What’s the Worst Asset Class for the Next 5 Years?

Summary

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Ask The Compound – Ep. "What’s the Worst Asset Class for the Next 5 Years?"

Date: March 18, 2026
Hosts: Ben Carlson, Duncan Hill
Guest: Nick Maggiulli

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Episode Overview

This episode dives into several key money questions from listeners with a special focus on the returns outlook for two major asset classes—private markets and residential real estate—for the next five years. Ben and Duncan are joined by financial writer and data analyst Nick Maggiulli to debate which of these might underperform, discuss how “buy, borrow, die” works in practice, weigh a compelling guaranteed-return pension option, compare brokerage accounts vs. retirement accounts, and consider the fate of 529 plans in an AI-driven future.

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1. Private Markets vs. Residential Real Estate: The Worst Five-Year Bet?

[02:24 – 10:55]

Synopsis:
Nick Maggiulli joins to discuss the much-debated tweet: Which is likely to have worse returns over the next five years, private assets or US residential real estate? Both asset classes look bleak, but for different reasons.

Key Discussion Points:

• Private Markets in Trouble:

  • Illiquidity is biting investors. Redemptions are being limited; private equity and venture capital marks are likely overstated due to a lack of exits.
  • "Mark to market like down 40 cents on the dollar. I think US housing also has its problems...incomes and prices haven't kept up." – Nick [04:03]
  • Ben adds that private assets resemble public equities with added leverage, so returns correlate somewhat—if public does poorly, privates likely will too.

• Residential Housing Outlook:

  • Long-term data shows incomes have not kept up with home prices, but prices have stabilized recently, and 2023 was the first time in years prices underperformed inflation.
  • The tight housing market is underpinned by entrenched political forces; price stagnation (rather than a crash) seems more likely.

• Demographics:

  • The largest US demographic cohort is reaching peak home-buying age (33-37), but many are sitting on the sidelines waiting for mortgage rates to fall.
  • Ben wonders: "How long young people can continue to wait...How long do you think people can hold out?" [06:53]

• Renting vs. Buying:

  • In major cities, the cost disconnect is vast—renting is far cheaper than buying. Many priced-out millennials may buy second homes elsewhere but continue renting in their primary city.
  • "There's this kind of tension going on...people are not going to just mark their houses to market" – Nick [08:00]

Notable Quotes:

• "Privates are probably going to have more negative returns and maybe, you know, US home returns will just be like flat to maybe slightly negative in real terms." – Nick [04:03]
• "The gap between buying and renting in big cities...is probably about as wide as it's been." – Ben [09:08]
• "We're also going to see a trend of millennials...buying a vacation place...but own a place that's just not their primary residence." – Duncan [09:25]

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2. Listener Q&A: Buy Borrow Die – Strategy for the Wealthy

[10:57 – 15:53]

Synopsis:
A listener inquires about the "buy, borrow, die" playbook for deferring taxes.

Key Points:

• Strategy Explained:

  • Wealthy investors buy a diverse portfolio, borrow against it for spending (rather than selling), and then, upon death, heirs inherit assets with a step-up in basis—avoiding taxes on prior appreciation.
  • "If you can borrow at 3% or something, and expect your portfolio to return over that, it makes sense" – Nick [12:16]
  • Not widely accessible: mostly for top 1-3% due to large asset requirements.

• Debating the Step-Up:

  • The step-up in basis is a major driver of intergenerational wealth transfer and inequality.
  • "If you really want to tax the wealthy, then you make borrowing against a portfolio a taxable event." – Ben [13:40]

• Risks:

  • Main risks include getting margin-called and the fact you can’t use this tactic with retirement accounts like IRAs.

Notable Quotes:

• "The biggest problem is most people can't use it, because they probably don't have enough assets to do it." – Nick [12:16]
• "It's not even a top 10% strategy. This is maybe like a top 3%, or 1% strategy." – Ben [14:05]

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3. Should You Take a Guaranteed 7.25% Return for 30 Years?

[15:54 – 20:59]

Synopsis:
A listener is considering switching a 401A balance into a plan offering a guaranteed 7.25% annual return for nearly three decades.

Key Points:

• Too Good to Be True?

  • Ben and Nick are surprised at the high guaranteed rate, seeing this as “unheard of” in today’s environment.
  • Biggest concern: counterparty risk and long-term plan solvency.
  • "My biggest question would be...Is it going to last 27 years?...What's the funded status?" – Ben [17:22]

• Would They Take It?

  • “Assuming it's real...I think you'd have to take it,” says Nick, but would not put all assets there.
  • Main risk is if inflation soars or the plan fails.

