Join us today as we dive into the core principles of building a sustainable financial future with marketing professor, author and investor, Scott Galloway. We explore the essential formulas behind his book Algebra of Wealth, discussing purposeful living, effective retirement planning, and the emotional aspects of investing.
Our headline today is all about AllianceBernstein 401k lawsuit that was dropped by New York US District Court.
During our Better Call Saul-Sehy and OG, we unravel the complexities of early retirement, delving into specific IRS rules for accessing retirement funds.
Plus, Doug wraps it all up with some modern history trivia!
Deeper dives with curated links, topics, and discussions are in our newsletter, The 201, available at https://www.stackingbenjamins.com/201
Enjoy!
Our Headlines
- AllianceBernstein 401(k) lawsuit booted (InvestmentNews)
Scott Galloway
Big thanks to Scott Galloway for joining us today. To learn more about Scott, visit profgalloway.com. Grab yourself a copy of the book The Algebra of Wealth: A Simple Formula for Financial Security.
Doug’s Trivia
- When was the first camera phone released?
Better call Saul…Sehy & OG
- Stacker Alex has a question about accessing money in retirement accounts before the age of 59.5.
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Other Mentions
Join Us Friday!
Tune in on Friday when we’re talking about how to accomplish more with a few Benjamin-Stacking time hacks. We’re joined by Rob Berger, Dana Anspach, and Paula Pant.
Written by: Kevin Bailey
Miss our last show? Listen here: Make Better Investment Decisions – Our TOP 5 Building Blocks to Constructing a Better Portfolio (SB1506).
Episode transcript
[00:00:00] bit: I am Max Felise, Navely being of sound, mind and body to hereby bequeath the following to my wife Rose, who spent money like there was no, tomorrow I leave $100 and a calendar to my sons, Rodney and Victor, who spent every dime I ever gave them on fancy cars and fast women. I leave $50 in dimes and to my other friends and relatives who also never learned the value of a dollar. [00:00:31] I leave a dollar. [00:00:39] Doug: Live from Joe’s mom’s basement. It’s the Stacking Benjamin Show. [00:00:53] I’m Joe’s mom’s neighbor, Doug, and are you investing with emotions or data? Today we dive into how to clear the emotional deck and let data drive your decisions with professor of marketing at the New York University’s, Sloan School of Business and Successful Investor, Scott Galloway, in our headlines, speaking of emotions, how is your 401k performing? [00:01:16] We’ll take a lesson from a recently settled lawsuit about how to better manage your own assets. Plus we’ll hear why a stacker said I’d better call Saul. See hi an og, and of course I’ll share some phony trivia. And now a guy who’s really photogenic and og. [00:01:37] Joe: Hey, there’s stackers. No, I didn’t write that open, but that was a nice one. [00:01:41] Doug. And actually we just got our photos back. And I gotta say, everybody has said just how photogenic OG is. Like, seriously? I know Doug. I was thinking the same. But, [00:01:54] Doug: uh, yeah, I think Did you show them only to his team members? Because I think he’s got performance reviews coming up. [00:02:01] Joe: He must, he, he’s one handsome dude sitting across the card table from me. [00:02:05] How are you Mr. Oog? [00:02:06] OG: Oh my goodness. I couldn’t be better. Uh, so excited about being here. Thanks for having me again. [00:02:12] Doug: Did you, did you hear any, any genuineness at all in that response? Are we having him here? [00:02:19] OG: Thanks for showing up to my podcast guys. How’s that [00:02:22] Joe: there? That’s more like you. Oh, he’s, we thought you were having a critical illness right there. [00:02:28] That’s more like you. You know we got a great show today guys, because if you want to get wealthy, if you are a saver or you’re somebody who wants to do better in your career, Scott Galloway is a phenomenal guy for career advice. You’ve seen him everywhere. His technology based podcast with Kara Swisher, the RICO podcast was just called the number one podcast at South by Southwest. [00:02:52] So congratulations to them. However, he’s not talking about technology related stuff, market based stuff. He’s talking about you and what you need to do to get ahead. So if you have never heard Scott Galloway before, you are for a treat. It’s a second time here and I think we got more letters last year OG, about Scott Galloway’s appearance Yeah. [00:03:11] Than any other. Plus, if you’re saving into a retirement plan at work, got a headline that hopefully will help you concentrate on the right stuff. But you know what we have before that og? [00:03:22] OG: Oh, I’m gonna guess that, uh, we are gonna kindly ask. Maybe just stick around and, uh, pay attention to a couple of these, uh, sponsor spots. [00:03:31] Joe: Thank you for helping us keep this podcast free for everybody. Scott Galloway. Coming up next, we’re diving into the Algebra of Wealth with Professor Galloway. But first, a big headline for those of you with a retirement plan. [00:03:45] bit: Hello darlings, and now it’s time for your favorite part of the show, our Stacking Benjamins headlines. [00:03:52] Joe: And I hope everybody has a retirement plan. Maybe you don’t have a workplace plan, but I hope that you’re putting a plan together for retirement. This piece comes to us from investment news and it’s written by Emil Halas. Emil writes Alliance Bernstein 401k lawsuit, booted. It’s been a long time OG since we’ve talked about one of these 401k lawsuits. [00:04:13] For a while I feel like we were. Cranking on these is lawsuit after lawsuit came up and some were legitimate added things like target date funds to 401k plans, and we also saw more choice inside 401k plans. However, thi this one brings up a little bit different piece of the Prism Linein Bernstein. This week, Emile writes defeated a lawsuit over the use of its own products in the company’s own 1.3 billion 401k, and the result has lessons for other plan sponsors. [00:04:45] I think, by the way, the reason I wanna talk about this is now other plan sponsors. It has lessons for participants. Emile writes, on Monday, the US District Court for the Southern District, New York dismissed the plaintiff’s claims without prejudice, meaning they can file an amended complaint to address the legal shortcomings within 30 days. [00:05:01] The lawsuit filed in 2022. Failed to show that the asset manager could have breached his duties of prudence and loyalty, and it did not successfully allege any prohibited transactions. The court stated, so what happened in this case, OG, is that Alliance Bernstein, their own 401k, used their own products and specifically participants in this lawsuit said that the lifetime income strategy fund, the target date fund that was out there was the default option. [00:05:32] If you decided to put money in, but you didn’t tell ’em where to put it, they would automatically put it in this low grade, uh, target date fund. Yep. The interesting thing about this lawsuit was, was that Alliance Bernstein won because they waived their management fees because it was their own fund, number one and number two. [00:05:52] Even though the plaintiff said, well, hey, it’s still assets under management for you guys, it was 0.2% of Alliance Bernstein’s, total assets under management, which the court actually talked about. First of all, og let’s talk about this idea of, of proprietary assets, which means, you know, it’s your 401k, it’s the General Motors 401k, and you’ve got GM stock in there, or it’s Alliance Bernstein’s 401k. [00:06:18] They’ve got Alliance Bernstein run funds in there. Do you have a problem with the home team having their own product inside the 401k? [00:06:26] OG: I don’t, I even wonder like, who, who is, who are the people that started this lawsuit? Like, I have an idea, I’m gonna sue my own employer. See how that goes over for me. I might win the lawsuit, [00:06:37] Joe: but I might lose the next, uh, next time there’s downsizing. [00:06:40] OG: Yeah. And, hey, why did you leave Alliance Bernstein? Well, I, I filed a lawsuit against him as one does. Okay, cool. And, uh, thanks for your honesty and, uh, I, I try somewhere else. Right? You know, if you’re a fund manager, a lot of fund managers are required to have a certain amount of their personal net worth. [00:06:58] I. Into the fund that they manage. So if you’re, you know, taking it a step further, you’re an Alliance Bernstein fund manager, you manage the large cap growth fund or whatever they’ve got, or on that team, you have to have some of, some of the vast majority of your net worth in, in investment net worth into that fund. [00:07:16] And that’s not any different than an executive at a company, right? I mean, if you’re a, the CEO of Disney, or you’re