How Do You Invest a Lump Sum of Cash In This Market?

Summary

Ask The Compound – “How Do You Invest a Lump Sum of Cash In This Market?”

Date: February 4, 2026
Hosts: Ben Carlson, Duncan Hill
Guest Expert: Bill Sweet
Podcast Theme: Listeners’ questions about investing, retirement, and personal finance, with special focus on investing a lump sum in today’s market.

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Main Theme & Purpose

This episode of Ask The Compound addresses listener questions focused primarily on what to do with a large lump sum of cash—especially when received in January for retirement accounts like a SEP IRA. The hosts also explore related retirement and savings topics such as in-plan Roth conversions, the new Trump savings account for kids, healthcare in early retirement, and how retirees should review their finances and purpose after leaving the workforce. The show is conversational, practical, and emphasizes the psychological as well as mathematical sides of personal finance decisions.

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Key Discussion Points & Insights

1. The 4% Rule in Retirement Withdrawals

[01:55–02:55]

• Ben addresses a comment from a previous show criticizing his take on the 4% rule for withdrawals in retirement.
  • Clarification: The 4% rule is designed for “worst-case” scenarios (e.g., stagflation in the '70s, Great Depression), not a baseline or average.
  • Ben believes it's "far too conservative," advocating for flexibility since most retirees under-spend.
• Quote:

  "That's why I think it's far too conservative. Because most of the time you end up with way more money and don't spend enough of your nest egg. That's why I like a more flexible plan." — Ben Carlson [02:31]

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2. Investing a Lump Sum: Lump Sum vs. Dollar Cost Averaging

[03:19–10:51]

• A listener (Dylan) asks about investing a large cash balance in a SEP IRA and managing the psychological challenge.
  • Context: Dylan and his partner, both 30, run a small business and just made the max SEP IRA contributions for two consecutive years, resulting in $145k in cash in their retirement account.
• SEP IRA Basics
  • Ben explains eligibility and contribution rules, emphasizing their value for business owners.
• Lump Sum vs. Dollar Cost Averaging (DCA):
  • Probability: Math favors lump sum investing because “most of the time, the stock market goes up.”
    • "Since 1928, the US stock market is up 73% of all years. Since 1950, 80% of the time." — Ben [06:31]
  • Psychology: Many investors are wary of bad market timing ("Murphy's Law") and prefer to invest gradually.
  • Advice:
    • Either choice can work; the key is to choose a strategy, write it down, and stick with it regardless of market moves.
    • DCA can include trigger rules like investing more if the market falls by a certain percentage.
  • Advisor’s Role:
    • An advisor’s real value is in process and behavioral coaching, not predicting market moves. Don’t blame outcomes solely on the decision made, since all investing is with imperfect information.
• Quote:

  "If you’re going to put that entire lump sum to work, just do it with no regrets. Do it, move on, don't second guess. Most of the time, the market goes up.”—Ben Carlson [08:00]
  "Write down your plan, follow your plan, don’t make changes because you wish you would have done something else." — Ben Carlson [08:45]

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3. In-plan Roth Conversions in the Thrift Savings Plan (TSP)

[10:54–16:40]

• Listener Phil (37yo Army, $375k household income) asks about new Roth conversion options in the TSP, and whether he should start converting traditional assets given expected higher income post-military.
• Expert Input (Bill Sweet):
  • TSP Roth in-plan conversion is new and increases flexibility.
  • Phil has already gone “93% Roth” in his savings—quite aggressive given current income.
  • Main tax planning principle: Don’t inadvertently trigger a jump into higher tax brackets (especially from 24% to 32% bracket).
  • State income tax is a big factor (especially if returning to high-tax state on retirement).
  • Can consider partial conversions each year to maximize Roth at the preferred tax bracket.
• Quote:

  “If you expect income to go up, why not? Now might be the last five years … in the 24% bracket, in which case I think it would make sense to consider [converting]." — Bill Sweet [16:01]

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4. Trump Kids’ Savings Account vs. 529, UTMA/UGMA, Taxable Brokerage

[16:42–22:27]

• Chandra asks how the new “Trump account” for kids compares to existing 529 and custodial accounts.
  • Trump account allows $5,000/year contributions, adjusted for inflation, with some employer matches and tax features.
• Panel Consensus:
  • 529 plans remain the best vehicle for education savings (for their targeted tax advantages).
  • Trump accounts are “one account too many”—no deductible contributions, earnings are taxed as ordinary income when withdrawn at 18, and loss of parental control as soon as the child is legally adult.
  • Employer matches could tip the scale, but only a handful of companies currently offer them.
  • Complexity is a problem in US tax policy with too many overlapping accounts.
• Quotes:

  “This one is the straw that broke Bill’s back. It’s just one more account that I don’t think is worth it.” — Bill Sweet [18:16]
  “The real bullet here, I want more kids to go to college … And I’ve got a 529 for that purpose for each of my kids.” — Bill Sweet [20:23]

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5. Retiring in Your 50s: Healthcare Options Before Medicare

[22:57–30:57]

• Listener Jeff, 58, wants to retire but is concerned about health insurance before Medicare eligibility.
  • Options: COBRA (18 months), ACA Marketplace, spouse's plan (though “not good”), Barista FIRE (part-time work with benefits).
• Panel Insights:
  • Health insurance costs are staggering: Average family premium is now $27,000/year and climbing 7–8% per year.
  • Complex system made worse by overregulation and patchwork solutions.
  • Often, the best option is to join a working spouse’s plan, even if not optimal, because employer usually pays at least part of the premium.
  • ACA plans are generally expensive unless household income drops low enough for subsidies.
  • “Barista FIRE” is a growing trend: retirement age professionals take part-time service jobs (often at Starbucks) solely for access to health insurance.
• Quotes:

  “The cost of health insurance, gentlemen, is just way too damn high ... $27,000, the average premium for a health insurance plan across the United States.” — Bill Sweet [25:15] “We wouldn’t do it this way if we started from scratch.” — Ben Carlson [27:34]

