Do you have assets in a previous employer’s retirement plan? Would it be easier to consolidate all your retirement assets into one place? Today we’re all about rollovers: what they are, how they work, and why you should care. We welcome Dana Anspach, CFP, the force behind Sensible Money, a financial planning service focused on clients who are nearing/in retirement, to help make sense of what rollovers are and if it makes sense to do one. Joining Dana is, Paula Pant, who has more knowledge about rollovers than pop culture, as well as our in-house CFP, OG.
Dana also shares some of her experiences about rollover horror stories – and what steps you can take to avoid mistakes – and the potential tax consequences that may ensue. Paula chimes in with her experiences and thoughts on the rollover process, and OG imparts his wisdom on what scenarios may make for a more difficult rollover process.
Doug brings the heat with some fast-paced this-day-in-history travel-themed trivia.
Deeper dives with curated links, topics, and discussions are in our newsletter, The 201, available at https://www.StackingBenjamins.com/201
Our Discussion Topic: What to do with assets left in old employer-sponsored plans – the pros/cons of rolling over to an IRA, the mechanics of pulling it off, and what questions you should ask before pulling the trigger!
4 tips for rolling over all of your client’s old 401(k)s (FinancialPlanning)
During our conversation you’ll hear us mention:
- Net Unrealized Appreciation (NUA): a tax strategy unique to some employer-sponsored retirement plans.
- Income ladder strategies: creating an income stream using a series of CDs, bonds, etc.
- How to insure a smooth rollover.
- Smart asset allocation of retirement assets.
- Importance of maintaining your beneficiaries current.
- Buc-ee’s gas station/convenience store chain.
Watch this episode on our YouTube channel:
A big thanks to our contributors! You can check out more links for our guests below.
Another thanks to Dana Anspach for joining our contributors this week! Learn more about Dana and how she can help you on your money journey by visiting her website, Sensible Money.
Grab your copy of Dana’s book, Control Your Retirement Destiny: Achieving Financial Security Before The Big Transition, and learn what financial moves to make in the critical years leading up to retirement.
Check out Paula’s site and amazing podcast: AffordAnything.com
Doug’s Game Show Trivia
- How long did it take pilots Wiley Post and Harold Catty to become the first people to circumnavigate the earth in a single-engine monoplane back in 1931?
Thanks to DepositAccounts.com for sponsoring Stacking Benjamins. DepositsAccounts.com is the #1 place to go when you’re looking to see if your rate is the BEST rate on savings, CDs, money markets, and even checking accounts! Check out ALL of the rates ranked from best to worst (and see the national averages) at DepositAccounts.com.
Mentioned in today’s show
- Dana will be speaking at the 2023 Bogleheads Conference. Learn about the conference and register to attend at BogleCenter.net.
- Unclaimed Money. Find out if you have unclaimed money and how to get your hands on it by visiting this US Government website to find out if you have any, and how to claim it.
Miss our last show? Check it out here: From Orphan to Fintech Award Winner: How to Find Mentors, Build a Future, and Help Others Grow.
Written by: Kevin Bailey
Ignition sequence start 6, 5, 4, 3, 2, 1, 0. All engine running. Lift off.
Live from Joe’s mom’s basement. It’s the Stacking Benjamin
Joe’s mom’s neighbor, Doug. And buckle your seat belts because we are rolling 401ks with the pros. How does a rollover work? Why would you do one? Why wouldn’t you? Either way. How should you invest the money to help you know when to roll and when to hold? We welcome the woman behind sensible money, C F P Dana OnSpot, and the woman who’s way more comfortable with rollovers than she is with pop culture.
Afford anything’s Paula Pant and rounding out our panel. It’s our resident 401K expert and C F P og. But that’s not all. Halfway through the show, you’ll hear our contributors try to outwit each other as they take on my traversing trivia question. And now a guy who’s never met a rollover conversation he didn’t like, it’s Joe.
Oh, saw. See? Hi.
Hey Doug. You
know what I was thinking about that rollover conversation. I think you’re right. Turnover conversations like the cherry turnover where the cherries are all like tart and sweet and it’s just that, but an apple turnover is
a good one. Apple turnovers a fine dessert item. Fantastic. But unfortunately we’re not big fan of that.
That’s what you talk about at the bar.
That’s, that is bar night with Joe. It’s incredibly exciting. Absolutely. Hey everybody, welcome to, uh, let’s turn this into a food podcast instead of money. I am Joe Sci. I average Joe Money on Twitter and. We have, as you heard, Doug so eloquently, say an all-star lineup.
And let’s start with a guy across the card table from me. Mr. OG is here. How are you today, my friend?
It’s another fryer, so let’s do
it. It is, what a great way to go into the weekend thinking about maybe getting that 401K money in the right place and from Manhattan. The woman who, when she’s not on a Netflix special, she’s here with us.
Paula Pant is here. How are
you? I am great, but you know, I have a question. Is an an apple turnover or a cherry turnover, any of those dessert turnovers, is that the same thing as like a personal pie? Like kind of like what they used to sell at McDonald’s, like the, you know, you know what I’m talking about?
Is that what that is?
No. I may or may not have eaten at a McDonald’s at the airport this morning, and they, Ashley asked me, Paul, if I wanted to add an apple pie with that. Oh. If I wanted to like add on. So, so apparently they still have one, but that’s not a turnover. What is
a turnover then? Come on. I, no, seriously.
What is a turnover?
It’s like a hot pocket with fruit. That’s right.
I don’t, it’s a hot pocket with
fruit. It’s turned over. So like the crust and the fruit is on the opposite sides of where it normally would be. Okay, so you got crust on top and the fruit on bottom.
Fruit on the bottom. What holds the fruit?
pan. Huh? We’ll draw a diagram a little further. Paula, we might have some other stuff we we need to talk about. I didn’t think when we talked pop culture that would include that she doesn’t even understand what a turnover is. And the one who you can tell she describes all this stuff for a living because a hot pocket with fruit in it, I think is a great way to go.
She’s walking her way through our podcast with people that aren’t on YouTube with us. Dana Obox here. How are you? Well,
I’m doing great. It’s day one on my under the desk treadmill. So here I am at 0.6 miles per hour to talk about rollovers.
I thought that you’re, it looks like you’re walking into the camera like any second.
You’re gonna get like right up on top of it. That’s right.
Yeah. I think you should speed it up a little bit. Get a little bit more, you know, let’s see,
what if I, you know, let’s see if I go 1.4, it’s really not, oh, she’s
Right? Settle down. But
then I’ve realized already at, at over one mile an hour, if you’re talking, you actually, and not get out of breath, but you start to feel it.
So to have a conversation, you have to be a little bit slower.
Doug feels that way. Every time you just walks to the refrigerator, it’s like exhausted. Gotta sit down and take, take a breather, take
a breath at the stairs.
Yeah. Hey Dana, let’s talk about you right now, because I saw that you’re gonna be joining, uh, the BOGLEHEADS Conference here soon.
I am in October in DC and super excited about it.
What are you gonna be speaking at the bogleheads about? Really
about retirement portfolio. So I still have to work through the presentation, but that’s the general
topic. But it’ll be some of the stuff maybe that we’re talking about today, huh? Could be, could be.
Well, we’ve got, uh, Dana here. We’re so happy she’s here. We got Paula, we got og. You know what, Dana, there’s something that we should probably talk about before we get into rollovers. Do you have a second? Sure. Okay. We should probably talk about this. So that’s the diagram, Paula, right there. Huh?
It doesn’t, it still doesn’t make sense.
I’m still not sure about this turnover
thing. All right, we’ll do another commercial and, and I think you’ll have it down. Got it now. Hi.
I have to admit, I’m
still a little confused. It doesn’t matter if you got it now. No,
it does not matter. Yeah, I gotta jump in and I gotta fall on a sword and admit something.