in the executive team of Proctor and Gamble, you’re expected to have a, a decent amount of your personal net worth tied up into that company because then you’re kind of all rowing the boat in the same direction. [00:07:35] Right. Eat your own cooking. Yeah. And a lot of times these executive comp plans have those restrictions. You’ve gotta keep X dollars, you’ve gotta keep X things. If you’re a board of directors member, you know, at a publicly traded company, they pay you in stock and they ask you to keep a certain amount there, then they give you all these restrictions around when you can sell, when you can purchase it, the disclosure that you have to do in advance of doing that. [00:07:54] So I don’t think that it’s completely unheard of to require. In this case, they’re certainly not requiring it, but if you wanna participate in the plan, if all the options were Alliance Bernstein plans, it’s a defacto req requirement. I don’t think it’s completely off-putting to say, this is what we do. [00:08:11] Like, if you don’t believe in the work that we do and you don’t believe in our, our outcomes for our clients, then maybe you should, uh, find another place. Yeah. I like the fact that they waived the management fee. I mean, to me, that that shows [00:08:21] Joe: good faith. [00:08:21] OG: Yeah, a hundred percent. We want [00:08:22] Joe: you to experience the cooking that we do here at Alliance Bernstein. [00:08:25] You work for Alliance Bernstein, use our stuff, try it out, [00:08:30] OG: and it’s gonna be less expensive. We can bring in another, you know, we can bring in BlackRock or we can bring in Fidelity, but they’re gonna charge you more money, so this is actually better for you. Now of course, what happens is they look at performance and go, well, hold on a second in this little sliver of time, you know, my performance was worse and I should have paid. [00:08:46] But you can’t predict that in advance. You, you, you don’t know that I. Into the future. Right? So it’s hard to justify. Wouldn’t you? Wouldn’t, wouldn’t the risk also be the other way? Like, Hey, we open it up, you’ve got 32 different options, and you go, well, how come you didn’t let us use Alliance Bernstein stuff? [00:08:59] Man, you guys killed it. Right? You know, it’s like, you know, I mean, it’s a double-edged sword. Well, it is funny you say that, og, [00:09:06] Joe: because the second half of this complaint, this lawsuit, lawsuit goes directly in that direction. When people evaluate their 401k, what drives you up a wall when people are evaluating their fund performance? [00:09:19] OG: Well, I mean, if I asked the average person, how do you pick your fund options? So if you start at a new company and you’re like, all right, I need to, I need to pick my phone, you know, my allocation, I would venture to say the vast majority of people, sort by performance over periods of time, they’ll sort by the one year performance, the five year performance, the 10 year performance, the 15 year performance, and go, I’ve seen that name a couple of times at the top. [00:09:44] I’m gonna use that one. That’s the default way of selecting options. [00:09:47] Joe: And if they’re comparing that performance against anything, what’s the thing that drives you up a wall that people compare the performance to? [00:09:54] OG: Well, they’re comparing it against potentially either the other things in the fund or an unrelated index of some kind and saying, well, this fund sucked. [00:10:04] And it’s like, well, yeah, you’re comparing the bond fund to, to the [00:10:06] Joe: SP 500 or [00:10:08] OG: the tech, you know, the, the nasdaq. Of course it’s gonna be different [00:10:11] Joe: in this court. They brought in all kinds of experts in this court case. They talked about skillful ways to benchmark your portfolios. And this was part of the reason lines Bernstein won as well. [00:10:23] Listen to this, so the plaintiffs also allege Alliance Bernstein acted imp prudently as the plan sponsor by retaining investments that underperformed benchmarks during various periods of time. However, and this is a quote from the document, the alleged underperformance is not of sufficient duration or magnitude to create an inference of misconduct. [00:10:45] Meaning just because it underperformed some of the time at random times does not mean that they did it maliciously. The court then said, quote, and I love this. Virtually any investment vehicle can be said to underperform its benchmark. Depending on the timeframe that is chosen. ERISA protects participants against Imprudence. [00:11:06] It does not however accord participants and insurance policy against market losses. Amazing. [00:11:14] OG: Yeah, and like Peter Ma, Luke said a couple of weeks ago, you’re virtually eliminate all of your market losses if you just give yourself enough time. That’s your insurance policy. Your insurance policy is invest in it for 25 years, or you know, statistically 20 years and don’t performance chase and you’ll be handsomely [00:11:31] Joe: rewarded. [00:11:32] Stop comparing your return to an index. That has nothing to do with your goal. I think that’s number one. Yeah. The ridiculous. I could have just picked the s and p 500. People say, well, number one, in a lot of cases you should be picking the s and p 500. But number two, what the hell does the s and p 500 have to do with your goal? [00:11:51] Like what, how much money do you need to save? What rate of return do you need to reach your goal? Pick funds based on that. Use tools like Morningstar to find the best tool to help you get there. [00:12:02] OG: I think there’s a great, uh, comeuppance. Can I say comeuppance coming? Is that, is that comeuppance? That’s redundant hair. [00:12:09] No hair too. That would be redundant. Yeah. Imminent comeuppance. [00:12:13] Joe: Okay. That works. Imminent. [00:12:14] OG: Yes, that works. Uh, I don’t know that it’s imminent, but that there’s a whole group of investors. Who have invested since the recession, call it 2010, 2009, and have been handsomely rewarded with being invested in large US tech companies. [00:12:31] I mean, insanely handsomely rewarded to the tune of four or 500% returns and at the expense of all other asset classes. That’s not saying that everything else hasn’t done well also, but the, the disparity between large US tech companies, a, KA, the s and p 500 as of late and large value, or international growth or value or small growth or value, is the largest disparity that it’s ever been. [00:12:56] And I think we’re losing sight of the fact that there is market cycles that happen and there’s periods of time where different asset classes perform at different, you know, rates and at different cycles. And I think we’re getting very close to kind of that tipping point where I. Just the general advice of going, well just put it on the s and p ’cause you can never go wrong. [00:13:20] And it’s like, Joe, you and I remember 2000 through 2007, you know, the market was up during that time, but it was pretty blah. I mean, what was the phrase? Was it the two thousands, the lost decade where you literally, you made no money, nothing in large growth over that period of time. So, you know, I’m not certainly forecasting that and saying that that’s, you know, what’s on the horizon. [00:13:41] I’m just saying that you gotta be careful when everything that you’re reading or everything that you’re hearing, or everything that you’re believing is all pointing you in. One thing, there wasn’t too long ago when everybody said real estate was the, the only place to be. And then we promptly had, you know, 50% losses in residential real estate. [00:14:00] I mean, [00:14:00] Joe: I got a wonderful email from a stacker. Who, uh, I encourage to call into the Haven Lifeline because, and it’s on this topic, he read J Collins, the Simple Path to Wealth. And by the way, j Collins, simple Path to Wealth, wonderful book, highly recommend it, but it’s called The Simple Path to Wealth, not the optimal path to wealth or the most efficient Path to wealth. [00:14:21] But when you’re first starting out, he recommends the total market index. Buy a little bit of everything. You buying small companies, mid companies, international companies. Mm-Hmm. You, you’re buying companies, well not international. You’re buying multinational companies. Yeah. But you’re buying a good chunk of a lot of the stuff. [00:14:36] This stacker said he had a problem with that. He’s like, I prefer the s and p 500 in large growth. And I wrote back, of course you do, because you’re looking at the short-term results. There is going to be a butt kicking for people that just look at short-term results. There always has been, I don’t know when it’s gonna happen to your point, but it’s gonna happen again. [00:14:56] So there are real people listening to the show og, who are thinking exactly what