When Money Rules Don’t Match Real Life (Your Questions!) SB1814

Personal finance loves clean rules. Save 20%. Follow the 4% rule. Always max the 401(k). But real life rarely cooperates with tidy formulas.

This week Joe Saul-Sehy, OG, and guest co-host CFP Anna Allem dig into the gap between the advice we hear and the messy decisions we actually face. What your savings rate really means. How often you should rethink inflation assumptions. Why a mysterious tax form after a backdoor Roth conversion might not be the crisis it first appears to be. Turns out some of the most stressful money moments simply come from misunderstanding how the system works.

The conversation tackles real listener questions about whether their savings rate is good enough (spoiler: it depends entirely on the life you want), how to increase savings without feeling squeezed, when to update retirement projections for inflation, and whether contributing to a terrible 401(k) with no employer match still makes sense.

Anna brings fresh perspective on the backdoor Roth tax scare that panics people every year, explaining why receiving a 1099-R is completely normal and usually harmless, plus the small IRS form that keeps your Roth strategy squared away. The crew also breaks down what’s actually happening when a mutual fund splits (far less dramatic than the headlines suggest) and the one disclosure document every advisor must provide that contains important clues about fees, conflicts, and discipline history.

Down in the basement, Doug delivers trivia about a document most investors rarely request but absolutely should. Somewhere between inflation math, tax forms, and the occasional rant about terrible retirement plan providers, the crew reminds us that personal finance isn’t about memorizing rules. It’s about understanding how the pieces fit together, even when the paperwork looks scary.

What You’ll Walk Away With:

• Why your savings rate isn’t a universal scoreboard and how to judge it based on the life you actually want

• A low friction strategy for increasing savings over time without feeling budget squeezed

• The expense audit trick that quickly reveals whether your spending still matches your priorities

• A smarter way to adjust retirement projections for inflation and how often those numbers deserve a second look

• Why the famous 4% rule should guide your thinking but never run your retirement plan

• How to evaluate whether contributing to a frustrating 401(k) plan still makes sense without employer match

• What’s really happening when a mutual fund splits and why the headline sounds more dramatic than reality

• Why receiving a 1099-R after a backdoor Roth conversion is completely normal and usually harmless

• The small IRS form that keeps your Roth strategy squared away and prevents tax headaches later

• The one disclosure document every advisor must provide and the important clues it contains about fees and conflicts

This Episode Is For You If:

• You’re in your 40s and money decisions suddenly feel like they carry more weight

• You’re tired of clean money rules that don’t fit your messy real life

• You’ve been following advice without understanding the assumptions behind it

• You want to stop stressing about parts of your finances that aren’t actually problems

• You’re ready to understand how the pieces fit together instead of just memorizing formulas

For many people in their 40s, retirement planning gets real, inflation has reshaped expectations, and the margin for error feels smaller. The danger is relying on simple financial rules without understanding the assumptions behind them. When you know how these tools actually work, you can make smarter decisions and stop stressing about the parts that aren’t problems in the first place.

Question for You:

What’s one money rule you’ve been following without really understanding why? Drop it in the comments or The Basement Facebook group because Anna, Joe, and OG might tackle it in a future episode.

Deeper dives with curated links, topics, and discussions are in our newsletter, The 201, available at https://www.stackingbenjamins.com/201

Enjoy!

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Doug’s Trivia

• What form should you ask an advisor for to review conflicts, compensation, and disciplinary history?

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• Check out The 201, our email that comes with every Monday and Wednesday episode, PLUS a list of more than 19 of the top money lessons Joe’s learned over his own life about money. From credit to cash reserves, and insurance to investing, we’ll tackle all of these. Head to StackingBenjamins.com/the201 to sign up (it’s free and we will never give away your email to others).

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Other Mentions

• Stacking Benjamins After Dark (BAD) Boston Meetup
• Join One of our BAD Meetup Groups! (Benjamins After Dark)
• The Financial Freedom Scorecard

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Join Us Friday!

Tune in on Friday when we’ll highlight FIVE rules one publication says you can thank Millennials for.

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Written by: Kevin Bailey

Miss our last show? Listen here: Private Equity for Regular People: Higher Returns or a Very Expensive Lesson? (SB1813)

