You wake up, check your portfolio, and realize one stock has quietly become your entire retirement plan. Maybe it came from an employee stock purchase plan. Maybe Grandma left you a pile of Apple shares. Maybe you bought NVIDIA in 2012 because you liked the graphics card and forgot about it. However you got here, the problem is the same: one company now owns you. Joe and OG walk through exactly how to unwind it — slowly, tax-efficiently, and without making the emotional decisions that cost people the most money.
What You’ll Walk Away With
- The four ways people end up with concentrated stock — and which one has the easiest fix that most people skip entirely
- Why inheriting stock is actually the best time to diversify — and the step-up in basis rule that eliminates most of the tax bill
- The conveyor belt strategy for employee stock purchase plans that keeps you collecting the discount without piling up company risk
- Why “I’ll just grow around it” almost never works — and the math behind why your stock tends to outpace your ability to diversify around it
- The question Joe asked every client in this situation: which outcome would upset you least — and why that’s the right starting point
- RSUs as a paycheck, not a loyalty pledge — and the mental reframe that makes it easier to sell
- What the Merck/Vioxx story teaches about why the tax bill is almost never the real reason to hold concentrated stock
- When a slow systematic sell makes sense versus ripping the Band-Aid — and how to decide which one you can actually live with
- The estate planning mistake that turns a free inheritance into a massive capital gains bill — and why the $1 trick backfires every time
- The insurance planning framework OG and Anna walk through: life, disability, long-term care, and property/casualty — including the umbrella policy most people skip
Why This Matters Now
If you’ve spent years building something — through your career, through conviction, through an inheritance — the last thing you want is to lose it all because one company had a bad quarter. The diversification conversation feels complicated, but the framework is simpler than most people think. The hard part isn’t knowing what to do. It’s making the decision when the stock is moving and your emotions are loud.
From the Basement
Joe and OG dig into concentrated stock risk — how people get there, what it actually costs them, and the five strategies for getting out without making it worse. OG and Anna return for episode two of their financial basics series with a full insurance planning walkthrough — including the disability insurance gap most people don’t know they have. Doug arrives with Mount St. Helens trivia and a dryer situation that may or may not involve auto parts. Stacker Molly’s car repair HSA story gets a full investigation and a satisfying resolution.
Resources Mentioned
Yahoo Finance / CNBC insider trading tracker — referenced for monitoring executive stock sales
Stacking Benjamins Basics Guide — season one and season two workbooks free at stackingbenjamins.com/basicsguide
Stacking Benjamins Newsletter (The 201) — stackingbenjamins.com/201
Stacking Benjamins Vault — stackingbenjamins.com/vault
Stacking Benjamins Community — stackingbenjamins.com/basement
Our Headline
- Stock plans reshape retirement outlook as Fidelity finds surge in first-time investors (InvestmentNews)
Doug’s Trivia
- On this date in 1980, a massive volcanic eruption caused widespread devastation and led to more than 40,000 insurance claims, with over $27 million paid out. What mountain blew its top?
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Other Mentions
Join Us Wednesday
Tune in on Wednesday when we hear from our annual guest who kicks off another season of theme park madness…from the top theme park website, Theme Park Insider, we welcome back Robert Niles.
Written by: Kevin Bailey
Miss our last show? Listen here: The Habits That Actually Make Millionaires (SB1842)
Episode transcript
[00:00:00] Joe: It is Monday. It’s a weird Monday when I’m not in the basement. I’m in Charlotte, North Carolina, and I have… I, I don’t even have… Guys, I don’t even have a mug for our Monday salute. I’ve got bottled water. [00:00:13] Doug: Wow. Times are tough in North [00:00:14] OG: Carolina, huh? It could be vodka. You don’t know. You don’t know. Are you at a WeWork? [00:00:19] OG: Is there somebody in the, in the background? I’m at a WeWork called The Hyatt. Did you run out of money and you had to share a room with somebody? [00:00:27] Doug: He’s at a hotel that has lots of mirrors, OG. So you do the math. [00:00:33] OG: Oh, it’s a mirror. Oh. Yeah. Okay. I got you. Well, I was waiting for… I was waiting to see something move, but it’s the opposite. [00:00:40] OG: Okay, I see how mirrors work. It’s amazing [00:00:43] Joe: how many quarters you can put in this bed, by the way. [00:00:50] Doug: Is there a vending machine in the bathroom, Joe? [00:00:54] Joe: Apparently. If I stay here three nights, I have to tell Cheryl that I got married to somebody else. I don’t know. Hey, we need to do our salute, though. Just because I’m not in the basement, you guys are. I’m so jealous. Let’s raise our mugs, everybody, and salute the troops who have been working double, triple, quadruple duty lately keeping us safe. [00:01:15] Joe: For all you do, on behalf of the men and women making podcast in mom’s basement, usually, or in Charlotte, North Carolina this week, and the people who are all trying to stack Benjamins, thank you very much for all you do. Thanks, everybody. [00:01:30] opener: It’s easy to grin when your ship comes in and you’ve got the stock market beat. [00:01:38] opener: But the man worthwhile is the man who can smile when his shorts are too tight in the seat. Okay, Pookie, do the [00:01:50] opener: honors. [00:01:57] Doug: Live from Joe’s mom’s basement, it’s The Stacking Benjamins Show. [00:02:11] Doug: I’m Joe’s mom’s neighbor, Doug, and millions of Stackers are becoming investors through stock plans, inheritance, and big winners, but many are accidentally taking on massive risk. Today, we’ll show you how to turn concentrated stock into a diversified, confident plan. Plus, it’s Monday, so that means OG and Anna are back with their second basics lesson of this eight weeks. [00:02:36] Doug: And of course, that’s not all. I’m also ready to swoop in halfway through to regale you with another piece of trivia, this one about insurance clauses. Oh man, who doesn’t love insurance clauses? You’re gonna love it. And now, two guys who are loving the fact that Joe’s mom made two pots of coffee, it’s Joe and O-G-G-G-G. [00:03:03] Joe: And a happy Monday to you, Stackers. I am Joe Saul-Sehy, and Doug, uh, two pots of coffee, and I’m not even in the basement with you this week, so, uh, no wonder your open was maybe a little- Okay … more exuberant. [00:03:18] OG: I, I do have a little problem though, Doug. Did you notice that Joe left his empty ice cream bowl sitting on his side of the table? [00:03:26] OG: Like- He does that … it’s stuck, it’s- Yeah … like what the heck, bro? If you’re gonna go on vacation, like, clean your trash up. And then the [00:03:32] Doug: stuff just, like, glues itself to the side of the bowl. You gotta let that sit in the, over in the utility sink for, like, a day and a half to soften it up. See, [00:03:40] Joe: this is what happens when I’m not there to defend myself. [00:03:43] Joe: I like how you take your empties and call them mine. It’s, it’s super awesome. I mean, who eats a bowl of ice [00:03:50] OG: cream for breakfast? [00:03:51] Joe: Let’s take- I don’t know … this idea of a bowl of ice cream. Let’s say that you were gonna eat a whole, uh, grocery store freezer full of ice cream, because sometimes people wake up, OG, and all of a sudden, for a number of various reasons, you’ve got way too much ice cream, AKA way too much of a single company stock in your portfolio. [00:04:11] Joe: And today we’re gonna talk about what to do when that happens. How about that? [00:04:15] OG: I like it. I like it a lot. [00:04:17] Joe: It is a great problem to have, and hopefully at some point in all of our Stackers’ lives, you’re [00:04:23] OG: dealing with this problem. Oh my gosh, I have so much money. What am I gonna do with it? What am I gonna do with it all? [00:04:29] Joe: But, but you gotta admit, OG, we see it enough among our Stackers, we hear about it enough, that I think it’s important to know what you could step in. [00:04:37] OG: I got a little preview of what we’re gonna talk about, so I know on the back end we’ll talk about, like, how to get yourself out of it, and then more specifically, you know, how not to get yourself into it. [00:04:46] OG: But this is a structure that you wanna have from your investment perspective on the front end of your investment plan, not on the back end of your investment plan of, like, “Oh, crap, now what?” “Oh, crap, now what?” is never a good feeling to have, you know, when you’re, when you’re working through your money. [00:05:03] Joe: So grab a piece of paper, whatever you use to take notes, sit back and relax because we are about to help you make sure that you stay diversified and keep your portfolio humming along. [00:05:16] Joe: Uh, we’ve got a couple sponsors, speaking of humming along, who keep us humming along. We’re gonna hear from them. The first one is The Vault. I mentioned last week that I solved another subscription problem, saved myself about $250 a year, OG- Hmm. Very nice … by looking into Subscription Manager. Of course, got rid of all of those places where my data was being sold, made sure I was wiped clean of that. [00:05:42] Joe: And coming soon, we’re gonna be talking about budgets and, uh, budgeting using The