• Practical Advice:

  • Diversify—do not go “all in.” Have a lawyer review the offer and plan documents.

Notable Quotes:

• "If you don't know where the yield's coming from, don't invest in it." – Nick [18:13]
• "It almost sounds stupid to turn it down. That's an amazing guarantee." – Ben [20:46]

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4. Brokerage Account vs. Solo 401k for Business Owners

[21:26 – 25:56]

Synopsis:
A listener juggling a solo business, traditional IRA, and growing savings wonders if she should contribute more to a solo 401k or a taxable brokerage account.

Key Points:

• Tax-Deferred vs. Flexibility:
  • While solo 401ks allow significantly higher tax-advantaged saving, many in their 30s and 40s are beginning to value brokerage account flexibility.
  • Ben: “You can slowly but surely build that brokerage account up...If you don't need the money soon.”
  • No harm in opening a solo 401k for the option; any additional disposable income can be split between retirement and brokerage depending on specific needs.

Notable Quotes:

• “For me, any excess income now goes into the brokerage account instead of topping off the retirement accounts because I want to have that flexibility.” – Ben [25:41]
• “It doesn't have to be an all or nothing.” – Ben [25:35]

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5. The Fate of 529 Plans in an AI World

[26:10 – 30:35]

Synopsis:
A parent asks if saving for college in 529 plans still makes sense, given the possibility that AI will radically change education.

Key Points:

• Role of AI:

  • Ben envisions every child having a personalized AI tutor, but does not believe this will eliminate demand for traditional college experiences.
  • The pandemic showed that online-only learning cannot fully replace the social and experiential aspects of college.

• Enduring Value of College:

  • Live, in-person experiences (networking, independence, social growth) may become even more valuable as the world digitizes further.
  • "If I could bottle up the feeling I had, I felt like I was walking on clouds that...I'm on my own, I'm away from my parents, I have new friends. If I could bottle that feeling, I'd be a trillionaire." – Ben [28:32]
  • Duncan predicts a resurgence of liberal arts and broad-based education, enabled and enhanced by AI.

Notable Quotes:

• "I do feel that the college experience for young people...is going to be maybe more important than ever again in this AI world." – Ben [29:22]
• "Instead of kids being so focused on just the bare minimum to pass a test...more people are going to have a favorite impressionist painter and maybe know how to build things with their hands." – Duncan [29:52]

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6. Lightning Bonus: Cutting Your Losses or Doubling Down?

[31:48 – 32:52]

A quick-fire bonus: What to do with a stock that’s lost 40%? Ben’s rule: If you wouldn’t buy more now, why keep it waiting for a break-even exit?

• "If you're not willing to rebalance into the pain and buy more, if you don't have the confidence to do that, why do you have confidence to wait for it to come back?" – Ben [32:21]

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Memorable Moments & Highlights

• Twitter Trolling: Ben and Duncan praise Nick Maggiulli for being “one of the highest quality trolls on Twitter.” [02:23]
• Real Talk on Parenting & Life: Ben shares his “deep thought” on nature vs. nurture after having twins, with Duncan joking about hats and hair. [23:18]
• Personal AI Tutors Prediction: Ben predicts every US child will soon have a personal AI tutor, changing the way we learn. [26:38]

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Takeaways

• Both private markets and US residential real estate have headwinds, but private assets may fare worse in the near term.
• “Buy, borrow, die” is a tax strategy for the ultra-wealthy, not the average investor; it's contingent on rarefied asset levels and comes with unique risks.
• Guaranteed high fixed returns sound tempting but should always be vetted for funding risks—especially if something appears “too good to be true.”
• The trade-off between tax-advantaged retirement accounts and the flexibility of brokerage accounts is increasingly recognized among younger savers.
• The disruptive impact of AI on education is real, but college’s social and experiential value—networking, independence, personal growth—remains strong.

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For listener questions or to join the conversation:
Email askthecompoundshowmail.com or join live chats and on Twitter.

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End of content summary. (Ads, disclosures, and non-content were not included.)

Transcript

[A]

Welcome back to Ask the Compound, the show where you ask and we answer. Ton of money poured into private investments in the past decade. The early 2000s witnessed perhaps the greatest housing boom we've seen in history. So which asset class will have worse returns going forward, Private markets or residential real estate? Nick Magiulli is here to help us answer that question and more. Let's do it. Email here is askthecompoundshowmail.com if you're in the live chat or on Twitter. Firesoft questions with Doom Live. Duncan, how we feeling? Jet lag?

[B]

Still feeling good? No, no, no, I'm back. I'm missing the warm Miami weather. I'm freezing here in Connecticut.