Episode transcript

[00:00:00] opener: Stacking Benjamins is not for everyone. Side effects may include euphoria, increased ability to meet your goals, and aggression from people wondering what the hell your secret is. Stacking Benjamins may be habit forming, especially if you stick around for the entire episode. Wink, wink. Please check with your doctor to see if Stacking Benjamins is right for you.
[00:00:21] Doug: Live from Joe’s mom’s basement. It’s the Stacking Benjamin Show.
[00:00:36] Doug: I’m Joe’s mom’s neighbor, Duggan. Today we are handing the steering wheel over to you. That’s right. Your questions are front and center, including this question from Tyler about savings rate. Tyler wants help figuring out the significance and how to up his rate. Maria has a question about a 401k. She doesn’t love her company, should she use it or invest elsewhere.
[00:00:58] Doug: And finally, jj, who just scored a backdoor Roth, IRA. But got a tax bill from the government and lots more. You know what else we’re gonna do today? Halfway through the shindig, I’ll share some homemade trivia. And now three people who are big fans of Homemade Money Talk. It’s Joe OG and special guest co-host Anna Al la Laal.
[00:01:25] Joe: Thanks, Doug. Hey there, stackers. Welcome to Wednesday. Let me be the first to say. Happy Wednesday to you. I am Joe Saul-Sehy. Hi. And this is the Stacking Benjamin Show. Sit back and relax. You found us, and man, we’re gonna answer a ton of your questions today and seated across the card table from me. Well, let’s start with my usual co-host.
[00:01:49] Joe: Mr. OG is here. How are you man?
[00:01:51] OG: I’m just here so I don’t get fined.
[00:01:53] Joe: Yes, you brought in the, the person who’s gonna do all the work for us today. Anna’s here with us. How are you, Anna?
[00:02:00] Anna: Hi, Joe. I’m good, thanks. Happy to be here. A little happier than og.
[00:02:05] OG: I’m always said, this is my happy face.
[00:02:07] Joe: Yeah, I was gonna say,
[00:02:08] Anna: yeah, you’re, you’re like the pow pow fish.
[00:02:12] Anna: What’s
[00:02:12] Joe: a pow, pow
[00:02:12] OG: note that is
[00:02:13] Anna: the Pow Fish. It’s a children’s book. It’s a fish who has, well, obviously a pow, pow face.
[00:02:19] Joe: It’s the perfect analogy for the three of us
[00:02:23] OG: people. People maybe. Maybe people say RBFI have resting.
[00:02:27] Anna: Mm-hmm.
[00:02:27] OG: And I resting o resting, I say p pow
[00:02:29] Anna: face.
[00:02:30] OG: Yeah. Oh, I see.
[00:02:31] Joe: We can call it ROF now, is that we’re gonna call
it
[00:02:34] OG: resting OG face.
[00:02:36] Joe: Well, we get a great show. I’m super happy that you guys are here to help us answer our questions. That stackers submitted. By the way, if you have a question, go to stack your Benjamins dot com slash voicemail. And we’re happy to answer yours too the next time, but we’ve got some fantastic questions. We’re gonna get to those.
[00:02:53] Joe: But before that, we got a couple sponsors who help us keep on keeping on. We’re gonna hear from them. And then Anna OG and I, we’re gonna dive into your questions.
[00:03:06] Joe: Alright, let’s start this shindig with a great question here from Tyler on savings rates.
[00:03:14] caller 1: The word savings rate comes up on the show all the time, but after trying numerous different ways to calculate it, I’m beginning to feel like the concept is meaningless without further context. For example, when I use Monarch, my savings rate’s entirely based on cash flow and it doesn’t reflect savings in the 4 0 3 B, 401k, 5 29 or other accounts.
[00:03:35] caller 1: It’s also not adjusted for taxes or employer contributions. From there, it becomes even more complicated. I participate in the ESPP and I have RSU grants. I’m not sure if I factor those as they are acquired or after I sell them annually. Once they reach long-term capital gains taxes, depending on which approach I use, my savings rate varies from 10 to over 50%.
[00:04:00] caller 1: Am I just doing okay or am I absolutely crushing it? The savings rate, whatever the hell that means actually matter. If you’re seeing consistent, positive cash flow and net worth growth, how do each of you calculate it? Does OG do it differently? What’s the simplest way? I presume that’s what Doug does.
[00:04:17] caller 1: Honestly, I’m most interested in that.
[00:04:21] Joe: He’s most interested in whatever Doug does. If Doug does it the simple way, I want this a boy. Tyler, thank you very much for the question. And by the way, of course you’re crushing it ’cause you’re hanging out with us. That’s always the first definition of crushing it is, uh, being a stacker, but, oh gee, this is a good question.
[00:04:38] Joe: You know, you see these people online all the time, nerd out about things like savings rates, safe withdrawal rates. We call ourselves all these different versions of Phi Coast, phi, barista phi, like we got all these different things. I mean, when I first heard of the 401k, I was even like, what the hell is that?
[00:04:57] Joe: Like, I can’t run that far. That’s a, that’s a long, long way.
[00:05:00] OG: Such an
[00:05:01] Joe: awful og. No
[00:05:02] OG: awful.
[00:05:02] Joe: No.
[00:05:03] OG: Nope.
[00:05:04] Joe: Too soon.
[00:05:04] OG: So bad.
[00:05:06] Joe: But back to Tyler’s question, does his savings rate matter? Is he crushing it or is he just doing okay?
[00:05:13] OG: Ultimately, it’s however you feel like describing to yourself whatever it is that motivates you or demotivates you.
[00:05:20] OG: If you’re making a million dollars a year and you’re saving 10% the savings rate, people would be like, oh my God, I can’t believe your savings rate’s only 10%. Blah. If you’re making 200,000 a year and you’re saving 30%, all the savings rate, people are like, oh my God, you’re so amazing. You’re saving. But guess who has more money?
[00:05:40] OG: The guy that’s putting a hundred grand away versus the guy who was putting 60 grand away. Sometimes it’s an absolute, sometimes it’s a rate, sometimes it’s none of those things. Because ultimately the only thing that matters is how much you are actually moving toward the goals that are important to you.
[00:05:57] OG: If your financial goals require you to save $10,000 a year and you’re saving nine, but that’s a great percentage, you arrive to your goals without having enough money and you’ll be broke. You know, your kids don’t go to school or whatever, whatever you’re trying to do. If you are supposed to save $10,000 a year, but you’re really focused on savings rates, so you save 20,000 because that’s 20% and that makes you feel good about yourself, well then you’re over saving and you’re, you know, stealing from life experiences today that you could be enjoying now.
[00:06:29] OG: So I think you have to go back to like, what are you trying to get out of this whole. Charade of life as it relates to money. Like what’s the path look like for you? And then what do you have to do? What do you have to bring to the table? And there’s another piece of this too that we talk about a lot, which is there’s some people that have just blindly saved money.
[00:06:48] OG: You know, you just invested, right? I’m supposed to invest, so I did it. And now they’re waking up and they’re 40 years old or 45 years old with two or $3 million in the bank. You might not need to have any savings rate from here on out. Like you might be good, like that’s the whole thing that you did by luck or maybe intention.
[00:07:05] OG: But you know, you end up with a, with a big basket of cash and that in and of itself, your money is gonna make enough money from here on out, that you don’t have to do anything unless you wanna accelerate your goals. So really start with what are you trying to accomplish? And then, and then the savings rate stuff doesn’t really matter.
[00:07:22] Joe: I like, uh, what OGs saying here, Anna and I just think about what mom says. The comparison is the thief of joy. Mm-hmm. Comparing herself to other people. And I feel like focusing on savings rate just invites comparing yourself with somebody else.
[00:07:37] Anna: Absolutely. I do think if you come up with the rate that you want, however you wanna calculate it works.
[00:07:45] Anna: But if I were you and I was gonna try to nail down what this number looks like, it doesn’t mean 5% is is bad and 25% is good, but whatever number you come up with, based off of your goals, based off of the speed you wanna get to your goals, all that, you have to come up with the number that works for you.
[00:08:05] Anna: And I think that’s what OG is talking about, and we’re not comparing it to other people, but once you do nail down that number and you wanna actually calculate it. I think what you can do is look at your gross income. It’s not as challenging as it might seem. I wouldn’t look at Monarch, I wouldn’t look at that.
[00:08:20] Anna: They can’t see the whole picture. I would look at what’s your total income and you’re dividing your total savings. So 401k, 4 0 3 B employer match your brokerage savings, your cash savings, your company stock if you’re saving into an ESPP, if you get RSUs, all of that is income, and if you’re saving it, then it should count towards that.
[00:08:43] Anna: On the RSU side of things, I don’t think you need to wait until you sell them. Technically, they’re yours when they vest, so I would use it when they vest. But I think that’s the clearest number that you’re gonna get. And it’ll be most consistent as you continue on. And you can keep recalculating this,