Vault. Stackingbenjamins.com/vault gets you there, and super happy to see that, uh, for people that have been there a while, we’re adding new functionality and not increasing the price. My goal is to be involved with products that I wanna use, and The Vault is simply, uh, just something I really, really enjoy going in. [00:06:07] Joe: And, and in the next couple weeks, I think our Vault users are gonna like it even more. All right. We have a couple more sponsors to help us keep on keeping on. We only have sponsor spots here and in the middle of Doug’s trivia halfway through the show. That’s it. So we’re gonna hear from them, and then OG, Doug, and I, we’re gonna help you make sure that your portfolio stays diversified. [00:06:35] Joe: Well, today, Stackers, we’re gonna dive into a problem that feels a little bit like winning the lottery until you realize that the lottery ticket also represents an oversized piece of your entire retirement plan. You wake up, you check your portfolio, and all of a sudden you think, “Wow, I got a lot of that blank stock,” whatever that might be. [00:06:56] Joe: And then, of course, mom reminds us, “What happens when that thing drops?” And the bad news is, OG, you and I both have seen this, where somebody has had too much of an individual stock, and it’s, it’s dropped in value during the time between you started thinking about doing the right thing and diversifying it, you actually got around to doing it, and that’s never, that’s never pleasant. [00:07:19] OG: Yeah, and the struggle, of course, is then, you know, it’s like, “Is now the right time? ‘Cause it’s gone down, and maybe I wanna wait a little bit.” I distinctly remember m- many years ago, a client came in, this was a long time ago, early 2000s, and they had all of their company stock was They worked at Merck and, and so it was, uh, you know, their entire portfolio was Merck stock, and then this little thing called Vioxx came out. [00:07:44] OG: And, um, you know, the stock went down, whatever, 75% or something crazy. And the worst part about that wasn’t even the fact that it went down 75%. It was, it was that you still had to pay taxes to get rid of the 25% that was left. All because the diversification was too hard or too challenging, or the tax bill was too much, or whatever the problem was along the way. [00:08:05] OG: So owning individual stock is a great way to be concentrated and a great way to make a bunch of money. Um, it’s also a great way to, uh, lose a bunch of money really quick. [00:08:15] Joe: It is. And I- I’m glad you brought that up to start off with because if your goal is to get rich quick, you just increase the volatility in your portfolio, right? [00:08:23] Joe: Mm-hmm. But generally, what you find, unless you are one of the four people running the company, I’m looking at Enron from the early 2000s where there were literally maybe four people who knew really what, what, uh, a house of cards Enron was. Unless you’re one of those four people, betting everything on this is a difficult place to be. [00:08:42] Joe: But clearly, fortunes have been made by keeping just a single stock, and they’ve often been lost that way, too. So more people than ever are becoming investors for the first time, and part of it is compensation through work. So maybe you’re listening to this and you’re a stacker and you just got restricted stock units or you have an employee stock purchase plan or s- somehow you’ve gotten some stock. [00:09:08] Joe: But there’s also, there’s also other ways where concentration… You know, you didn’t choose to be concentrated stock. Maybe concentration chose you, right? So first one is through your workplace. Second way you might have got there was an inheritance. OG, we’ve seen that from time to time. I remember when I was an advisor a few times, people came into my office and they said, “Hey, I’ve never owned stock before and Grandma died, and now I have all this General Motor stock and I don’t know what to do with it.” [00:09:34] OG: And you’re like, “Don’t worry, it’ll be worthless soon.” You won’t have to decide what to do with it. [00:09:40] Joe: Too soon? Wow. Hey, Detroit. [00:09:44] OG: I mean, that one in particular, just to put a pin in that one for a quick second, there’s no excuse for not being diversified if you inherit stock. Like, there’s no reason not to do [00:09:52] Doug: it. [00:09:52] Doug: So just to clarify, OG, you mean, you said there’s no reason to not be diversified if you inherit. Does that mean as soon as you get it, you want to either yourself or ask your advisor to split that up and diversify the net value of that? Well, maybe we’ll [00:10:04] OG: talk about it in a little bit, Doug. But I like your foreshadowing. [00:10:08] OG: Maybe. I like your foreshadowing. I do. Stay tuned for more pr- particulars around what to do with your inherited stock. [00:10:14] Doug: So you’re saying I’m that annoying guy that figures out the plot of the movie soon and tells everybody? [00:10:19] OG: Like six minutes in, you’re like, “Oh, it’s the mistress.” Wait, what? How did you know that? [00:10:27] OG: Did you see this already? What mistress? No, I could see this a mile away. [00:10:31] Joe: Number three is, remember back in the early 2000s, OG, when NVIDIA stock was going nowhere and it was just kinda this, uh, crappy computer, [00:10:41] OG: uh, card [00:10:42] Joe: company? No. No, [00:10:43] OG: nobody remembered NVIDIA back in 2000. Nobody knew it existed. It wasn’t a thing. [00:10:48] Doug: Joe, you and I remember NVIDIA back in those days ’cause we were talking about which graphics card to get to upgrade our PC for Racing Game. Right. [00:10:56] Joe: Right. That was what NVIDIA was. Yeah. That’s what it was. And, and I remember reading reports on NVIDIA going, “Yeah, you don’t wanna own the stock.” And now let’s say that you bought NVIDIA back in 2012 or ’13, OG, and all of a sudden NVIDIA owns you, right? [00:11:14] OG: That’s a good problem to have. [00:11:15] Joe: Yeah. And then, uh, number four is, and I have a couple relatives that did this, they had conviction around specific companies or specific ideas, and now they have heartburn because of the fact that they own too much of a good thing. Like they’re like, “No, no, no, I really, really truly think…” [00:11:34] Joe: Well, in one case, one relative, it was Bitcoin, just really believed in the use case of crypto, and now has just a ton of crypto, not because they were hoping to get rich, but because they just thought cryptocurrency was the wave of the future. [00:11:50] OG: Do you think that some of that is a little bit more generational? [00:11:54] OG: And what I mean by that is, you know, you look at the history of investing from largely individual stocks to pretty good mix of individual positions and mutual funds to maybe like a third, a third, a third w- to now include ETFs. And then now, you know, the, at mid, you know, quarter way through this century, I certainly don’t know the percentages, but it feels like it’s mostly ETFs with a smattering of mutual funds, and then occasionally you have some individual stock. [00:12:29] OG: And I feel like, you know, 30 years ago it was I have a lot of stock, and the conversations were like, “Hold on a second. Why don’t you just put this all together in one line item?” W- you know. Although there is now the breaking apart of the ETFs, which is an interesting dynamic. So some of this maybe is a little bit more generational, but what I suspect… [00:12:49] OG: And so thinking about your f- you know, you said your family member’s conviction around it, I mean, that was the thing. Invest in the companies you do business with, right? Like, invest in what you know. So you had a lot of people in Michigan that had Ford and General Motors and, uh, Dow. Uh, it’s Fords. Yeah, I’m aware. [00:13:07] OG: That’s why I didn’t say it that way. And the companies that are headquartered or employed there, and I suspect it’s probably somewhat still true, just maybe shifted to, you know, tech companies now. But- I wonder if this is a problem that’s on its way out. I don’t know. Interesting to think about. [00:13:27] Joe: Well, I think for all those reasons above, people will sometimes hold. [00:13:30] Joe: I think the conviction area we see a lot less because I think we realized, oh gee, just how risky it is. And I w- and I wanna go over just because it isn’t risky in one way. Like, you know, so far we’ve been talking about single company risk, right? You own one company versus owning 500 in the S&P 500. [00:13:47] Joe: That’s, that’s a big risk difference. If one company goes through the floor, your whole retirement goes with it. But also, if you got this through work, let’s talk about those people at first. If you’re loading up on company stock because of your workplace, if your paycheck and your portfolio depend on the same company, I mean, that’s not diversification, that’s, that’s loyalty points. [00:14:11] Joe: That’s, that’s beyond loyalty points. [00:14:13] OG: Yeah. There’s an incentive to do it. There, the ESPP, the employee stock purchase plan, you usually get a discount of some kind for owning company stock or purchasing company stock. Um, you get a tax incentive for owning company stock in your workplace retirement plan, uh, if you do it right. [00:14:30] OG: There’s a, there’s a tax incentive there. And, um- And they also make it super easy to buy it. [00:14:35] Joe: Yeah. ‘Cause just- Yeah, for sure … payroll deduction. [00:14:37] OG: Yeah. And then nowadays, like you kind of alluded to earlier, nowadays even part of your compensation is company stock, which can be good, you know, if you’re in the, in the, you know, in, in a position to help row the boat, so to speak, you know, with your