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6. The Secret Sauce of Retirement Planning: Year-End Reviews & Purpose

[30:59–34:57]

• Rick (teacher hoping to retire after this school year) asks about the “secret sauce” for retirees’ annual reviews.
• Panel’s “Secret Sauce”:
  • There is no “secret sauce.”
  • Focus on knowing your spending (planned and actual) and your goals. All other decisions (“branch off those questions”).
  • The transition to retirement can be psychologically jarring, especially after the initial “honeymoon” phase.
  • Plan not just for finances but for meaning and structure—consider volunteering, a hobby, or part-time work.
• Quotes:

  “It’s a process, not an event. The two biggest things… How much do you spend or plan to spend in retirement and what are your goals? Every other decision is some sort of branch off those questions.” — Ben Carlson [31:20] “I think people burn through all that [to-do list], they do everything they wanted to do...about two, three-month process, and then, like, ‘OK, now what?’” — Bill Sweet [32:01]

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Notable Quotes & Moments

• On Flannel vs. Sweater:
  “Sweater day. It’s sweater weather sweater.” — Ben Carlson [00:28]
• On why so many different accounts in the tax code:
  “It’s about optics, not a political statement. Every politician does this crap and nobody is there saying, ‘Hey, let’s make this easier for people.’” — Bill Sweet [21:56]
• Healthcare frustration:
  “Some of our employees… are opting into plans that cost them $50,000 a year. That is completely insane to me. It’s completely unacceptable.” — Bill Sweet [25:41]

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Timestamps for Important Segments

• [01:55] – Revisiting the 4% rule for retirement withdrawals
• [03:19] – How to psychologically and practically invest a large lump sum
• [10:54] – TSP Roth in-plan conversions and high-income retirement savings strategy
• [16:42] – Evaluating the new Trump Account for kids vs. existing options
• [22:57] – Healthcare choices for early retirees; pros/cons of each route
• [30:59] – The "secret sauce" for successful retirement & maintaining purpose

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Additional Memorable Moments

• Beer and Travel Tips:
  Ben provides a mini-guide to the best breweries and cocktail spots in Grand Rapids, Michigan.
  • “The Mitten Brewery… Brewery Vivant… Founders… New Holland… Bell’s in Kalamazoo for Hop Slam and Oberon.” [28:29–29:59]

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Takeaways

• Investing a Lump Sum:
  Math favors lump sum investing, but investor psychology is critical. Whichever plan you choose—stick to it.
• Retirement Account Complexity:
  While new savings vehicles proliferate, time-tested options like 529s and IRAs are generally best for most people.
• Healthcare for Early Retirees:
  Start planning well before quitting. Joining a spouse’s plan or working part-time for benefits remains popular.
• Retirement Reviews:
  The key: Know your expenses and goals, plan for purpose—not just money.
• General:
  The hosts blend personal experience, data, and humor in answering questions—always circling back to the importance of behavior and adaptability in financial decisions.

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For more listener questions, tips, and behind-the-scenes banter, catch the next episode or send in your own question to Ask the Compound!

Transcript

[A]

Welcome back to Ask the Compound, the show where you ask and we provide the answers. I am Ben Carlson. Let's say you decided to front load your contribution and max out your IRA in January. You're ahead of the game, but now you're sitting on a pile of cash. How do you invest a lump sum like that in today's market? Put it all at once, maybe wait for a correction dollar cost average. I'm going to answer this question and more questions straight from our viewers on the show today. Duncan, play the music. Our email here is ask the compoundshowmail.com, chris in the live chat as Is Ben gonna wear flannel or a sweater today? Sweater day. It's sweater weather sweater. All right. Welcome to everyone in the live chat on YouTube for coming in. Also people watching live on Twitter. We appreciate it. Fire questions at us in the chat. We'll take them live on the show. On today's show we have questions straight from our Compound inbox about how to invest a lump sum in today's market. How to think about an in plan Roth conversion for retirement dollars. Roth are so hot right now. How the new Trump savings account vehicle for kids compares to 529 plans and other savings vehicles. What you should use for healthcare when you retire in your 50s. And finally, what is the secret sauce of retirement planning? But first, today's show is sponsored by our friends at Public, the investing platform for those who take it seriously. On public you can build a multi asset portfolio of stocks, bonds, options, crypto and more. And now generated assets which allows you to turn any idea into investable index. With AI it all starts with your prompt. From renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20% year over year, you can literally type in any prompt and AI will be put to work. It screens thousands of stocks, builds a one of a kind index for you and lets you back test it against the S&P 500. Then you can invest in a few clicks generated assets like ETFs with infinite possibilities, completely customizable and based on your thesis, not someone else's. Go to public.comatc and earn an uncapped 1% bonus when you transfer in your portfolio. It's public.comatc paid for by Public Investing. Full disclosure in the podcast Description.

[B]

All.

[A]

Right, before we get to questions for today, I want to address a YouTube comment from last week. Throw it up here. Calling out my retirement withdrawal strategy Honor People have very strong opinions about the 4% rule and this person says people Continue to not understand the 4% rule. Think he's talking about me. Some think that it's a far too conservative rule. Right. Some think it should be more like the 3% rule. Some people say, no, it should be like the 4.75% rule. Personally, I think it's too conservative. Listen, I've read Bill Bengan's original paper on the subject multiple times. I interviewed him last year. Okay, I read his book on the topic. I get it. All right. The goal of the 4% rule was to find the number that could get you through the worst case possible scenarios over 30 years in retirement. It's not like a baseline or an average number. It's meant to protect you against the ultimate worst case scenario number, like really high inflation in the 70s or a huge crash like the Great Depression. That's why I think it's far too conservative. Because most of the time you end up with way more money and don't spend enough of your nest egg. That's why I like a more flexible plan. So there I defended my honor about retirement withdrawal strategies onto the questions.