[00:09:01] Joe: but you don’t count the RSUs before they vest, is what you’re saying?
[00:09:04] Joe: No. Yeah.
[00:09:04] Anna: No. ’cause what if you get fired?
[00:09:06] Joe: My thought process just is, is that you’re so much happier if you just begin with the end of mind. Like, what am I saving toward? Mm-hmm. And then the question is, is am I saving enough? Mm-hmm. To meet that goal? And if I’m not saving enough, then my saving rate sucks.
[00:09:21] Joe: If my savings raise 50%, it needs to be 60 to reach this goal that I’m really thrilled about, then no, 50 sucks. Which is kind of funny to say, but if I need to save 5% and I’m saving 10%, why am I saving so much money?
[00:09:35] Anna: Yeah.
[00:09:35] Joe: Like why?
[00:09:36] Anna: Yeah. And what’s the trade off for that too? Like you want to now save 50% of your income?
[00:09:43] Anna: What does that look like for you? Are you now not going on vacations and Right. And that’s all because you wanna retire? Five years earlier
[00:09:51] Joe: living in a van town by the river.
[00:09:52] Anna: Mm-hmm.
[00:09:53] Joe: Right. Yeah. Yeah. What are you giving up for this, you know, future of unicorns and rainbows? I just think that we, in the financial nerd community, sometimes we’re our own worst enemy.
[00:10:04] Joe: ’cause we focus on things like save more, save more, save more, save more. Instead of live more, live more, live more. And, uh, I think it’s all gotta begin with your goals. Og.
[00:10:13] OG: It’s the only thing that matters.
[00:10:14] Joe: Yeah.
[00:10:15] Doug: We need to be libras.
[00:10:17] Anna: Hmm.
[00:10:18] Doug: We need to be Libras.
[00:10:20] Anna: Can you expand?
[00:10:21] Doug: You know, I hear that people who are Libras are super well balanced.
[00:10:25] Joe: Mm-hmm. Just
[00:10:25] Doug: kind of even keel. I mean, that’s what I’m told about Lis lepers. Gotcha. Yeah.
[00:10:30] Joe: The whole astrology thing. I’ve, I just have never been that. I don’t know. I just don’t know it that well.
[00:10:37] Doug: Well, I, I just use the parts that suit me
[00:10:40] Anna: and Are you, are you a Libra Doug? Is that why you’re saying we should all be Libras?
[00:10:45] Doug: Probably.
[00:10:46] Joe: I see what just happened there. Well, I see
[00:10:49] Anna: you don’t even know what you are.
[00:10:51] Joe: I needed, I need to Anna to point it out that, uh, of course Doug is just going, you know, you should probably be a little more,
[00:10:56] Anna: mm-hmm. Should
[00:10:57] Doug: be a little bit more like me,
[00:10:58] Joe: a little bit more Doug ish. You know, let’s say though that he does need to notch up his savings rate while we’re on this question.
[00:11:03] Joe: ’cause I think this is a good exercise because let’s say you’re not saving enough. You start with the end of mind. You’ve got this goal and you need to save more. Anna, what’s an easy way somebody can begin notching up that savings rate?
[00:11:16] Anna: I think it can be a slow process. I don’t think it has to happen immediately.
[00:11:22] Anna: There’s automatic transfers that you can do $50 a paycheck going in. I mean, depending on what your, your total income is, but. $50 a paycheck going into your brokerage account, going into a Roth, going into cash if, if you’re saving for something that’s more short term, small incremental changes is what I think is gonna last the longest.
[00:11:44] Joe: Yeah. I love this idea of hiding a little bit of money from yourself. Oh gee, you and I have been doing this for a long time and just challenging people to raise that savings rate, like Anna suggesting just a little bit. I don’t remember any time during my 16 year career somebody ever coming back and, and going, uh, I wasn’t able to do that.
[00:12:03] Joe: Like the 50 bucks Anna’s talking about. I just go, Hey, let’s just challenge ourselves and see if you can do it. And they go be, be like, oh, what if I need that money? Well, we can lower it again. Just call me. Mm-hmm. And we’ll put it in a place where, you know, you can get at it. If you end up needing the money, we’ll put it in some place, but let’s just take the challenge.
[00:12:18] Joe: And og f never had a time when somebody came back and said that didn’t work.
[00:12:23] OG: I, I had a funny joke there when you said, we’ve been hiding money from each other for a long time. And I was thinking, yeah, I’ve been hiding money from you for like 15 years. Man, you should see how much money I have sucked away.
[00:12:33] Joe: It’s incredible. All that big podcasting money. OGs been piling it up, ready to embezzle out the back
[00:12:39] OG: door. You guys seen like the whole Scrooge McDuck thing with the big fault of dollar bills. Yeah. You know, that he dives into,
[00:12:45] Joe: yeah. That’s you. That’s you.
[00:12:46] OG: It’s like my spare bedroom. It’s podcast money,
[00:12:50] Joe: all the, all the hidden podcast, wealth
[00:12:52] Doug: bathing and podcast money.
[00:12:54] Joe: I also like the idea, uh, at N og, I’d love to hear some of the tactics that you’ll use. I love just the challenge that Anna suggests. I like going through your expenses and taking a look at which ones really are ones that we could get rid of to save more money.
[00:13:11] OG: God, that sucks so bad though. Like that’s such a crappy, crappy thing to do.
[00:13:17] OG: Like admitting that you spent money maybe in areas that you might otherwise upon further review, choose to do differently in the future.
[00:13:24] Joe: Not if I think about it like Marie Kondo, I’m like, did I really enjoy that? Did that bring joy to my life? And I’m like, no. I could totally have saved that 50 bucks.
[00:13:34] OG: So I was going through, I downloaded all of our Monarch transactions from 2025 and I dumped it into.
[00:13:41] OG: Um, an AI tool and I was like, put this all in categories and tell me what you think. And it goes, are you on a wine subscription?
[00:13:50] caller 1: Oh no.
[00:13:52] OG: It’s like, do you know how much money you would have if you didn’t buy this wine? Like is like literally said, is this a subscription you forgot to cancel? ’cause it comes up off very frequently.
[00:14:02] Anna: Og does that spark joy? Absolutely. Going back to what Joe said.
[00:14:05] Doug: Absolutely does.
[00:14:06] Anna: Yes. Okay. Then that’s all that matters.
[00:14:08] Doug: Does it spark joy the next morning?
[00:14:10] Anna: True. Does it spark joy when you’re riding your bike?
[00:14:13] Doug: Yeah.
[00:14:13] Joe: It advises you to join a 12 step program, not for your life, but for your bank account.
[00:14:19] Doug: Thankfully those are free.
[00:14:21] Joe: Yeah, yeah, yeah. Oh man. But look at the things and see if they spark joy. If wine does it, then that’s great. If it doesn’t, then certainly, uh, start saving that money. And then when you don’t have it available, um, that your habits change based on your savings. Tyler, that’s a great thi Cheryl and I do this every week in our weekly meeting.
[00:14:41] Joe: We look at how we spent money the week before and we ask that question, did we really like that thing that we did? And man, we found that our savings rate went up almost unintentionally as we started just being more focused on what we really valued. Let’s stick with this idea of financial concepts.
[00:14:58] Joe: Tyler wanted to talk about savings rate, and Michael wanted to talk about a different calculation that he’s struggling with, and this one is around inflation. Hey, Michael.
[00:15:11] caller 2: Hey guys, it’s Michael in New Mexico and I’m got another question I’m hoping can spark some interesting discussion. I was listening to episode 1789 and during the part where you all are talking about the individual who was tracking their net worth and inflation adjusted dollars, that got me thinking about my own plan and the ways in which inflation both fits into it and doesn’t fit into it.
[00:15:30] caller 2: Back in 2021, when I was fresh outta school and my spirit had yet to be grounded dust by the world of engineering, I estimated that I would need about $1.5 million to retire in 2020 $1. This would account for potential changes in my lifestyle between now and whenever I actually do intend to retire. If you fast forward to today, I’ve managed to save about 33% of that number, but that’s in 2020 $6.
[00:15:54] caller 2: But my initial goal of 1.5 million remains unchanged. So my question for you is, is how often should we be returning to our goals and adjusting them based on inflation? From where I’m sitting, five years feels like a good spot, but I’m also about 10 years from hitting that goal. Even if I don’t plan to spend the money in 10 years, and I could see that how long you have until the goal affects that number.
[00:16:19] caller 2: I’m hoping this at least serves as a good jumping off point for some interesting discussions. And thank you guys so much for taking the time to listen.
[00:16:27] Joe: Michael, thank you so much for the question. And I’m sad that your spirit got, uh, grounded to dust by the world of,
[00:16:34] OG: in five short years. Even just think with the next 20 years will be like, there’s a funny, um, YouTube or something where, you know, they’re wrapping up a meeting and she’s like, okay, well see you guys in the fall.
[00:16:45] OG: And, and like the two other like, or older corporate people are like, do you on vacation or something? She’s like, no, it’s uh, end of June, it’s summer break. And they’re like, yeah, we don’t do summer break at work. Like it’s. And she goes, what do you guys have to look forward to? And the lady goes, eh, retirement.