shippings. [00:14:55] OG: But also can be frustrating if you are on the other side of it and you’re like, “I’m good. I’ll take… My friends call me Cash. I’m gonna take that.” You know, “I don’t need any of that incentive stock option no- nonsense. I know where this thing’s headed.” Hard pass. [00:15:11] Joe: You know? There’s another risk, OG, that I think we need to talk about, and this is the risk of your behavior. [00:15:15] Joe: ‘Cause you don’t see with an index fund somebody go, “Ooh, when my total stock market index hits whatever the next number is, that’s when I’ll sell.” Right? So we don’t have all these, like, I don’t know, preconceived ideas in our head about, “Well, heck, the stock is about to… They’re about to have quarterly earnings for the S&P 500, so I’m not gonna sell this index or small cap index or international,” whatever it is. [00:15:40] Joe: Like, we don’t get emotionally tied, which I think is a great thing. But man, when it comes to clients with individual stocks, you must see people that are emotionally attached to a bunch of these positions that they own. [00:15:52] OG: Well, I think emotionally attached is, is, is a strong way to think about it. More people, I suspect, believe that they have some sort of insider knowledge And I don’t mean insider knowledge in terms of bad insider knowledge, but insider knowledge of like, “Nah, you don’t understand. [00:16:10] OG: Like these are good people, man. We’re, we’re making really good drugs here,” or, “We’re gonna have this new technology tool that’s coming out,” or, “We’ve got this new,” you know, whatever. Even if it’s not, you know, non-public information that is true insider info, people just have an allegiance to the people that they’re working with and believe that the people that they’re hanging out with every single day are working toward, you know, a good outcome. [00:16:35] OG: And I think that people are like, “Well, you just don’t understand. Here’s what we’re doing that’s special.” And then from an outsider perspective, Joe, yours or mine or somebody like us, we’re like, “What do we care?” Like I don’t care if you ship another box of widgets. The only thing that’s gonna be rewarded is if you’re profitably doing that. [00:16:52] OG: And, and to your point, it’s super concentrated to your risk profile, so why would you wanna do it that way? But, but there’s good reasons to, right? It’s like we talked about. Concentration gives you a great opportunity for wild wins, and there’s plenty of success stories along the way that, that say, hey, Jeff Bezos didn’t become a billionaire because he bought an S&P fund. [00:17:14] OG: ‘Cause he was [00:17:15] Joe: diversified, [00:17:15] OG: right. Yeah. I mean- [00:17:17] Joe: Yeah … [00:17:17] OG: he might be diversifying presently into like yachts and stuff. But I think that’s not a fair example either because, you know, he took all the risk of starting the organization. You know, that’s- Sure … a different kind of risk, but, uh, nevertheless. [00:17:31] Joe: I mean, if you can make a fortune through what you do through your paycheck and really shovel money into your portfolio that way, I mean, that is a great way to win because you know what you’re doing, you understand the threat to your payroll. [00:17:44] Joe: So working on that part of your portfolio, which people don’t often talk about, right? We talk about a lot here how to be better at work because- Mm-hmm … you and I believe that that skill is an asset that you are accumulating, much like you’ll accumulate stocks and bonds. The interesting thing, OG, about what you’re saying is, you know, also when it comes to an index fund, we think of practical numbers. [00:18:05] Joe: I mean, our average stacker knows what the stock market goes up in an average year and what our expectations are for the portfolio. But I think back to one of the formative books that I read, which was Ric Edelman’s The Truth About Money, and he said when it comes to individual stocks, we get these outsized just feelings in our head. [00:18:24] Joe: So Doug, without thinking about it too much, let’s say you have a random stock. I’m not even gonna tell you what stock it is. It’s trading at $10 a share. What price does your head immediately go to that would be a nice return to sell it, let’s say, later on this year? Probably 13. Yeah. Yeah, 10 to 13 would be nice. [00:18:43] Joe: And Ric Edelman said, by the way, the average person says 15. On a 10, they did this big study. That’s a 30% return that you said. Yeah, that’s why I picked that number. And the stock market expectation that you Well, no. You’re like, “Three bucks. That’s not a big deal.” But then Rick points out that it’s a huge deal. [00:19:01] Joe: Like in our head, you got a stock that’s at 40, and you’re like, “Okay, it gets to 50.” That’s a 25% return that you’re talking about. I got a tr- stock trading at five, I’ll sell it when it gets to eight or nine. Like, these returns that we expect from individual stocks just because we’re attached to the number and not really thinking about what the stock market does in an average year gives us this expectation that might be bigger than what we could hope to achieve, and that’s a risk that we have as well. [00:19:29] Doug: Now, if you change that example to, say, Rivian stock, and what would I be excited about to sell, it would’ve been $10.13. Please, God. To be fair- That I’m selling … I did [00:19:40] OG: tell you when to sell it. [00:19:43] Joe: He did. You did. You tried to tell me. If only you’d had some insight from somebody- … who was talking in your ear about that one. [00:19:49] Joe: I did. I thought I did. I wanna talk about five things that maybe should be in your, your playbook, and OG, I wanna run these by you ’cause as I thought about these, I thought, “Oh, OG’ll have some more.” And as usual, if you’re brand new to the greatest money show on Earth here, that we haven’t shared with OG any of the pieces that we have, uh, thought about. [00:20:08] Joe: So the first thing that was on my list, OG, was this idea of a slow unwind, which is I think people think that when you own a concentrated stock, I gotta sell all of it or none of it, and that’s not true. You can, just like people dollar cost average in, you can dollar cost average out. And I think about insider traders with these, uh, major corporations. [00:20:31] Joe: You can go to cnbc.com or Yahoo Finance, and you’ll see that insiders have to display how they buy and how they sell stock so that we can all follow them. And OG, you’ll often see people that are, on a quarterly basis, you can see it’s part of the financial plan because once a quarter they’re dropping another X number of shares as they’re diversifying out as the company’s giving them more. [00:20:58] Joe: This is a strategy I’m sure that you use from time to time. [00:21:02] OG: Well, I think, you know, kinda like looking back at this from the perspective of, like, how did we get to this spot, you know, a- and, and I think we’ll circle back and talk about that, but this is like, okay, I’ve… now I already have the problem, right? [00:21:14] OG: So there’s stuff to do before you have the problem, but okay, so we have the problem, so how do we, how do we rectify the situation? And certainly one of the options is you just sell it down to whatever allocation you wanna have. And to be fair, I don’t know that that’s a terrible idea most of the time. [00:21:32] OG: The risk, of course, is that the stock goes up 30%, like Doug thinks it should, and you miss out on a big gain. But I suspect there’s an equal risk of it going down 30% and, you know, you prevent yourself from a big loss. I will tell you that no matter what you choose to do, it’s gonna be wildly incorrect because that’s just how Murphy’s Law works. [00:21:48] OG: You know? You’re gonna, you’re gonna be like, “You know what? The right thing to do is diversify it all,” and tomorrow after you sell it, it’s gonna have a, you know, surprise whatever dividend, and you’re gonna miss out or something like that. It’s funny [00:21:58] Joe: you say that, OG, because when I was an advisor, I would tell my clients when we were in this situation, “Okay, w- w- we’ve got two choices. [00:22:07] Joe: We diversify out slowly, and it just continues to be this giant sucking sound, and it gets bad news, and it goes down and down and down, and you lose out on a bunch of money that you would had if we’d sold it all at once. Or we sell it at once, and it goes through the roof two days after we sell it, right?” [00:22:23] Joe: My question was not which one do you prefer, ’cause we all want the better one. M- my, my question, OG, always was which one would upset you the least of those two? Yeah. Because no matter which one we choose, there’s a chance it’ll be wrong. Yeah. [00:22:38] OG: It’s gonna suck regardless. No matter which one you pick, you’re gonna be, in the short run, wildly incorrect and feel frustrated by that. [00:22:44] OG: So then the other option, to your point, is you just say, “Okay, well, I don’t wanna sell all of it today because, you know, there’s other downstream effects, maybe some tax problems or, you know, whatever.” And so you set up an established plan of like, “No matter what, I’m gonna do this.” And it works really well because at the end of the day, when you got into it, that’s how you did it. [00:23:05] OG: You know, a lot of people ask the question, uh, just kinda take it a step further, say, “Well, you know, I’m gonna get close to retirement. How do I take the money out of my investment accounts?” Well, this is gonna come as a shock to a lot of people. Um, kind of the same way you put it in. Like, every single month for 30 years, and now you’re gonna take it out every