[B]

You got to write a book on it now. That's the way to really prove.

[A]

Bill Benken already wrote the book. I don't need to. He did it. You're right. All right, all right.

[B]

It is confusing.

[A]

No, it's not. It's easy. It's just. It's not simple. How about this we were talking about.

[B]

Last week, how confusing it is. Like, if you're doing like, CPI or your own inflation, stuff like that.

[A]

Yeah, yeah, you're right. There's a lot of decisions.

[B]

There's variables.

[A]

Yeah, true. All right, let's do a question.

[B]

Okay. First, say we got a question from Dylan. My partner and I are both 30 and operate a small business. We made the max SEP IRA contribution in December 2025 of $70,000. Then another max contribution for fiscal year 2026 of $72,000 in January. The SEP IRA has $365,000 of total market value and about $145,000 in cash. My question is, psychologically, how do I invest this money? I know I can follow all of Ben's rules. Lump sum over dollar cost average, diversify, manage risk tolerance, et cetera. But now I'm starting to feel the pressure, given that the account is so large. I've always managed my brokerage, but that felt different because it's about half as much. And if I messed anything up, I would pay the price, not my partner. I joked with our advisor that they get Paid a fee to deal with potentially taking the blame if things go wrong, not for their advice. Is it normal for people to manage this amount of money without an advisor?

[A]

Okay, so Dylan and his partner obviously had a good year, so I'm guessing they made a bunch of money. They decided, hey, we got this huge sum of cash here from our profits. Let's backload our SEP IRA in December, front load in January, boom, 140, something, thousand dollars in cash. I wonder what the business is. But they did great. That's a nice.

[B]

What business would Dylan run, you know.

[A]

That did so well. I don't know, like a nice effort. Yeah, maybe he's plowing roads right now. It's a really nice text for determined ness egg that you created for yourself. So I think before getting into the lump sum cash part of this question, I want to talk about SEP IRAs because I think there's some people in our audience that might not be familiar with these accounts. So the 2026 limit, as Dylan says, is $72,000 for a SEP IRA. For a traditional or a Roth IRA it's $7,500, not including the catch up provision. That almost doesn't seem fair. So the reason they created sep IRAs is for business owners. So if you're self employed, if you're a small business owner, even if you're a freelancer, someone who does doordash or whatever, doesn't have access to a 401k or pension, the SEP IRA is for you. So the way it works is you can contribute up to 25% of your compensation up to that $72,000 limit. Right. And that's the cap that gets usually ratcheted up by the irs. So the height, the whole idea here is that if people don't have, people don't have the ability to make matching contributions, they don't have a 401k, there's no Roth option for these. So they're trying to make things even. But I still don't think it seems fair. I'm not going to lie, if you had a few other employees with you, it makes sense. But listen, I personally can put into a SEP IRA because I am, I technically have like freelance income from book sales and speaking gigs and some of these other things, stuff from my website. So I have the ability to put into a separate and I do it, but it doesn't seem fair to me that the limit is so much higher than the regular one. I don't get it. We're never tax expert on that. He can Explain it to me. Anyway, onto the real question. Sitting on a huge lump sum, six figures. 40% of that IRA is now sitting in cash. That's kind of a lot. Okay, so this is an allocation question as much as it is a lump sum DCA question. Like, are you comfortable with that allocation for now in the short term? So we've gone over the math before here and on my blog many times, right? A lump sum into the market makes more sense from a sheer probability perspective, because most of the time. Duncan. What? The stock market goes up, right?

[B]

It's true.

[A]

Since 1928, the US stock market is up 73% of all years. Since 1950, 80% of the time. Over 12 month periods, the stock market is up. That's an amazing win rate. So most of the time, putting your money in the market, it's going to be higher in 12 months, right? Most of the time. However, people with a lump sum always have the Murphy's Law thing, right? Anything. If you put a lump sum to work, people assume anything that can go wrong will go wrong. If you put the money to work right, it's going to follow. The market's going to fall out of bed right away if I do this. So we have a lot of these conversations with our clients and some. Sometimes they come to us with cash because they sold a business or they're sitting on cash from sale of stock, or maybe they just tried to time the market and they were sitting in cash and they need someone to help them with it, right? Okay. Some people are swayed by the math. You show them the math, you show them the numbers, the win rates, the probabilities, and they say, oh, light bulb, boom. Spreadsheet choice. Do it. Put it all in. I don't care. This makes sense to me. Maybe it'll work, maybe it won't, but most of the time it should work. The problem is you don't have, like, enough times to make the average, right? You have one choice with this lump sum, right? Other people see the numbers, they understand the numbers, and they say, I don't want to do that. I would rather make the psychologically driven decision of slowly but surely putting the money in because I'm scared or I want to wait for a correction or whatever. Neither of these choices are right or wrong. It really depends what's right for you. Thing is, if you're going to put that entire lump sum to work with, no, just do it with no regrets. Do it, move on, don't second guess. Most of the time, the market goes up. Sometimes it goes down, you're going to be invested anyway. So what? This is the stock market. That's the trade off.

[B]

You wouldn't feel a little better about waiting for a red day to lump sum.

[A]

Oh, red day. Yeah, but no one relates for a red day. People wait for a red month or, you know, like people are waiting for like.

[B]

I'm just saying if the, if the S and P is up, like you know, a percent today, like it's harder.