[00:17:03] OG: Maybe She goes, oh. And then she goes, I got a rebate on a furnace. That was kind of cool. Anyway, see you on Monday.
[00:17:12] Doug: It is crazy how excited you get about
[00:17:14] OG: those things. You’re like, ah, I gotta two $50 re rebate on that. That’s really cool. I forgot about that. It’s like, what don’t you find in your pocket?
[00:17:20] Joe: We had a leader when I was at American Express that would talk about the power of being five.
[00:17:24] Joe: And when you’re five years old, you’re gonna be, you know, a firefighter, the president or an astronaut. And then when you’re 40, you’re hoping for a 3% cost of living race. Like just the, the different outlook that you might have. Uh, this is an interesting question, Michael. What’s most interesting to me about this question is five years ago on Stacking Benjamins, we were never talking about inflation.
[00:17:46] Joe: And when we did, I felt like we put all the stackers to sleep. ’cause you know, inflation, while we called it the silent killer, was something that was. Pretty much silent. I mean, it was, it was just this two to three to maybe 4% per year. And now we look at inflation today versus five years ago. Just the cost of living has changed dramatically.
[00:18:09] Joe: But I guess Anna, that brings up Michael’s question, which is he starts off calculating his goal. Now inflation has been a little different than what he thought it would be. How often should he recalculate, you know, the experience that he’s had and, and what his goal costs now versus what he thought it costs five years ago?
[00:18:29] Anna: Yeah. Even though inflation, the last couple years has been higher than normal, than average, there’s still inflation nonetheless. So this needs to be addressed whether we’re in a environment with very high inflation or not. And to answer his question about how often he needs to. Look at his plan and adjust it for inflation.
[00:18:54] Anna: I think that really depends on how dialed in he is on his retire. I mean, this is also just how often are we looking at the plan in general, because I think every time you look at the plan and you’re really trying to figure out what your number is and all the numbers involved in it, inflation should be part of that conversation and part of that planning.
[00:19:15] Anna: So it really goes back to how often are we looking at the plan in general. And I think if, if you’re looking at it every five years, then you’re probably pointing the ship in the right direction and that’s totally fine. There’s people who never look at the plan. So every five years is better than that.
[00:19:37] Anna: It could probably be done more often than every five years. Every year is probably a good cadence if you are a little bit more honed in on like what you’re trying to achieve and you have a specific number in mind and that’s what you’re working towards.
[00:19:51] Joe: It’s interesting that you say that because I look at it like a road trip and I mean, initially you get on the road, and I live in Texas, and let’s say I’m going to California.
[00:20:00] Joe: Initially, I just point the car toward California on a highway that gets me there. But when I get to California, I’m looking for exit 76 that says this. You know what I mean? The road becomes clearer the closer you get, so I think it’s easier to get more granular the closer that you get as well. Yeah. So the goal’s even gonna change a little bit.
[00:20:18] Anna: Yeah, that too. Going back to adjusting the plan, like in the last five years, your expenses probably have changed. I mean, I don’t know. Outside of inflation, maybe you potentially had a kid gotten married, you could just be at a higher salary now, and now you’re spending more money, you’ve nicer things, nicer memberships, like all that kind of stuff, um, could have changed in the last five years.
[00:20:43] Anna: So everything needs to be updated.
[00:20:46] Joe: Yeah, that is interesting, Michael, that it’s not just inflation. The goal has changed. Also, og, his investment results are not gonna be what you pinpointed either. Like even if you’re just doing the back of the envelope, the, you know, rule of 72 or whatever, your investments, you’re not gonna double exactly every, every X number of years because you’re not gonna get that exact return that you focused on.
[00:21:11] OG: Well, and honestly, most people forget about the value of the contributions, especially early in terms of your doubling frequency. You know, if you’re maxing out your 401k, you’re putting money in a Roth, or if there’s two people in the household and you’re doing a bunch of savings. You know, and you’re starting from scratch, or you’re starting, you got 30 grand in your account, you know, and this year you put in 80,000, you’ve more than doubled and you’ve quadrupled in one year, and next year you put another 80, you doubled again.
[00:21:37] OG: You know? So the doubling happens because of your contributions, not because of the market. I would look at this from the perspective of in the inflation adjustment on the front end. Let’s assume for a second that you could accurately predict your spending today, and setting aside for a moment that 25 year olds spend way differently than 35 year olds who spend differently than 45 year olds just because of life circumstances, generally speaking.
[00:22:04] OG: And I know there’s plenty of people that are out there that are like, no, we track everything to the penny and our cost of living has, you know, remained flat for 20 years. And okay, that’s cool. But like Anna said, you know, as your life changes, you do other things. You maybe go on vacation more or less, or you.
[00:22:20] OG: Your kids are involved in different events or you join a country club or you know, whatever, you have different hobbies and so your spending likely is gonna change. And I’ve never met anybody who retires, especially retires early to a lower standard of living, right? Like, I spend 10,000 a month, but I can’t wait to retire five years earlier than I should and spend 7,000 a month.
[00:22:41] OG: Nobody does that. Now, if you’re 68 years old and you’re like, okay, I’ve been doing this for like 40 years, I have to be done. Like I will just accept whatever I have to accept at that point. That happens. But maybe, yeah, the 50-year-old doesn’t walk out early to a crappier lifestyle than they’re used to.
[00:22:56] OG: So let’s just assume that you’re 30 years old and you’re like, Nope, I’m convinced that I know exactly what my spending is gonna be and I just need to have this target. Kinda like you, what you were saying, Joe, out in the distance, some pretty broad brush stroke number, but I need to at least account for inflation.
[00:23:12] OG: I think you do the inflation on the living expense in the front. So let’s say that you’re spending is, you know, a hundred thousand dollars a year. You say, well I wanna use the 4% rule as a rule of thumb to get me close that says if I distribute 4% of the portfolio in my first year retirement, add inflation to that every year I should, I should be okay.
[00:23:31] OG: That’s kind of the theme of the 4% rule. So basically I gotta get to a big enough pool at my retirement date, you know, so that my 4% number is there. So you divide by 4%. So what I would do is I take that cost of living a hundred k, I got 20 years to go. I would add inflation for 20 years on that a hundred K.
[00:23:53] OG: You just do it on your calculator, type it in the computer and it will say, okay, you’re, your new spending in 20 years from now is I’m gonna make up the number ’cause I’m not gonna do it. Let’s say it’s 200,000, then divide that number by 4% if you wanna use the 4% rule. And so now you’ve got your true inflation adjusted dollar amount based on today’s spending that you’ve inflated.
[00:24:13] OG: Does that make sense? Did I Yeah. Say that Elise clear enough to make a mess of it. You know? And like Anna said, the reality is, is that you’re going to be fine tuning this every year as you’re reviewing your financial plan anyway. And then in those final 10 years of retirement, you’re really gonna be, or final 10 years before retirement, rather, you’re really gonna be kind of being particular about like, is this a recurring expense?
[00:24:35] OG: Is this gonna go away? I need to factor in this one time thing. That may or may not happen, so you get a little bit more granular. But if I was doing this and I was 30 and I said I wanna be done at 55, I got 25 years and I spent a hundred grand a year, I would just inflate a hundred grand for 25 years at 3%.
[00:24:52] OG: Makes it 200 divide by 4%, that means I gotta have somewhere in the neighborhood of about three, four, $5 million. Is that right? 5 million at 4%.
[00:25:03] Joe: And I don’t know that I want to go og right when I reached that point either. Um, I actually, this was part of my talk in Seattle last weekend.
[00:25:13] OG: Right?
[00:25:13] Joe: Was that it’s
[00:25:14] OG: scoreboard?
[00:25:14] Joe: Well, just, just, just like I said there, you start off with if your goal’s a happy retirement, you start off with this question, oh my god, inflation, you know, take Michael’s question, but you’re retired. Oh my god. Inflation was way more than it said in my plan. What am I gonna do? ’cause I use the 4% rule and I went immediately when I reached 4%.