I rarely do. I was wrong. What? Dana was right on a turnover. It’s a hot pocket with fruit in it. It’s like a triangle and there’s like, it’s like a light puff pastry. You might have even said that, Dana. So those sponsor spots, as good as they were and there were some really good sponsor spots, they were never gonna clear up the turnover.
Dilemma that we
had, that basically Doug just eats dessert upside down.
Doesn’t that mean then that my,
well, that’s what my grandma was gone, my
original guess then would’ve been Correct. Like the, the McDonald’s, the personal pie thing. Right. That’s, that’s basically the shape of a turnover then, right? Well,
you Paula. I, oh boy. I just, I just looked ’em up and they’re like, these tri, they’re triangles, they’re triangle. The ones that all came up on my, on my Google device. Were all triangles. Who has a triangle sheet? You can not
exactly. But everybody listening right now is like it said. They’re talking 401K rollovers on the title of the podcast.
Can we, can we do we over 401K
conversation? The s I thought it was 401k turnover. Ah,
that’s good. So why don’t we get moving on that,
Dana, you know why the retirement account wanted to go budget jumping. Why? Because it wanted to experience a real 401K rollover.
no, no, no, no. Okay, fine. Dana, let’s start with you then. Let’s define this. What does it mean to roll over your 401k? For people that made it this far, and they’re like, I didn’t even know what this is.
Tell us what a 401K rollover is.
Yeah, it means you can transfer assets in a company, usually company sponsored 401k plan directly to an ira. If you do it correctly, then you don’t have to pay the taxes. So we have people all the time saying, no, I can’t take money outta my 401K at all. I’ll have to pay the income taxes or a penalty tax.
And we’re like, no. If you do a rollover, then it is a tax-free transfer and now your money stay tax deferred within that IRA account.
But why might you wanna do that? Paula, let’s start there. Why might I want to do a 401K rollover to somewhere
else? So let’s say that you leave your job, maybe you quit, maybe you got fired cuz they realized you’re kind of an IOL for whatever reason.
Cause you didn’t know that it was a hot pocket, right? With fruit in it, offense taken, right? You
lose your job at the turnover company and you don’t want to have your 401K funds tied up in this account that’s, um, affiliated with your former employer, especially. Particularly millennials, gen Z tend to have many employers over the span of their lives.
So if you’ve got, you know, over the span of a career, 6, 7, 8 employers, cuz you keep getting fired from the turnover factory, then you’re just gonna have 401ks scattered with all kinds of former employers. You want to centralize your retirement funds into one account that you manage that isn’t tied to a particular employer.
And ideally the, because you get to pick your IRA custodian that has the type of fund selection that you
like. We’ll get into what that phrase is, IRA custodian, what that means. Mm-hmm. But og, you know, you hear these people that are often asset gatherer, financial pros telling you, Hey, that money sitting in that old 401k, you should roll that to an ira.
You should roll that to an ira. Is that oversold or is roll it to the ira? Really the best thing to do. Well, that’s kind of a
loaded question. I’ll also add that the term rollover is a term we use kind of colloquially between everybody, you know, as we’re talking about this. But, but in reality, the IRS of course means a completely different thing when they say the word rollover, what we’re talking about, if you really wanna get in the weeds is a trustee to trustee transfer.
Right? That’s what we’re saying is you can move it from one trustee to another. Mm-hmm. And then you don’t have a penalty. You can do a rollover, which is, uh, actually a step in between that. A rollover is you get the money first and then you put it back sometime later. Within that 60 day window, you’re gonna be responsible for all the taxes that they withhold to do that though.
So, you know, this is a real kind of in the weeds thing. When we say rollover, we probably mean trustee to trustee transfer. But when it comes to trying to decide whether or not it makes sense, there’s a lot of factors that go into that. The cost structure. Paula mentioned the investment choices or the custodian.
If you’ve got. Uh, company stock in your plan. So you’re holding company stock within that plan would be a big decision point. Uh, depending on how long you’ve worked there, um, whether or not you plan on going back. There would be another reason, you know, liquidity when you might need the money cuz there’s some favorable withdrawal programs for money that’s in a 401k that’s not the same as an ira.
So those are all things you gotta be considered of.
Let’s talk about that a little bit, Dana. What are some reasons when you’re working with people as they get close to retirement, that you might tell ’em to leave their money alone, keep it in that same 401k?
Yeah. Some of the same things OG said. Just diving a little deeper, you know?
Yeah. If you are under age 59 and a half, but leave your company in the year you reach age 55. If you leave your money in that 401K plan, you have access to the funds without paying the penalty tax, you’d still have to pay income taxes on a withdrawal. But sometimes we have clients that are in that four year window, and so we’ll say for liquidity provisions, if you’re gonna need the money or might need the money in these next four and a half years, let’s leave the money in the plan.
That way we can take a withdrawal, no penalty tax. Another would be in specifically to the investment option. Sometimes we come across a unique option called a stable value fund or a fixed income, uh, contract that’s within the 401K plan. Now, particularly when interest rates were zero outside the plan, we would say, okay, you know, we can earn more on this stable value fund by leaving it in your 401K plan.
You know, very low risk option. That may have changed. I haven’t come across that in the last year, but that analysis would have to be looked at afresh with, with interest rates being higher. Now,
do you agree, Dana, with what Paula mentioned earlier, that maybe having it though in an IRA just largely that’s kind of the place to start, maybe Paula, I inferred that you said that.
Mm-hmm. That because it sounded like you really liked the idea of ira, all your assets in one place. Dana, you like that better for that reason as well?
I like it just for the fact that people lose track of old 401ks. They forget to update their address, they forget to update their beneficiaries. The 401k plan can go through and find a new 401K provider and it goes through a blackout period.
You know, there’s all kinds of things that can happen and people move and, and years later they don’t even remember they had money in this old plan. And so, yeah, I agree. In general, I think it makes sense to consolidate and then you have to look for the particular situations where it doesn’t make sense.
Well, let’s go to the other one of those then. You mentioned these stable value funds that were still paying five and 6% when money was paying. Paying nothing. Oh gee. The other one that you mentioned though is if people have company stock in their plan, talk about why you might wanna leave that alone, or at the very least not roll it to an ira.
Well, there’s a couple of things that can happen with company stock. In your 401K plan, you have a unique opportunity to have that taxed differently. And there’s lots of rules around it, and, and it’s a very specialized calculation and depends on how long you’ve been there and that sort of stuff. Suffice it to say if you have company stock in your 401K plan, like for example, your company has a company stock fund within the plan as one of the choices and you’ve just been investing in your, in your, you know, normal weekly investing or normal, uh, paycheck investing into some amount of that company stock, uh, you have a unique opportunity or potentially have a unique opportunity to take that money out and pay a different tax rate, a capital gains tax rate on those dollars as opposed to an ordinary income tax rate.
But there’s a lot of rules around it and here are the highlights of it. If you have company stock, make sure you are aware of, of your options and you can’t deal with this in the last quarter of the year. So as you get toward October, November and you’re thinking, Hey, I just let my job, I’ve got company stock, I remember those knuckleheads on Stacking Benjamins talking about this, I’m gonna try to tackle this Thanksgiving week.
No chance. It’s too involved and you have an opportunity to screw it up because there’s something that has to be done before December 31, or all bets are off. So this is best used to, to think about at the beginning of the year, if you wanna look it up. It’s called N U A net Unrealized appreciation.
Let’s talk for a second because you, you mentioned the tax benefits there and talked about capital gains tax versus ordinary income tax, and I think, oh gee, a lot of times people don’t understand what a huge difference this can be sometime.
Can you talk about the difference potentially in those tax rates?
Well, it could be, right? I mean, capital gains rates are as low as zero, depending on what your income is, right? So you could be taxed at $0 for the gain portion of that. Of that stock, but probably 15, maybe 20 or maybe 23. But then we just kind of, kind of compare that against what your current tax rate is and whether or not you can afford to write the check.