[A]

Sure. You want to put in the down. Hey, today, isn't today a down day? Put it in today. Yeah. Listen, my only plan is, and this is the advice we give our clients, if you're going to dollar cost average in, create a plan and stick with it come hell or high water. So it's every other week or every month or every quarter, whatever your time frame is, stick with it. You can add another rule too. Some people say, hey, if the stock market is down 10% or 15%, Duncan says if it's down 1%, he's going to do it. If it's on 20%, then I'm going to speed up the dollar cost averaging. Right. I'm going to pull some forward. That's fine. Whatever it is, write down your plan, follow your plan. Don't make changes because you wish you would have done something else. We've had that question before from people. We lay out a plan, we have it all set out. This is what we're going to do. We're going to invest here, here, here and here. Six times over the next nine months, whatever it is, six times the next 12 months. And then something happens in the market, it goes up or it goes down. They say, wait a minute, should we change our plan? No. This is the plan we set without knowing what's going to happen in the future. Okay. And I don't, I'm not sure about the advisor part of this question. Maybe they have an hourly advisor or maybe sometimes the advisor is doing part of the portfolio, but they're managing part themselves. If you do have a financial advisor, they should absolutely be helping you through this decision. That's what you're paying them for. That's what they're there to help you make better decisions. Because there is no right or wrong. Like, sometimes you like the outcome, sometimes you won't like the outcome. But everyone is dealing with imperfect information about the future. That's just how investing works. You make an informed decision and then you stick with it. That's it.

[B]

This is where the actual investments matter a lot though, right? Like, if he puts a ton of it into three times levered ETFs and, and a bunch of single stocks and loses a bunch of money. No one's going to feel sorry and people are going to blame him. Right? But like, yeah, yeah, no one's going to blame him for buying the market, you know, index funds or, you know.

[A]

And if you're, and if you're in more of like a 60, 40, 70, 30, 80, 20 portfolio, maybe that's a little easier because it's more diversified. Right. You're not going all in to stock. So that's part of it too. Right. But yeah, I would write it down so you know why you made the decision at the time and then stick with that plan. That's the thing. So you can, you can go back and take a look and have a hell of a refresher.

[B]

I like, I like what he says though, about, I think that's probably true. A lot of people go to advisors because they're like, I don't want my family blaming me or looking to me if things don't work out.

[A]

Well, you know, advisors are used to that, right?

[B]

Yeah, yeah.

[A]

But you can't blame the advisor for what happened to the market. Right. The market is going to do what it's going to do. Right. Just like it's, the advisor isn't a, isn't a better advisor because the market went up 20% last year. Right, Right.

[B]

Unless they're trading individual stocks for you, I guess.

[A]

No. Then they're getting lucky too, right?

[B]

Yeah, that's true.

[A]

All right, it's true. Next question.

[B]

All right, up next, we got one from Phil. Starting January 28, 2026, the Thrift Savings Plan TSP will offer Roth in plan conversions, allowing you to move money from your traditional pre tax TSP to your roth after tax tsp within your account. I'm 37 and have been serving in the army for 15 years. My wife works and our household income is $375,000. All of my contributions have been Roth, but the agency matching contributions are traditional. We have $400,000 Roth and $60,000 traditional plan assets with combined $300,000 in our personal Roth IRAs. And my wife has $50,000 Roth in her 401. I expect my income to increase when I transition to a civilian career in five years, pension at 20. So I've been planning to keep our contributions 100% Roth at least until then. Should we take advantage of this new TSP option? And if so, what is a winning strategy? All right, thank you for your service.

[A]

And yeah, as always, we always. We love these questions for our service members. Let's bring on everyone's favorite tax expert and a former service member himself, Mr. Roth. Ira. Bill. Sweet.

[C]

Gentlemen.

[B]

What's up?

[C]

Bill, Good to be with you. I have a problem. Yeah. With Phil. I got a big issue.

[A]

Oh, yeah, what's that?

[C]

Six more weeks of this crap. Gentlemen, it was 27 degrees in Lake Placid, New York when I was there last week. Negative 27. The high last week when I was there was negative 10. I've had enough of this. I think we can go down to Punxsutawney. It's time for we put this groundhog in its place.

[A]

RWM Florida. Bill, I agree.

[B]

Yeah. I keep saying, like, who? Why do people live up here again? I mean.

[C]

Yeah, yeah, no, definitely, definitely north of the ball.

[A]

Every year in February. I love the snow in December. I love it when it's around the season and the holidays in the lights. I love snow. And then it gets to January, I'm like, okay, then February, I'm done with it. Yeah, Yeah.

[B]

I don't know how people do it without beards, to be honest. You guys clean shaven right now?

[C]

I mean, hey, I'm getting there. I'm working on it.

[B]

Yeah. For that reason, I get cold even with a beard. I can't imagine.

[C]

Yeah.

[B]

Beardless.

[C]

No, it's. It's punishing. Yeah, it's punishing.

[A]

Bill, would you say that the TSP and the pension plan at 20 years are pretty big perks of serving your country? Correct.

[C]

Yes. Very, very inexpensive. And Ben, as you know, we are advocates. The Carlson Suite 2028 platform is open. The TSP to the. To the people.

[A]

Yep. So how many plans actually offer this in plan conversion option? Because it has to be relatively. Because the Roth is still relatively new, too. Not all plans offer this, obviously.

[C]

Yeah. So not. Not a lot, Ben. But I think they're increasing. I don't have the numbers with me, but yeah, the TSP covers government employees. And this is a big one ul. Ultimately, it's more flexibility, I think, for folks. And I think that Phil is in a really interesting position. So let's start. Phil did not go full Roth. Gentlemen, did any of you guys do the math on how far Phil is down the Roth rabbit hole? Sounds like he's about 93%. About 93% Roth, which I think is awesome. Pretty high household income, too. Ben, did you pick up on that 375?

[B]

Yeah.

[A]

I was wondering how that fits into this conversation, quite a big.

[B]

Not to brag. Yeah, I was going to follow up on that, actually. So he's saying that the match is not Roth. Correct. So he's putting in Roth, but the match is not.

[C]

Okay, yeah, that's correct. And that is typical Duncan.

[A]

That's what most plans. That's what our plan does.

[C]

Exactly. Yes. Traditional. However, there are rules changing on that. 20, 27, I believe there's a mandatory Roth for folks in Phil's income bracket. He doesn't split out what his income is versus his wife, but regardless, 93% Roth is pretty close gentleman to full Roth. The only caveat, I would say is that obviously Phil's got some pretty hefty income right now. Can we just pull up a chart and look at where he. On the tax bracket realm? So, you know, two random.