[A]

Well, you couldn't enjoy it the last night because you were like, down for the count.

[B]

Yeah, me and Travis both got wiped out. I don't know, it was, I don't know, heat exhaustion or something.

[A]

My forehead's been peeling for five days. On today's show, we're answering questions from our Compound audience about housing versus private investments. How to how does buy, borrow, die work in practice? Would you take a guaranteed 7.25% return for the next 30 years when you should prioritize your brokerage account over your 401k? And then do parents still need to save in a 529 plan in an AI world? But first, today's show is sponsored by Public, the investing platform for those who take it seriously. On public, you can build multi asset portfolios of stocks, bonds, options, crypto and more. And now generated assets which allow you to turn any idea into an 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 any prompt and put AI to work. Screens thousands of stocks, builds you a one of a kind index and lets you back test it against the S&P 500. Then you can click, 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 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. All right, we got good questions today. Let's do it.

[B]

Yeah, it's stacked. I should also say, you know, great job to you and Bill while I was out. You know, just no one even missed me. Y' all just kept, kept trucking along. And Bill had a bunch of funny quips thrown in there.

[A]

That's the one thing.

[B]

Tried to catch you with political stuff.

[A]

You know, he gives me quizzes. He makes me work a little harder.

[B]

Yeah, yeah, it was good.

[A]

All right.

[B]

I enjoyed it. All right. Up first today we got a screenshot of a Nick Maggiuli tweet which if you don't follow him, you should follow him because it's very entertaining. He is, I think, one of the highest quality trolls on Twitter.

[A]

You love Nick on Twitter because he's always poking the bear.

[B]

He's not afraid of, he's not afraid of anyone on Twitter. It's very entertaining. So he said, I'm trying to decide which asset class will have worse returns over the next five years, private assets or US Residential real estate. Private assets are liquid and investors are getting impatient while home prices have outrun incomes and no one is buying. Both look bleak.

[A]

All right, someone in the comments said, hey, I want to see Ben and Nick debate this one. So let's bring him on from of dollars and data's fame.

[B]

Hey, Nick.

[A]

Nick Maggi, thanks for me on guys. Nick, you wouldn't be farming for people to come at you on Twitter, would you? You would never do that.

[C]

No, I just, you have to, you have to come up with some sort of contrarian takes. Like, it's just too like, oh, hey, just keep buying. Like, I've said that a million times. Everyone's heard me talk about that.

[A]

I like this idea you want to

[C]

try and say, like, let's look at some things that are maybe on the edge and like, let's kind of explore these ideas. And I learned a lot from it. I'll put something out there and I'll get some pushback. And I'm like, actually, that's a really good counter argument. I didn't think about that.

[A]

I agree. Sometimes you have to take a take. You have to make a take. So this is a very provocative question. I want to let you go first and then I have some data and stuff. So I want to, I want to, I want to see you make the case, make it for both of them or either of them. And I want to hear where you fall on this because I agree it does seem like these, these assets are kind of headache for trouble. But what is, where did you fall on this?

[C]

I have to lean more against private assets. Right. We're already starting to see kind of some of this unravel. I know Dan Rasmussen, who's the person has talked about this for a Long time with privates. He was saying this back and I think 20, 19, 2020 pre Covid and he was talking about this stuff. And now I think that they're coming home to roost. We're starting to see, you know, they're limiting redemptions. You know, we hear all these things like Mark thinking Mark to market like down, you know, 40 cents on the dollar. All this types of crazy stuff. I think US housing also has its problems like incomes and, and prices haven't kept up. And so, you know, rates have, everyone's like, oh, rates are going to come down. You know, date the rate, it's going to come down. Don't worry. Rates haven't come down. Right. So there's a lot of things that we've expected to happen that haven't happened. But I think there's entrenched political factors keeping U.S. home prices higher. And so even though I don't think either are going to have great returns going forward, I think, you know, privates are probably going to have more negative returns and Maybe, you know, U.S. home returns will just be like flat to maybe slightly negative on real terms over the next handful of years.