Because the gov, you know, there’s always a gimme, a gotcha to everything. The, the IRS is not really big fans of going, here’s all this great stuff. They like to go, here’s this and we’re gonna smash you on the hammer with that, or smash you on the head with the hammer on this one. So you have to be able to, to evaluate the whole thing.
But ultimately it just comes down to whether or not Are you saying
Go ahead. Sorry. Are you saying if you do end the, the net unrealized appreciation, then you have to be able to write the check that year for whatever the tax would be? Is that what you’re
saying? Yeah, there’s gonna be some taxes due. I mean, now, now you could take, you know, you could sell some stock to pay it or something, you know, but there’s gonna be some, some tax amount due and it could be a little bit, it doesn’t necessarily always have to be a lot, but it’s something that you’re gonna want to, uh, want to know what you’re getting yourself into.
Paula thinking about this idea of moving it over, you mentioned, uh, IRA custodian. Mm-hmm. That may be a new term for people. So when you’re comparing the different custodians out there, what the hell are you talking about? Sure. A custodian
is just a fancy way of saying the business, the entity, the company that holds your ira.
So think of it this way, imagine that you’re at a bar, you’re drinking, right? There are all kinds of different glasses available. There’s a martini glass, there’s a pint glass, there’s a um, uh, shot glass, right? Each of those glasses are different vessels. And each vessel is designed for a different type of liquid inside of it.
Now, that doesn’t mean that you necessarily have to have a particular, you know, you can, you could have a martini glass and fill it with beer if you wanted to. I mean, most people don’t, but you know, you’re free to do so. But there are just certain vessels that are kind of better for certain purposes, and that’s what you’re shopping for when you’re looking for an IRA custodian.
I’ve, I’ve, I’ve
described this as which kinda shock class do I need? Exactly.
That was awesome. I can see,
see couple shot class as the kind I need. I need a double.
I can see a bunch of people after this go to their advisor and go and, yeah. Yeah. So what shot class we get with this? I heard I get a shot glass, like I roll it over.
Like I go to, you know, I used to collect those glasses at Hard Rock Cafe, right? Like I heard, I get a glass with this. What’s, what, what, what glass do you guys offer? Yeah, but I do like that because, so I think that Paula, what you’re saying is different custodians might be better at different
Exactly. Exactly. A martini glass is better for vodka. A pint glass is better for beer.
It’s put in only a way. I think that you could put it right there. Uh, try
reversing that. I was gonna say, I could argue that a pint glass is great for vodka. Great
for vodka. So good for vodka.
Depends on how bad the recording session went that day.
That’s exactly, exactly. Uh, right there when we think about this, Dana, if I’ve got this new job, Is it automatic then that I don’t roll it to my new job? Nobody’s mentioned yet, Dana, rolling the money cuz the IRS will also let you roll it to your new job. Why are you saying roll it to an IRA versus roll it to the new job?
Well, that’s a great question, Joe. You know, typically I’m working with people who are retiring and so they don’t have a new job. They’re going to, that’s it. They’re done. And so that’s, well, let’s say that they
got, let’s say they got fired from one turnover factory and they’re going to work at the, at Paula’s new vodka factory.
Yep. You know, in that case, I do think it could make sense to look at what does their new 401K plan offer, what are the investment choices, what are the fees? But depending on how close you are to retirement, if you wanna use what we call an income ladder strategy, like laddered bonds or laddered CDs, those are investments you can’t have within a four ohk plan.
So that’s a consideration. Like Paula said, depending on. What liquid you’re gonna put in that, that glass, right? That would depend like do I want all of that in my new 401K plan? What kind of options do they have? Or do I want a different selection of options that maybe they don’t offer?
Well, and this is why OG assuming, cuz I’m seeing you nod your head as Dana’s talking, it assumes then you start, you don’t start here, then you start with the plan first.
Right? I mean, we don’t start with the different, the different options inside. I didn’t know how to do the analogy anymore. The different options inside the class. It has
to do with vodka. That’s all I know.
You’re talking about a mixed drink, right? A cocktail, a
mixed drink. Yeah. But doesn’t it start off with what am I in the mood for?
Isn’t that what it starts off with? Yes.
I had a CD dive bar in the back alleys of town. Or am I one of those upscale
places? Dana was talking about like laddered CDs. You’re saying in a CD dive bar. Like where they
give you CDs? No cd, no dive bar. Got it. Got it. A CD bar. Oh, something different. Yes. CD bar. I don’t know.
What’s the question? I’m completely lost. Well,
I think that if I’m exploring this, my point was I think that it goes back to something you and I have talked about a lot where we don’t even start with any of this stuff. We really start with where am I going?
Yeah. Yeah, I think there’s really a lot to be said for simplicity.
Um, I think there’s a lot to be said for organization, and I know it seems really silly, especially if you’re talking to somebody that’s on their second job change or something. You go, listen, you wanna put this in one place because you want a repository to collect these things because you know you’re gonna lose track of ’em.
And people. Now, I would never lose track of it. I know, Dana, this has happened to you. Cuz it happens to everybody I talk to where all of a sudden somebody, a client gets an email or a client gets a letter more likely from a job that says, Hey, by the way, we’d really like to start your $360 a month check.
And they’re like, for what? What does this mean? And, and, and you go, well, it says General Mills. Did you ever work at General Mills? Oh God, yeah. Way back, like in 78 to 83 when I was in college. There you go. There’s an example of, we just forgot about this money that existed. Now in that case, you know, or in some cases it’s like a pension or something like that.
But nevertheless, it’s hard to keep track of all those things if you go through all these different job changes and even career changes over your, over your lifetime. So having one place where you can kind of collect all those things, I think is gonna be a lot, uh, a lot more helpful.
You see that often a lot.
Dana Gardens that need to be weeded.
I see it occasionally. Wouldn’t say often, but certainly I’ve been practicing since 1995. You know, every couple years we find someone who has what I call missing money. Like money they didn’t know they had, they get something in the mail. There’s actually some great websites.
I don’t know if you can reference it in the show notes, or if anyone knows them off the top of their head, like unclaimed funds websites now where you can go put in your name. Um, the first time I heard of one, I thought, well, if anyone’s missing money, it’s my mother. And so we found her some money, so it was great.
How much was it? They’re pretty cool. Do you remember how much it was? Oh, it was a couple hundred bucks, I think, and I found some for myself. So when I graduated from college at University of Florida, I moved to Colorado and I had a refund from my renters or auto insurance, I don’t remember which, didn’t know they mailed it to the address, but I had moved.
And so, you know, 10 years later I’m like, oh, I have about 250 bucks sitting there.
I, I, I have a funny story about that. When we had our office in Michigan, we changed suites a couple of times where, you know, suite 1 0 2 and then two 10 and whatever, bounced around on a whim. My brother called me and said, I think you have some money from when you were in Northville.
And I said, I, no, I don’t think so. I mean, I knew the landlord and all that sort of stuff. And he said, no, I think it’s, I think it’s a, like a commission check or something. So I called the state and they said, well, you have to prove that it’s you, you’ll send us verification of your address. And I said, well, I, I don’t live there anymore.
You know, and it was something relatively insignificant, a hundred dollars or something like that. But it was, you know, it was fun to send an email. And they said, well, if you don’t, if you can’t prove that, that’s you. And I said, I can, here’s my name and here’s my social. And that’s probably referenced on the check somewhere.
And here might be an account number or a ID number of some kind. They’re like, yeah, we really need proof of, proof of a address. I said, how do I prove and address that I’m not at anymore? They’re like, yeah, we can’t help you with that. Wow. Oh my really? Sometimes it works, but the, the state of Michigan said, no, you don’t get to have your un unclaimed property.