you’re cautioning. [00:15:01] Doug: Okay. Oh, that’s a bit of a stretch. Real people listening to this show, right? Whoa, whoa. Easy. Okay. I dunno what color the sky is in your world, Joe, how is she related to [00:15:10] Joe: mom? [00:15:11] Doug: But what, so you say short term results. [00:15:13] What is short term? As you were on that rant. Well, this is [00:15:17] Joe: the scary thing because Doug, it looks like long term, right? I mean, oh gee. It totally looks like long term. We’re looking at the last 10 years and you go, well, it’s 10 years. That’s a yes. It is a long time, but just like we had 10 years of the s and p doing nothing, so everybody gave up on it. [00:15:34] Now we have the last 10 years of the s and p 500 doing everything, and so people are like, forget the total market index, 10 year quote, long term period. It kicks its ass. You’re, you’re asking for trouble [00:15:48] OG: over long periods of time. We know that the s and p averages somewhere between 9.9 and 10.1% a year. [00:15:54] And you say, well, how’s that possible? If the last, you know, 12 years since 2009, the s and p has averaged 13, and that doesn’t include 20, 23 numbers. That only includes 2022 numbers, or through 2022, where the market was down 20%. And, and over that 13 year period, it’s still averaged still 13.1. And so you go that 13 year period averaging 13%, including a minus 22 in there, and yet the overall return moved one 10th of a percent. [00:16:21] That’s gotta tell you something in terms of your, you know, just kind of thinking about how, how this works over long periods of time. It’s like, it, it kind of means in my mind that there, there has to be some other end of that pendulum. It doesn’t mean it’s gonna radically swing. I, I don’t know. I. But I think Prudence would suggest that it can’t always be one particular thing forever. [00:16:43] We’re saying it. [00:16:44] Joe: Mentor Peter Mauk a few weeks ago said it. We have had another amazing gentleman on the show a couple times. Paul Merriman has said it. Never heard of [00:16:55] OG: him. [00:16:56] Joe: No. No. I, no idea. I think it’s really important to divorce your benchmarking from the s and p 500. Forget b, base it on your goal stackers. [00:17:07] Don’t base it on the s and p 500. You know what, if you wanna dive even deeper into that and, uh, assorted links from different places we’ve curated. Kevin Bailey writes our 2 0 1 newsletter that will come out tomorrow on this very topic, so if you hurry, you can get that one. Stacky Benjamins dot com slash 2 0 1 signs you up for the 2 0 1. [00:17:26] Comes out twice a week and does deep dives on these very topics we, uh, discussed, so that if you’re gonna put these into action, you can go even deeper on those topics. Speaking about going even deeper, our mentor today is the Scott Galloway. You’ve seen him Rocket on Bill Maher. You’ve seen him all over the internet with comments that I often agree with. [00:17:51] Smartest man in the room stuff. A guy who’s not afraid to tell you exactly what he thinks. Very Gordon Ramsey ish. Yep. Personality. A lot of fun to talk to because he doesn’t mince words. Scott Galloway, happy to mentor you and beat you around a little bit. If you are somebody who’s not taking yourself seriously, that’s who we definitely want you to learn from. [00:18:12] He’s coming up with the algebra of wealth. Let’s get rid of emotions. Let’s begin thinking in terms of how do we boil this down to a very simple formula to success. That’s what Galloway’s all about. He’s coming up next, but as a way to get there. The guy who’s also, yeah, no BS ever. I’m a [00:18:30] Doug: little hurt. I mean, that whole intro, I really thought you were going to right up until the very end, I thought you were gonna say Neighbor Doug and then you said Scott Galloway. [00:18:38] Well, the both of you. The both. The both of you of, yes. Hey there, stackers. I’m Joe’s mom’s neighbor, Doug. On this day in 1888, George Eastman founded the Eastman Kodak Camera Company, a former bank clerk. Eastman changed modern photography forever with the release of his first camera, the Kodak number one. [00:18:58] Unfortunately, Eastman died in 1932, barely missing an opportunity to be a guest on Stacking Benjamins. While the Kodak number one was compact and lightweight, it came loaded with what was then a huge 100 exposure roll of film. I’ve got more selfies on my phone than that. They’ve all been taken by request. [00:19:18] Of course, they’re all just too good to delete. One day far into the future, I’ll be old and wrinkly maybe, and I know people are gonna wanna see how I became a local legend. History will tell the full story, and I’ve got it all saved on my phone. Now. People spend their entire days taking photos and videos of seemingly everything within their line of sight, just in case everything suddenly turns to dust. [00:19:44] You can’t be too careful. Today’s trivia question is like two great tastes that taste great together. At some point, someone said, Hey, why don’t we combine the phone with a camera? So let’s make that. The question for today, when was the first camera phone released? I’ll be back right after I set up my new ring light. [00:20:05] I’m gonna do a photo shoot wearing all the different Stacking, Benjamins, t-shirts, and once those are up on the site, I bet we’ll sell out of them in a day tops. [00:20:27] Hey there, stackers. I’m photographer and Stacking Benjamins resident model, Joe’s mom’s neighbor, Doug. When George Eastman started his camera company, he invented the word Kodak as its name. Why? Because he thought his name would be impossible to pronounce. I’d like to talk to the person who found Eastman to be too exotic of a name. [00:20:47] Today’s trivia question is, when was the first camera phone released? The answer? While the iPhone seems to have launched a generation of amateur photographers, the very first camera phone was not that, but a Kia Sera phone slash camera, which was released in May of 1999. And now let’s meet today’s mentor. [00:21:10] And if you’ve never heard him buckle your seat belts. It’s Scott Galloway. [00:21:16] Joe: I’m super happy he’s joining us again at the card table. Scott Galloway’s back. How are you my friend? [00:21:20] Scott Galloway: I’m great, Joe. Thanks for having me. [00:21:22] Joe: Mother’s Day is coming up in about a month and your new work, the Algebra of Wealth, has your mom, Scott all over it? [00:21:31] Can you talk about your mom and the importance of your mom in your life? [00:21:34] Scott Galloway: Wow, I wasn’t expecting to start there. Yeah, I don’t know your background. I was raised by a single mother and single immigrant mother who lived and died, a secretary. And I describe, I described my mom and my life up until the age of 25 is, you know, lie to my life. [00:21:48] And it was me and my mom against the world. You know, we didn’t have a lot of money, but you know, I look, I’m here with you for a few reasons. One, being born in America in the sixties was hitting the lottery. The generosity and vision of the regents of the University of California and California taxpayers. [00:22:07] I got to go to UCLA for a total tuition of all four years, or actually five years of $6,000. And then I got to go to graduate school at Berkeley for a total tuition of $2,000. And the acceptance rate more importantly, was 76%. When I applied to UCLA, now it’s 9%. So it was not only affordable, it was accessible. [00:22:25] And then probably first and foremost, the irrational passion for my wellbeing of my mother. I’m a, I’m a confident person and I think a lot of that is I had someone telling me explicitly and implicitly every day that I was, you know, that I was worthy. So played a huge role in my life. So I think that a lot of my views on social policy are shaped by the fact that anything that gets in the way. [00:22:47] Of mothers not being able to look after their kids and, you know, instill that sense of confidence and, and worth that. That’s kind of where I think it all starts in terms of a, you know, raising secure, healthy, healthy men. And there’s actually some research showing that the kind of single point of failure for men actually is when they lose a male role model. [00:23:09] And I didn’t have that, but my mom went out of a way to make sure I did have male role models in my life. Anyway, long-winded way of saying, you know. Yeah, the reason I’m here with you is ’cause of a lot of things were outta my control, but my mom and that irrational passion for my wellbeing kind of built a nice base. [00:23:26] How about you, Joe? I don’t know much about you [00:23:30] Joe: except for working in mom’s basement at 56 years old. You know, living the dreams, Scott. [00:23:34] Doug: There you go. [00:23:35] Joe: No, I was very lucky. I had two, I had two parents that didn’t know much about money. They