[A]

This is your favorite chart right here.

[C]

It really is this. If you, if you can do one thing for yourself thinking about Roth conversions, I would burn this chart into your retina. This includes, this assumes a standard deduction. And as you gentlemen can see, Phil and Phil and Mrs. Phil are pretty, you know, getting high up there on the 24% tax bracket. So they're not going up to 32%. I think if you're considering this type of in plan conversion, which effectively is a Roth IRA conversion similar to that concept, what you don't want to do is jump up to that 32% range. And Phil and Mrs. Phil, about $60,000 from that. Can we chart off real quick? But the other factor that Phil laid out, gentlemen, in the email, is that he does expect income to increase post service. And the one thing that I would ask Phil to consider is if he is returning to a high tax state. There's a lot of rules about service members when they're stationed in other states where generally they're not subject to the state income tax of the state that they're stationed in. And so if Phil is going to return back to California, New York or another high income tax state like New Jersey, I would really strongly consider a conversion as long as he doesn't trip that 32% bracket.

[A]

Right, but. Or I mean, could he do pieces over time so he doesn't get too close to it?

[C]

Yeah, that's a good point. So 15 years, Phil is right now typical. Typically people are sitting down to think about retirement around 20. So. Yeah, over the next five years. Absolutely. And one of the things we didn't ask, you know, does Phil have any investment income? Are there dividends, interest? Right. We don't know the full picture. You really do need to sit down before you do any damage.

[A]

Okay. But to your point, he's already pretty, pretty close to that full Roth. Like he's, he's almost already there. Right.

[C]

And I think that again, the key is if you expect income to go up, why not? Now this might be the last five years, Ben, that Phil and Mrs. Phil in the 24% bracket, in which case I think it would make some sense to consider especially.

[A]

Yeah, like you said, he's going into the private sector. He's got the pension income coming.

[B]

One because another wrinkle in this for, you know, our, our younger viewers and people that aren't as familiar. They are above the threshold of being able to actually put into like a Roth IRA or something, right?

[A]

Correct.

[C]

So this is their only opportunity to get Roth directly. Yeah. And it sounds like they do have a large Roth IRA balance outside. Again, Duncan, you answered that question. But yeah, again I think I take a look at it. I think it makes a lot of sense given the circumstances of Phil's situation.

[A]

All right, next question.

[B]

Okay, we got one from Chandra. I was hoping to get your thoughts on the Trump accounts relative to other saving options such as 529, UTMA and UGMA. Can I say that? Or taxable saving brokerage accounts. When it was first announced last year, I assumed it was only applicable for children born between 2025 and 2028. Turns out parents of children who aren't eligible for the thousand dollar seat contribution can still open the account and contribute up to $5,000 a year, adjusted for inflation. The no withdrawal limitation and loss of control once the child reaches age 18 are disadvantages and. But perhaps the tax treatment benefits and potential employer contribution could make it worthwhile. While there are clear benefits of contributing towards 529 accounts, how should one consider it over UPMA or just standard taxable brokerage under the parents account?

[A]

Just what we need, more accounts. Right. This is why it's so confusing. The Carlson Suite ticket is going to have just one big account. Right? Right. Build like a SEP ira. Why do we need to have a SEP limit so high? And then we have the 529 and now we have the Trump account. And then we have the Utmas and the Ugmas and we have the HSA and the Roth IRA and the traditional IRA.

[C]

Coverdell 451, 457. Right. You just keep going and going and going.

[A]

And I like the idea of the Trump account because it helps get people involved in the stock market. Early. But people are starting to think like, wait, does this make sense compared to some of the other accounts? And it seems to me you can tell me if I'm wrong here. For education, the 529 plan is still, still the best option, right?

[C]

Yeah, to me.

[A]

Because that makes the most sense for education.

[C]

Yeah. So limited purpose. Right. So you can only really use it for that thing. I think. You know, Chandra, just to boil it all down, Ben, for Chandra, I would say look, if you're not getting money from that seed contribution or money for your employer, this is one. Ben, to your point, I would, I would, I would avoid. I think it's too many accounts. This one is the straw that broke Bill's back. It's just one more account that I don't think is worth it. Is it good to your point, Ben, to incentivize savings? Absolutely. 100%. If you can start a contribution $1,000, median household income in the U.S. right now is roughly $80,000 a year.

[A]

Right. Can you imagine the stream of income you could create by having one kid each year for the next 18 years? Right.

[C]

Because they're totally cost. Outside of that.

[A]

You know, Duncan, think about it.

[C]

You don't have to worry about feeding or clothing them or anything else.

[A]

No, but they just created a new video.

[B]

I can't wait for the comments thinking you're being serious.

[C]

I mean the child tax credit too. But anyway. But no, but the problem is that these things basically are IRAs. Like that's what they're IRAs, but they're without a tax deduction. So Chandra mentions potentially contributing $5,000 a year. That's great and wonderful. That's a non qualified contribution. You're not able to take a tax deduction for that. And then when the earnings come out of the account at age 18 or later, then they're coming out at ordinary income rates at usually the highest possible tax rate. Again for the kid. Right. So we don't know. Typically people don't roll out of college with pucks of 20.

[A]

Any kid gets the money at 18. Right. That's a big difference too.

[C]

That's the other problem. The superpower here is the employer matching contributions. If you happen to have employer that matches these things. But they're just so new.

[B]

Yeah. Can you clarify that? There are employers who will match the Trump account.

[A]

Some employers are saying that hey, if you contribute to this, we'll match it. I think it's a handful of employers right now.

[B]

Is this like a political thing? Like companies that consider themselves more aligned with the right will do it versus or is it just kind of.

[A]

It's just companies that like the idea of trying to help. It's not a lot of companies now, I don't think.

[C]

No.

[A]

If your company does this, it's free money you're turning down.