[00:25:34] Joe: Now I can’t live on that same amount of money anymore that I did. That leads us to watching the stock market every day, right? Instead of doing the things that you wanna do in retirement. So you’re fixated on the tv. We’ve seen a little bumpiness in the road lately in the stock market, and I think, but there’s always bumpiness in the road.
[00:25:53] Joe: But you’re watching every single move because you need that 4%. Like you’ve, you’ve based your lifestyle on that same number. And then
[00:26:01] OG: no, that’s not the 4% rule, though. The 4% rule is 4% on day one plus inflation from that point forward.
[00:26:08] Joe: But what I’m saying is, if I base the amount of my spending on that versus what I want to do, which I see some people, you know, you see all these people online that go on and on and on about the 4% rule and go on and on and on about, oh my goodness, the safe withdrawal rate.
[00:26:22] Joe: Right? What’s the safe withdrawal rate that I can live on? And I’m on this jagged edge. I think I’ve become the angry guy that watches my TV all day. We all know this person. They’re fixated on the tv, they’re watching every single thing. They’re worried all the time. Is that a happy retirement? I don’t, I don’t think it is.
[00:26:37] OG: Yeah.
[00:26:38] Joe: Even if you get to the point where you reach the number, I think I might build in a little buffer above that, I guess is my
[00:26:45] OG: point. Oh yeah, absolutely. It’d be pretty, pretty silly to pull. Again, depending on the timing, right? If you’re like, if you’re the person that’s trying to do this like early financial independence thing, yeah.
[00:26:56] OG: You wanna give yourself a margin of safety. If you’re like 64 and a half years old, and by God, if I work a day past 65, so be it. And like my lips are just above that 4% target number.
[00:27:07] Joe: Yeah.
[00:27:07] OG: Gone. I’m
[00:27:09] Joe: out. Sure. But I’m still then, rather than spending every penny, I’m still looking for ways to lower that number.
[00:27:15] Joe: Give myself a little margin of error. ’cause I don’t wanna be watching the news all day. I don’t wanna worry about, you know. If the stock market drops, I can no longer live. If the inflation goes up, I can no longer live. Like all of these things that I could worry about,
[00:27:28] Doug: 4% does give you a little cushion.
[00:27:29] Doug: ’cause isn’t it up to 4.7 now?
[00:27:31] Joe: It is. Yeah. Or five something. Yeah, it could be five.
[00:27:35] Anna: The other thing to take into consideration too is that 4% roll is based off of a 60 40 portfolio. So maybe that’s where you’re at. But I know a lot of people were moving away from 60 40 portfolio in retirement. There’s been some articles I read recently about that.
[00:27:52] Anna: I think of
[00:27:53] OG: course they are, because the market’s at an all time high. Everybody’s like, Yolo man, this is awesome.
[00:27:59] Anna: Yeah. There’s other ways to protect yourself from risk in retirement. And so the 4% rule, I don’t think it’s too far off of 4%, but it’s not that we need to be tethered to that number particularly.
[00:28:13] Joe: I think it’s a, it’s just a better number to be tethered to the number you need for your goal, and then ask, can I safely maintain retirement during that time?
[00:28:22] Anna: Mm-hmm.
[00:28:23] Joe: Yeah. It’s interesting, Michael, that you bring this up because I think that all of these things factor into your plan. And the reason why I like what Anna said about checking it every year is not just a course correct, which is what we’ve been talking about during our answer, but it also is, you know, we get frustrated with the boring middle of the plan.
[00:28:45] Joe: We get frustrated with I, I’m still just doing the same thing over and over and over and over and over, and it doesn’t look like I’m making any headway. And if you look at it once a year and you could look back a year and you see just how many steps you’ve taken, I like Anna, I like these mini celebrations along the way, so you don’t get distracted and you don’t get, you don’t wreck your own plan.
[00:29:06] Joe: You high five yourself, and it gives you the courage to keep going.
[00:29:09] Anna: Yeah. And also on the flip side. Trying to give yourself grace too, when you have difficult ears and you maybe need to adjust it, but you understand why, like maybe an emergency came up or something came up, or the plan changed, but giving yourself grace in that because of, in that moment, you know what happened.
[00:29:31] Anna: You know, the feeling, you know, you had to adjust cores and that’s okay because it’s what you had to deal with.
[00:29:37] Joe: Yeah. Great stuff. Michael. Thank you so much for the question and, uh, keep Stacking those Benjamins buddy. Hey, we’ve got, uh, three more, but we’ve got Doug who looks a little antsy here. We’re, we’re a little late to your trivia, my friend.
[00:29:51] Joe: What do you got on tap today?
[00:29:53] Doug: Not really, you guys just keep on, I mean, you guys just keep on going. I don’t. Nobody’s really here for the, what am I talking about? Everybody is here for the trivia. Hey there, stackers. I’m Joe’s mom’s neighbor, Duggan. We ask all the time, how do I know that my advisor has my best interest at heart?
[00:30:10] Doug: The answer is, they should be something called a fiduciary, a word that’s not that fun to say and kind of sounds like a medical issue Joe’s mom’s having right now. But sadly, as OG says all the time, nobody’s really enforcing the fiduciary rule. So lots of providers are calling themselves this ridiculous word.
[00:30:31] Doug: Who would do that to themselves? But here’s a question. An advisor is required to hand you a form that can help you find out about whether they are in fact a fiduciary, where they may have conflicts of interest and where they’ve had disciplinary actions. Against them in the past. What is the name of this form you should definitely ask advisors for?
[00:30:55] Doug: I’ll be back right after I go find out if Joe’s mom’s fiduciary gland is inflamed again.
[00:31:11] Doug: Hey there, stackers. I’m big word lover and guy who will tell you to fi doe this. It sound naughty. Joe’s mom’s neighbor, Doug Fiduciary is a big word that sadly has no teeth, thank God. But you can still protect yourself by asking for a form that shares how your advisor is paid, where conflicts of interest may arise, and any disciplinary actions against them, among other things that’ll help you decide if they’re on the up and up.
[00:31:38] Doug: What’s the name of this form? It’s called Form a DV, officially known as the Uniform Application for Investment Advisor Registration and report by Exempt Reporting Advisor. That’s so ridiculous. Where do they get a TV on all of that? I mean, I I, I guess every letter in the alphabet’s in there, so a DV probably you can pull from that.
[00:31:59] Doug: It’s the government. There’s your answer. Now your advisor may tell you she doesn’t have an A DV, but that just means you’ve got a lot more questions to ask and you’ll have a great discussion before you buy that ocean front property in Montana.
[00:32:14] caller 2: I hear it’s beautiful this time of year.
[00:32:15] Doug: Did you learn something?
[00:32:16] Doug: Of course you did. On this show, you learn all the time stacker. And now back to three people who are also still learning how to quickly say Fi, Fido, fi fiduciary, Joe og. And
[00:32:34] Joe: thanks to Doug who puts the douche fiduciary,
[00:32:37] Doug: we all try to contribute in our own way.
[00:32:42] Joe: Good, good work, my friend. That is, uh, quite the term, Fido, uh, whoever created that term, I have no idea. Hey, uh, in the first half we talked financial planning and some of the financial planning concepts like savings rate. We talked about 4% rule. We talked about inflation. In the second half, we’ve got a couple questions about 401k.
[00:33:03] Joe: So let’s start off with Marie. Hey Marie.
[00:33:08] caller 3: Hello, basement dwellers. This is Decker Marie and I am calling to ask a question about a 401k. I am working currently with a company that I am closing my service with and will be starting a position at a kind of pass through company contractor. And this contractor has a 401k provided, which is nice with a company that I’m gonna call Eddie.
[00:33:34] caller 3: I have some experience with Eddie in the past, and I don’t like Eddie. Just for a little bit of background, before I got married a few months ago, I had collected about $2 million chasing fire. I’m definitely financially independent as a single person, but as a married person, I am not, and my husband is a little less on board, so I’m working on what that’s gonna look like in the, in the near future.
[00:34:02] caller 3: Anyway, that money part of it is 1.1 million in traditional retirement accounts, 4 25 in Roth, and this year I have already put about $8,000 in for front loading. So would you avoid Eddie by not putting money in? There’s no match from my company, so I don’t see that I’m missing anything out and I could pass through to the new company with a better 401k soon.
[00:34:28] caller 3: Thanks.
[00:34:29] Joe: Hey, thanks for the question, Marie, and congratulations by the way, and a nice job of saving so far.
[00:34:34] Doug: Getting married.
[00:34:36] Anna: I was gonna say, I thought you were gonna say marriage.
[00:34:38] Doug: Yeah. Oh, by the way, it’s all dollars and cents to Joe.
[00:34:43] Joe: It’s, it is. The other
[00:34:44] Doug: stuff. Marriage. Just pull up.
[00:34:45] Joe: That’s okay too, but great savings rate.
[00:34:47] Joe: Nice job.
[00:34:48] Doug: Have, have any of you known in Eddie that you’re like that? Eddie, he’s a great guy. I trust Eddie.
