot on your show about Hilocks, uh, which is home equity line of credit. And of course, your stance is, uh, to never touch a low interest mortgage. Here's my question. >> Someone's paying attention. Yeah. >> Mhm. >> Uh here's my question. Instead of a 7.25% HELOC or a 7.5% HH home equity loan, >> Yep. >> Uh what about a cash out refinance? I would be exchanging a 2.875% rate for a 5% rate for a refi. Is it a no-brainer to do a cash out refi? Maybe when my 2.875% loan is almost gone, uh like less than $10,000 left instead of a heliloc in that situation. you know on this math so this is on you guys. >> We got it. So people who have a low rated mortgage are will happily bring out to three decimal points. Instead of saying 2.9% he had to say [laughter] 2.875, right? >> The one a few weeks ago was 2.625. That's that's when you got to use all the death just that's a total not to brag like hey I got 2.875. I'm way lower than three. >> Um okay. Uh so here's the thing. >> Uh great congratulations on the renovation. That's a lot of money. I I guess it's uh it makes sense. These things are not cheap. But, uh, you're >> Are they building a golf course in their yard? >> This is your forever home. Landscaping is expensive. Kitchens are expensive. This this actually does not surprise me that it's that much. >> Um, and listen, if if they have this low rate and it's almost paid off and they want to stay in this, make it a forever home, I I get it. I understand why people are doing this. So, here's the thing. Helocks are floating rate. Um, so that's one thing to consider. So, taking on a heliloc, yes, it's like seven and a half now. I looked at mine this morning. Mine is 6.75 and it was way more than 8% at the heights of so if the Fed keeps cutting I would imagine that these things will fall. So that's one thing to consider. The heliloc could fall whereas if you do a cash out refinance then you're locking it in. But you said it's like a 5% rate right now. So that that's not terrible actually. Um so I don't really mind that. Plus you know with with that one you're locking it in right. You're locking in the rate you're locking in the payment. With HELOC, it could fluctuate. If if inflation comes back and rates go back up, then your HELOC payment could go up. >> The the one thing I do like about the HELOC is it offers you a lot more flexibility because you have usually the way it works is you have 10 years of interest only. You have no principal payments and then from that point on then you have 15 years to pay off the principal, right? So it gives you a little more flexibility on when to pay and how much to pay. anything I'm not thinking of here, Bill, that they could do. Obviously, we haven't talked about like a borrowing against a stock portfolio or something, but is there any anything else that you would consider here in terms of like getting this done? >> Yeah. No, Ben, I think you hit it all. Travis, this is a time value of money question. I think Ben, a cash out refinance is a great option. It allows you to leverage the asset, right? A lot of equity is tied to that to that house, right? Your loan to equity value is like 10% which is fantastic. Uh and ultimately, you could you got a couple of options. You could just take out a brand new loan, right? en roll your existing balance into the new one. I did some quick back of the envelope math. Uh on for a 15-year loan, we're looking at about $2,300 a month. So, that's going to be about $414,000 over the life of the loan, which would start at roughly 295 because keep in mind, we have that existing balance. Um or we could go all the way up to $1,600 a month for a 30-year payment, right? And that would increase the total. >> You're effectively taking out a new mortgage. And the thing is, that's the whole point of the house is that like if you're putting this much money in, hopefully you're increasing the value of the home, correct? Well, you're adding equities. It might not be a one for one. Yeah. deal, but you're hopefully adding some value. >> Usually isn't, but yeah, but I think there would be some reasonable expectation as you share house, you'll get it back on the back end. But I think Ben, you correctly identified it. If we're planning on staying this house forever, like I probably would sit down and consider the 15 the 30-year option uh just based on your cash flow needs because ultimately, I'm guessing the mortgage just where you are, like you probably don't have a large mortgage payment. So, if a $1,600 a month mortgage is kind of shocking, like I I don't know that I would go all the way, you know, go all the way out uh there. And then you can if if rates go back to 3% for some reason, if we get a nasty recession, you can refinance. >> Yeah. And you can even start out with the heliloc, right, to get everything paid and financed and and then and then ultimately talk to the bank afterwards. So yeah, you got a lot of flexibility here. Uh I don't think any of these options are bad. There's just trade-offs. >> Yeah, I think you're thinking about it the right way. I think they're they're go approaching this in the right manner. >> Correct. Yeah. But I don't see any reason, Ben, not to lever the house. I mean that that sometimes people, like you said, borrow from a stock portfolio, something else. You are you are introducing a little bit of risk there and particularly like I said with a 10% loan to value why not why not use the equity that you already