[C]

I've only seen a handful, Ben. And yeah, the Duncan made. To your point, it's about the press release right now, but the details really do matter. So like again, if you have to open a Trump account to get $1,000 or $2,500 a year for employer, absolutely. There's no, there's no downside.

[B]

Right.

[C]

However, again, I don't see the point of giving somebody at age 18 a large basically IRA and telling them, hey, you can use this money, but because it's an ira, you have to pay the penalty and tax versus a non qualified account where they're subject to capital gains rates. Or, or Ben, to your point, the real bullet here, I want more kids to go to college. My kids are going to college. They can be whatever they want as long as it's doctor, lawyer, engineer. And so their ass is going to college. You bet it. And I've got a 529 for that purpose for each of my kids.

[B]

I can't wait for your son to go to school for painting again.

[C]

If he's painting for attorneys. That's great. Yeah. Need to do that for a law firm or engineering firm. But yeah, to me these are a little too complex, they're a little too cute and I'm very excited next year or five years from now when they're Casio Cortez accounts or some other nonsense.

[A]

So just lump them all into one.

[C]

I agree.

[B]

Yeah.

[C]

USA Patriot. That was actually something Ben, in the, in the last bill two years ago that was proposed, it was like a Patriot savings account where you could. Basically it was an IRA and a Roth IRA and you could put $1,000 a year, withdraw it at any time, tax free. That, that type of thing makes a lot of sense to me versus this complex nightmare.

[A]

At least they're not taking stuff away though. Like none of these accounts have been taken away yet. That's good.

[B]

Is someone benefiting from like why. Why are there so many different accounts? Like are these being custody that fill in the blank custodian. I mean is making a lot of money off of this or something?

[C]

If you happen to have. Yeah. If you happen to be an investment professional and you're helping people navigate this stuff. I don't know, like the three of.

[A]

Us maybe Ask Bill why the tax code is so complicated. It's because they keep building on top of it. They can't start with a clean slate. It's like latch this on and latch this on and yeah, that's it.

[C]

And I'm letting my libertarian soul, you know, be buried here. But, yeah, the goal here when politicians get elected is to do something right. We have an action bias. And here we are, we're rolling out into account. This is great. Let's ignore the 17 other accounts, right, that maybe are better than this one. It doesn't matter because their names on it. And it's about optics, not a political statement. Every politician does this crap and nobody is there saying, hey, let's make this easier for people. Let's take this regulation away.

[B]

Think about how many people will forget about some of these accounts and then they'll get to grow over the years with no one messing with them. And then they'll be surprised one day. That'll be cool.

[C]

Yeah. Per that great apocryphal fidelity study that apparently doesn't exist, where dead people and people are changed, moved, or the best performing investors in the United States.

[A]

I still believe it. All right, next question.

[B]

We're being blown up in the chat by Dave Ary. He's saying about. He wrote pretty much the same question in December, so I don't know why you picked this.

[C]

Don't dis my guy, Dave.

[A]

Dave, personal apology for me.

[B]

Yeah. Yeah.

[C]

We should answer five of Dave's questions on the next show.

[A]

I promise we'll make it right.

[B]

Yeah.

[C]

Amen.

[B]

Okay.

[A]

Duncan's going to send you a free hat, Dave.

[B]

There you go. Sure.

[C]

It's a MAGA hat.

[B]

No, it won't be. Okay, up next, we got one from Jeff. I'm 58 and contemplating retiring from my corporate role this spring. And the only real concern I have is health insurance. My options right now are Cobra, 18 months max, the ACA marketplace, not as good as Cobra, or move to my wife's. She's 51 and her insurance is not good at all. The other option is to just go the barista fire route. That's new to me.

[C]

Yeah, never heard of that.

[B]

And get a job.

[A]

So that's you. You work at Starbucks just because it has benefits, Right?

[C]

I don't.

[B]

I don't hate it. I don't hate it. But yeah. The other option is. Yeah, barista fire and get a job with health insurance. What do you advise your clients who retire before they're eligible for Medicare to do about health insurance? Bs I'll be in Grand Rapids, Michigan for a weekend in March and would very much appreciate some guidance from Ben on the best breweries to visit.

[A]

All right, so we get a lot of questions from people who want to return their 50s, right? That's the thing, right?

[B]

Yeah, yeah.

[C]

Very common. God bless them. Yeah. If you're lucky enough to do that.

[A]

And I joke that the age is almost always 55. Why is it 55? I don't know. It's a round number.

[B]

Yeah, that's.

[A]

Jeff wants to write 58. Bill, I sent you this question earlier this week and you went down a rabbit hole. So I want to put. This is Bill. After we started talking about the health care system in the United States. Pull my picture here. This is that. That's Bill in the mailroom.

[C]

I lost my mind. Yes.

[B]

What a shame.

[A]

So I think it's probably because you handle the health insurance numbers at Ritholts wealth, so you understand these things and how expensive it is. And every year this happens, you go, I can't believe how much health care is costing us now and how much the increase was. And I think there's things that we can fix in this country that are relatively easy. Right. Social Security we talked about in a recent episode. Like, I think that's pretty easy to fix. Like health care system. I don't think we're ever going to fix it. Just like the tax system. I don't think it's ever going to be. We can't just start from scratch. Right. But it seems like, at least to you, Jeff has all his options covered here, right? What he's listing on the question, those are his options. There's nothing else he's missing?

[C]

No, I think. Yeah, I think Jeff is really sober about this. I think he's looking at it really smart. You know, the health care exchanges are decent option, particularly if you're income limited. They're just so complicated, Ben. And I think ultimately the key, the downstream of this, the reason I went completely insane in our internal message board. Can we chart my first chart here, Daniel? For this question, it's that the cost of health insurance, gentlemen, is just way too damn high. Like, we are looking at $27,000, the average premium for a health insurance plan across the United States. And that's a combination of good plans, bad plans, the whole gamut. And it really varies tremendously by region. But $27,000 in excess of $2,000 a month, in my opinion, completely unaffordable.