knew the value of hard work. And what was interesting to me about this project is you say that a lot of us get trapped in this. [00:23:47] You know, I mean, we’ve got this American way, right? We’re gonna work our butt off. And you make a big point of saying that, hey, working hard is great, but there’s this hustle culture which often leads us nowhere. [00:24:00] Scott Galloway: Well, you just have to keep your eyes on the prize. And that is all of this money saving, you know, this stuff’s important with GDP, innovation, growth. [00:24:09] Yeah. All the things we talk about all day. This is a means and the ends is deep and meaningful relationships. And people say money can’t buy you happiness. That’s bullshit. There’s research that shows that happiness, generally speaking, is correlated to the amount of wealth you have. The good news is it tops out once you get to a certain level of economic security where you can afford a home education for your kids absorbent, economic shock, good healthcare. [00:24:32] And unfortunately, in a place like LA or New York, that’s seven or 800 grand a year. Mm. And there’s also another myth. Billionaires are no less happy than millionaires. They’re not any happier. But once you get to a certain point, and this is obviously a good problem, but once you get to a certain point, you gotta realize that money is ink in your pen. [00:24:48] But you can make chapters burn brighter and maybe you can write new chapters, but it’s not your story. And the research is definitive. The key to a happy life is deep and meaningful relationships, and I think of money as just something that makes it easier to engage in those relationships with an absence of anxiety, if I was economically strained, my ability to really connect and really enjoy my sons. [00:25:12] It just would be harder to really engage in the joy of those relationships. It would be harder to take care of my father. It would be, I think it would inject strain into my marriage if I was economically insecure. But at some point, you gotta realize, okay, the reason you work, the reason you save money, the reason you invest, the reason you’re smart about money is such you can enjoy and engage in what is the whole shooting match. [00:25:34] And that is deep and meaningful relationships. And then flipping back, it kind of goes full circle. I think a lot of the things I write about in this book, you talk about on your show all the time, the power of compounding, diversification, low cost index funds. You know, it’s kind of the basics, but what people don’t talk about in financial literacy books is that if you look at the research, there’s a bit of a myth that billionaires are these awful people lighting their cigars with a hundred dollars bills that crawl over others to become rich. [00:26:03] And it’s just not true. And it’s unpopular to say it, but I stand by it. Generally speaking, very wealthy people have very high character because greatness and wealth are built in the agency of others. And the most financially disastrous things that can happen to you are a divorce from your spouse or your business partners. [00:26:19] They’re very talented people who make a ton of money and end up much less economically secure because they’re hard to get along with and they don’t bring generosity. And forgiveness to the relationships. My dad made a lot of money and ended up poor at 65 ’cause he was married and divorced four times. [00:26:36] And nothing ruins the company, like the partners getting a divorce from each other, not getting along. So if you wanna be really wealthy or if you want economic security, the pillars of achieving that are bringing real character and generosity to your relationships. It’s like what’s the key to wealth? I can give you an algorithm that’s pretty straightforward and I have that algorithm in the book. [00:26:56] But the atmospherics for it are building a life of love and forgiveness, such that people want you to win, acquire allies along the way. You have a real partner in your spouse who’s pulling with you. You have people that want to give you the benefit of the doubt. You have people who want to give you investment opportunities, that wanna loan you money, that wanna see you win. [00:27:18] And we don’t talk about that enough in financial literacy book. Show me someone who’s difficult and it doesn’t have an easy time maintaining long-term relationships. I’m gonna show you someone whose economic security always trails their talent. [00:27:31] Joe: I don’t understand why we call that a soft skill then, right? [00:27:34] I mean, there’s this term soft skills communication that seems to me to be Scott, what we talk about more than anything on the show, the value of community, the value of successful communication, the value of getting yourself in the room and developing your own curriculum versus letting somebody else do it. [00:27:52] Scott Galloway: Yeah, I think that’s right. And I talk about this. The first part of the algebra or the equation, if you will, is focus. And that is, I think young people unfortunately get terrible advice at schools such as mine, NYU. We invite two types of speakers, really interesting, accomplished people and billionaires. [00:28:09] And we’ve just decided that billionaires have access into life and they always end with this advice, follow your passion. And the guy telling you to follow your passion made his billions in iron or smelting. And what happens is kids conflate passion with hobby and passions tend to be in industries that have a 90 plus percent unemployment rate. [00:28:29] And if you’re in the 0.0001% of sports or fashion, fine, go for it. And people around you will let you know that you are in fact, in the 0.001%. But when someone tells you to follow your passion, just be clear. Opening a restaurant or a nightclub or being a dj, I. Those industries are incredibly difficult to maintain a living in. [00:28:49] That’s the bad news. The good news is that if you understand, if you have the discipline to get great certification, get a law degree, you understand tax code, your discipline, you can understand and articulate the intersection between tax and law and people’s economics and organizations and you’re good with clients. [00:29:06] The best tax lawyers fly private and have a broader selection set of mates than they deserve. And those things, the accoutrements, the relevance, the economic security, will make you passionate about whatever it is, being great at something that affords you relevance and economic security makes you passionate about that thing. [00:29:22] So your job, your job is to find something in your twenties that you’re really good at. Maybe you could be in the top decile at some point, maybe even the top 1% in an industry that has a 90 plus percent employment rate. ’cause you’d rather be in the top 10% of what I’ll call an industry that maybe doesn’t have the kind of curb sex appeal versus the top 1%. [00:29:44] Being in the top 1% of sports or modeling or acting is not a good place to be. You have to be in the top 0.1%. Being in the top 10% of a profession or something that sounds a little bit more mundane is a life full of trips to Italy and taking care of your parents and having your weekends off and getting invited to cool events. [00:30:05] Uh, so. Yeah. The absolute, the return on investment of your human and financial capital is inversely correlated to the sex appeal of the industry. You are thinking about going into, [00:30:17] Joe: you referenced earlier the, the algebra of money. I referenced it earlier as well. Year construct is several equations, but there’s a couple really basic equations at the beginning, and you have the first foundational equation is focus plus stoicism times diversification. [00:30:36] Obviously, the entire book lays out all those things, but I’m just imagining you, Thursday night in your writing session, you’ve got a glass of wine and all of a sudden you, you know, you got some nice jazz music playing in the background, and all of a sudden you stumble upon this equation. Tell me how that became the equation. [00:30:51] Scott Galloway: Well first it’s, it’s bourbon and it’s Tom Petty, but I, I get your meaning. Um, so look, I looked at it is pretty research. I like to think I’m fairly research or data-driven, you know, that kind of study that showed that you are the average of your five closest friends. Sure. That if five people hang out together, they end up the same body mass index, they end up the same political affiliation. [00:31:14] They end up making the same amount of money usually except where the variance is. One of them will end up economically secure, wealthy, and one will not end up fairly poor. And the other three, somewhere in between, there’s much more variance around where you end up. Wealth isn’t about how much money you make, it’s about the