But I have seen it happen a number of times. Dana, like you said, with family members or something, the unclaimed property websites. Right. Any states that you’ve lived in or worked in, you absolutely have to Google unclaimed property for that state and, and, and put in your name and see what you put every put, put in everybody’s name that you know.
You never know who’s your, who you gonna find. I found money from my aunt, you know, like from the sixties. It was crazy. It was fun. Like a treasure hunt. Speaking
of OG dumb times when they can’t quite match up a place where you used to live. How about not being able to match up your name? This is, uh, comedian nap Azi
checking a bag,
and the guy by the counter, he sees my ticket, says, Nathan, the license says Nathaniel.
And he was like,
this is not good. He goes, these
names don’t match. And I was like, but
they match, right? Like you can see the leap
that we took to get from one to the other. And he was like, but they’re not the same. I was like, but they’re the same. And. We took a leap from Nathan to Nathaniel, like it’s you.
You can see the leap. I know my ticket says Nathan and my driver’s license says Nathaniel. The guy’s like, I don’t
think so. And then he, and he goes on to say something like, you know, the thing that I really thought was great was when they put the picture right on the license. So with a hundred percent match on the face and like 60% match on the name, that’s 160%.
We’re pretty much there. That’s,
I love his math.
It’s fantastic. He’s so good. Coming up in the second half of this discussion we’re gonna talk about, now you’ve got your money at the new custodian. And how do you invest that money? We’re gonna talk about investing in your 401K rollover, but for those of you that are new to the Stacking Benjamin Show, we have a competition that’s going on all year long between our three frequent contributors, OG Paula and, uh, decorated blogger, Len Pezo.
Dana, today you, you are playing on team Len Pezo, and that means we’ve got good news and bad news. But even before we get to that, how many miles have you walked in the uh, the, uh, 23 or four minutes since we logged
on, you know, about 2000 steps, so I don’t know. Okay. Probably not, not that many. That’s generally
steps is general mile. They a mile. They’re really slow steps though.
Well, you gotta get moving it. Yeah. I find, I don’t know. I’ve got this Garmin watch and it, and it, uh, when I work out, the steps go through the roof and when I’m not, I felt really depressed yesterday. I got to like 6,500 steps and it’s like you’re, you made it. My go boy. Not that, not that far. I need to get out more.
We got good news and bad news, Dana, about where you’re sitting on Team Lezo. Do you want the good news first or the bad news? I’ll take the good news first. Guess what, Dana? The good news is you and Len are in first place because Len and everybody who’s come on when he’s got a week off has contributed toward eight points.
And then right behind you, OG and Paula both have seven. Paula still fighting it out for the win. What’s, oh yeah, that’s right. You just got back last week, Paul.
Exactly, exactly. It is mind to blow.
She’s like, I’ve got plenty of time people, I will find my way to last place sooner or later, but maybe not this week.
Maybe Paula, who gets to guess last gets the win. But first we need a trivia question. So Doug, what do we got on tap?
Hey there, stackers. I’m Joe’s moms neighbor, Doug, and I’ve been known to cruise up and down Main Street. You know, back in the day with my Vespa gang, the flamingos. I like to be a man about town. Cruising Texarkana is mean streets and looking for adventure. I’m not the only one who likes to do laps. This day in history is known for some pretty big circumnavigation.
Back in 2016, NASA’s Mars Odyssey completed its 60000th orbit around Mars. One lap around the distant planet takes 18.6 hours to complete, which is exactly the same amount of time it takes Joe’s mom to get ready for shrimp. Scampy night down at the Sizzler, but a little closer to home. On this day, way back in 1931, some other pioneers were taking off from Long Island, New York to fly around the entire world, the whole planet.
When they finished, they’d successfully completed the first circumnavigation by a single engine Monoplane. My question is, how long did it take pilots Wiley Post and Harold Caddy to complete this epic journey? I’ll be back right after I wiped down the old El Camino. It’s a solid step up for my Vespa gang days.
And a guy, you know, he likes to represent a certain image when he is making laps around the tasty freeze all night. You know what I mean?
Thank you for that Doug. And yeah, we definitely, we know what you mean, man. We know. We know what you mean. We’ve got, we got quite a question, you know, these people after not just lots of Benjamins, but also lots of fame back in the day.
Imagine 1931, trying to make it all the way around the world. And uh, Dana, you get to imagine first, how long did it take them to make their way
around? Oh my gosh. I’m trying to do the math in my head. Is it like 24,000 miles around the globe? I can’t remember. But how fast could a plane fly back then? I really don’t know.
So about as fast as you’re walking right
now. Oh, then I need to like double my initial guess if that’s the case. So let’s see. I’ll take like 158 hours.
A hundred? No, no,
Wait. It’s not what I was
thinking. I was thinking
in days, but not that many days. Let’s go, let’s go. Six and a half days.
Six and a half days to make it around the world. Og. Do you think that’s too many or too for you? So
a clarifying question, if I may, to the judges, he always does this. Well, it’s, you just, it’s too ambiguous. Do you mean like how long, like actual time, you know, door to door? Or do you mean like Yes. I mean, door to door mean.
Cause like, like
not, not just wheels uptime or No door to
door. I mean, obviously the plane landed and took gas on and then they took a nap and all that sort of of stuff. You don’t know. You mean from, you don’t know? I do know. I, you know, so it’s like Jules
Verne? Yeah. Door, door time. Yeah. Like Jules Verne, he runs out of the room and he starts his around the world and then he slaps the bet down.
Just in the nick of time. Yeah. Yeah.
Uh, golly. I was gonna say, like, I was gonna say six and a half days. Honestly, that was gonna be my answer. So, uh, I have to make it challenging for Paula. I’m going to say it took them 13 days.
days, but I think Dana’s
right. Oh, is he, is he smokescreen in or is he being legit?
So my question, so the, uh, the winners, whoever places the closest guess Correct.
Closest guess. Okay. She’s
been on the show for like 32 years and she’s still asking this
as, as opposed to, it used to be closest without going over.
Right. Paul’s like, oh, it’s closest. No wonder I suck at this.
Ah, closest. Oh, back
in the day, it was closest to without going over. Yes. But now it is simply closest regardless of whether or not you go over. So my strategy is going to be to capture the upside. So I will guess 14 days.
14 days. So she So you think that was a smokescreen? Yeah. That he doesn’t, that he does not think really that Dana’s hot.
Well, you know, I’m, I’m thinking
of the whole, you know, around the world in 80 days kind of a, I just, I was, I was thinking would be a longer period of time. So got a hot air balloon. It was a hot air balloon. Yeah. Yeah. But still if, if the whole
It was everything. They were in all kinds of stuff weren’t they on trains?
I mean, they were in all kinds of
crazy things. They’re probably walking on a standing desk treadmill stage. Yeah. Stage
coaches. Yeah, that’s right. Standing desk.
Yeah. Day 78. They’re like, oh crap, we’re not going anywhere.
What is going on? Took the hyperloop after that. Yeah.
Speaking of move, we’re gonna hyperloop, uh, and be right back.
Dana, you kicked this off with six and a half days. Everybody else went significantly higher. How you feeling? Hey. Well, I missed all that. I didn’t hear.
I said, I’m feeling okay.
Right. She’s like, I’m all right. I could stop walking, but, you know, oh gee, you got, well, not your knees capped. What? You got your head chopped off?
I don’t know what the analogy would be. Yeah. Paula took the upside. What are you
thinking? I know, I, I love Dana’s answer. I honestly had quickly done the math in my head and was like six and a half, seven days. That’s probably about right. And, and I, uh, I just had to put some space there, so I think, I think Dana’s got this one,
but Paula, if it is 80 days, you’ve got
Yeah. You know, I mean, my strategy is basically just, uh, I, I figure I’ve captured a wide berth, so yes. We’ll see how that plays out.