[A]

Yeah. Because housing doesn't fall that often. Right. It's pretty. I'll make a case here on the private side. So. So my chart, this is from the Financial Times. This shows all the money that is held for private equity. Obviously there's more money in private equity, so this makes sense. But it just shows the value of PE assets held for more than seven years is just growing and growing. It's over a trillion dollars now. And so there are no. The IPO window is seemingly closed. There are no exits in this space. So investors are waiting to get their money back. And you could make the case that whatever the marks are, they're probably lower than they seem because there haven't been any exits to mark them to. So they're Private valuations are probably a little too high. John, show the next one. This one Michael and I talked about on Animal Spirits this week. Rex Salisbury shows the the IRRs for these VC funds that got marked up way higher. And this shows by vintage year. Right. Going back to 2017, and they just keep coming down. And there are of course no IPOs in venture capital EAs, so these numbers are probably way higher than they should be. So I kind of agree with you that the private assets probably have to come down. I still think I would probably bet on the private markets because there's just not that. Because it's like it's Kind of like public equity with a little bit of leverage on it for most of them. Right. So if public equity does okay, they probably will do okay. I got some housing charts for you to throw my first one up here. This just shows. Okay, so this is your income to. So this is median income to median home price. And it's funny because I had Claude make this for me. Nick, you're a big user too. They have the healthy dotted line at 2.6%. And you can see going back to 1985, it's never been healthy, which is kind of funny. It's actually, it has come in a few years because housing price returns have stabilized. So it's actually the incomes have been going up a little bit more than housing prices. John Stroman. Excellent. Which shows the housing price returns in the 2000s. Obviously, we had the huge boom in the first couple of years. And you can see every year housing prices have come down where last year, for the first time in a while, housing prices actually lost out to inflation. So I kind of agree with you that housing price is probably the best bet would be not a housing price crash, but a stagnation where they don't go anywhere and you have to wait for incomes to catch up. Now here's the. Here's the one like question I have. So John, throw my demographic chart up here, the John Burns one. There we go. So John Burns has this thing that shows the largest population group in the US turns 33 to 37 this year. So I don't know how you can do chart off. I'm curious your thoughts on how demographics impacts this, because I just want to know how long young people can continue to wait and push this off since that's like the next step for most people. There are certainly fewer houses being bought and sold right now. But do you and I agree that a lot of people have just been on the sidelines waiting for mortgage rates to come in, but how long do you think people can hold out for without just saying, all right, fine, I don't care what I'm paying, I'm buying?

[C]

I think people just decide to rent. I mean, they're like. When you do, like the equivalent, like, I'm looking, I'll just use my place here in Jersey City. It's a little expensive. It's like 46.50. But if you. That's my all in cost. That includes my 2 per 2.2% property tax. If I were to own, that includes my insurance, everything. When you run all that through and say okay, let's say this is my all in cost. What would my. What would this place cost like to buy? It would be like $650,000, which, for an apartment, you're saying that's not that crazy. But there's no way that someone's going to sell an apartment for 650 in, like, an area that's very close to Manhattan. And so it's like, someone would probably sell this apartment for a million bucks. I'm like, that's overpriced by like 30%, in my opinion. Right. And so that's what I'm. There's this kind of tension going on, and I think what's going to happen is just out of pride. People are not going to just, you know, mark their houses to market, aka drop in by 10, 20, 30% to sell them. They're just going to say, no, I'd rather just sit on it and I'm not going to sell. And I think that the ego of it, of being the first person to take a 30% loss or something like that is too high, and people would just rather not do that than. Than sell. And so I don't see how that, you know, friction gets broken. And so, you know, even. And with it, regardless of the demographic factors, like, you need sellers, like, people need to sell, you know, and there's people trying to sell, and no one's going to buy at those prices. I think people know it's crazy.

[B]

Yeah.

[A]

Especially I think that the gap between buying and renting in big cities, more expensive cities, is probably about as wide as it's been. Right. That that, to me, is the one that makes the most sense. If you're in an area like where you guys live, that makes the most sense to me. That renting is just. You run the numbers and it doesn't even. It's not even the same ballpark.

[B]

I think we're also going to see a trend of millennials who are priced out of, you know, buying a primary home, buying a vacation place that is in a much cheaper location, a mountain home or a beach place, somewhere that is, you know, $400,000, a condo or something. Right. Or a mountain home for 350.

[A]

Come to Michigan.

[B]

And yeah, that's what I think I've seen. I've seen people talking about this, and, you know, I've looked at places before, too, and I think we're going to see that, which I think is going to be kind of weird for the economy. A bunch of people renting, but ova own a place it's just not their primary residence. I think we could see that.

[A]

We've talked too about how that rental you the difference you're saving, Nick, between renting and buying. Where does that difference go? To the stock market, right?

[C]

Yeah.

[A]

It allows you and invest more.

[C]

Yeah, exactly. So I think people are going to run these numbers and of course it's always local. Like in certain markets it's like you should be buying. It's obvious. Right. In other markets you shouldn't be. And so you have to run that. I have a rent versus buy calculator.

[A]

There's.