[00:34:53] Joe: I do. My Uncle Eddie. My Uncle Eddie was a fantastic guy.
[00:34:57] Doug: Okay. There’s one exception that proves the rule,
[00:35:00] Joe: but you’re thinking Eddie Haskell.
[00:35:02] Doug: Well, there’s, yeah, there’s a ton.
[00:35:04] Joe: Anna has no idea who Eddie Haskell even
[00:35:05] Anna: is.
[00:35:06] Anna: I have no idea who Eddie Haskell is, but I also had an Uncle Eddie, great Uncle Eddie, and
[00:35:09] Joe: he was, yeah. See, okay, there’s two of them.
[00:35:11] Doug: So if you’re an uncle, apparently you have to be an uncle to be a great Eddie. Mm-hmm. But after that, there’s no Pastor Eddie’s, there’s no like Nobel Prize winner. Eddie’s,
[00:35:20] Joe: I think they’re gonna come outta the woodwork now, Doug, now that you’re calling him out, Doug, who’s going after another name?
[00:35:25] Joe: How many names are you gonna go after by the time the show finally retires, like he’s going to run the gamut of all the names that don’t make sense. Anna, let’s dive into this. Marie does not like Eddie. This, uh, 401k provider, she’s done a good job of saving. Is she okay just ignoring her, saving for a little bit while she’s at this company for a short amount of time?
[00:35:47] Anna: Yeah. Is she, are we assuming that she’s going to the next company within the same year? Like in 2026, she’ll be at a new company with a 401k access and all that.
[00:35:57] Joe: I don’t know the answer to that. I don’t think she clarified. So let’s do it both ways. Okay. Let’s say she is and she isn’t.
[00:36:03] Anna: If she is gonna go to a new company, let’s say midyear, and she will get access to contribute to the 401k ’cause that’s also key in this situation.
[00:36:15] Anna: If she can start with a new company in let’s say July, they may not let her contribute to the 401k until a certain period of time. So keep that in mind if that is this situation. But if it is, you start in June or July, whatever it is, and you can now contribute to their 401k. Yeah, just wait until you move over there.
[00:36:39] Anna: Um, I personally haven’t had an issue with a 401k provider so much that I wouldn’t wanna contribute to them and just kind of like get through the rest of it. But if it is that terrible, then on the flip side of things. Let’s say she’s not gonna have access to a 401k if you’re already financially independent.
[00:37:02] Anna: Let’s take the husband outta this too, then throw some money into a brokerage account. You can save in other places. And it sounds like you’re young. Sounds like you might need access to the money before you’re 59 and a half. Maybe It’s actually better to be moving some money over to the brokerage.
[00:37:17] Joe: Just building some more flexibility.
[00:37:19] Anna: Yeah.
[00:37:20] Joe: Instead of handing money to Eddie. I like that solution. But I also think og, I like what Anna said about the fact that is there really a 401k so bad that you don’t put money in it? ’cause you get the tax break, right? You get the tax sheltering. And if she, if she’s moving on to another company, whether it’s this year or next year, whenever in the future, she can just roll it away from Eddie.
[00:37:44] Joe: The second that she leaves the company Ji.
[00:37:47] OG: Ultimately it’s just gonna go down to, or come down to the impact. You know, if you’re gonna do pre-tax contributions, you know, and you don’t do that 20 5K or whatever it is, you’re gonna have a $8,000 tax bill, something like that. I also heard her say that it’s gonna be an independent contractor position, which to me signifies a 10 99, which means you can do your own 401k if you want, as long as you make that kind of money.
[00:38:09] OG: It may actually be better to do your own 401k because it can reduce your overall tax bill even better than a normal 401k potentially, and you have more flexibility and you can put it wherever you want and you can do your own match. If you’re paid as a 10 99 person, even if it’s a short period of time, you make $20,000, you can set up your own 401k, put virtually all 20 k into it, then you’ve largely hit the max and off you go.
[00:38:33] OG: I also have not run into a 401k plan that’s so atrocious. I, I would just be curious as to like, what makes it bad. You know, is it the user interface? You know, Vanguard, uh, very publicly even has announced themselves that, Hey, we recognize that our technology is crappy. You know why it’s crappy? ’cause we don’t charge you guys any money.
[00:38:51] OG: So we don’t have any money left over after we pay our people to frigging fix our tech. You know, that’s that. Pick your poison. Do you want like a cool tech program or do you want cheap fees in your ETFs? So is it like the tech package sucks? The usability? Is it like the cost structure? Because most of the time when it comes to 4 0 1 Ks, like you said, Joe, it’s just, you know, or Anna, whoever said this, it’s like.
[00:39:17] OG: It’s somewhat regulated, you know what I mean? Like the structure has to be the same. There’s no surprises there. Maybe it could be full of like crappy funds maybe. I don’t even know.
[00:39:26] Anna: But that’s like on the, even if it was funds, it’s on the, the company side more so than it is on
[00:39:32] OG: Well, I was thinking about cost or something.
[00:39:34] Anna: Oh yeah.
[00:39:35] OG: Don’t let that be an excuse to not save money. You know, it sounds like in Maurice’s case, she’s a great saver anyway, so she’s gonna save money. She’ll just put it in her Roth, or she’ll put it in her HSA, she’ll put it in her, you know, create her own 401k or, or brokerage account or whatever. Like she’s got the discipline to do that.
[00:39:49] OG: What we don’t want to do is we don’t want somebody to listen to this and go, oh, well, you know, if your 401k sucks, you shouldn’t do it. It’s like, well, no, you probably still should. And especially if you’re getting a match. I don’t care how sucky your four, in your opinion, your 401k is free money is free money.
[00:40:05] OG: Like go get the free money. If you have some reason that you don’t want to get put in beyond the free money, fine, but get the free contribution.
[00:40:15] Joe: Marie, thank you so much for the question and um, congrat, congratulations on the savings rate on the marriage. Maybe I should do that. Say that differently. The marriage and the savings rate.
[00:40:25] Joe: I dunno. But it sounds like things are going in your direction. Joe’s
[00:40:29] Doug: like, I give it a year.
[00:40:33] OG: This deadbeats not financially independent like me. I know. So
[00:40:36] Doug: he smashed that cake in her face at the reception. It’s never gonna last.
[00:40:41] Joe: One of those betting platforms now that you can bet on anything. Yeah, I just don’t wanna see the one on Marie’s Marie’s marriage.
[00:40:48] Joe: Wouldn’t that be horrible? That would be just rotten. Uh, we got another question on 4 0 1 Ks. Uh, this one comes from Stacker Shane. Hey man.
[00:40:58] caller 4: Hey fellas. This is Shane from Kansas. I got a question for OG my s and p 500 fund with Charles Schwab at a split back in August of 2025. They said that it was to make the price more marketable and you know, attractive to investors.
[00:41:19] caller 4: But these days with no minimum purchase amount and fractional shares pretty readily available for mutual funds and stocks and the like. I mean basically at any brokerage anymore with no fees, broker fees, what’s the real reason why a split in today’s market for funds or stocks? Can you dig into why companies or mutual funds would do a split?
[00:41:41] caller 4: Whether there are advantages, maybe like long term. I know that at the time of the split value for value, I have the exact same amount and even that the dividend splits proportionally. But is there a benefit long term somehow? I mean, technically now I have more shares. Uh, anyway, thanks for all the laughs, the live shows.
[00:42:01] caller 4: And Doug, you’re still the lifeblood of the show. See ya.
[00:42:06] Joe: Oh man.
[00:42:07] Doug: Did he say
I,
[00:42:07] Joe: did he have to go there? Where
[00:42:08] Doug: Didd, he say, I was the snow leopard
[00:42:10] Joe: of the show. He said, you’re the lifeblood of the show. The
[00:42:11] Doug: lifeblood of the show. Damn. That’s a smart man right there,
[00:42:15] Joe: Shane. Agree to disagree. Uh, Shane, thank you so much for the question and for hanging out with us when we make our Friday shows.
[00:42:23] Joe: We do those on Monday afternoons on YouTube. If you wanna join us, uh, just subscribe to the YouTube channel and, um, make sure your alerts are on. You’ll see when we go live. But, uh, he said specifically, this was a question for og, which Anna and I went back and forth on, we’re not allowed to answer this, Hannah.
[00:42:39] Joe: We have
[00:42:40] Anna: no
[00:42:40] Joe: business.
[00:42:41] Anna: I’m putting my feet up. So
[00:42:42] Joe: this is
[00:42:42] Anna: all you og.
[00:42:44] Joe: It’s, it’s time, man. So what’s the deal? Why do they, in the old days splitting it to make it more attractive for investors made sense, but why would a fund or a stock split these days?
[00:42:55] OG: Well, first of all, it wasn’t just the s and p fund that, uh, Schwab did this with.
[00:42:59] OG: They did it with a bunch of products on, uh, last August. And it 100% has to do with the optics. You’re right. The math doesn’t change. It doesn’t change the number of shares. I mean, it changes the number of shares outstanding, but it’s divided by the same number. So share price is the same. The dividend payout is lower per share, but you have more shares, right?