That strategy hasn’t worked in five years, so why? What’s that definition of insanity?
I’m just gonna keep doing it. Right,
but this could be the day. Who knows Doug Well, one person knows Doug knows Doug, who’s our winner.
I absolutely do
know Joe. Hey there, stackers. I’m Cruz captain and town Trotter Joe’s mom’s neighbor, Doug. And my trivia question today is based on the historic flight of the Winnie May, a single engine monoplane that flew all the way around the world, while today’s trivia question could have easily been which one of the pilots had the weaker bladder, or who made the sweet mixtape for the journey, our trivia committee decided that the actual question should be, how long did it take pilots Wiley Post and Harold Caddy to complete their journey?
Well, OG was off by just six and a half days. Paula was off by, beg your pardon? I’ve got this wrong. Paula was off by six and a half days. OG was off by five and a half days. They were both over. Dana was under by two and a half days because the answer is that while the around the world in 80 days took, you know, like 80 days, we’ve covered that post And Caddy’s trip took just over 10% of that time, or eight days, 15 hours and 51 minutes.
But they made 14 stops along the way, probably at Bucky’s for some corn nuts. Right? So that means Dana really, Len is our big winner.
All right. But did they have tapes in 1931? I,
but that’s who cares.
They just bet the band with them. They just brought the band with them. Have, have we ever
let the truce get in the way of our trivia questions?
I don’t, who knows? Well, maybe except for the, uh, the answer is always truthful, but the rest might be mythology or there was Bucky’s. Have you been to a Bucky’s Dana?
Never. I never heard of Bucky’s. Paul,
have you been to a Bucky’s?
I have. I have been to a Bucky’s on a trip to
Texas. Joe, I’ll tell you, when we were on the book tour last year and we were in, I think it was Houston, we recorded in your hotel room and when we got there on your bed, were a bunch of things from Bucky’s.
Some listener had brought you a bunch of stuff from Bucky’s. Do you remember this?
It was, uh, Paul Lambert from the Phi Lighter podcast.
Yeah, yeah. And you were on some of one of your stupid health kicks. You’re like, I can’t eat the stuff. You guys take it. And I snatched it up as fast as I could. And one of the things I snatched changed our family’s life, really our trajectory, because it was chocolate covered.
Espresso beans and holy. Are those good? Unbelievable. I rationed myself. I didn’t eat ’em all. They came home, they made it to the freezer. Well, the fin turn came back home for a weekend and in inhaled them, we got in a big fight. I got, you know, I was really mad Adam, him for eating all the Bucky’s espresso beans.
But ever since then, I’ve been buying him Bucky’s espresso beans for birthdays and Christmases and all of that stuff. Like him off the internet. It’s now a thing for us. That’s
good. Oh yeah. You’re welcome. It’s a whole thing. You’re welcome. Thanks Paul Lambert. Dana, next time you’re driving through Texas, you gotta make sure that you stop
It’s a restaurant. Is it like a convenience store? What is it? It’s a gas station.
Yes, a gas station.
It’s a way of life. It’s a gas station that has probably 150 gas pumps with an attached grocery store. The cleanest bathrooms you’ve ever seen on the road, ever in your life. With fresh barbecue and t-shirts and Yetis and saltwater taffy.
Rarely line at the checkout counter. Yeah.
Wow. It is a Texas sized gas station. Yes.
Wow. Yeah. Think of a Walmart with a bunch of gas pumps out in front of it, but it’s
rowing. I mean, they’re not just Texas anymore. They’re kind of getting in like the whole southeast. Yeah, they’re moving over that way.
Yeah, go to a Buckys near you, but Buckys, if you wanna sponsor the show, we just spent four minutes talking about you, so, uh, send me yes, the beans Joe at stack Benjamins dot com if you’d like to sponsor us.
Hey, speaking of sponsors, our sponsor for this episode is deposit accounts.com. You know what happens, Dana, when you go to deposit accounts.com, I don’t
know, tell me,
you, you find out that those interest rates you’re getting from your regular brick and mortar bank might not be the best as we record this, which is just over a week before people hear it.
Top 1% average on savings accounts in the usa, 4.4%, the national average still only 0.4%. CD rates, top 1% average 5.33, national average 3.39 Checking accounts, top 1% average 2.27 money markets. 4.28%. They just compare all the different rates out there. If you go to deposit accounts.com, you can see where you stand up when it comes to those banking products you use every day.
Deposit accounts.com. All right, let’s head into this. So how then, Dana, do I get a 401k? LO four. Oh, well, wow. Easy for me to say. How do I get a 401K rollover? There we go. Rolling. What do I gotta do to start making that happen? Let’s talk paperwork.
Yeah, so sometimes you can go onto your plan sponsors website and initiate it from there.
We usually like to do phone calls, so we will call, you know, with the client on the phone and talk to a representative. I’ll give you an example. I sometimes I do web meetings. I did one with a retired CPA a few weeks ago. Her former employer had switched 401K plans. We went on the website and we processed it all and then, Nothing happened for weeks.
And so I would talk to client, Hey, you’ve gotta call ’em, you’ve gotta call and check them. And somehow it just got stuck in their system. So when you process it online, it went to someone for review and then no one hit the button to release the funds. So, I mean, a phone call is great cause you’re talking to a live person.
Of course, if that live person doesn’t hit the button and, and you know, make it happen, you can still get things that get stuck in the process.
I haven’t been a financial planner in a long time. Dana, for both you and og, does that happen? Like, what percentage of the time does that happen? Because when, when I stopped, what, 14 years ago now?
It was, it was like 20% of the time that story Dana would happen.
You know, I don’t, I, I would say a lot less, you know, maybe 5%. But there’s all kinds of other things that can happen. You know, you’ve had, we’ve had clients who have both Roth 401ks and regular, but the company, you know, messes up and sends the wrong check to the client, deposits them in the wrong account, and that has to get corrected.
We’ve had checks from inherited IRAs that get sent the wrong way or put in the wrong account. So there’s all kinds of, you know, if I look at collectively all the mistakes that happen, yeah, 20%.
Uh, Paula, Dana and OG doing this with clients. Have you done this just by yourself? Just called them up and made the, the an i a 401K rollover happen?
you know, I, I did it. Uh, I had a friend who left his job end of last year around November, December, and he was like, w what do I do? You know, I’ve never been through this before. And so we just sat down. I like, looked over his shoulders. He logged into all of his accounts and I was like, all right, press that button.
Press that button, press that. This is what that means. So sometimes just having a friend who’s knowledgeable about personal finance and who understands, like trustee to trustee transfer, knowing someone who understands or can interpret a little piece of jargon like that can be very helpful to somebody who is brand new and has never done any of this before.
Did you just do it all online? Yeah. Different than what Dana said. Did you, so you didn’t talk
to anybody? Yeah, yeah. We just executed everything online, partially through the website, and then partially through sending emails to, uh, the HR from his former company.
And did it go smoothly? Yeah, everything went.
That’s fantastic. You know, back in the day it seemed like if the 401K provider was an annuity company, it generally took forever. Oh gee. Is that still the case? Like if you’ve got a 401K company and it’s the same company that represents an insurance company, that is still generally a, a bigger problem?
Yeah, I, I would say, you know, there’s a lot more technology now, especially, especially if you’re at some of the bigger firms. You know, think like if Fidelity is managing your workplace 401k, they make it very simple to roll it over to your ira, to the point now where you can just. Quite often, just click the button that says Roll it to my IRA and it will done.
And they, cuz they, you know, they wanna make it easy for you to keep it kind of on their platform. Uh, once you get into some other types of custodians, whether it’s a smaller 401K provider or an annuity firm, life insurance company, something like that, they’re still, I think, unfortunately, pretty well stuck in the 1940s with, uh, paper and medallion signature guarantees and, you know, all sorts of weird, esoteric ways to, to move money.