principles and strategies you apply to that money you make. [00:31:35] And so essentially it’s find your talent, find something you can make decent money at, that’s what your twenties is about. And then it’s about, when I say stoicism, it might not be the perfect word, but having the discipline to recognize that no one’s thinking about your as much as you are. And that the ability to try and stiff arm the economy in America, which is constantly figuring out ways that are psychologically tested to hit you at exact, the exact right moment. [00:32:01] To say you should upgrade from economy to economy comfort. Do you want to order some flowers, chocolate cake with your pasta that you just ordered on Uber Eats? You really should order these really cool new Bombas socks ’cause you ordered these tennis shoes in your Amazon cart. There are so many amazing ways to spend money in a capitalist society that it takes real discipline. [00:32:22] Oh, you’re at a club. You need to signal that you’re a baller and increase the likelihood you’re gonna meet somebody. So you should really order a bottle of alcohol and don’t order vco. Order the dom. This is stupid. This is ruin us. The having the savings muscle, the discipline muscle, uh, realizing that you can control your emotions and that these folks are trying to manipulate your emotions such that you spend money on stupid things. [00:32:49] That don’t add value to your life. I call that stoicism. It’s basically developing the savings muscle, then it’s diversification, and that is, we see so many screenshots of people who went all in on Solana or Nvidia and are now rich. You know, I can prove to you mathematic. I mean, last year the s and p was up 24%. [00:33:08] Well, that’s amazing. Well, not really. 70% of those gains were from just seven stocks. And you’d like to think you can pick the 1.4% of stocks that hit. Most of us can’t, and most of us will never be able to do that. I didn’t buy Nvidia. I couldn’t figure it out. So you don’t need to be a hero. Don’t try and find the needle in the haystack by the whole haystack because while something going up, you know, the s and p’s gone up, I think the last 15 years, 11% a year. [00:33:33] Well, that doesn’t sound like a lot. That means if you’re smart enough to hold onto money and invest over 21 years, you’re up eight x. And you don’t need to be a hero. And the way I screwed up was I was never diversified. I was always over invested in tech, in my own companies. And when the dot bomb implosion happened, and then again in the great financial recession, I went from being wealthy to most definitely not wealthy. [00:33:56] And it’s psychologically very, very damaging. It’s really takes a toll on your mental health and diversification is your Kevlar. You can take a bullet to the chest, you can have a stock go to zero, but if you’re diversified, you’re fine. It’s not a fatal injury. Any one stock goes up 50.01% of the days. But if you picked any five stocks in the s and p 500 and held onto them for 10 years, nobody has ever lost money. [00:34:21] And that takes me to my last equation. Try and also ignore a flaw in the species. And that is for the majority of our time on this planet, we haven’t lived past the age of 35, so we literally can’t calibrate time. You know, if you’re 25, you’re probably gonna be on this planet. For another 80 years. And the other thing I want to convince young people of is that it’s gonna go a lot faster than you think. [00:34:43] You just, it’s gonna be shocking how fast it goes. So if I could give you a magic box and say, relatively quickly after you put a thousand, 10,000, 50,000 bucks in this box, if you put a thousand bucks in now when you’re young, and that’s hard. I’m not saying it’s easy. I can get you 25,000 or 15,000 in an instant, and that instant might be 20 or 30 years. [00:35:02] And that doesn’t sound like an instant. But Joe, you know, you’re kind of my age, weren’t we in our twenties yesterday? It just flew by. [00:35:09] Joe: Yes, [00:35:10] Scott Galloway: it’s gone. Try and grasp what our instinct is not good at. Try and grasp, but time is gonna go really fast. And if you take advantage of that, your superpower as a young person is time. [00:35:21] Do your best to find something where you can make good money. Focus on your talent. Find your talent, not your passion. See if you can gamify a savings muscle and start just saving a little bit of money. Then a little bit more. Diversify low cost index funds. Don’t try and be a hero. Don’t fall into the trap of thinking that you understand the market better than other people and can find the right stocks. [00:35:43] You don’t need to be a hero. Buy indices that are low cost, and you talk about the importance of low fees, and then just let time take over and don’t fall into the trap. I did. I’m always been very successful, made a lot of money. Taking a company public, always made a lot of money, but I always thought, I’m such a baller. [00:36:00] At some point I’m gonna have a 10 50 and a hundred million dollars payday, and I never really just sort of consistently saved and put into low cost diversified funds. And where it left me was at the age of 42 when my first son was born. I was not nearly as economically secure as I had hoped, or I thought I deserved to be given my retail or curb success and was hugely just stressful and anxiety driven. [00:36:22] And I’ve just, and if I had just been a little bit more disciplined and saved a little bit of money from a young age, I wouldn’t have found myself in that spot. And I got very lucky from that point forward. And now I’m economically secure, or I shouldn’t say I got lucky. I got very serious when my first son came, you know, marching outta my girlfriend. [00:36:38] I’m like, that’s it. I make good money. I’m gonna move to a low cost state. I’m gonna bank a ton of money. I’m gonna diversify like crazy. And I got lucky that, you know, my son was born in 2008. These have been 16 amazing years. But saving money in what will be the decade or decade and a half of a bull market, which will happen over the course of your lifetime, is just extraordinary how much money you can save and the comfort. [00:37:05] That can provide and also free you up to really focus on what’s matter in your relationship. So that’s essentially the equation. And if you make a ton of money selling an album or, uh, picking a great stock or selling your company, good for you. But why not have a plan B just in case you don’t hit it big? [00:37:22] Let’s dive [00:37:22] Joe: into the stoicism piece a little bit, Scott, and I’m wondering how we change behavior effectively. Because you write, if durable changes of behavior could arise from intention alone, right? We wake up, we’re like, I intend to do X, and then of course we stick chocolate in our mouth and we don’t do any of it. [00:37:38] You write, if durable change of behavior could arise from intention alone, we keep our New Year’s resolutions and never forget a thank you note. How do we. Change our behavior, because most of us, as you know, not as many of us as as we’d like, are on that stoicism bandwagon. When, to your point, we’re always asked to be upgraded. [00:37:58] Just before this, I was on with American Airlines, you know, on the app, and they’re like, Hey, you could be first class for another 120 bucks. [00:38:05] Scott Galloway: Yeah. And it’s not an expense, it’s an investment in yourself. I mean, they’re, they’re amazing at this. You’re fighting. [00:38:12] Joe: You deserve it, Scott. You deserve it. [00:38:14] Scott Galloway: Yeah. You’re fighting unbelievable technology that’s been tested by psychologists, so recognize that you’re fighting them. [00:38:21] So look, I, I think it’s a few things. The first is what gets measured gets hopefully done. And that is, there’s a great movie called, uh, house of Sand and Fog and Ben Kingsley’s in it. And he is a gas station attendant who leaves Iran after the revolution. And he is working in a gas station, used to be a general, and he writes down everything he spends, including the Snickers bar. [00:38:39] I think being a little bit neurotic about it as a young person. Uh, helps you really try and understand where your money is going. Have a budget, take advantage of these apps. Then gamify it round up, you know, with acorns, round up your spending, cut out a cup of coffee and gamify your saving. When I was a sophomore in college, I. [00:38:59] When I was at UCLA, if I didn’t make $3,300 over the summer, I wasn’t enrolling in the next year in college. I needed that to pay my overdue fraternity bills and pay tuition. So I had 12 weeks to save $3,300. So me and six other guys in the fraternity who were all in the same position went to, you know, UCLA as a public school. [00:39:15] There was mostly wealthy kids in my fraternity, but a lot of us weren’t. We gamified