single month for 30 years. [00:23:27] OG: And it, that is the most logical way to do it. It keeps the money invested the longest. So you have two ways to do, you know, kind of rip the Band-Aid off, which is probably right to solve that problem. What’s a greater problem, a tax bill or wild, you know, over-diversifica- or under-diversification? I’d say under-diversification’s worse. [00:23:48] OG: Um, but if you can’t stomach it, then set up a plan for, “Okay, I’m gonna sell the same number of shares at this same cadence until I’m to the position size that I want.” And especially if you’re somebody that’s accumulating it on one end, you’re pouring money, you’re pouring shares on the top end, and you’re trying to drain it out the bottom end at the same time, this is very critical because everyone who’s in this spot knows this to be the case. [00:24:10] OG: ‘Cause we talk about it when they’re early, and they go, “Eh, it’ll never happen to me.” And then it happens to them and they go, “Hey, you told me this was gonna happen to me.” It’s like, “Yep.” So here’s what happens. You start getting some RSUs, you start doing some ESPP purchases, maybe you get some incentive options that are non-qualified, and they’re all kind of worth just a little bit of money, and it looks cool on your balance sheet that you got all these shares, but they’re not really worth anything ’cause they’re not vested or whatever. [00:24:34] OG: But next year, they go, “Hey, you did a good job. Here’s a couple more shares. Hey, you did a good job. Here’s a couple… Oh, you got a promotion. We’re gonna give you these options and some more shares.” And as you move up in the company, as your career progresses, more and more of your compensation is aligned with corporate outcomes and less aligned with what you do on a daily basis. [00:24:55] OG: Which makes sense. The CEO, while they’re paid, you know, an insane amount of money, cash, right, two million bucks or something, you know, we’d all go, “That’s a lot of money.” Jam- Jamie Dimon doesn’t make his money on, on his cash, right? He gets, like, two million bucks. That’s, like… That’s the money he, like, buys booze with. [00:25:10] OG: What he makes money on is the fact that JP Morgan’s stock, he owns $100 million of it, or 500 million, some, like, insane amount of JP Morgan stock. That’s where his compensation is really driven. And so as your career progresses, it goes from working per hour to working for outcomes. [00:25:26] Joe: Well, think about how that aligns too, because as a shareholder, you want that. [00:25:30] Joe: You want these- [00:25:30] OG: Absolutely, you do. 100%. Yeah, 100% you do. So if you don’t have a plan for, “I’m pouring st- you know, I’m filling up the top of the bucket, but I don’t have a way to, like, drain it out the bottom,” you’re gonna run into this problem where you’re gonna be putting more stuff in the top than you’re pulling out the bottom along the way. [00:25:45] OG: So if you find yourself, you’re like, “Okay, today’s the day I wanna do it,” establish a systematic sell order. Say, “I’m gonna do this on this frequency.” It can be weekly. I wouldn’t do daily. I probably wouldn’t do weekly either. Monthly, quarterly, you know. And if your company has restrictions, now you’re gonna be restricted around the times that you can do that, um, as well. [00:26:04] OG: But pay attention to that. But you put it in on a quarterly basis with your bonus, take it out on a quarterly basis. Like, this is, this is an easy, easy decision. And if you have the option to pick which shares or which lot, you know, maybe it can be some tactical stuff, but that’s 20131. [00:26:20] Joe: I like this with the employee stock purchase plan especially. [00:26:23] Joe: Think of it as a conveyor belt. We’re just trying to get that 10% discount, hold on to some of it, a little bit of it, so we own a little bit in our company, and then sell it on the way. So whatever I buy in- during this mo- six-month period, I sell an equal amount on the other side. So I’m always conveyor belting in. [00:26:41] Joe: I get the free 10%, I’m conveyor belting some off. And then- Yeah … I’m constantly not- Yeah, there’s a two-year [00:26:47] OG: rule on the tax benefits for ESPP. So, so yeah, you’d… If you were starting from scratch, you’d go, like, Q1, Q2, three, four, Q1, two, three of year two, and then Q1 of year three you’d sell Q1 of year one’s tranche. [00:27:00] OG: So you put money in, take money out, put money in, take money out, you know. Because look, this is the thing when we talk about RSUs, maybe we’ll get to this, this is your compensation, right? Like, this is your paycheck. And it’s really interesting to me when people are like, “Oh, I’m gonna hold on to this stuff.” [00:27:16] OG: It’s like- Okay, well, let’s flip this around the other way. You just got a bonus from work. It’s $50,000 cash. Is the first call to OG to go, “Hey, let’s buy my company stock with all of it”? Or do you think, “Well, hold on a second. There might be other things. Like, I’ve got other financial goals. I wanna pay off my house faster. [00:27:34] OG: I gotta send my kid to college. You know, I gotta build my investment portfolio. I need to pay off some consumer debt.” Like, are there other things in your life, or do you immediately go bonus equals buy company stock? And I would submit that most people, when they think of it that way, they go, “Yeah, that’s probably the last thing I would think about would be buying company stock.” [00:27:53] OG: And so ESPP, RSUs, to your point, is a conveyor belt. I like that analogy. Like, this is your pay. It’s, like, deferred. You gotta wait a little bit to get it, but this is your paycheck. Your company was like, “Hey, we’re giving you a bonus. Psych.” You know? “You can have it in a year.” And now you get it, and you’re like, “Eh, I’m just gonna buy company stock with it.” [00:28:15] Joe: Well, and I actually had that as one of my things. Uh, I mean, that was the fifth one on my list of five was RSUs truly are a piece of your income compensation. Yeah. And I love your analogy of, “Hey, if this were cash, i- is this what I would do with it?” ESPP really is opportunity to invest more money and use that to get a free additional return, so it is a way to invest more money. [00:28:39] Joe: Yeah, it’s [00:28:39] OG: like a match in your 401. But still, you don’t wanna pile it up in company stock, so. Right. [00:28:45] Joe: I think no matter how you come out, uh, number two on my list was to be tax aware. We used Nvidia earlier. Let’s use Apple stock. Okay. Apple stock, highly appreciated, and Grandma owned a bunch of it, passes away, and now you own all of this Apple stock. [00:29:02] Joe: Let’s talk about taxes on this sale. If I inherit this money from Grandma, will I be subject to tax on all these gains? [00:29:11] OG: Most likely not. It, it largely depends on how you got the shares. You know, if, if it literally was transferred to you because Grandma died and, you know, it was in her brokerage account, and the executor called or Schwab called and said, “Hey, uh, you’re the beneficiary of this account. [00:29:25] OG: You know, we’re opening up a new account. We’re sending the shares to your account,” then you get what’s called a step-up in basis. You get the opportunity to own the shares not at Grandma’s purchase price, ’cause if she sold it she would pay capital gains tax, but at the value it was on the date of her death. [00:29:40] OG: And this is what I was talking about before where I said if you inherit stock, there’s really no excuse to not be diversified because there’s very little tax bill associated with that generally speaking. Unless, of course, you know, Grandma died on Tuesday, on Wednesday, you know, the stock ran up 30% or something. [00:29:55] OG: But even then, you’re only paying gains on the difference between- The one day … you know, when she passed away, the one day, you know? So in all likelihood, there’s, um, a pretty low amount there. But this counts for all capital assets. So this is the lake house. This is the, the homestead. This is the farm. These are all the things that if you get them through inheritance, generally speaking- You get what’s called a step-up in basis, and you get the opportunity to own it at today’s price, and then, you know, you sell it, and you don’t have to pay any, any cap gains taxes on it. [00:30:25] OG: This is why also, by the way, it’s a really stupid idea to give away stuff or… And you see this, people say like, “Oh, we have to transfer all Grandma’s money before she dies to make it easy.” Oh. It’s like, this is the dumbest thing possible because now you just, y- because they, it was a gift while she was alive, now you get, you inherit her basis. [00:30:49] OG: You inherit the property value that she bought it at. You see this all the time at lake houses or the farm. These are the two offenders, and I don’t know why it’s just these two, but it is. It’s like, “Well, we, you know, Grandpa built the lake house in 1971, and now he’s gonna pass away in 2024. Oh, crap, we gotta make this easy. [00:31:13] OG: We don’t have to, wanna do paperwork. God forbid we have to go down to the courthouse and do paperwork, so we’ll just have Grandpa sign this thing that says he gives us the property today.” Ah, and, and everybody jokes about it. They go, “I bought it for a dollar. ” “Oh, look at me. I’m cute. Look at this cute thing. [00:31:28] OG: I gave Grandpa a dollar. Hardy har har.” I was gonna inherit it anyway. You get the property, you do your thing, and then five years later you’re going, “Nah, we’re not up there all the time anymore. We’re gonna sell it.” You know what the CPA says? “Hey.” “How’d you get it?” And you go, “Well, I got