But that’s not even just unique to that. I mean, you can even see some of the new FinTech companies that still have some pretty, pretty arcane rules for moving, moving your money to a different place that you want instead of allowing it to be a simple, easy online process because that’s how they process it generally anyway.
It’s usually done on online electronically anyway. But why they make you go through, you know, jump through hoops to get paperwork is, is beyond me, but it can be a, a little bit more challenging. Is
that the kind of thing, Paula, that before you roll money over to an ira, like you kinda look online and see, uh, like how hard is it gonna be to get my money outta here?
Like, I’ve never thought about that until Oh, gee’s talking, I’m like, maybe I’ll just do a quick Google search ahead of time to see if this is gonna be a pain in the ass getting my own money out later.
Yeah, I mean, I, I don’t know exactly what a person would Google. I mean, you could, you can certainly Google the name of your custodian and kind of see if there’s like a forum thread about it or something.
But there are so many different options out there. Look for horror stories and, um, yeah, to your point, Joe Horror stories, there’s also gonna be some sampling bias because the people who have a negative experience are most likely to post about it. So I’m not sure if that’s gonna be very effective.
You know Dana, um, do you see though people make mistakes when they’re rolling money over?
You mentioned one that they might get the check or OG mentioned. It was, somebody mentioned it earlier, they, the check come to them. That’s a mistake. Do you see people make other mistakes when they’re trying to roll their money over?
Well, let me back up for a second, because a lot of the custodians, the 401k providers will require the check go directly to the participant.
Now it can be made payable to the new custodian. So for example, we custody of Charles Schwab. It might be payable to Charles Schwab for the benefit of, you know, if it was my rollover for the benefit of Dana. But the check is often required to be mailed to the address of record. Ah, and so then when that check comes, the participant has, you know, 60 days to get it to their new custodian.
There are occasions, but there’re still rare where they will mail the check directly to the new custodian. And I always recommend people pay the extra $25 if it’s a substantial amount of money. And if it’s a couple thousand dollars, you know, maybe you don’t pay to have it overnighted, but I saw a half a million dollar 401k check get lost in the mail once.
And we had to put a stop payment on it, have it reissued. The original check showed up like 90 days later. Oh, oh, by then, you know, we, we’d taken care of it, but you know, it’s just, it’s worth the FedEx fee to say if it’s a substantial amount of money, just pay to have it overnighted if it’s coming to you or if it can get issued direct to the custodian and then you, you need to be checking.
The reason that we caught this one recently that just didn’t show up is cuz every day we were checking the account for the funds and finally we know, we told the client like, it should have shown up by now. You really need to get in touch with them. And it was just stuck in the system. No one had given it the green light.
$25. Just a small insurance policy, right? Mm-hmm. Just a tiny one. Oh gee, you were nodding your head during that. You must have seen that before too.
There’s lots of ways to see this followed up. Paula, you were talking about helping the friend at the end of the year, and I would say that that’s probably the biggest one.
Is make sure you’ve give yourself enough time to get it done before something major else is gonna happen. And something major is a new tax year. You know, there’s nothing wrong or illegal with having a rollover happen on December 30th, but the likelihood of it being muddled together with all of the other year end issues that have to happen with IRAs or contributions or conversions and you know, the fact that everybody’s working at 30% cuz everybody wants to be out of outta the office and on vacation.
There’s just, there’s so many ways for it to get messed up. And then you compound it with, what if the checks in the mail over that year And, and you think about the technical aspect of that. Well one company says we sent the check, but there’s not the corresponding, we got the check in the same tax year, right?
Mm-hmm. Because there’s, the IRS needs to see these two transactions happen to make it a tax free transaction. Right. And so you see one side and you get your, you get your 10 99 at the end of the year. It’s all gets cleared up, but it’s just another hassle. You know, it’s, Dana, you were talking about your, you know, your missing rollover check.
That money’s not going anywhere. It’s not gonna be, no, it’s not fraud. It’s just lost. It’s, but it’s a pain in the butt. Not to mention the fact that you got 90 days of it not being invested, which, you know, could make all the difference, you know, depending on the timing of that. Yeah. So try to stack the odds in your favor, you know, if you’re gonna tackle this, try to get it all done at one time.
Try to, try to sit down and do it during business time, you know, during business hours. So if you get stuck with a question, you can call the 800 number and actually talk to a person who can, you know, finalize it for you and, uh, and just be aware of other things that are going on throughout the year, different holidays, or certainly at the end of the year.
And like I mentioned before, if you’ve got some, some extenuating circumstances, like it’s an inherited account or you’ve got company stock or uh, you’ve got multiple different types of contributions, yours and company contributions, and some of yours are pre-tax and some are after tax. These are all things you wanna just kind of take your, take an extra second and be, uh, specific about, just to make sure you, you have a smooth process, Paula, now
I’ve got all this money sitting here in cash in my new IRA or my new place, maybe the new 401k, whatever it might be.
How do I start thinking about redeploying this money?
Oh, so once it’s transferred to the new thing, it’s done. Um, yeah, I mean at that point it’s, it’s an asset allocation question. Asset allocation and asset location question that basically means when I say asset location, all right, you’ve got an ira, it has a particular type of tax treatment.
What other accounts do you have? What kind of tax treatment do those other accounts have? And what kinds of investments do you want to hold across all of your different accounts based on how much money is in there? And the tax treatment of each account. Right? So you’ll wanna take a look at this lump of money in the context of all of your other buckets of money to figure out what types of investments you want to hold in which accounts.
That’s the asset location piece. And then as far as asset allocation goes, which is just a fancy way of saying how do you wanna mix the cocktail? You want like, Two shots of vodka, but you also want some, and we’re back,
right? You can tell it’s Friday for Paula,
right? As as the allegation is just the recipe for your mixed drink, it’s the proportions of each ingredient, the amount of vodka, the amount of, the amount of grenadine, the amount of cranberry juice.
It’s, and it’s, it’s the relative proportions of each.
Walk us through then, Dana, what she’s talking about. Assuming that you agree, how do I start mixing that? How do I start mixing that cocktail?
Yeah. Well, I’m gonna be a little controversial here in that, you know, I know as an industry we talk about asset allocation in terms of our risk profile, and we define risk as volatility typically on a year over year basis.
But me, I’m a fan, like I’m 52 and I’m a hundred percent equity. So if I have at least a 10 year timeframe, I’m gonna stay a hundred percent equity and go for maximizing returns. And when I’m, when I’m within that 10 year window of retirement, which for me, I think the earliest I would retire would be 66, likely I’ll work till 70.
But that means, you know, at 56 I will start taking about 10% of my balance and shifting it into, I’m gonna actually create a bond ladder at that time, but a little differently. You know, if some, if people wanna think about really maximizing returns and they’re far enough away from retirement, then um, I like to say, you know, be as risky as possible within reason.
You’re still not gonna, you know, put all your money in Bitcoin. You’re gonna, you know, still choose an allocation strategy, but maybe you’re not gonna do 60% stocks, 40%
bonds. But that’s all based on when you’re gonna take the money out. I mean, based on everything
said, it’s all based on timeframe, which is a little different way of looking at it than traditionally our industry will have you fill out a risk tolerance questionnaire, and I hate that too.
You know, it’s designed to, drives me crazy, be a C y A for us. And you know, to me that’s not always in the best interest of the person, depending on their investment experience and their education level and their timeframe. There’s all kinds of other factors than filling out a risk tolerance questionnaire.
Well, my problem with the risk tolerance questionnaire is when it gets presented to people, people start off with the risk tolerance. My first question is, what type of risk do you need to take? Like, is there a type of risk that you have to take? If I, and, and then the question is, can I accept that risk? I think I feel like we do it, we do it backwards.
yeah, like, oh yeah, go ahead Dana. What’s realistic? You know, what rates of returns are realistic on the high side or on the low side? Depending on what I choose and over what timeframes. Not just over a single calendar quarter or a single year. Like, how do we get people to think longer term? Like I’m investing for the rest of my life.