spending, and as we got together every night on a whiteboard and we had a contest around who could spend the least money, I spent $73 a week. My total living expenses. Now granted this is 1984, but our big treat, I lived on Top Ramen, bananas and Milk. [00:39:34] Joe: Wow. [00:39:34] Scott Galloway: And I’d go to work and I’d you know, work 12, 14 hours a day, two different jobs ’cause I needed to save that $3,300. And then on Sunday nights we’d cut this coupon out of the Daily Brew and we’d go to this restaurant, you might remember it called Sizzler, where they had 3 99 with this coupon all you can eat. [00:39:49] And me and the entire crew team would walk into this restaurant and eat for a week. I’m convinced we put this restaurant out of business. And here’s the thing, when you’re young, Joe, we still had a good time. We’d each throw in two bucks and go get a case of beer and have a fun time and invite friends over and play our Bruce Springsteen and Tom Petty albums and drink beer. [00:40:11] And we had a nice time. You can have fun on not that much money when you’re young. So one use apps, measure everything really gamify and start just as when you consistently work out, the muscle gets stronger. Really try and work out consistently the savings muscle and gamify it. And what’s great is if you have a partner, a friend, it’s like having a workout partner, a friend, a girlfriend, a spouse who understands the importance of savings and wants to play with you. [00:40:43] Everyone talks about, okay, what ruins divorce? Well, it’s lack of communication or it’s infidelity. The number one reason that people file for divorce, specifically 70% of the filings are made by women is economic strain. So being aligned with a partner around, okay, if we can figure out a way to put a thousand bucks a month aside and then 2000 bucks in 10 years, we’re gonna have, if with low cost, we could have this and just be, just have a giant sigh. [00:41:11] Having a partner in gamifying it and developing that savings muscle using technology apps. But more than anything, I. Specifics. Every day I’m gonna write down everything I spent. I’m gonna round up on Acorns. I’m going to try and get a hundred bucks a week automatically into my public.com savings or investment account measurement, gamification, and then really committing to really developing a huge savings muscle and ideally gamifying it with a friend or a spouse. [00:41:43] Joe: It is not lost. I mean, that’s the third time in this short time that we’ve been together, Scott, that you’ve talked about the power of surround sound, about the people you’re surrounding yourself with. I was at the gym yesterday and we were all talking about, I. I could go to a gym and workout on my own, but you know, the reason I go is ’cause I know my friends are waiting for me there. [00:41:59] And if I don’t show up, I’m gonna get a text that says, Hey, how come you weren’t there today? [00:42:03] Scott Galloway: Yeah, [00:42:04] Joe: absolutely. Super. [00:42:05] Scott Galloway: It’s powerful. And the key is having other people, especially in your, what I’ll call, I mean, friends do it really well, but I would say this is something that doesn’t come up enough in people when they’re thinking about trying to build a life together. [00:42:17] Make sure have an honest conversation. What is our expected economic weight class? Who’s responsible for maintaining that economic weight class? And also what is our approach to spending and saving? Because it’s just so hard when you’re not on the same page and, you know, it creates just huge friction in the relationship. [00:42:35] Again, it comes back to the key to wealth is really rooted in relationships. [00:42:39] Joe: I love the, the old, uh, Stephen Covey work about having a family mission statement. Like, Scott, you’ve had many companies and your company is a mission statement. Yet we go home and we burn our money. We spend so much time on stuff that we’re not, we’re not focused on. [00:42:56] I wanted to, speaking of focus, I wanna, I wanna focus on a different area, which is, you know, you talk about how these companies are so good at selling you things about upgrade and you deserve it. But you also make a point early in this work that financial companies are often talking about your number and about working toward retirement. [00:43:15] And you have this very bold statement, like, you’re a guy that makes a lot of bold statements, but you’ve a very bold statement that you kind of, you wanna burn this idea of working toward traditional retirement. How come [00:43:29] Scott Galloway: Look, what you should be working towards is at some point your work becomes something you enjoy versus something. [00:43:36] It’s a want versus a need. I get to do exactly what I want. Professionally, I work as much, I don’t work 60 to 80 hours a week anymore. I work 40 to 60. But the difference is I used to work 60 to eight hours doing that. I didn’t really love, I mean, I was good at it, but I’m not sure I really loved it. Now I just only do things I love, and it’s because along the way, I developed those savings muscles and started getting economic security work used to be awful for most people. [00:44:03] It really did. I mean, for all the, you know, the notion we’re depressed and anxious, but the reality is the majority of men did hardcore, laborious, dangerous work a hundred years ago. So the idea that at some point you would get to stop doing this literally backbreaking work, that was the end state. That’s no longer true. [00:44:22] If you’re talented or you can save some money, you can start thinking about. Spending your days not working, but involved in an, in an advocation that you really enjoy, but there is no finish line. The greatest increase in mortality for men is when they retire. When they lose their social network and their social connection and their purpose. [00:44:43] You, you’re never more likely to die versus where you were yesterday, your mortality rate than when you retire. You add years to your life when you keep working. So the key is how do you keep working or find purpose and do something that you really love? It might be non-profit, it might be coaching basketball. [00:45:00] It might be riding a substack on a topic that you’re passionate about. And here’s the thing, if you develop that savings muscle, if you’re smart about your investments, diversification time, et cetera, you have the luxury of thinking, all right, my nine to five is gonna start to have more purpose and be a function of choice as opposed to a function of just need. [00:45:22] And that that’s a gift if you can figure out something. If you have the flexibility and the economic security such that over time, okay, I don’t need to make as much money. I worked in investment banking right outta college. All of my bosses hated it. They all hated it. None of them enjoyed what I, I, I couldn’t, I can’t tell you one investment banker I worked with that really like, thought, oh, this is awesome. [00:45:45] But they were making so much money and they had let their lifestyle creep up to their income that they were sort of trapped. So I could see they were really working towards retirement. Get me outta here, put me on the beach. It’s a horrible place to be. That’s okay. So you’re gonna, you’re gonna work your whole life and work, not enjoy your life as much until you’re 65, and then hope you live another 20 years. [00:46:07] So the idea is if you spend, if you keep your spending low, at some point, maybe in your thirties or forties, you can start thinking about, okay, the world of making less money, but doing something I enjoy more is now open to me. That’s an amazing feeling. It’s liberating and taking your days to something that are a means to an ends as opposed to your days become the ends. [00:46:29] I absolutely love what I do. I don’t discern between the weeks and the weekends. I could give a shit if it’s Saturday or Tuesday when I was working and I had to make money and I was doing something I didn’t like. I remember by Thursday night I’m like, oh my God, the weekend’s coming by Friday afternoon. [00:46:44] It was Yaba DBA Do, thank God it’s Friday. You’re right. And then I go crazy and drink a ton and have a ton of fun over the weekend. And by Sunday night this dark cloud would start to come over my, my Gulf. It’s back in a Vietnam again, you know, hand to hand combat in this job called investment banking where I just hate what I’m doing, but I gotta do it because I gotta pay my rent. [00:47:06] And just over a course of time, as I got some economic security, being able to kind of continue to work or work in stuff where I. That’s the key. You don’t wanna discern between the weeks and the weekends. That’s the goal. That’s the finish line. The finish line isn’t stopping working. People need purpose. [00:47:21] People need