[00:43:20] OG: So like that stays the same. Your net difference is zero. Whether you have a hundred shares at $10 or 10 shares at a hundred dollars, that’s just how much you have. It’s a hundred percent an optics thing. And while it’s true that there’s some places that you can do, and a lot of places you can do fractional shares, um, not every place and not initially, sometimes, depending on the product, and I don’t know, Schwab s and p fund exactly, you know, what rules they have around their initial purchase or, or subsequent purchases.
[00:43:54] OG: Um, they probably allow it. But I have known places that, that have some limitations there as well. But yeah, this is a hundred percent a a optics thing. Do you wanna buy the thing that’s $160 or do you wanna buy the thing that’s 16 bucks? And when you buy the thing that’s $16, you feel like you got a better, you, you know, you did, had more progress because you’re like, oh, I got 10 of those instead of one.
[00:44:17] OG: So now I feel like a different level of baller with 10 in my account versus one, even though the dollar amounts the same. And if you’re looking at it from Schwab’s perspective, they’re competing against in terms of index funds, right? They’re competing against Fidelity’s index funds, um, Vanguard’s Index Fund, BlackRock’s index Fund, that all largely do the same thing, all for roughly the same price.
[00:44:42] OG: So how do you differentiate yourself? You can differentiate yourself by saying, ours doesn’t cost 600 bucks, ours costs 60. What a deal. You know, again, it’s the same thing. It just. If you’re a consumer of that, maybe you notice that it’s a different price.
[00:44:58] Joe: Shane, thanks a lot for the question. And um, now, you know, now you can brag to all your friends that you know exactly why that is and you can
[00:45:05] OG: just, I have 10 shares of the fund.
[00:45:08] OG: You losers only have one. Now, my favorite thing that happens with this, by the way, is when all the threads come up and go, why is the SAP down 84% today? And it’s like, it was a six to one split. It will be adjusted on your statement. Just give it a second.
[00:45:22] Joe: The sky is falling for real
[00:45:24] Doug: chill, man.
[00:45:25] Joe: Uh, one more question today before we say goodbye, we got a text question from jj,
[00:45:30] OG: not it.
[00:45:31] Anna: That’s okay. ’cause he wrote it to me.
[00:45:34] caller 5: Hi Joe Oji, and of course, uh, Doug, uh, and JJ from Atlanta. I had opened a traditional IE and uh, broth, IE with Charles Schwab. Basically primarily for the purpose of, um, you know, doing a backdoor Roth. IRA, I moved, uh, $5,000 last year to the traditional IRA and the moment it got cleared, within three days, I moved it to the Roth IRA, in effect, doing a backdoor Roth.
[00:46:00] caller 5: However, um, this year I got a 10 99 R for the traditional Roth I, and the 10 99 R says, uh, shows the taxable amount is five, has $5,000, and, uh, 3 cents. I, I guess 3 cents is for the three, you know, interest or whatever. I, it, it gained. Uh, but my question is do I need to pay taxes on it because, um, I immediately rolled it over to the Roth.
[00:46:23] caller 5: I, and I didn’t try, you know, do any transactions in the traditional area. I’ve been a long term listener of your show. Keep on doing the great work and of course, enjoy, uh, Doug’s jokes. Thank you.
[00:46:36] Joe: Oh man, what is it
[00:46:37] Doug: with all these last two questions are the best ones. I was wondering the first couple of callers, I’m like, eh.
[00:46:42] Doug: Boring. Now we’re kicking it up a notch.
[00:46:45] Anna: Now we’re kicking it up a notch.
[00:46:48] Doug: Here we go.
[00:46:48] Anna: All right, what do we do with the 3 cents?
[00:46:51] Joe: J jj, glad to hear from you. And, uh, this sounds like he might be a little distraught, Anna. I mean, you, I know you do the right thing, right? You’re, you’re doing everything by the book and you get this, uh, tax form.
[00:47:04] Joe: What do you do?
[00:47:05] Anna: I know you don’t want the IRS coming after you for those 3 cents, that’s for sure.
[00:47:09] Joe: Well, and that is the part that I think will confuse everybody. Like, what do you do with the 3 cents? But I think JJ Anna’s worried about the whole thing. He did this by the book, and he’s worried that I still got this tax form, even though I’m just executing this backdoor Roth, IRA.
[00:47:26] Anna: Okay. When you do a backdoor Roth, you’re basically going about it because you are over the income limit to do a direct Roth contribution. So ideal world, you’re just putting money directly into a Roth. But in J’s case, he makes a lot of money and he can’t put money directly into a Roth anymore. So what he’s doing is doing a non-deductible contribution into his IRA that has a $0 balance in it, and then it sits in there, it grows 3 cents, there’s 3 cents worth of interest that is put into the account.
[00:48:04] Anna: Then he does the Roth conversion portion of that, converts it all over, and once that’s completed, so that’s a backdoor Roth, he sees a 10 99 for the conversion, and it’s showing the full amount. He is like, wait a minute, I already paid taxes on this money. I already paid taxes on the five grand and now I’m gonna get taxed again on this money.
[00:48:32] Anna: And that’s like one of the biggest tax errors we’ll see is that someone will throw into TurboTax or even just tell their CPA or show them the documents and then they end up getting taxed on it a second time. And so what you need to do is also fill out an 86 0 6, which just says this was a non-deductible, IRA contribution.
[00:48:53] Anna: It should not be taxed when it goes through the Roth conversion portion. That make sense?
[00:49:00] OG: Yeah. So what’s happening is Schwab is sending the tax document with the information that they know. And so what do, what does Schwab know? Schwab knows that you took five grand from an IRA and put it into a Roth.
[00:49:12] OG: That’s all that they know. They don’t know how you decided to. Treat that initial $5,000 and because traditional Yeah, they don’t know what you did with
[00:49:21] Joe: it. Traditional. Mm-hmm.
[00:49:22] OG: Yeah. The traditional way to put money in a traditional IRA is you put the money in, and then on your tax report you say, oh, by the way, I put this money in, I’m gonna take a deduction.
[00:49:30] OG: But what you’re saying, Anna, is you’re putting the money in and then you gotta waive the flag. The piece of paper to the IRS, it goes, I don’t want the tax deduction for this five grand. I’m specifically excluding this as tax deductible. And that’s the 86 0 6 form that says, do not give me a tax credit for this 5K, which then allows you to do the Roth contribution and have that be a, basically a tax free transfer because you never claimed a tax deduction on the first 5K.
[00:49:59] OG: Mm-hmm. But the, but Schwab is gonna send this out regardless, or your custodian’s gonna send this out because they don’t know your tax treatment of that original five.
[00:50:05] caller 4: Mm-hmm.
[00:50:05] OG: All they know is, I, you took five grand from this account and put it in this account. That’s, that’s all. In fact, what you’d see here, JJ, is if you looked at that form, there’s a box, I think it’s box two a.
[00:50:16] OG: That’ll be, have a little check mark in it that says taxable amount not determined, which is basically Schwab’s way of saying, we don’t know anything about taxes on this account. That’s on y’all. You guys figure that out and, and so now you have to go to your CPA or TurboTax and go, don’t treat this as a taxable event.
[00:50:34] OG: This should be a tax-free, you know, exchange and make sure you don’t pay taxes on it. Like you said. I would say that’s probably the number one thing that we see wrong with backdoor contributions. Yeah.
[00:50:44] Anna: Yeah, and you can even double check this on your actual 10 40. I don’t know what line it is. It’s like midway through, you’ll see it should not show up $5,000 of taxable IRA distributions or whatever the wording is there.
[00:51:00] Anna: I would double check on that too before you even submit.
[00:51:03] Joe: So hopefully JJ that clears that up because, and, and, and it’s funny because I know lots of people, they get this form and they’re like, whoa, whoa, whoa, whoa. Wait a minute. Hold on. But if you just think about it from the company’s point of view, I think that always clears it up.
[00:51:15] Joe: They don’t know what you did with the money. You just gotta tell ’em what you did. So they’re doing their part now you gotta do your part. Anna, what about the 3 cents? This is what drives people crazy, right? The money sits there just for a couple days and it earned a little bit of interest. What’s going on there?
[00:51:31] Anna: Yeah. So he let it sit there for three days. It’s accumulated 3 cents of interest. This could happen with somebody else if they accidentally invested it and it grew a little bit. Or if they left it in there in cash for a couple of months, whatever it is, you know, if it’s 3 cents, it’s gonna round down to zero and you’re not gonna be taxed on that if you’re.
[00:51:56] Anna: Interest was $5 or $5 and 3 cents. We’re in a round two, the nearest dollar. So in J’s case, it doesn’t matter, this is not gonna be a tax taxable event or anything like that. But if somebody else had this and they had it sitting around for a little bit longer and there was a little bit more interest, yes, that would be a taxable event that they would need to report on their taxes.