it from Grandpa.” “I bought it for a dollar.” [00:31:42] OG: And he goes, “Oh, did you inherit it from Grandpa?” “Well, I mean, yeah, but n- I mean, not technically, no. Technically, I bought it for a dollar.” Well, guess what? Technically, you owe all the capital gains taxes. Except a dollar. You [00:31:56] Joe: saved- Except a dollar … the capital gains tax on the dollar. Because [00:31:58] OG: guess what? I- your smart ass like literally wrote it down on a piece of paper and filed it with the courthouse or filed it with the county. [00:32:06] OG: Purchased for $1. Like, it’s like, you… Just wait, inherit it. It’s okay. It’ll be all right. There’s attorneys. It’ll cost a few bucks, but it’ll cost a hell of a lot less than paying freaking capital gains taxes on it. [00:32:17] Joe: This would be a lot funnier if I didn’t have a family member just do this. Just do this. [00:32:23] Joe: Even though we told them not to, even though we told them ahead of time not to. [00:32:26] OG: Yeah. [00:32:27] Joe: This is [00:32:27] OG: commonplace. Yeah. You would think, “Oh, OG’s family’s got this covered.” Nope, nope. They’re a bunch of idiots, too. They- They, you know. Like they’re… Oh. With the answer usually being, “I saw you in your diapers. I’m not listening to you guys.” [00:32:40] OG: It’s like, you’re right, you know? What would I know? I’ve only been doing this for 30 years. That was exactly the way I was treated, by the way. Yeah. It was like, “Oh, no, no, no, no, no. No, no, no.” No, you don’t, you don’t understand, young man. “Back away.” We’ve… The adults are talking. We have it handled. And all I can think about is, thank you for making my life worse when you’re dead. [00:32:57] OG: You know, it’s like, literally who’s, who’s gonna have to solve this problem? People are gonna go, “Hey-” What do we do? I’ll go, “Well, you should have done it my way to begin with.” And I know that’s what’s happening to you too, Joe [00:33:08] Joe: But I think that no matter how you came about the shares, the big point- Yeah [00:33:11] Joe: here, stackers, is to think about what is the tax consequence of when I sell, what is the tax consequence gonna be? So a few strategies, you can spread the sales across years. We talked about that, holding onto it- Yeah … for a couple years, maybe get long-term tax treatment if it’s an employee stock purchase plan or you’ve bought the stock and it went up. [00:33:31] Joe: Well, you can [00:33:31] OG: look at your tax… Y- you can do some tax planning at the end of the year. Let’s say you got that appreciated stock you’re trying to get rid of. You can do some tax planning at the end of the year and say, “Where am I at? What am I gonna pay? Am I… Can I get some at 15%? Can I get some at zero? Is my income such that I might have a 0% tax bracket for a little bit?” [00:33:48] OG: You know, still, this is the crazy thing, the most you pay in capital gains taxes, long-term anyway, is 23.9, right? Which is still pretty good. It’s, like, pretty good, you know, tax rate considering your income tax rate, so. [00:34:04] Joe: Well, and I had somebody ask me this before, OG, which is holding onto an individual stock for two years with the additional risk versus that, frankly, small bump up. [00:34:15] Joe: In the big scheme of things, in, in- Yeah … tax ramification, which one’s riskier, hold onto it for two years or the higher tax rate? And I actually had a stacker who was like, “I would prefer to get the short-term capital gains rate and not have that risk,” [00:34:30] OG: and I’m okay with that. Well, it certainly depends on what your rate is. [00:34:32] OG: Short-term capital gains rate could be as much as, you know, your, your ordinary income rate, which could be- Sure … as high as 37% plus state. So I mean, it could be 50%, but it’s still only 50% on the gain. You know, you’re never paying on your own contribution. [00:34:45] Joe: And that’s another piece that I had here with tax where moves is if you’ve got lower income years, um, or you’re in a lower tax bracket, j- just think about managing tax brackets. [00:34:55] Joe: And also, you can offset some gains with losses. If you’ve got that flyer that you took that didn’t work out, and you’ve… You know, it’s time to finally- Mm-hmm … sell that thing, you can hopefully offset some gains there. The third strategy to make sure that this concentrated piece is not as big a piece, and we’ll see this when we talk about rebalancing, OG. [00:35:18] Joe: There’s two ways to rebalance a portfolio. One is to sell and rebalance, but the other one is to not sell, just stop accumulating that stock and build around it. Of course, you still have the concentrated stock risk, but as the rest of your portfolio grows, now you’re getting rid of some of the risk because it represents a smaller piece of your overall pie. [00:35:41] OG: Right. Basically, what you’re talking about here is accepting the percentage that I have, and then saying, “Okay, I’m not gonna add any more to the mix.” The downside is that if you get too far ahead, like it’s almost un- It’s, y- y- you can almost not be able to catch up. Yeah. Uh, no matter how hard you try. This is like the same concept of like, I’ve got a million bucks of pre-tax money. [00:36:03] OG: Should I do Roth and try to diversify? It’s like, yeah, you should, but you’re not gonna catch your pre-tax money. Your pre-tax money’s growing at a rate faster than you can put money in, you know, and it’s compounding at that rate, so you’re not gonna be even money, basically. So be careful with that thinking of like, “I got a million dollars of Apple stock, I’ll just stop saving in Apple.” [00:36:22] OG: It’s like, well, Apple’s gonna be two million before you get another million saved. [00:36:27] Joe: We talked to Grant Sabatier about this. Grant, of course, been on the show a couple times, also was live with us in Detroit for a great Q&A session back when I lived there, and he said in front of the whole group, OG, that the, h- his issue was his Amazon stock just continued to grow so quickly. [00:36:44] Joe: Mm-hmm. That had he decided to just hold it, which is what he was doing initially, he’s like, “Oh, I’ll just grow around it,” he’s like, “It still became the bigger piece of my portfolio. I could not put money fast enough into other places because my Amazon had grown so big.” And, and this was a true believer thing, where he just believed in the early days that Amazon, this little book company online- [00:37:03] Joe: was going to be- Never heard of them … uh, yeah, gonna be a big thing. I wanna get back to something that you foreshadowed earlier, which was when you talked about not getting in this position in the first place, ’cause this is, was my last point, OG, which was, you know, maybe when you’re thinking about your portfolio, obviously if you get an inheritance, there’s nothing you can do about that. [00:37:23] Joe: If you get massive RSUs or, or stock options, maybe not a ton you can do about that. Think about ultimately how much of my portfolio do I want in any one position, and what should that number be, OG? For me, I’m, I, I think, you know, 10%, okay. You might get me to argue 15 if you’re super aggressive, but I think anything over 15, you’re really asking for it. [00:37:51] OG: Yeah, I don’t, I don’t know that I have a dog in the hunt in terms of the percentage. It’s, it’s like that, um, I can tell you what’s too much, you know? I, I’d say probably, like you said, maybe 20 is probably too much, but I can see where it gets out of hand, and it can get out of hand quickly, and that’s not necessarily a bad thing. [00:38:08] OG: Look, you know, again, back to the results thing here, if you happen to be in a company that’s fast-growing, and you happen to get a bunch of company stock, and it happens to, like, 10X, like these are all really awesome problems. Like, like you’re talking, it’s like, oh, back to that Merck story that I told at the beginning. [00:38:27] OG: That guy had 12 million in company stock, and he didn’t wanna pay the tax. It was two million bucks in taxes to, to diversify the other 10. This is a really stupid decision on his part, and, and it’s a pretty fair trade. I mean, every one of us would take a $12 million paycheck today, uh, y- no matter the tax rate. [00:38:47] OG: You know what I mean? Like, you say, “Well, it’s a 50% tax rate.” I’d be like, “Okay. Yeah, whatever.” I mean, I’d, I’d like it to be less. But if somebody said, “I’m gonna give you $10 million,” and they said, “Well, hold on. Before I give you the 10, you gotta give us two back,” nobody would be like, “Oh, to hell with it then. [00:39:02] OG: I’m good. You keep it all.” Right? Like, this is… We just have to, like, evaluate it from a different side of the equation, you know what I mean? So these are all good problems to have. If your company, if you’ve gotten company stock, and it’s gone up 10X, and you all of a sudden you go, you wake up one day and you go, “Oh, my goodness, I haven’t been paying attention to this. [00:39:18] OG: I’ve just been making widgets. Now I got 2 million bucks, 5 million bucks, 10 million bucks in company stock. What, oh, what shall I do?” Well, you know, maybe you write a big check to the gov and call it a day. Or you implement some of these other strategies, you know, in terms of dollar cost averaging out. But I, I, I just fail to, like, see this as a problem. [00:39:37] OG: This is a fantastic- It’s [00:39:39] Joe: a great- … scenario … great, great, great issue. Which I think is where some of the fear comes in, is because you’ve been gifted or you worked really hard to get to this position where you got a bunch of money in one stock. And, and most of the time it’s a combination of both, right? [00:39:55] Joe: Mm-hmm. I worked really hard to get here, and it grew, so I was, I was right, either the company I worked for or my conviction, whatever it might be, and it grew. But I think this is where it’s important to reframe, that diversifying out of this is not about giving up upside. It’s just making sure that one decision doesn’t define everything from here on out. [00:40:16] Joe: Like, you’re not walking away from success, OG, when you decide to diversify portfolio. You’re actually protecting the success that you’ve had. Yeah. And I think it’s important to reframe that way. [00:40:26] OG: Absolutely. And look, there’s a bunch of other 201, 301 strategies of, like, if you have this company stock problem or you have under-diversification problem, you can put buy/sell orders around the numbers, you know, to say, “Hey, you know, if it goes above this, I sell. [00:40:43] OG: If it goes below this, I sell,” to kind of protect yourself. You can use option trades to do it. You could do, uh, a product called an exchange fund, where you take all of your company stock, you mix it with everybody else in the universe who also has a bunch of company stock, and you guys create your own ETF, basically. [00:40:58] OG: And so there’s products that exist like that. So there’s a lot of, a lot of specialization around here. Sometimes the juice isn’t worth the squeeze. You know, you look at it and go, “Does it make sense to do this for $100,000 position?” Probably not. You know, probably just sell it. Does it make sense for a million? [00:41:15] OG: Eh, depends on your overall net worth, right? Because there’s gimmes and gotchas for all of these different strategies. But I think recognizing that you wanna do something, and sitting down clear-headed and going, “Okay, let me make a plan of what I’m gonna do.” Like, what’s the best- outcome here, and how do I protect myself? [00:41:35] OG: Like you said, I think is the biggest thing, uh, and I, uh, I think this is probably the highlight of it, which one of these things will piss me off the least? Right. You know? Like- … this is my standard. Which one sucks less? ‘Cause they’re all bad outcomes in terms of what’s likely to happen. Which one sucks the worst, or the least, I mean. [00:41:53] OG: And then you make the plan when you’re clear-headed, not when the stock’s going up or down 20% a day, not when it’s, you know, chaos, and then you just go execute it, and you live with the outcome. The thing I wanna point out here, by the way also, is in all likelihood, you’re not moving the money from the market to cash. [00:42:12] OG: You’re moving it from the market to another part of the market, right? It’s like the question when somebody rolls over their 401to an IRA, like when should I invest it? Well, frigging right now. It was invested five seconds ago when it left Empower, and now it’s at Fidelity. Why would… What, what are we doing? [00:42:27] OG: Like, get it back to where it was, you know? So yeah, you’re not saying, “Hey, I’m gonna take this money and put it in cash,” right? It’s, it’s still gonna be diversified, it’s still gonna be invested and growing longterm. Well, the [00:42:36] Joe: second you move to cash, you start playing that game of should I do it now, should I do it later, and then you back down- Well, yeah, that’s a whole different thing, I guess [00:42:42] Joe: emotional [00:42:43] OG: deal. Yeah, so don’t do that. But yeah, think about it clear-headed, create a plan, and execute the plan no matter where you are, whether you’re at the beginning of this going, “Hey, I think, I think I’m gonna have this problem if I don’t pay attention to it,” or you feel like you’re in the problem. [00:42:56] OG: Either one of these is the same thought process. [00:42:59] Joe: Coming up later in today’s show, OG and Anna are gonna be talking about insurance this week, but guess what? In two weeks they’re going to be talking about tax efficient withdrawals, and in three weeks, equity compensation. And this has a lot to do, both of those topics have a lot to do with what we covered today, so more to come on this in the OG and Anna segment, which we also are now playing on our YouTube channel- Sweet [00:43:22] Joe: as its standalone series. Yeah, so if you’re interested in the basics, go sign up for the 201, our newsletter, stackingbenjamins.com/201, and sign up for the YouTube channel so that you can see all the OG and Anna basics, and work through your financial plan. At this point in the show, though, we hand the keys to the car, this is scary, over to Doug, who’s sitting at the end of the card table. [00:43:44] Joe: I’m sure, even though I’m not there, I can imagine him there, sitting at the end of the card table ready to have What he calls the best part of the show, today’s trivia question. [00:43:55] Doug: Hey there, stackers. I’m Joe’s mom’s neighbor, Doug, and man, if someone doesn’t fix the dryer, Mom is gonna blow her top. You know how it is. She wants her spelunking outfits ready to roll. Yeah, she’s into cave exploration now, and of course, that’s when the dryer breaks. Just an unfortunate coincidence, by the way, that I happen to have a dryer stuffed with bed comforters and some auto parts when it stopped working. [00:44:23] Doug: Does Mom have dryer insurance? Asking for a friend. I’ll find out, but while I do, answer this insurance question. On today’s date back in 1980, a big old mountain blew its top off, resulting in huge amounts of devastation and, of course, insurance claims. There were more than 40,000 insurance claims and over $27 million paid out, which would have been over 100 million today. [00:44:46] Doug: But what mountain was it? I’ll be back right after I figure out if there’s a way to blame this on OG. I’m tired of him always being Joe’s mom’s favorite down here. [00:45:01] Doug: Hey there, stackers. I’m laundry lover and guy about to watch a few dryer repair videos on the YouTube machine, Joe’s mom’s neighbor, Doug. Well, good news and bad news. Because the auto parts in the dryer were from an El Camino, I think blaming this on OG is out, and Joe’s mom has no dryer insurance either, so more bad news. [00:45:21] Doug: But on the good news side of the ledger, she did say that if I get it repaired quickly, I’ll only have a week of dishwasher duty, so, you know, winning. Sadly, a mountain came tumbling down in a terrifying event on today’s date in history. What mountain blew its top in 1980? It was, of course, the Mount St. [00:45:42] Doug: Helen volcano in Washington State. While considered an act of God, the act of God clause you hear about in insurance contracts wasn’t invoked by insurance companies. And now, let’s send you back to two people who are bringing the hot magma in personal finance. No? Went on… I thought that was a pretty good one. [00:46:03] Doug: It’s OG and Anna. [00:46:07] OG: Oh, insurance, our favorite topic of all time. I know you’re listening to a financial podcast on a Monday morning going, “I really wish that we would talk more about life insurance and disability insurance and property and casualty insurance. That’s super fun.” But here’s what’s changed my mind about this topic. [00:46:23] OG: It’s, it’s really not about the products, and we’ve talked about this on the show before. It’s not what the agent sold you. It’s about answering the question of how are we going to transfer risk to a third party or what of the risk that we, exists, ’cause the risk already is there, how much of that risk do we wanna own ourselves versus transferring to a, a third party? [00:46:43] OG: So Anna’s gonna walk us through the framework today, and then we’ll go kind of deep into each one of those In the time that we have, and all this you can follow along on your guidebook. And if you don’t have the guidebook, stackingbenjamins.com/basicsguide, you get, uh, you get both of them listed, uh, in an email that gets sent to you. [00:46:58] OG: Anna, let’s go through the kind of the four buckets, if you will, and then we’ll kind of dive into each one of them. [00:47:03] Anna: Yeah, so we have the risk of death, which would be having life insurance in place. [00:47:10] opener: Yep. [00:47:10] Anna: Calculating like what do you need on that end. We have the risk of a disability, so that would be disability insurance. [00:47:17] Anna: What is the risk of you losing your income or part of your income, um, and what do we need to replace that? We also have long-term care, so if you needed to be in a facility for a long period of time, what is the risk there? What can we transfer over? And then property and casualty. So this is your auto insurance, your, uh, homeowners insurance, umbrella insurance all listed under there if, if anything were to happen with a car or with your, in your house, to yourself, to somebody else, what kind of coverage do you have in that way? [00:47:50] OG: So we know the four of them, and the, the one we didn’t talk about was health insurance and, you know, if that’s a missing gap right now, that’s probably something that you need to tackle before you get to any of this sort of stuff. But this is the framework for today. So life insurance, everybody’s got a rule of thumb. [00:48:05] OG: There’s a lot of different calculators online and, you know, 10 times my salary I get paid through work or 20 times or whatever. How do we think about these, uh, calculations and m- specifically kind of designing it to what’s going on in your life? [00:48:19] Anna: Yeah, so if you’re gonna try to calculate this yourself, which can be a little daunting, the number can come back like- Yeah [00:48:25] Anna: really high sometimes. There are some big [00:48:27] OG: numbers that get thrown around, yeah. [00:48:28] Anna: And it’s scary, but once you actually apply