[A]

Right.

[C]

For a family making 40, 50, $60,000 a year. It's just too expensive. And I can't quite understand why outside of the impact of government regulation. Dan, can we flip on chart two? I'm going to call some people behind the curtain. Ben, you're exactly right. I have watched our health insurance increase at roughly 8% a year for the last almost 10 years going at this point. And I've watched that happen via a certified payroll employer organization that we're a part of, that they're good people, they do good work and it's not their fault that the costs are insane. But some of our employees, Ben, are opting into plans that cost them $50,000 a year. That is completely insane to me. It's completely unacceptable. I don't know what to do. But it does seem back to our politics point before. Every solution they've thrown at this problem unfortunately has just made it worse. Be the aca, repeal the aca, the whole thing just every, like clockwork, the costs go up 70% a year.

[B]

Wouldn't making healthcare costs go down be more popular than the credit card thing that the administration's looking at? This seems like this would be a huge win.

[A]

But this is really complicated stuff and very hard to fix because it's the healthcare providers and the hospitals and the insurance and I mean it's like a.

[C]

Third of the economy right now. Like that's what's so insane to Ben's point. So many people rely on this system and the reality is these margins are paying people's jobs. Like it's not just a capitalist, anti capitalist point.

[B]

So will they bring these down?

[C]

Perhaps, but I think it's a symptom, frankly, gentlemen, of overregulation. Like if you take a look. Mark Perriott, aei, if you want to Google that chart, has a great chart showing what happens when you cut regulations. You're able to outsource, you're able to get efficiencies, flat screen TVs if you look at those costs there, versus more regulated industries, housing, extremely highly regulated. Right. What you can build. Few things are more highly regulated than health insurance. Right? Because it's the state level and there's so many requirements and so many barriers to entry.

[A]

We wouldn't do it this way if we started from scratch. All right, so but this is the kind of thing that the people who want to retire in their 50s, they almost never ask about this. And this is a big, it's huge, this is a big thing. So I think if, if I'm looking at his options here, I would probably even if it isn't an optimal plan. I'd probably go on his wife's plan.

[C]

Yeah.

[A]

Don't you think? Because even if it's not a great plan, maybe he's got to cover some of it on a cost. But like I'm guessing her employer is covering some of that. I think if she's working, that makes the most sense to me. Unless he wants to get a part time job at Starbucks just for the health care benefit.

[C]

That's exactly right. And most jobs too. Ben, if you sign up for a family plan, they'll let you cover that cost pre tax. Right. So you're basically 30, 40% potentially out of pocket because you're not paying income tax on that benefit versus using after tax dollars for healthcare exchanges. Even if you're narrowing hitting that window of the premium tax credit, which can go horribly wrong. And we've seen it happen a lot with Bill Arts, Everett and the team at RWM Tax. I would strongly look at that. I think that's Jeff's best option.

[A]

All right. As far as the breweries go, we actually do get a lot of questions from people who come to Grand Rapids because we've been named Beer City USA for like the last 10 years in a row. Oh, I didn't know that. A lot of the stuff start here. So the staples are founders in New Holland. That's the Knickerbocker downtown. Bill, you're a big founders guy, right? So you can go to the founders that. Those are the ones that like check off the list.

[C]

Kbs. I mean they do some heavy stuff. That's heavy duty beer.

[A]

You like the stuff that's more like whiskey as opposed to woods.

[C]

It's like drinking maple syrup.

[A]

Yeah, but you have to drink it when it's warm. That stuff's not for me.

[B]

Barley wine.

[A]

The Mitten Brewery is pretty cool. It's like an old fire station. Solid pizza and beer. Brewery Vivant, that's my favorite one. It's an old Belgian beer. It's an old church with like the big steeple in the middle, like small church. Really good burgers. Outside of the breweries, I'm like a travel host here.

[C]

So you have a God shaped hole that you're filling with beer.

[A]

Is that what you're. Stella's Lounge downtown is a favorite. My kids love it. It's gq. Named it the best burger in America at one point like 10 years ago. It's kind of like a punk rock theme. So you want to go like drink a PBR there or something right they have punk rock and video games. And if you're in a cool cocktail place there, a place called Mangiamo is an old house. There's all these really huge old houses from all the furniture barons back in the day in Grand Rapids. They turn house into a restaurant. It's a cool restaurant. And then they have a place called Moe's Cocktail Lounge in the back for a good cocktail.

[C]

Nice. Ben, how far, how far is Kalamazoo from you? I. I couldn't.

[A]

45 minutes if you want to go to Bell's.

[C]

Yeah, that's what I was going to say. So Bell's is my stuff. Big two Hearted guy. I think the Hop Slam ale in a can, that stuff is excellent. I mean you're approaching 10 ABV, but that is an excellent, excellent.

[A]

In the spring and summer, Oberon is by far my favorite beer. And then I got a shout out. Brewery 424 in Holland, Michigan.

[B]

I was about to ask how far is that from you?

[A]

Probably 45 minutes as well. So everything is 45 minutes from here. So Dave in Holland, Michigan got his own brewery that he started and I've been there before. We did an event there. Excellent beer.

[B]

Nice.

[C]

Let's go.

[A]

Can't go wrong though.

[C]

Road trip, beautiful time of year.

[B]

One more question before we jump to the next question. Just one more thing on the health insurance. How much agency does the average employee at a company have to try to lobby for better benefits? He mentions his wife's insurance not being good. Like that sounds, that sounds really bad. Like what company is offering insurance that is bad to their employee, you know?

[C]

Well, probably what he's talking about, Duncan, is the company's passing on more of the cost to employees. Like that's the most likely, you know, explanation for that. It's probably not that the insurance plan is bad, it's just extremely expensive. It's my guess.

[A]

Yeah. You got no, Duncan, you're not going to make any changes?