[00:52:23] Joe: And there it is, jj.
[00:52:25] OG: Yeah, and the good news here is that you don’t have to like try to manually calculate this. Like if you put in the conversion was $5,000 and 3 cents TurboTax or your CPA, the software’s automatically gonna round it, you know? And so you don’t have to sweat that
[00:52:39] Joe: and you’re good. Good news is the IRS isn’t gonna come after you for the 3 cents.
[00:52:43] OG: Well, they’d only really come after you for like 20% of the 3 cents I think, which is
[00:52:47] Joe: right.
[00:52:48] OG: Do we even use sense anymore? Can we, are we supposed to just run now?
[00:52:52] Joe: As long as it’s digital. You digitally can have three sets.
[00:52:56] OG: Oh,
[00:52:56] Joe: but you won’t have three pennies anymore.
[00:52:58] OG: I feel like that’s a catch 22.
[00:53:00] Joe: Yeah.
[00:53:01] OG: Or catch three.
[00:53:02] Joe: Catch oh three. In this
[00:53:03] Doug: case it, it’s more proof that money is, is just a concept.
[00:53:07] OG: It’s a construct.
[00:53:08] Doug: It’s, yeah, it’s just a figment of our imagination.
[00:53:12] OG: Damn. Right. That’s what I say.
[00:53:14] Anna: That’s our whole business. So d
[00:53:17] OG: that’s my whole cat floor problem is, uh, money’s just a construct.
[00:53:21] Joe: It’s just a construct.
[00:53:23] OG: Wine is legit, but money’s a construct.
[00:53:25] OG: That Amex bill that I get because of the wine.
[00:53:27] Joe: That’s right. Turning this fungible, uh, construct into
[00:53:32] OG: real estate. I would say Jesus used to do it with water. I do it with Amex points. I’m gonna go to hell for that. Probably
[00:53:40] Doug: OG turns the wine back into water.
[00:53:42] Joe: That’s right.
[00:53:44] OG: Sometimes
[00:53:45] Joe: it’s the circle of life.
[00:53:46] Joe: Doug. Well, what a great bunch of questions. One tax question, 2, 4, 1 K questions. Two questions on, uh, financial planning, financial planning ideas. Uh, thanks guys for all the great questions. If you’ve got a question for us for next month’s episode, uh, tackle in all your questions deck you Benjamins dot com slash voicemail and we’d love to answer yours as well.
[00:54:08] Joe: All right, before we say goodbye, time to go out to the back porch. And Doug, I’ve just got one really quick thing here, which is I’ve got a thing too. Boston, Boston is having their big meetup tonight, 6:00 PM at Hannah’s Brewing in Melrose, Massachusetts. I hope you can come and join all of our other stackers there for Benjamin’s after Dark, the very first Boston Meetup.
[00:54:31] Joe: Super excited to see, uh, this team get rolling in Boston. I know my daughter’s excited and I think she’s gonna be there tonight partying with other stackers. So should be a great time in Melrose if you are a stacker in the area coming out.
[00:54:46] Doug: Get together with people with similar likes. They’re all, you know, are all gonna talk about money and how much you hate the Yankees.
[00:54:53] Joe: That’s it. Yeah, I mean, a lot of bonding going on.
[00:54:56] Doug: Right. And I, my one thing for the back porch was similar, Joe. It was about the Benjamins after dark group in southern Minnesota. We’re not sure if Southern Minnesota’s a real place yet. It doesn’t appear on any place on a map, but did you see the picture?
[00:55:11] Doug: It’s called, it’s
[00:55:12] OG: Somo. It’s called Somo dude,
[00:55:13] Doug: to look it up. It’s so somo.
[00:55:16] OG: Would it be
[00:55:16] Doug: so men, so men, it’s, it’s becoming like a gentrified neighborhood. Like did you see the picture they posted? There were 28 people at the last Benjamin’s after dark. That’s huge. And there’s all, there’s so much you can glean from this picture.
[00:55:31] Doug: 28 people, things are happening there right in the back of the picture. I can tell there’s, there’s Sparks of Love are flying. There’s a, a couple that probably just met there. They’re connecting. There’s a guy in the back left who’s just built out of testosterone. He’s got the thickest beard I’ve ever seen.
[00:55:48] Doug: You can’t even, I don’t know how he gets food in there. It’s just all beard and, and there’s one beer. 28 people and one beer. That’s a whole story. It’s a mug root beer.
[00:55:59] Joe: Especially since they meet on a college campus. I think that’s,
[00:56:02] Doug: yeah,
[00:56:02] Joe: that’s part of the, they’re
[00:56:03] Doug: doing it. They’d, they’d have 128 people if they had actual beer.
[00:56:07] Joe: They’re doing great. I know that, uh, stackers, Andy and, uh, Kristen did a great presentation about their money dates. That’s what they talked about. If you wanna look and see if there’s a bad group of Benjamin’s after dark group in your neighborhood, just go to stack your Benjamins dot com slash bad and you’ll find, you’ll find your group.
[00:56:26] Doug: Stop it. You’re so bad.
[00:56:27] Joe: You’re so bad.
[00:56:30] Doug: Stop.
[00:56:30] Joe: All right. That’s gonna do it for today. Anna, thank you so much for joining us.
[00:56:34] Anna: Thanks for having me, Joe.
[00:56:35] Joe: And og. Great. Sit across the table from you as always, man. Like thanks
[00:56:39] Doug: for you too.
[00:56:40] Joe: Thanks. Thanks.
[00:56:40] Doug: Yeah.
[00:56:41] Joe: And finally, before we hand the show over to Doug, this is an, that’s another line I really, I know, scares me every time I say it.
[00:56:48] Joe: It’s dangerous
[00:56:48] Doug: cringe every time you say it.
[00:56:51] Joe: You know how we always talk about knowing where your money actually stands? And we did the that a lot today. Well, OG and Anna and their team, they built a free five minute scorecards. You can find out if you’ve got $500,000 or more and you’re not sure that that money is optimized.
[00:57:07] Joe: Go to Stacking Benjamins dot com slash scorecard. Takes about five minutes. You’ll get a personalized score across your taxes, your investments, and your freedom planning. So stacky Benjamins dot com slash scorecard gets you there. Alright, that’s gonna do it for us, Doug. What should we have on our to-do list after today’s episode?
[00:57:28] Doug: So what’s stacked up on our to-do list for today? First, take some advice from our answer to Tyler’s question. Savings rate only matters in the context of how much you need to save. Bragging about saving more and living less. We’ll leave that for other podcasts, the boring ones. Second form a DV. It’s a great question to ask when you’re wondering about fiduciary responsibility.
[00:57:54] Doug: But the big lesson, don’t joke with Joe’s mom about the word fiduciary. I’m fairly certain even she doesn’t know what it means. ’cause she’ll threaten to wash her mouth out with soap for the third time today. Thanks to Anna Allen for joining us today. Hear more of Anna every Monday in our new segment that hasn’t been named yet, but will probably be called Doug’s Educational Minute.
[00:58:19] Doug: Oh boy, don’t like that name. Send us a better idea. This show is the property of SP podcast, LLC, copyright 2026, and is created by Joe Saul Sea High. 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.
[00:58:41] Doug: Come say hello and oh yeah, before I go, not only should you not take advice from these nerds, don’t take advice from people you don’t know. This show is for entertainment purposes only. Before making any financial decisions, speak with a real financial advisor. I’m Joe’s Mom’s neighbor, Doug, and we’ll see you next time back here at the Stacking Benjamin Show.
[00:59:54] Doug: By your definition, Josh, that’s a taco. Remember the argument we had of, or the difference between a taco and a burrito?
[01:00:02] OG: No.
[01:00:03] Doug: Oh yeah, it was a big one. It was one of our knockdown drag outs. Oh, wow. And I was at your club,
[01:00:07] OG: excuse me, Mr. Middle of Michigan, who happens to know everything about Tex-Mex food 1100 miles away from the place that actually makes it.
[01:00:15] Doug: Yeah,
[01:00:15] OG: but you should have a strong opinion. Go ahead. Tell us more. What separates a taco from a burrito?
[01:00:21] Doug: To me, anything that’s wrapped in a tortilla, if you do the wrap and the ends are closed, that’s a burrito. It doesn’t matter what size it is, that’s a burrito
[01:00:31] Joe: size. Doesn’t matter
[01:00:32] Doug: if it’s in a hard shell.
[01:00:33] OG: Yeah.
[01:00:35] Doug: I’m passionate about this topic.
[01:00:37] OG: Okay. So if it’s an enclosed soft tortilla, it’s a burrito, regardless of it’s a burrito. Okay. I don’t necessarily disagree with this. Why would you say that? I would disagree with
[01:00:47] Doug: this. You did when we were at, when we were golfing at your club and they had. They were calling ’em breakfast tacos and we got one A.
[01:00:55] OG: Oh. I mean, to be fair, they were like taquitos. They were like teeny tiny things
[01:00:59] Doug: and Right, and your answer was tacos, a size thing. It’s like a snack, not a burrito. It’s like a full meal. That was your explanation of the difference.
[01:01:10] OG: I mean, based on what Joe’s shoving in his gullet right now, that’s like three meals.
[01:01:13] OG: It’s delicious.
[01:01:14] Doug: Oh, that’s a, that’s a small one. That’s a snack.
[01:01:17] OG: You okay? He’s been eating it for like 25 minutes.
[01:01:20] Joe: I’m gonna eat it for another 25. I’m waiting for Doug to start. Okay. I’ll talk slowly so you can keep on stuffing.
[01:01:28] OG: That’s the after show right there.