something to do. [00:47:24] Joe: The book is The Algebra of Wealth, and we just barely touched on it. Scott is always is just like, last time I had 67 questions. We got to four of them, but it’s available everywhere yesterday, right? It’s available now. [00:47:37] Scott Galloway: Yes, that’s right. Thank you, Joe. [00:47:39] Joe: Last question for you. When I first came across your work for the first time, I remember seeing how blunt you were, seeing how you made these bold statements. [00:47:48] You were able to reset and focus people on the truth. I enjoyed all that, but I’m like, this is just a very serious guy. As I’ve gotten to know your work over time now, Scott, you don’t get enough credit for how funny you are. Big guy. God, your book is so funny. Have you ever thought about developing like five minutes of standup? [00:48:08] ’cause I think there are so many times when I think this guy is so, so funny. [00:48:14] Scott Galloway: Yeah, you’re being really generous, but, and this is a flex, and I’m bragging, but it won’t stop me. At, at South by Southwest, I host a podcast called Pivot. [00:48:23] Joe: Yeah. [00:48:24] Scott Galloway: And we won Best News podcast from the the iHeart podcast Awards. And that was really exciting. [00:48:29] And they ask you a question on stage and they said, and they always have a random question and you’re on the spot and you know the cameras and they’re like, what’s the last award you won? I sat there, you know what, the last award I won, I won most comical in high school. [00:48:42] Joe: Did you? [00:48:43] Scott Galloway: Yeah. And since I was a class clown and since then I’ve avoided all awards until 40 years later, uh, I won an award for a podcast. [00:48:51] But I think that depressed, angry people are generally a little bit more funny because they, they see the world as it is. Oh my gosh. I, I absolutely, the people I love listening to who soften the beach for me, whether it’s a John Stewart or David Chappelle, use humor as an effective tool. Also, I developed a humor muscle ’cause I figured out as a guy who was not very attractive, uh, that if you can make a woman laugh, there’s a much greater likelihood that she will kiss you. [00:49:19] So for me it was, for me, it was just an ability to maintain some prospect and I might get to propagate at some stage. [00:49:25] Joe: Scott, thanks again for mentoring our stackers. I appreciate it and good luck with your next activity. [00:49:31] Scott Galloway: Thanks, John. Congrats on your success. [00:49:33] bit: Hi, I am Derek, and when I’m not working on the hook for Joe’s Mom’s next greatest rap album, I’m Stacking Benjamins baby. [00:49:41] Joe: I wonder how Scott Galloway really feels we’ll. Never know if he quit hiding his feelings about things. Stop beating around the bush, Scott. I love that guy so much. He could, if he could join us every episode, I’d be all for it. I’m like, yep, [00:49:54] Doug: hold on. Him and OG together. Oh, I need a little bit of velvet on my hammers. [00:50:00] The new, the new [00:50:00] Joe: Ghostbusters is out to use their classic line. Don’t cross the streams. No, please. Hey, time to shine a light on one stacker said, you know what? I better call Saul C Hi and og. This is the part of the show where we help another stacker, hopefully get their financial house in order today, we’re gonna help Alex out, guys. [00:50:20] So, uh, Alex, how you doing, man? [00:50:24] caller: Hey, Joe and og. I’m not great at introductions, but I’m sure that Doug will fill this in somehow. I have substantial savings in my retirement account and I could retire early. I’ve heard that it’s possible to access retirement funds without penalty if I fill out the correct paperwork and let the IRS know that I’ve retired. [00:50:41] Is this true? And if so, what are those forms? Thanks. Any helps. Gonna be greatly appreciated. [00:50:49] Joe: Oh, Alex, we’re not gonna make your day. We’re gonna make your year hopefully ’cause og. Looks like he can retire. [00:50:57] OG: So great. It’s a fun way to start a Wednesday. Like, yeah, I think I can retire. Yeah. So take this job and show it. [00:51:07] Don’t. So how does he get money? Yeah. [00:51:09] Joe: How does he get money out of his, uh, workplace plan? I would do the thing before you start og I would recommend Alex that you do the thing that we saw Kitty do in front of the entire economy audience. A couple years ago she wrote out her resignation letter, but then she created blanks and had the entire audience fill in the blanks for her. [00:51:31] And they weren’t very friendly, by the way, og It’s like ad Libs. It was totally ad libs. That’s great. It was totally complete Mad Libs retirement thing. And, uh, she, she said she ended up, uh, turning it into her bus and her boss was like. Really? And she goes, well, let me tell you how I did this. And then she told him and he thought it was hilarious. [00:51:51] But anyway, that’s great. Yeah. Yeah. Do a mad list. Yeah. Be careful [00:51:54] OG: you don’t, you don’t know exactly how, how that’ll be received. Maybe do the real resignation and then go, this is what I was gonna send you. Ha ha ha ha. Yes. Right. You know, uh, so he gets to retire or maybe can potentially retire before, you know, the traditional 59 and a half age. [00:52:08] I think that’s what he’s talking about here, is I’ve got money in retirement accounts. I know about 59 and a half, which is where you can access your money penalty free for any reason. You don’t have to actually be retired. But after 59 and a half, you can take money out between 55 and 59 and a half. If you have money in your 401k, you can take that money out without penalty if you’re separated from service. [00:52:32] So, so you’re, you know, you’re working, you did your 30 years at, you know, x, y, Z corp, and you retire. You’re 55. You’ll leave the money in the 401k, you can take it out. So don’t, this is not a rollover. You take the money out for your distributions without a penalty. So you know, if you’ve got a pre-tax, you’re gonna pay taxes like normal, so on and so forth. [00:52:51] If you wanna retire before your 55, then you have to do what’s called, uh, SEPP, substantially equal Periodic payments. And all of the rules are found in the IR RSS Rule 72 T, uh, that’s what that is, uh, called or found. You just Google IRS 72 T distribution, or IRA, distribution 72 T. And there are so many rules about how to do this, so you definitely wanna get help on getting this set up. [00:53:20] But basically what the IRS says is, if you’re retired and retirees tend to have a a a A level income, that’s what you need to live on then, uh, if you are going to take a level income out of your qualified plan. Until you’re 59 and a half or five years, whichever comes later, then we will allow you to do those distributions without any penalty. [00:53:48] So set a different way. Let’s say you’re 45, you got $32 million in your IRA, and you’re like, I need 10 grand a month. You can set it up and you gotta set it up with your CPA, with your financial planner. And, and so there’s some rules around this, but you can set it up so that you receive $10,000 a month from your IRA. [00:54:04] You’re gonna be taxed just like you would be, right? But you’re not gonna be penalized the 10% for being under 59 and a half, and that distribution will have to go until you 59 and a half or five years, whichever happens longer. There are some very limited ways to amend it. So this is kind of something like, it’s, it’s, it’s, it’s irrevocable. [00:54:26] Once you decide to do it, you can’t say later, oh, I decided to go back to work. I don’t need to do this anymore. There’s some. Asterisk that you can use to plead insolvency or, you know, some extenuating circumstances, but they’re very few and far between. So this is one thing you definitely wanna make sure that you work through all the, all the technicalities correctly, but it’s totally doable. [00:54:47] So do it. It’ll be fun. Super awesome. Let us know how it goes. Yeah, [00:54:52] Joe: that is so great. And, and by the way, those, those SEPP rules, I’ll second OG what you said, which is that it, it’s not an easy calculation. There’s different ways to do it. And, and I think also having somebody who’s done it before to bounce off the different calculations, which one really works for you is, is a good thing. [00:55:09] Yeah. ’cause, uh, I don’t know about you. While one calculation usually worked best for most people, there were times that people went, oh, I can do it that way instead. Like that, that worked out better. Also, if you have high cost options in your 401k or not enough to really give you a well-rounded portfolio, I like, tell me if you like this or not og, but if you’re over age 55, leave the money in the 401k that gives you the flexibility toward 59 and a half. [00:55:38] Do a good job of that. Maybe