So that’s a different decision than if I’m investing for, for one year. But
even over those short term, I used to like showing people the weather report about we can expect, we can expect this bumpy ride. Like this is what the bumps are gonna look like. Do you think this is gonna send you, you know, this is gonna send you, uh, on one of Paula’s cocktail parties.
Uh, are you gonna have a, have a tough time with that or not? Like, that’s when I wanna get into risk, like, can you accept the risk of a hundred percent equities? Cuz you know, OG is singing off that song sheet too, man. You’re, I mean, you’re all about equities, but how do you start walking people through og what the right investments are to use inside of that rollover?
Well, I’m thinking about this from where we see people make mistakes and where I think people would make mistakes on it would be to say, oh, shouldn’t I dollar cost average in, you know, I’ve got this big bucket of cash, shouldn’t that dollar cost average in? And the answer is absolutely no. This was invested five days ago.
It needs to be fully invested by nightfall just like you were. Wait, that was
gonna be, yeah, that was gonna be my, actually, my next question was exactly that. And hold on, because Jim, I’m gonna come right back to you, but I see both Dana and Paula nodding your head. You guys both agree with the fact don’t dollar cost average back in.
Mm-hmm. Get jump in Paula.
Mm-hmm. Absolutely. So if you think about it, by virtue of dollar cost averaging back in, you are going to be disproportionately weighted to cash for way too long. You’re just gonna have cash sitting on the sidelines until you get that money in dollar cost averaging Makes sense when you’re talking about paychecks, because necessarily you can’t invest money that you haven’t earned yet.
So necessarily, you know, I can’t invest my paycheck that I will earn six months from now until six months from now, but if I already have the money, then throw it all in at once because it’s that whole time in the market, beats time in the market.
Og, I’d wanna come right back to you. I just wanted to make the point with everybody that all three of you agree on that.
Mm-hmm. And this was a big question I got all the time. Shouldn’t I dollar cost average in, shouldn’t I tip? No, absolutely not. But back to you, og. Keep going. Yeah.
I mean, it was, you already were invested yesterday, so why not just be invested again today? And, and now the question is, you know, what’s the time horizon of the money?
I would argue that 10 years, I, I think that’s even a little too long. I, I like. Four or five, you know, like, let’s take advantage of that last double and, and whether it’s four or five, 10, it doesn’t much matter because it’s such a small percentage of your portfolio that needs to be conservative to pay for that next year’s income.
You know, and and Dana’s example, she’s talking about at 56, planning on her 66 years of income. What happens and where we th where we see mistakes are, people say, well, I’m gonna retire at 66. I need the money at 66. It’s like, well, no, you need one 30th of your money at 66 because I’m planning on you living to be 96.
So you still have 30 years for the age 96 money, or 40 years if you’re, if you’re 56. You know, so you have such a long time for the vast majority of your money that I think this is where we all could have a lesson in history and say the retirement crisis in America would largely be solved if we just stayed invested.
It would just, it would just be so much easier. But yeah, take the money, get it invested, move on with life. I’m glad that
earlier Dana, you talked about making sure you check the beneficiaries. A lot of times people open up the new account, they forget to make sure the beneficiaries are correct. Uh, OG and I have shared stories about the ex-spouse getting the, getting somebody’s assets when they die cuz they forgot to check, check the beneficiary.
Or worse they’re in their financial planner’s office and the financial planner, og you’ve had this happen like, so who’s, who’s Misty? Who’s Atlas? Right? Who’s, oh, oh, wait a minute. Why do you have your ex-wife on there? And then the fight begins right in front of the financial planner. Not a great idea. I want to ask you guys, is there an investment type that is a red flag for you inside of an a rollover that people should go?
Uh, maybe I need to be a little skeptical about this. Polo, let’s start with you. Any type of investment generally that makes you, make you go, uh, you might wanna ask a lot of questions. I think if
anyone had like, too much of their portfolio tilted towards individual stocks. Or Bitcoin, uh, that would probably give me some pause.
Uh, you know, and any types of funds that had like really excessive fees. Uh, Joe, you and I have talked about this. Neither of us believe in, um, becoming obsessed with fees the way that some people can be, but if, if the fees are like super egregious, you know? Yeah, yeah, yeah. Absolutely. That would give me pause.
And, and some people want, I think people will understand why crypto might not be the best idea. They also, the fee argument, I know a lot of people get that, uh, why not individual stocks?
It’s too much concentrated risk. Um, you know, having a, a small portion of your portfolio that you dedicate towards individual stocks, maybe 5%, maybe 10% of your overall portfolio, uh, that you dedicate to individual stocks, I think is fine.
But if you are just betting everything on individual stocks, you’re concentrating risk a little bit too much
Dana product type you worry about seeing in somebody’s rollover. Yeah.
You know, the self-directed IRAs where you can invest in private real estate deals, LLCs, that’s where I’ve seen people, including myself, lose the most money.
And so the biggest I saw was a client who lost 1.7 million. Wow. They had moved, you know, rolled over their 401k, self-directed IRA custodian where they could invest in an underlying real estate deal. And this was right before 2008. And that whole deal, you know, went under. They eventually, I think they got a couple hundred thousand dollars back, 10 years later.
And as you’re entering retirement now, they’ve pushed the R M D H out, but you can have an illiquid asset and those self-directed IRAs, and now you have required minimum distributions on that. And you know, it’s a challenge. That’s where I, I’ve had more clients lose money. Me, myself, I had a friend who, you know, I trust her and her husband completely.
They were doing this really cool RV park in Florida. And so I did a self-directed IRA and, and invested a, a smaller amount of money, much smaller than 1.7 million. And uh, what happened is their contractor partner got c o d and died and they didn’t have his share of the business. They didn’t have the buy sell in place and, and all of those things.
They couldn’t finish the deal themselves. They did finally get the deal sold. I got back 60% of what I put in, but it was one of those, I call it asymmetric risk, right? Like it was a good deal. Their project was solid, they were the right people, but you know, the business partner that was the main contractor, like who could have foreseen that.
Yeah. And so, you know, those are the kind of things where I’ve seen people, you know, including myself now, really lose the most money.
And it’s asymmetrical risk because you could have been a lot safer and had a return close to the really nice return you would’ve had without taking that risk. Is that why it’s asymmetrical?
Yeah, that’s why I would call it asymmetrical. And I couldn’t have, you know, as much as I would’ve thought through the deal, I wouldn’t have thought to ask like, you know, what if that contractor dies? And did you have insurance in place to buy out his share? You know, I would’ve just, it’s, I didn’t even think to ask that
We always wonder what we do without Paula and her martini glass analogies here. Like, nobody ever asked that question. Uh, about time she got back with those. That’s
why you insure my spot
here. That’s exactly right. Right. $25 a week, we pay that premium, uh, og, uh, product type that you don’t like to see in a rollover or wonder
about in a rollover.
Yeah. Anything that’s a liquid. Dana already answered this. Basically, you know, if you can’t price it on a daily basis, then I don’t think that it belongs in your. In your retirement accounts, there’s too much that can go wrong, whether it’s the example that, that Dana gave, of course. Or, or anything else. I mean, it can, we’ve heard really great stories of people who have done this very well, which makes it really sexy.
Like, uh, most notably, uh, Peter Thiel putting his PayPal pre i p o shares in his Roth, and now allegedly he has the biggest Roth IRA in existence at something like five or $6 billion of tax free money. That’s, that’s a great example of asymmetric risk, right? That’s, that’s like, I’m either gonna be a billionaire tax free or I’m gonna lose it all, but we don’t hear about all the 99.999% of the time where that sometimes, or that eventually blows up.