[C]

You can find these on the Internet. I have one on my website I think. Very useful for this. And you can just see like how close is this going to be over a 30 year time frame.

[B]

Do you need a head an example of a place where you should buy instead of rent?

[C]

I'm guessing it's probably parts of Texas and Florida where like the prices are not as elevated relative to rents. That's my guess. I don't know exactly where, but something like. Yeah, probably mid places in the Midwest too. But yeah, definitely not the coast. I think that's where things are really bad.

[A]

Duncan, we need a poll in the chat about which is going to be the worst one.

[B]

Okay. Okay, I'll ask.

[A]

All right, let's do another one.

[B]

Okay. Up next we got a question from Tim. The guy on talking wealth with Ben last week mentioned a buy borrow DAI strategy. I need to know more. What does Ben think about this? What are the benefits and potential drawbacks?

[A]

So I've been talking about borrowing against your portfolio recently. So last week on talking Wealthy we had Joseph Wang from Synthetic Fi on to talk about box spread loans against your portfolio. If I'm being honest, this whole like buy borrow die thing is still relatively new to me. I think it's kind of relatively new in the finance terms. Right. It's kind of a new thing. So here's the gist of it. You buy your, and this is for wealthy individuals. Typically you buy a bunch of assets. You buy stocks and bonds and real estate, whatever. Then you borrow against them for your spending, right? You, you don't sell your stock, you borrow against it to buy something else. Whether it's to start a business or to go on vacation, whatever it is you're borrowing. So you're not selling those assets. They can, they can appreciate. And then the whole idea is for estate planning when that, when those assets get passed on to the next generation, they get the step up basis. Right. So they don't have to pay taxes and then now they can, they can sell them free and clear of taxes or they can take these assets and hold on to them. And so it's just a way to defer taxes basically forever. Nick, I'm curious your thoughts on this. In theory it sounds awesome. There's obviously some holes to poke in it. What do you think?

[C]

I think the biggest problem is most people can't use it because they probably don't have enough assets to do it. Like, you need a lot of assets to do this. It's not for someone like, oh, I have a, even a million dollars in a portfolio that's a, you know, a lot of money. That's not something you're going to be able to like really do a ton of borrowing with, right. It's usually as the reason you hear about billionaires doing this because they have so much assets that like would want to sell these things. And really when you think about it, it's actually, it's a great strategy because like if you can borrow it, you know, let's say 3% or something, right? And you can, and you expect your portfolio to return over 3%. That's where it makes sense. I mean even 4%, you can make arguments, right? But it's really depending on what you can borrow at. And you know, with rates a little bit higher now, I think, I'm guessing right now with some of these strategies you can get around a 4%, maybe a 5% loan, which would be decent, but it really depends on what that borrowing hurdle is, right? And so as that, as that hurdle gets lower, the strategy gets more attractive. And then you completely correct on the stepped up basis. That's, I think that's one of those things that's, that creates more wealth inequality than anything else out there, right? It's like your, your grandparents bought something for a nickel, you know, 100 years ago and now they're, they're step when they die, it gets passed on and now it's worth, you know, half a million dollars in California and all those, all that tax basis is gone. And now they only have to pay the tax on from when they die to when they sell, which whatever that change in.

[B]

What is the argument for allowing that. Do you guys have a good one? Like why, why is that if, if other than to just enrich the already rich?

[A]

Well, I guess, I guess the point is like, do you really want to like hand your heirs a bunch of taxes to pay? It's not their fault that they got so. But then you say, well, Just sell the assets. I guess I made this point, Josh, a month ago or so I said, if you really want to tax the wealthy people, then you make the bearing against the portfolio a taxable event. Right. Because that's, that is what, that's the thing is they're deferring taxes. And you're right, this isn't even like a top 10% strategy. This is maybe like a top 5%, maybe a top 3% or 1% strategy. And of course the biggest risk is getting margin called. So if you borrowed too much, so I think you'd have to like cap it. You don't want to borrow more than 15, 20, maybe 25% of your portfolio. And Cliff in the chat asks, you can't borrow against your ira, right? Yes. This is taxable money only, so you have to have a big taxable account. So you're right. This is a very few number of people who can do this. But it also does show you, we keep talking about we need to tax the rich more like the rich, rich people have so many ways of starting taxes that any strat, any rule that the government comes up with the tax some more is probably just they're going to figure out a way around it. And I know it doesn't seem fair, but this is wealthy.

[B]

Seems like that would be hard to skirt. Right. If they did away with the step up, that would be harder.