leave a little bit extra or maybe a little bit more than a little bit extra in the 401k. Then roll the rest of that to an IRA to maybe give you a little bit, in some cases, a lot in other cases, more options, more flexibility, possibility, a lower fees, more control. Give yourself the, the wherewithal to do whatever the heck you wanna do in your financial plan. [00:56:02] What do you think about that? [00:56:03] OG: No, that could be a good idea. Obviously you wanna read through your plan document and make sure that, um, that doesn’t have to be all or nothing. You know, some companies, some companies are, are very particular about. Kinda an all or nothing decision, but it’s, yeah, I mean, for most plans that’s, that’s doable to do a little bit. [00:56:19] Gives you more flexibility. The other thing you can do with the SEPP is create separate IRAs. Yeah. So instead of having all 32 million in one bucket, you could say, well, I’m gonna have, you know, one bucket that’s got a million in it, one bucket that’s got 31 million in it, and then do the SAPP with just the $1 million bucket. [00:56:37] So you’re not exposing all the dollars to the calculations, like you mentioned, and, um, to all the strict rules that you have to follow. Are you [00:56:44] saying [00:56:45] Joe: Alex only has $32 million? [00:56:47] OG: Yeah, that’s a, I mean, I’m just guessing, just low balling the guy based on his confidence. Yeah, I mean, based on his confidence, I’m guessing that’s kind of where he’s probably landing. [00:56:55] Joe: Alex, congratulations on the early retirement. Great job and love to hear that. Uh, nice work. And you know what, we, were gonna send you some swag anyway, but we’re sending you some swag as a thank you for calling in, celebrating with us, and also, uh, hopefully we helped you answer that big question of being able to get money early. [00:57:13] Hopefully we helped a lot of our stackers who were maybe in a similar situation. So thank you stacky Benjamins dot com slash voicemail. If you’d like us to give you good news as well about whatever you’re wondering about. The best news is, is that there is a, is a place that you can call better news, is if you’re not worried about one little. [00:57:31] Problem. I, I wouldn’t call Alex’s little. I think that’s a big issue. But if you’re worried about the fact that you don’t really have a great financial plan for the future, OG and his team are taking clients. So the way to get on their calendar to see how they can interface with you to make better retirement and better financial planning decisions in the future, you Benjamins dot com slash og. [00:57:53] So go to that link and, uh, make better decisions in the future. Alright, that’s going to do it for today, except for my favorite episode because speaking of the community, this is where we involve the community. Doug. We, we have taken, uh, we give, we gave people about three weeks to vote on our joke off, which is where we took math, we took jokes, we took these two things, we put them together. [00:58:18] Almost like in your trivia, the phone. Yep. And the camera. We took jokes in math and put them together and we’re down to our final four. God, it feels like we’ve been joking off forever, doesn’t it? [00:58:29] Doug: Which is the best feeling? Listen to our 11. It’s. There’s a, it’s a little abrasive at this point. Like when is this gonna end? [00:58:37] Oh my God. [00:58:41] Yeah. So should we remind everybody what the final four jokes [00:58:45] Joe: are? Let’s dive in and tell everybody who the winners are. ’cause this, unless you’re in the Facebook group, you’d have no idea who won this. And I bet people have been waiting for three weeks with be of breath. Like, please tell me, having so much trouble with this. [00:58:58] So, uh, top bracket we had, uh, the number nine seed against the number four. [00:59:04] Doug: Right. So, as usual, we’re gonna give you the higher seed. I’ll just remind everybody the nine seed, little upstart, just, you know, the fan favorite. ’cause it’s a, a high seed. I saw my math teacher with a piece of graph paper yesterday. [00:59:17] I think he must have been plotting something [00:59:19] Joe: from Jen with two Ns. And then, uh, Susie spelled with a z like E Susie. Yeah. Number four. Pretty hard time for me financially. I wasn’t able to pay the bills to my Exorcist as a consequence. I have been repossessed this one. I was sure the Exorcist joke was gonna win, not the case. [00:59:39] Doug: No it didn’t. The because the fan favorite, the upstart, the Cinderella story number nine took this matchup. So we’ve got a math teacher. Wow. We got graph paper, we got plotting. Jen. Jen is in the championship [00:59:57] Joe: game. Nice job. Congratulations. We’re gonna send Jen an email and a prize package for going yet another step. [01:00:04] I feel like I’ve been talking to Jen nonstop, uh, down at the bottom half of this bracket. Another number 11 versus number seven in our Midwest region. [01:00:14] Doug: Melvin and Jeff. An even bigger Cinderella story. Number 11 versus a number seven. Let’s have it with the number seven. Joe, let’s hear what you got. [01:00:24] Joe: What’s the difference, guys, between Texas and taxidermy? [01:00:27] One’s cruel and inhumane. The other’s dealing with dead animals. For all of us that just finished, you know, uh, taxes about, uh, 10 days ago, it’s a little close to home. It makes me chuckle. [01:00:38] Doug: All right. Number, uh, number 11, college is the opposite of kidnapping. They demand a hundred grand from you or they’ll send your kid back. [01:00:47] That was from Melvin, [01:00:49] Joe: Melvin and Valdosta, Georgia. Uh, but by the way, uh, how the hell was that to number 11 seed? Because that’s not, that’s not number 11. Seat joke. [01:00:56] Doug: What idiot did the seatings, [01:00:58] Joe: I had some more. [01:01:01] That’s, that’s the seatings experts calling. They, they want that person fired. That’s exactly who’s calling. Uh, all right guys, go to the Facebook basement group. We’ve already had a lot of voting on these the last couple weeks. You can get your vote in here at the last second. Stacky Benjamins dot com slash basement gets you there. [01:01:23] And all the other general hilarity questions people ask each other. Uh, somebody was talking about being not motivated a couple weeks ago. I like that. Oh, yeah. Discussion. What do you do to kind of get, get your groove back? Yes, uh uh. Go talk to Scott Galloway. He’ll slap you around. Some people are into that. [01:01:41] I’ll tell you, he will. Like I got on that interview, as you heard, I woke up and like, whoa. [01:01:46] Doug: Hey. Yeah. Smelling the coffee facing north. [01:01:49] Joe: All right. I think that’s all we have time for today. Thanks to everybody, by the way, for who’s, who played the joke off this year. We’ll bring that back in another decade. [01:01:58] But, uh, for now, for now, Doug, wrap this thing up for us. Lots of takeaways. What are the big ones? [01:02:06] Doug: Well, Joe, here’s what’s on our to-do list today, whether or not we photograph it first. Take some advice from Professor Galloway. Take the complex and simplify it into a simple equation. What are you hoping to accomplish? [01:02:18] Who has succeeded in that area previously? Create an equation that boils life down to its most essential pieces, and then start working. Second, use this from our headline. Evaluate your 401k plan against your goals, not against some other benchmark. Your benchmark should be your goal. Don’t have a goal. [01:02:39] How are you gonna know when you’re actually succeeding or not? And how will you know when you should change directions? But what’s the biggest to do? I gotta print all the photographs I’ve got on my phone. I gotta have hard copies with me for when people start asking me for autographs. I’m sure that day’s coming any day now on my path to international super stardom. [01:03:04] Thanks to Scott Galloway for joining us. You’ll find his new book, the Algebra of Wealth, wherever books are sold. Wanna help the show and press the easy button? Use our show notes link to order it through Amazon. It’ll both help you and you’ll support the podcast at no additional cost. Thanks to everyone who uses our Amazon link already. [01:03:25] This show is the property of SB podcasts, LLC, copyright 2024, and is created by Joe Saul-Sehy. Our producer is Karen Repine. Karen and Joe get help from a few of our neighborhood friends. You’ll find out about our awesome team at Stacking Benjamins dot com, along with the show notes and how you can find us on YouTube and all the usual social media spots. [01:03:48] Come say hello. Oh yeah, and 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, Duggan. We’ll see you next time back here at the Stacking Benjamin Show.
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