have. >> Yes. Exactly. That that's what it's there for. What else is it going to do for you if you're going to stay in the house? >> Yep. Exactly. >> Uh so I got something from the chat going back to the previous question. They say uh I still don't understand the benefits of a 401k. Qualified dividends are already taxed at a beneficial rate. Why roll that into a 401k when it counts as ordinary income when it comes time to withdraw >> a traditional IRA? Duncan, we were talking about Roth IAS. Do you gentlemen know what's the distribution tax on a qualified Roth distribution? >> It is zero. Zero. >> So, I understand the qualified dividend rate is 15%, but you know what beats that? Zero. Zero beats 15 just about every time. >> All right, we got more Roth stuff in the next one. >> Of course. >> And a local Michigan question, too. >> Yeah, I love the curveball. This next question is called cracking the Roth Code. Uh, I've always wanted to submit a not to brag question and a bill question, so I'll check both boxes with one. Uh, I'm a 50-year-old surgeon married to a 45-year-old surgeon living on the shores of Lake Michigan. Combined, we have 2.5 >> This guy won the game of life. >> Sounds like it. >> Uh, combined, we have $2.5 million in tax deferred accounts, $1.5 million in a traditional taxable account, 600,000 in 529s for our young boys, and surprising even to me, we have over $600,000 in Roth accounts. We should have well over a million dollars in Roth accounts by the time we retire. Here's the plan I've been contemplating, and I would love to hear Bill tell me where I'm wrong. If we supported all our initial retirement spending from our Roth account with appropriate dividend planning, we would have almost no taxable income, this would allow us an enormous buffer, $96,000 in today's dollars for Roth conversions from our 401ks with essentially no tax implications. We would then simply rinse and repeat every year, partially refilling the Roth bucket until we have to take mandatory distributions from our 401ks or start social security at age 70. Have I cracked some kind of code or am I completely wrong? >> People love to figure out how to not pay any taxes in retirement. Obviously, >> I'm picturing uh always sunny, you know, Charlie, like with the the math like this, that's what I'm picturing here. >> Um, so Bill, you're a big Roth guy, but does it make sense for these to do these conversions in retirement? Is that just like is that too much? >> Ben, Ben, and the questioner is Ben, too. So, Benjamin, I don't like this idea. I love this idea. This is brilliant. This is winning the game. As we said before, gentlemen, uh the tax rate on assets that are uh let's say your first $130,000 for a maritime joint this year, that's taxed on ordinary income rates at 12%. Right? So, we're not talking about capital gains. it won't be zero, but 12% the effective tax rate up to around that amount is about eight or nine%. It's actually very very low. It's less than double digits. Furthermore, uh, one of the things that Benjamin didn't do was analysis. He mentioned $96,000. That doesn't include a standard deduction, right, which this year is jumping up for 2026, even higher. So, I love this because ultimately what Benjamin could do with Mrs. Benjamin is sit down at the end of each year and decide, hey, I don't this is let me total up all my income, right? I got this amount from from bank account, this amount from whatever. and ultimately do that Roth conversion every year and then just spend down from the Roth, right? Because the first thing you get back, even pre-age 60 qualified distributions is your tax basis, which for for Benjamin and Mrs. Benjamin are already $600,000. So effectively what you're doing is you're paying the lowest possible tax rate on a guaranteed amount of conversion every year that you can pre-calculate, you can predetermine, and then you just draw money out of the Roth portfolio to to effectively live your life. And you can do that almost up to your b your basis completely taxree at any age. And then once you hit 59 and a half, completely taxfree. I'd love to. >> So he cracked he cracked the code. >> This is great. Yeah. In fact, I'd even say I'm not sure, Ben, shores of Lake Michigan. Where are we when you say that? Because Lake Michigan is a relatively large lake. What state are we in? >> Uh Dave in the chat after Wisconsin or Michigan. He's definitely in Michigan. Come on. >> Okay. Michigan. I was going to say, yeah, I'll take a look at Wisconsin. But uh the nice thing about Illinois, Illinois does not tax distributions at all. Like they have a they have a a complete exemption. So, if we're talking Lake Michigan, north of Chicago, uh, yes, you could effectively do this completely state taxfree. This is a brilliant idea, Benjamin. I've never really sat down to consider this, but I but I love it. >> So, I need to retire in Chicago. >> Yeah, we have people there. We have good people there. Yeah, >> that's right. >> Sounds like it. >> All right, we got one more question. >> I wonder uh I wonder if they're like I'm picturing Todd. That was his name on Scrubs, right? The surgeon. >> I wonder if they have a lot in common with with Todd. [laughter] >> H good pull, Duncan. All right, got one more. Last but not least, we got a question from Paul. My wife and I are 38 with kids ages 19 and seven. We've been on high deductible insurance plans for a while and have been paying expenses out of pocket to allow the