[C]

Yeah, yeah. I mean that's probably, that's why it's such a, it's such an entrenched thing. And I hear the counter, it's like, hey, I worked my whole life to have this thing. Like why should the government. It's like an estate tax base basically. Right. So it gets rid of that. I mean, the estate tax is so high that it basically doesn't exist for like 99% or plus of households. So it's, it's stepped up basis is essentially getting rid of estate tax on everyone else.

[A]

Right.

[C]

So that's another way of thinking about it. So. But yeah, I mean there's debates to be had about that about how maybe there should be a, the step up shouldn't be as large or maybe the tax rate should be lower if it's a stepped up asset. I don't know. But I think right now it just allows people who maybe don't have over 11 million or $22 million to pass on wealth tax free.

[A]

But there's a lot of millennials and Gen Z people who this is their retirement plan, if we're being honest.

[B]

Right? Oh, for sure.

[A]

Inherit my parents assets at a stepped up basis. The only problem is you're probably gonna be like 60 years old when it happens. So here's what I want exactly.

[B]

Jay in the chat said you can borrow against your private credit investments.

[A]

Yeah, there we go. Those never go down. All right, we got another. This next one is probably one of the more unique questions we've gotten.

[B]

I know it's long, but this one's from from Ben. I have a one time only retirement fork in the road and would love your take. I'm 43 and work in the public sector. For the last 13 years I've been in a self directed 401A which I've never heard of where I choose my own mutual funds. But my employer is now offering a brief window to irrevocably switch into a different plan that offers a guaranteed 7.25% annual return. No more, no less. The Account currently has $320,000 in it with fixed annual contributions of roughly $17,000 at age 70 and a half. The guaranteed. The guaranteed annual return plan would require that I close the account and roll over the full balance. I think my wife and I are in a unique position to let this ride. She's also 43 and works in the private sector with over $1.1 million amassed in her retirement accounts and a $31,000 annual 401k contribution rate including employer match. I also have a separate deferred comp account with $60,000 that I contribute $7,000 to annually. Our strategy would be to retire in our early 60s and live off my wife's accounts and my deferred comp first, essentially quarantining this 401A so it can compound untouched at that 7.25% clip for the next 27 years. In an era of market volatility, is a guaranteed 7.25% for nearly three decades. The ultimate free lunch. Or am I giving up too much upside by abandoning my low cost mutual funds?

[A]

Okay, so this question may be completely double. Take a 401A is typically like government or nonprofit or something. So I had to run this one by Dan LaRosa, who runs up our corporate retirement division. And he, he was shocked. 7.25 guaranteed for almost 30 years is unheard of. I've never. So this has to be some sort of cash balance plan or pension. And my biggest question would be what's the solvency of this plan? Like what's the funded status? Is it going to last 27 years to ensure that this Isn't some sort of Ponzi scheme? Like, that'd be my biggest question is like, what's the, what's, what's going on? Are you working for a very small business that's making this promise or is it a big government agency? That'd be my biggest worry is like the funded status. Okay, so setting all that aside, Nick, you get a lock in 7.25% guaranteed right now for the next 30 years. Do you take it?

[C]

I think, yeah. You got. Assuming. I mean, it's a crazy thing. Would you put all your money in that? No, I think that would be crazy because what happens if we have some sort of hyperinflation event? Like you're still getting 7 to 5% even when the, you know, the currency is going to nothing. So I don't know on that front, I agree with you. I think the biggest issue here is solvency and counterparty risk. Right. There's that old joke. If you owe the bank $1 million, you have a problem. If you owe the bank $100 million, the bank has a problem. Right. So I'm like, how are people handing. Like, I would just want to know how does this thing actually work? Like I get like, let's say the, the U.S. stock market returns 10% a year. And let's just assume this is an all stock portfolio. So like you're giving on nominal terms, you're giving up 3% a year, like annualized. Like I could see how that makes sense. But like sequence of return risk is everything. If we go into like the next Great Depression next year, how is this thing going to be paying out 7.25% for the next decade? It has to break in some way. Right. So like, I don't fully understand it. And so my take is like, if I don't understand it, I don't, you know, if you don't know where the yield's coming from, don't invest in it. Yes.

[A]

Again, I've never heard a guarantee this high before. But I think if this thing is, is actually real. Yeah, you're right. The leaving the opportunity cost as well. Or if the equity markets return 9 or 10%. But I just think this could allow you, because they are, they said, look, we have assets outside of it. Right. The wife obviously is doing really well. She's got a seven figure retirement plan. You could potentially take more risk outside of that plan because of this guarantee. Right. Financial planning is way easier if you know that this guarantee, like your spreadsheet can be mapped out for decades now. Right. For that piece, it. If so, I think as long as you trust the people, I just, man, this sounds too good to be true.