for it, you’re, you know, if you’re putting an application for a $4 million policy, like don’t let that scare you. You- it’s not as expensive as you think it is if your health is okay. [00:48:39] Anna: The way that we think about determining this number is, A, looking at your total debt. Your mortgage, student loans, auto loans, anything that’s considered within that liability category, that’s the first calculation. So number one. These are, [00:48:53] OG: these are the three checks that people wanna write when someone they care about dies. [00:48:57] OG: Mm-hmm. Just in our experience kind of straight across the board. So the first one is, “I want to pay off all the bills.” Mm-hmm. “I don’t want a mortgage. I don’t want student loans still hanging over my head. I want to pay the car off.” So all of your debt is kind of check number one. [00:49:10] Anna: Yep. Then we’re looking at college funding. [00:49:14] Anna: So if you have dependents, they’re under the age of 18, they’re still looking to go to college, fully funding that. You do not want your spouse having to figure out, uh, student loans or passing that off to the kids. Like, just calculate that whole thing within your life insurance. [00:49:32] OG: And that’s the second check that people want to write. [00:49:34] OG: Yes. It, almost uniformly I want to pay the house off, and I want to make sure the kids are taken care of through college. Mm-hmm. Those are the two checks straight off the way. [00:49:42] Anna: Mm-hmm. The last one is probably the biggest number here, which is your lifestyle expenses. It’s basically allowing your spouse to, let’s just say, like not work. [00:49:53] Anna: You don’t know what the situation is going to be. If they, if they’re currently working or not working, whe- whatever that looks like, you have no idea what that’s gonna be. If you lose a spouse, you haven’t, if you haven’t experienced that, you don’t know what it’s like. You don’t know how you’re gonna react, how you’re gonna grieve. [00:50:09] Anna: What we like to do is we like to plan for the ability to make that decision for you. That is creating a number where they can take withdrawals from that portfolio, which is the life insurance and any other assets that you have, and be able to live off it indefinitely. What you could do there is you take your normal expenses. [00:50:30] Anna: You can take out the liabilities of that, so your all other expenses, which we talked about calculating in the first season. Take that number, multiply that by 25, which is basically like using the inverse of the 4% rule. That is your calculation of your lifestyle expenses. So then you add up the liability, you add up your college funding, and then lifestyle expenses, and that really should be your number that you’re shooting for in terms of total coverage. [00:50:59] OG: Total coverage, yeah. So you probably get some through work, and then you just kind of subtract it out, and then you start shopping. You shop at a couple of different places, and if you find a great price, then take care of it. If you have some medical issues that maybe drive that price up a little bit, maybe you circle back to your work policy and say, “Hey, can I get a few more Xs on my salary?” [00:51:20] OG: ‘Cause that’s usually how they price it, you know, or they think about it. Yeah. But you just kind of back into the calculation then. [00:51:25] Anna: Yeah. Another little tip with that when applying is just, like not every insurance company is gonna determine, like one health issue the same. So if you have one health issue and a company is gonna basically not offer you or give you a really bad rating, you can always look at a different company. [00:51:45] Anna: They might look at that health issue completely differently. [00:51:47] OG: Yeah, having a broker here helps a lot too- Mm-hmm … ’cause you can, you can say, like, like let’s say for example you smoke cigars. Are you a smoker or are you not a smoker? [00:51:55] Anna: Yep, and one company might say yes, and one might say no. Right. [00:51:59] OG: All right, so moving on to disability insurance. [00:52:02] OG: I got my disability policy through work. I’m great. Eh. Tell us how you really feel. [00:52:11] Anna: You gotta, you gotta dig into this a little bit more. Yeah. So awesome if you have a disability in- policy through work. Disability can be a little bit more pricey, so we definitely wanna try to utilize any sort of disability through your employer. [00:52:23] Anna: But you wanna look at what that coverage is actually covering. So is it covering just your base salary, not including bonus, not including equity compensation, anything like that? Which typically they don’t. Typically disability policy, if they’re saying, “Hey, you get 50 or 60%,” which is normal- Mm-hmm … it’s gonna cover your base. [00:52:43] Anna: So if you have half of your income coming from RSUs or stock options or a bonus every year, then you have a pretty big gap in terms of what disability coverage you’re getting on your total take-home income. [00:52:58] OG: So the fix for this, kind of the same thing. You just kind of read through the policy, find out what it’s covering, do the calculation, figure out what the gap is, and then just go buy an individual policy. [00:53:09] OG: Pretty simple? [00:53:10] Anna: Yeah. Another really quick tip on this too is make sure that you are paying taxes on the premiums if your employer is paying for your disability policy- Mm … so that if you ever need to get the benefit on it, it’s gonna be tax-free to you. [00:53:24] OG: Yeah, if you have the option for that. Sometimes, sometimes you don’t have the option, but- [00:53:28] Anna: Yeah [00:53:28] OG: it’s a nice little benefit if you can kind of toggle that switch over. And yeah, you mentioned the, y- y- you kind of casually mentioned disability insurance is expensive, but the probability of using disability insurance is much higher than, than other types of insurance. And if you just think about, like, how insurance works, it’s just order of magnitude of it happening or if it happens times the probability of it happening. [00:53:52] OG: And so- Mm-hmm … absent a, a health issue or something like that, and you say, “Well, why is my disability insurance three times more than my house insurance?” That’s, you know, my house is you know, I got this $800,000 house, and, like, my house insurance is 2,500 bucks a year. Why is my disability policy 5,000 a year? [00:54:12] OG: Well, that ought to tell you something about either the likelihood of something happening to one or either of those things or the magnitude of the cost if you- Mm-hmm … if you had to do it. Yeah. And then just rounding out the last two really quickly, long-term care insurance. This is gonna be much more for a subset of people. [00:54:27] OG: We start thinking about it in our practice 50-ish, 55-ish, 60-ish. And it’s a catch-22. The earlier you start, the lower the premiums, but the longer you’re gonna pay it generally. The later you start, the higher the premiums, but the shorter that you’re gonna pay it, and then you run the risk of being uninsurable ’cause you have an issue or something like that. [00:54:47] OG: But again, this is about risk transfer and the likelihood of one or both of you, if you’re in a relationship, needing some level of assisted care later in life. And certainly if you have $25 million in the bank, you probably don’t need to think about this risk ’cause, you know, you’ve got the cash. If you’ve got 25,000 in the bank, you probably also don’t need to think about this risk because you don’t have enough money to pay the premiums. [00:55:10] OG: It’s just a lot, you know. You got Medicaid [00:55:11] Anna: at that point. You’re gonna [00:55:12] OG: have that. So this is something if you’re in that kind of 55 to, or let’s say 50 till early retirement segment, I think it’s part of your retirement planning. And property casualty insurance, also not super, you know, fun to talk about, is, you kind of really only people look at this stuff when their renewals come up. [00:55:30] OG: I know I just got my homeowner’s insurance r- renewal, and that’s when I paid attention to it. [00:55:35] opener: Mm-hmm. [00:55:36] Anna: Yeah, and I think the big thing with, the big gap typically with property and casualty is you have a homeowner’s insurance, you typically have a auto insurance. You’re not, that’s not an issue. It’s similar to health insurance. [00:55:46] Anna: Usually everyone has it. The issue is the umbrella policy, and, and most people don’t have this. It’s typically good to go through the same people that you’re doing your auto insurance and your homeowner’s insurance. They might give you a discount on that. And at least covering your, your total net worth right now plus a little bit more- Yeah [00:56:04] Anna: is, is the ideal for an umbrella policy. Again, they’re not very expensive, so just add it on to the, the bundle. [00:56:10] OG: Yeah. And to save money, very quickly, a couple of areas to save some cash. Deductibles, so if you’re still running $250 collision deductibles on your, on your car, but you’ve got $100,000 emergency fund, you can probably bump that collision deductible up to 1,000, 2,500 or something- Mm-hmm [00:56:27] OG: and save a profound amount of savings there on collision or comprehensive deductible. Same thing on your house, by the way. Again, if you’re running a pretty good, uh, emergency fund, that’s what this is for, you can lower your, or I’m sorry, increase your deductible on your home. And then any policies that you have outstanding that may be just kind of lingering. [00:56:44] OG: The policies that Mom and Dad got you for the Gerber baby life, whole life policy, that, uh, there’s