balance in the HSA to compound. Uh our income is high enough that paying out of pocket is not a strain on us financially. We have $74,000 in the HSA today. Uh, sorry, I'm just laughing because it is dawning on me what like 1enter show today's [laughter] show is. Uh, okay. Assuming no major medical issues, uh, further contribution. >> I'm just trying to make young people really angry today. >> Yeah, there you go. Further contributions and compounding seems to save by the time I'm 65, we could have a million dollars in this account. Assuming I stay covered with my employer, my max family out of pocket is $15,000 a year, and eventually Medicare would cover a lot. How would you advise me to balance ensuring adequate funds for the future without overdoing it? How much is too much in an HSA account? >> So, they're going to make some decent cont. So, they're going from 74,000 a day to a million at retirement. Um, I don't know what's >> compound compound math, Ben. Yeah. >> Yeah. Compounding and then making additions like >> um not an HSA guy. Okay. One too many accounts for me. I've mentioned this before. Is there any is there any downside to having too much in this account? >> I don't see it, Ben. I think at a minimum we have a tax shield. Any assets for Paul and spouse would compound there uh completely outside of taxation. Paul would have the opportunity to take distributions for let me say major surgeries. I'm not sure if we have any, you know, family stuff going on, but two kids need some braces. Maybe two kids, a seven-year-old maybe, you know, something could happen surgery wise. >> Maybe I could have used an HSA because my son George has broken his braces seven times for a month. >> Oh, that hurts. Yeah. Yeah. So, I don't I don't see the problem building up just falls out. >> I don't see the problem with building up a bucket because the worst case scenario is you hit age 65, that HSA effectively becomes a traditional IRA uh at that age. So, I I don't see any problem having that amount of assets in an HSA. I think I just treat it as part of my retirement plan and I'd be no rush to take any distributions. It's there if you need it. It's a great great compounding device. >> Right. And obviously, I'm assuming he's filling up the other buckets already, too. >> Yeah. And Ben, you mentioned uh in prior episodes, there's this neat thing of HSAs that the the year you take a distribution does not have to match the year that you have a qualified expense. So, let's say you do sit down with with Young George and you need a $2,000 distribution for medical bills, you just print that invoice, stick into a tax folder, you can take that distribution 10 years from now, >> save those receipts, right? >> Exactly. And so, like, yeah, rule of seven, like $10,000, 5K turns into 10, you effectively had the market pay half of your your orthodontist bill in the future. So, that that to me is a great use of an HSA. I would be in no hurry to wind it down. >> And now you're you're stuck with the HSA your employer provides, right? Because like my wife has an HSA and there's a lot of fees. Like I look at the statements that come and there's a lot of fees, but there's like nothing we can do about that, right? That's the way it is. >> It it all depends on the employer, Duncan. But ultimately, what I would recommend for a situation like that is take a look at the fees, ask if the plan has a rollover option. Can I roll this money out while I'm still working? You have to make the contributions to that plan, particularly if your employer is providing support, but you don't have to remain in that account forever. It's not a death pact. And ultimately, you can set up an HSA roller to a lowerc cost provider. Major providers have HSA options. >> Public and Robin Hood don't vote, do they? Now that I think about it, I don't think they have HSA. >> I'm not certain. Yeah, the major custodians we work with at Rit Holtz do. Uh, but yeah, but they're both bespoke and plan specific. But yes, if it Duncan, if you're paying a lot of fees, uh, you know, you you there in Connecticut, I would definitely look at a rollover option like what if the plane allows it and I know the CFO over there, let's make it happen. [snorts] >> So, Sean in the chat says his his back hurts. Uh, what over-thec counter meds do Ben and Bill use? Um, this is not a medical advice show, but I say rub some dirt on it. Dirt on it and drink some whiskey. >> That'll make you feel all better. >> Whiskey is a good one. I'm a I'm a couple of beers guy. [laughter] >> Couple of beers. Couple of beers will take care of that one. Yeah. Um, >> yeah, that's that's my only health uh health advice for today. >> Yeah. Wow. Not not medical advice. I uh Yeah, I skipped over that that that episode. >> All right. So, we cracked the code for Roth Retirement today. >> Benjamin, big ups. >> Thanks to Bill as always. >> Nicole asked me to to promote our our new Animal Spirits mug. So, let me get that right.com. There's a bunch of them in the office. Yeah, we're repping hard holiday party tomorrow. It's great. >> They're very nice. They're like diner style. They're that really thick kind of ceramic. I like it. >> I don't drink coffee, so I don't have one yet. Um, email us ask the compound showgmail.com. Thanks to everyone in the live chat as always for bringing it. Uh, thanks to Bill, thanks to Duncan, all the whole production team, and we'll see you guys next time. >> See you everyone. [music]