[C]

I agree.

[A]

It's great.

[C]

It's too. It's really too. I would actually argue the opposite. You got to take less risk. Because if this thing doesn't turn out to us, I mean, what could happen? Let's say at some point when they say, hey, we can't keep doing this, and they stop the 7.25, at least you earn that through a period. That's still something. Even if you get five years of seven to five, I think that's a good. You take that. Right? In a diversified portfolio, like, that's a pretty good return. I would. I would definitely take it and just explore it, but I would do more research before committing all into it. But I like the. I like the idea here.

[A]

Don't do the Kevin Bacon. Kira said we can put all your money with Madoff here. Right? Diversify a little bit. Kevin Bacon had to do a lot of TV shows he didn't want to do because all of his money was with Bernie Madoff before.

[B]

So it sounds like a big. A big takeaway here is make sure that it actually is 7.25. And they're. I would need something or I would

[A]

need some sort of assurances. And I would. I would really have to have a lawyer check out the paperwork. I would want a ton of assurance,

[B]

maybe an actual lawyer. Not chatgpt.

[A]

And I would. I would need like an update once a year on, like, how was the funded status of this plan. I would need a lot of guarantees. But if. If that's real, I mean, man, it almost sounds stupid to turn it down. That's an amazing guarantee.

[B]

Dave in the Chat says a 401A plan is a money purchase pension plan that typically required E&ER contributions used by government nonprofits.

[A]

Yeah, that makes sense.

[B]

Sure.

[A]

Okay, Nick, thanks for help as always. Everyone sign up for Nick's newsletter at of dollars in data and buy his book. What do you got?

[B]

Yeah.

[C]

Thank you, guys. Appreciate everything.

[A]

Thanks for having me on.

[B]

See ya.

[A]

All right, let's do another one.

[B]

All right, up next, we got one from Aaron. I'm taking advantage of your promise Vet questions from female. It's funny how many people have taken us up on this. Your promise that questions from female listeners will go toward the top of your list for consideration. My husband is 35.

[A]

I'm a man of my word.

[B]

Yeah, no, I mean, we're serious. My husband and I see the numbers creeping Up. I think we're up to like 9 or 10% female audience now. Uh, used to be, you know, years ago, it was like 4%. Um, so, you know, we're, we're growing. Uh, My husband is 35 and I'm 37, and we live in a suburb of Columbus, Ohio, with our infant and twin daughters. I'm in the process of scaling my business back up since having the babies in October. My husband has a W2 job, and I'm a sole proprietor with no employees. My husband saves 9% in his 401k and has a great company match. And I've maxed out contributions to my traditional IRA for the last couple of years. I'm toying with the idea of converting my traditional IRA into a solo 401k, given the contribution limit is much higher. However, I'm also considering whether it could be more beneficial to keep my IRA as it is and instead invest more into our joint brokerage account. Is it smarter to increase retirement savings, or is the brokerage account the better way to go?

[A]

Okay, first off, kudos to Erin for scaling up her business five months after having twins. Having two babies come out of your body almost doesn't seem possible. I don't know how women do it. My wife did this. I have a kinship with parents who had twins. It's like a club. And I've said this before, but my side note is, yes, having twins has completely changed my mind about nature versus nurture, because I see my two kids that grew up in the very same environment and are completely different people. And I think that you can really screw your kids up bad as a parent. But I think you kind of are who you are in some ways based on your DNA. That's my deep thought for the day. Like, you were born to wear hats, Duncan. You have a great head of hair, but you're born to wear hats.

[B]

That's true.

[A]