So anything that’s a liquid, anything, uh, Paula said is high. You know, high cost double taxation benefits are really silly. Like, why would you have an annuity inside of an ira? There’s some, some very specific reasons for maybe doing that, but on par that’s, you know, you’re getting tax deferral and then you’re paying for tax deferral, which just is kind of silly.
But, um, keep it simple, you know, the easiest stuff is the simplest stuff.
I’m also thinking when you say not priced every day, it doesn’t have to be as far as as Dana went, which was, you know, the self-directed ira. You’re also talking then about like a non-traded reit,
right? Yeah. Any, yeah, non-traded REITs, any private equity deals, anything that you can’t log in and say, tell me how this did today.
Um, because if it’s not priced every day, that means it’s not gonna be liquid every day, and you’re gonna have to jump through some hoops to try to get your money out. And the worst thing that can happen is to have that valued on Jan, on December 31 at X dollars. Now you have to withdraw, like Dana said, on the, on your required distributions based on that value.
But that, but that’s just a made up number. And so that’s not the real number. And now the actual value is lower than that, and you’re starting to withdraw from a, from, you know, from that. It’s just, no thanks. I wanna be able to buy and sell as I please. And there’s plenty of diversification and plenty of upside potential, frankly, with publicly traded securities.
thanks a ton for helping all our stackers with this. This is an area that a lot of people have written us about, so I hope we help to a lot of people today. Let’s find out what’s going on, where you guys are. We’ll have our guest of honor go last. Og, what do you got happening this weekend? Of course.
Yeah. Okay. Done. And Doug and I both shaking our head like. It’s the same answer every time. I might even
golf with Doug. As a matter of fact, this next weekend, oh, well
there you go. You get to watch him Doug throw, did he throw a club in a pond or something?
I can neither confirm, nor did I, but it definitely wasn’t a pond.
Right. It might have been something that
can’t confirm that. But it wasn’t a pond. Yeah, it might have been a lake. No, it was a heavily forested area, which caused a structural defect in the shaft to come forward and reveal itself, thereby snapping the shaft of the club
into multiple pieces. I was putting it it in the woods because it was made of wood.
was absolutely no natural materials involved in that
whatsoever. Science. It’s science Doug. Yes. He’s he’s saying it’s science. Yes. Paula, what’s happening on the Afford Anything
podcast? So on the Afford Anything podcast, we have a Stanford economist named Nick Blum, who is talking about work from home.
Uh, he actually has been studying remote work since b before nine 11. Um, he’s been studying it for 20, almost 30 years back when it used to be referred to as telecommuting. So while it is a new topic in the minds of many, it is for him, uh, you know, a decades old topic. So he has the, the benefit of his historical insight in how the ramifications of work from home in terms of your productivity, creativity, collaboration, how all of that
That’s interesting. So I’m sure anybody that owns Office Real Estate wants to listen to that show exactly where, where the future may lie there. Dana, thanks for hanging out with us again. How far did you walk this episode? You know,
I am, I think at a total of about 5,000 steps. You’re
welcome. Yeah, that’s all I have to say is you’re welcome.
you. What’s going on at Sensible Money? Tell me what you got coming up.
Well, I don’t know how much I have coming up at work, but I’ll tell you, I think last time I was on, I had just started playing pickleball and I have become a pickleball playing machine. I’ve joined the JW Marriott Pickleball Club.
Oh. I played for two hours this morning. I am a pickleball playing, you know, it’s just every spare minute now. I’m, I’m loving it.
That’s, by the way, is sweeping Texarkana right now. Like all of my friends are getting into pickleball. Like everybody, a good friend of mine last week, we were at our workout in the morning and he’s like, I played pickleball for the first time yesterday.
I get it. I see why everybody loves
it. I love it. It’s, you know, we go out, we drill, we practice. I have a ladies group, and then we have a couples group we go with. It’s, it’s a lot of fun.
If somebody wants to email you, they wanna know more about working with you, where do they find you? Dana.
email@example.com or visit our website, sensible money.com. There’s a ton of info and free reports to download.
And we’ll link to sensible money. We’ll also link to afford anything on our show notes at stacky Benjamins dot com. That’s gonna do it for today, except for one thing, Doug, we, we had a lot of takeaways, but what do you think our top three should be, Joe?
I think of the top three. First, take some advice from our panel and do your homework and preparation. Before you roll over your 401k. Maybe the right answer is to stay where you are, or maybe it’s to use an ira. You’ll make the right decision if you know what your goal is, and you’ve heard it here before.
Begin with the end in mind. Second, once you decide to do a rollover, you’ll need to stay on top of it to make sure things are moving along. Hiccups throughout the process aren’t unusual, like the time they lost my half million dollar check. Thanks for that out in the open, Dana. But the big lesson, don’t forget to check the gas gauge when you’re tooling around town.
It’s a little embarrassing having to ask Joe’s mom to help you push your car out of an intersection you’ve driven through 20 times in a night. Not that you know that’s ever happened to me last Tuesday. Thanks to Dana for joining us today. You can find more work from firstname.lastname@example.org. We’ll also include links in our show notes at Stacking Benjamins dot com.
Thanks to Paula Pant for joining us today. You can find her amazing podcast, afford Anything wherever finer podcasts are sold. Thanks also to OG for joining us today. Looking for good financial planning help. Head to Stacking Benjamins dot com slash OG for his calendar. This show is the Property of SB Podcasts llc, copyright 2023, and is created by Joe Saul-Sehy.
Our producer is Karen Reine. This show was written by Lacy Langford, who’s also the host of the Military Money Show. With help from me, Joe, and Doc G from the Earn and Invest podcast, Kevin Bailey helps us take a deeper dive into all the topics covered on each episode in our newsletter called the 2 0 1.
You’ll find the four 11 on All Things Money at the 2 0 1. Just visit Stacking Benjamins dot com slash 2 0 1. Tina Ichenberg makes the video version of this show. Once we bottle up all this goodness, we ship it to our engineer, the amazing Steve Stewart. Steve helps the rest of our team sound nearly as good as I do right now.
Wanna chat with friends about the show later? Mom’s friend Gertrude and Kate Youngen are our social media coordinators, and Gertrude is the room mother in our Facebook group called The Basement. So say hello. When you see us posting online to join all the basement fun with other stackers, type Stacking Benjamins dot com slash basement.
Not only should you not take advice from these nerds, don’t take advice from people you don’t know this. Show us 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.
What was that? It’s
called the medium sketch. The Medium sketch, yeah. It wasn’t
rare and it certainly wasn’t well done.
Maybe Paula who gets to guess last gets the win, but first we need a trivia question. So Doug, what do we got on tap and you’re on mute. Muted.
And I nailed it too.
We should have just let him do the whole thing. We should,
yeah. Every time OG always wants to just let me go on and do the whole thing. Pretend if we’re really interested.
If you wanna see me snap like a dry December twig, it would be when I get to the very end and then you tell me I would come unglued. Here we go. Okay. 3, 2, 1. So I, while I was ad-libbing that second takeaway and I was trying to talk about my half million dollar check, somehow I got twisted up in my metaphors and I was gonna say shedding light on.
And all I said was shedding. And I think it’s gonna sound like she ed, like he was, that story she said, I’m like, I got a can’t undo it. I can’t fix it now. I’m just gonna keep going. So if Steven ends up bleeping out that word, I will not blame him or you. That’s good,
Steve. Do it just, but we did an episode a few years ago where we just bleeped out random words for fun.
You bleep random words. That’s awesome. And that was hilarious. We just went through it. Could you still understand it? We could, but it sounded, we would bleep out a word where we said something that was no big deal and it made the whole show sound dirty. Like,
like we were, it
was, it was pretty, pretty fun.