[B]

No, no. Okay. Yeah. I mean, I'm just wishful thinking for them, but yeah.

[A]

Yeah. All right, one more. Okay.

[B]

Last but not least, we got one from Jeff. I'm hoping to retire when the current school year runs out at the end of May. Right now I'm putting together what my budget and net worth review process will look like. Without giving away your secret sauce. What items should a recent retiree be paying attention to in a year end review? And you know what? I'm going to go and say give away the secret sauce. I want to hear it.

[A]

Okay. Let Jeff hear it. The Secret sauce is. There is no secret sauce. Right. So I'm guessing Rick is a teacher. He's waiting till the end of school year. Unless he just wants his kids to be out, I'd say there's no secret sauce. It's a process, not an event. The two biggest things. And Bill, you can tell me if I'm wrong. How much do you spend or plan to spend in retirement and what are your goals? Every other decision is some sort of branch off of those questions, Bill.

[C]

Yeah, I'd agree, Ben. I think it's just take things slowly. That'd be my take. What I observe, Ben, and a lot of retirees is that they're building up to this moment and they get that gold watch, they get the high five, they have the party and everything's great. They do everything they wanted to do. They travel, they get the garage clean. Just have a lot of fun. It's about two, three month process.

[A]

You would probably clean your garage. I can definitely see that.

[C]

I have a total mess right now because it's disgusting outside and I don't want to be outside. This is negative 27. But moving forward. Yeah, with our guy Rick, they get that three, four month mark and then like, okay, now what? And I know it sounds trite, I know, like everybody's looking forward to this moment, but it is really disorienting, right, to have worked for as long. I'm sure rick has maybe 25.

[A]

What do I do with myself? What do I do with my time?

[C]

Exactly. And I think people burn. What I observe is people burn through all that and then roughly six months later, they're like, all right, well, what the hell am I going to do?

[A]

Yeah, I did my trip to Italy. I saw the coast, Amalfi coast. Now what do I do?

[C]

Exactly. So, I mean, I wouldn't like immediately search a job, but look to volunteer. But I just think thinking through what you're actually going to do with your time is extremely important. Obviously you're going to get in shape. Obviously you're going to do all the things that you've been wanting to do. But then I think the cold, hard reality sets in that, hey, if we're retiring in our 50s, if we're retiring in our 60s, you got 30 years in front of you. And I think that people really do want to provide a meaningful part of life. Like they want to participate in society in some way. And I don't think sitting around scrolling through Twitter or watching our show on YouTube is a great way to participate in society. I think you have to go out and figure that out.

[A]

And I talked about this a few weeks ago on the show, how in the past 100 years ago you might live for five years in retirement and the average life expectancy meant you probably didn't have a lot of time. Now, 20, 30, 40 years for some people in retirement, like, you have a whole nother life.

[B]

Yep.

[A]

Right. And that's, that's you're right. That's the big thing most people don't consider is what do I do? Yep.

[C]

That's 100% it. And what I see a lot, Ben, is folks, particularly if they retire early, they're back doing something similar, like I said, in six months or a year, and they have more flexibility, like maybe they can still draw on their pension. But ultimately, again, I think there's this need to be a part of, like, society and culture. And again, even if your friends aren't retired, it's even worse. So I think just having that plan of like, hey, I'm going to maybe go do this, maybe a consulting project, right. The thing I'm pushing Mrs. Bill to do is, like, figure out how to use language models to teach kids how to read. I think that's like a big place where you could do a lot of work in the education sphere. So that'd be my advice to Rick.

[B]

I think the volunteering thing is big too, Right. Because, yeah, sense of purpose is so big. I think people retire and sometimes feel like they have no sense of purpose anymore. And volunteers.

[A]

My parents both do that. My dad does tax returns at Goodwill. And you can imagine, Bill, those are really easy tax returns because you use some software and people don't have a lot of inputs. My mom volunteers at, like, the local place that people come to give all their stuff. Another Goodwill kind of place. And it's funny because she's constantly looking for diamonds in the rough there, too, of some people bringing in.

[C]

Yeah, I mean, big shouts for Ed Carlson, big shots to Ed Carlson because his hand gets hurt this year. It gets read from all the high fives from getting people their refund. So that's just an awesome thing to do. But, yeah, I think, Ben, there's a big need out there in society, and particularly you've been fortunate if you've worked hard, if you do have that pension. Finding a way to give back is.

[B]

An amazing thing to think about for Rick Sodak. Jason, in the chat, ask about best coffee shops. Ben, got any coffee shops?

[A]

You think I know the answer to that?

[B]

It's the wrong guy to ask you talk about your wife drinking lots of coffee. Yeah.

[C]

Might as well ask for the wheat dealers in Grand Rapids to Starbucks.

[B]

Okay, well.

[C]

Ew.

[A]

Come on.

[C]

Yeah, it's great for retiree healthcare, though, for giving people.

[B]

We're looking for a good Ethiopian roast. Come on.

[A]

Yeah, I got nothing. All right.

[C]

Greenwood Lake Coffee in New York. That's where I'd send them. It's a great roaster. Support your local roaster.

[A]

By the way, someone in the chat said that I'm bougie. They tried to spell bougie, but they spelled it boogie. And I'm definitely not bougie with my beers.

[B]

It is. It's a hard. It's a hard word to spell.

[A]

It said Ben is boogie, which actually, that's boogie, Ben. That's pretty good. Ask the compound showmail.com for all your questions. I think last week might be a new record for most questions in a single week. We got like a dozen questions last week, so keep them coming.

[B]

The doc is getting chaotic.

[A]

Yeah, we got. We got way many, way too many.

[C]

I love it. Stay warm out there, friends.

[A]

Thanks to Duncan. Thanks to everyone on the production team, as always. We'll see you next time.

[B]

See everyone. Thanks for listening to Ask the Compound. All opinions expressed by Ben Carlson, Duncan Hill, and any of their guests are solely their own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast.

[A]

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[C]

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