a whole generation of us that had those. That’s probably not your generation, Anna, but in, in ours it was. [00:56:55] Anna: I did get them in the mail when I had my daughter, though. [00:56:57] OG: Oh, okay. They still market. Good. Uh-huh. So those. [00:56:59] OG: You’ve got the policy that your buddy sold you when you graduated college ’cause he started a new career as, you know, a financial planner, you know, which was code for sell insurance to your buddies. So you know, those things are laying around. Just an audit will help kind of consolidate all those, uh, all those things and, and give you, give you some cash flow back to maybe redeploy either to other savings goals or to more efficient use of it. [00:57:26] OG: So the goal isn’t to have more insurance, right? The goal is to have the right insurance, and sitting down and covering and thinking about, “Here are the risks that I have, here’s how I’m gonna cover them,” i, is a more strategic way of thinking through life insurance. Or more strategic way to think through all of your insurance. [00:57:44] OG: Love it. Season two guidebook is here. We’re on episode two. We’ve got three, four, five, six, seven, and eight coming. Uh, next week I think we’re gonna do, uh, estate planning and a little dovetail- Mm-hmm … into insurance, so we can talk a little bit about all those tax savings you get by having all those trusts. [00:58:01] OG: Been seeing a lot of Instagram reels recently about rich people have trusts to save taxes. Uh, let’s unpack that a little bit next time. If you don’t have the guidebook, stackingbenjamins.com/basicsguide will get you an email and, uh, and you get both of the guidebooks there. All right. Joe, [00:58:18] bumper: back to you in the studio. [00:58:21] bumper: Hi, I’m David Hirsch, and when I’m not hosting the Dad to Dad podcast for the Special Fathers Network, which is a dad-to-dad mentoring program for fathers raising kids with special needs, I’m stacking benjamins. [00:58:32] Joe: Nice job, OG, and thanks to Anna for stopping by. Let’s mosey out on the back porch, Doug, because some of our stackers have been doing some really cool stuff. [00:58:43] Doug: Yeah, you know, Gertrude frequently asks, uh, members of our basement what’s been going on in their lives, what successes are they proud of, anything that happened that they’re, they’re happy about, and we got a couple of great responses. A couple I wanted to point out or highlight was that Stacker Joan passed the final CFP exam. [00:59:04] Doug: That’s pretty exciting. Awesome. Beyond [00:59:05] OG: exciting. That’s pretty awesome. [00:59:06] Joe: Yeah, that is not an easy exam, OG. Hard work. Yeah. [00:59:10] Doug: I mean, this next one is very impressive, but I’m kind of scratching my head on how they pulled it off. Stacker Molly claims, alleges, that they paid for an expensive car repair, very expensive car repair, with HSA money, and I [00:59:27] Doug: Wait, what? They, they didn’t explain how that happened, but they put that out there. So now I gotta know more, ’cause this is intriguing. Th- that is that is, uh, a very interesting- There was a window in the car that wouldn’t go up, and it was very expensive, and somehow they figured out how to use HSA money to get that fixed, so. [00:59:46] Doug: So I hurt my arm trying to put the window up? Exactly, right. I don’t know. Maybe it was something like that. So Molly, uh, please give us updates on that, and, uh, let us know how you figured that out. Is it [00:59:56] OG: maybe that there were some, like, pre-piled-up expenses, and basically it was like, “I could reimburse myself from my HSA,” and so I did that, and used that money to- Fix the car? [01:00:11] OG: Maybe that’s it I don’t know, [01:00:11] Doug: man. We did not get those key details from Stacker Molly, but I thought- Okay … that was worth, uh, sharing with the group. Maybe our, uh, hive mind can share how that’s done. [01:00:24] Joe: If there’s a way you can do that legally, our Stackers will know. They, they will know, “Here’s how you do that.” [01:00:30] Joe: Oh. [01:00:31] Doug: I was gonna say, I hope we didn’t out Molly, but she outed herself- … putting that out there in the basement if, if this might be, uh, in the gray area, let’s say. Doug, [01:00:40] OG: you know, there is some chance, there are some ways that you can use an HSA. I’m not calling Molly a criminal, nor you a liar, but can you double-check? [01:00:51] OG: Like, did she leave any other clues in her post that maybe we can get everybody out of jail? [01:00:56] Doug: All right. You know, I’m just gonna read you the post, and we’ll see. I don’t know, uh- [01:01:00] OG: Yeah, just read it out … I mean, maybe [01:01:01] Doug: you can suss this out better than I can. She says- I can suss [01:01:04] OG: the vibe … [01:01:05] Doug: she says, “We were able to pay for an extremely expensive out-of-nowhere car repair with money in our emergency H Y S A fund. [01:01:13] Doug: Thankfully, this wasn’t exactly an emergency.” Okay . “Uh, but having a car window stuck in the open position is a problem. We did the fix knowing we could pay in cash-” Okay. All right. All right. “… after we got those-” We, we [01:01:23] OG: don’t have to read the rest of it. I think we’ve narrowed down how she used the H Y S A. [01:01:28] OG: It’s, um- [01:01:29] Joe: Which is, which is OG short for Health and YOLO Savings Account. [01:01:33] OG: Yes. Yeah. Right? Indeed. [01:01:35] Doug: I mean, everybody knows that. Joe. But thanks for spelling it out, Joe, and making it obvious. Yes. [01:01:39] OG: Um, so it sounds like Molly used her emergency fund and not her, uh, medical fund. Maybe, maybe she used her high yield savings account. [01:01:47] OG: Her high yield, huh. Is that maybe the thing that was used and not the health savings account? I mean, I guess that’s one way to read it. Yeah. It’s the way to read it, actually. Thank goodness there’s two different ways to read H Y S A . I mean, tomato, tomato. Okay, Molly, great news. You’re not going to jail. Um- Better news, Doug learned today that a Y changes the meaning of HSA. [01:02:09] Joe: I’ve got, uh, just one more quick thing. I, I recently had the opportunity to be the emcee of the Plutus Awards, and, uh, we actually won. It’s, it’s kind of awkward when you are the emcee and then no one won. And the [01:02:25] opener: winner is me. Me. [01:02:28] Joe: Again. Luckily, I was the emcee, I was not the presenter, so I would introduce the presenter. [01:02:32] Joe: There’s this weird where you- Were there any shouts [01:02:33] Doug: from the audience? “Fixed. [01:02:37] OG: It’s fixed” The presenter, like, literally you’re like, “And now presenting for the best podcast in all time-” “… Neighbor Doug.” Neighbor, Neighbor Doug’s like, “Okay, and the winner is us. Hey, great job.” [01:02:56] Joe: The great news is I was counting of the Plutus winners, the number that have been on our show, uh, 65% of these people have been on the Stacking Benjamins show that won Plutuses, so. [01:03:08] OG: Okay. Not saying that we are the cause of their Plutus award-winning, but, um- We [01:03:13] Joe: can neither confirm nor deny that we were the cause. However, I do think there’s a high degree of correlation, which may be causation, maybe. In this case, probably causation. But congratulations to, uh, a lot of our friends. [01:03:26] Joe: Congratulations [01:03:26] OG: to you, Joe. Good job, buddy. And to me. And to you. Mostly to you. For winning- The Plutus awards … again. [01:03:34] Joe: All right. Time to, uh, say goodbye, though. Thanks to you for hanging out with us. If you know somebody who has concentrated stock positions, this is the episode for them, so please share it with them. [01:03:46] Joe: And also make sure that you share with them what really the big takeaways are, because we end every episode with Doug telling us what are the three big things that should be on our to-do list now. [01:03:57] Doug: Well, Joe, first, take some advice from our headline. Create a plan to diversify away from big positions in one stock. [01:04:04] Doug: Just because you work at a place or inherit concentrated stock doesn’t mean you need to go on the emotional rollercoaster of betting your future on that company. Second, insurance planning. If you start with a broader focus on risk management, you’ll be on the right track. But the big lesson, don’t ask Joe’s mom about Mount St. [01:04:25] Doug: Helens trivia, or you’ll feel the ground rumble when she starts to rant about how she’s a saint for having to deal with people in her basement podcasting all day. This show is the property of SP Podcasts LLC, copyright 2026, and is created by Joe Saul-Sehy. You’ll find out about our awesome team at stackingbenjamins.com, along with the show notes and how you can find us on YouTube and all the usual social media spots. [01:04:53] Doug: Come say hello. And oh yeah, before I go, not only should you not take advice from these nerds, don’t take advice from people you don’t know. This show is for entertainment purposes only. Before making any financial decisions, speak with a real financial advisor. I’m Joe’s mom’s neighbor, Doug, and we’ll see you next time back here at the Stacking Benjamins show. [01:05:26] Joe: And the people who are all trying to stack Benjamins, thank you very much for all you do. [01:05:32] Doug: Thanks, everybody. You know, I always raise my mug for that, like it’s going on video and I’m gonna be out on the internet actually raising my mug. And we never are gonna do a short of that. We never do it. [01:05:43] Joe: And [01:05:44] Doug: I always like hold it up so everybody can see it. [01:05:46] Doug: Oh, look what’s written on it
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