So we've been getting more and more of these questions about retirement accounts versus brokerage accounts. And it's interesting. It's mostly people in their 30s and 40s who have realized that, oh, actually the tax deferral is great. Like, allowing your money to compound tax deferred is awesome, but I really would like more flexibility because I want to travel more, I want to retire early, whatever it is, so. And I certainly had a similar realization. We focus almost exclusively on funding tax deferred retirement accounts in our 20s and 30s, most of our 30s. And so I feel like I'm kind of in a. I've been playing catch for the last five years or so as well. So Erin wants to know if she should set up a solo 401k or focus more on the brokerage account. I then there's other details in the question that we cut short because it was a long one about retiring early and traveling and then daycare expenses. When their daycare for their twins is done, they're going to have way more disposable income to save and invest. I think she said it's $2,500 a month for daycare, which is absolutely insane, but I know that's true. So the contribution limit for a solo 401k is very high. $72,000 in 2026, it's just 24,500 for a regular 401k and then 7,500 for an IRA. So there's no harm in setting up your solo 401k, converting that IRA into it. If your business really takes off and you want to stash a bunch of tax deferred money in there and get a tax break upfront now, as long as you're not doing a Roth, I, I see no problem with that. You could always just put in a lower amount and not get up to the contribution limit. It's the same thing. So I think there's no harm in setting you setting it up. I, I guess, you know, I think the course of action too is like, you're only in your mid-30s still, like, you can slowly but surely build that brokerage account up if you don't need the money soon. Right? Like so slowly but surely. If your business is doing better and you have more disposable income, put more and more of it in the brokerage account. If you get it, your husband gets a raise. Instead of putting more in the 401k, put a little more in the brokerage account. Slowly but surely build up. I don't think you have to do it all at once. It doesn't have to be an all or nothing. So for me, it's like any excess income now goes into the brokerage account instead of like topping off the retirement accounts because I want to have that more flexibility. So I think that's the way to go about is slowly but surely doing it and giving yourself more flexibility. But it is interesting how many people are coming to this realization that, oh yeah, text retirement accounts are great, but I'm stuck for a long time in those and I have no flexibility if we want to retire earlier and what's the age everyone wants to retire at Duncan in their 50s.

[B]

What's the age? 55.

[A]

55. Everyone says 55. Why? It's a round number. I don't know.

[B]

It's nice. It's a nice number.

[A]

Yeah, but good on you for doing your own business and. But yeah, open the Solo 401K. It's not going to hurt anything.

[B]

What do we think? Aaron is sole proprietor. Sounds so official.

[A]

I don't know. It could be anything these days.

[B]

Photographer, designer.

[A]

She's, she's doing, she's showing people how to use AI. I don't know. Yeah. All right, one more question.

[B]

Hey, up next, we got one from Antonio. Should parents be concerned about the future of. This is a heavy one. Should parents be concerned about the future of education and whether to invest in 529 plans versus a more flexible brokerage account? As knowledge is increasingly democratized by AI, I think the world will look vastly different in five years, let alone 18. When kids born today reach college age, I feel like it's hard to justify locking money away based on assumptions that may not hold in the AI era. It's a good question.

[A]

Yeah, I completely understand the sentiment here. Like, it's certainly possible within I don't know how long, two, three years. Every kid in America is going to have their own personal AI tutorial. And I think that would be amazing. Like, all of my kids learn in different ways. Like they have. Everyone has their strengths and weaknesses and certain, you know, some more visuals, some more numbers based. Like, if you had an AI that could understand those strengths and weaknesses and create a learning plan that takes them into account, that'd be amazing. That sounds. Sign me up right now for my kids. I would love that. So, like, will that make it so more kids are able to learn on their own and not need as much formal education? Yeah, I think so. Does that mean that you should start shorting colleges? I don't necessarily agree with that. Like, remember when classes went online in the pandemic and a bunch of talking heads said, that's it, college is done for. Once we realize this and you open the veneers, sorry, it's done. And all of the kids hated it and actually made them yearn for the college experience even more? I think if anything, the more we move into a digital world and AI is obviously moving us that direction, there's just we're going to be interacting more with computers and screens and whatever. I think it's going to give the premium to real world experiences. Travel is going to be more important. Concerts, comedy shows, live sporting events that Stuff hanging out in real. Think about like the. How happy people were to be in a big group of people last week in Miami with us. Right.

[B]

Yeah. I mean to me that's, I'm, I'm a little biased as, as a former educator, but like it's a package deal. People are completely missing the point when they, when they talk about college. Like it's just about the classes or just about the, it's obviously about the networking. It's obviously about, you know, improving social skills. And you know, if you, if you live off campus and just go to class and then go straight back home, you're really robbing yourself of the true college experience. Right. Like it's, it's a package deal and is it worth the money? That's a whole different, you know, argument.

[A]

It has gotten, yeah. Living on your own, but. But yeah, being responsible for yourself, being around kids your other age. I still think back to my very first week of college. Meeting new people, making new friends. If I could bottle up the feelings I had the first night I had this group of new friends and we're drinking beer in the dorm room and we're listening to, I think it was Nelly country grammar. Just come out listening to music and then we go to our first house party. If I could bottle up the feeling I had, I felt like I was walking on clouds that, you know, that just. I'm on my own, I'm away from my parents, I have new friends. If I could bottle that feeling, I'd be a trillionaire. I don't think you can put a price on that. Now some people would say, like you said, do you really need to spend 50 or 60 thousand dollars a year to get that experience to be on your own?

[B]

No.

[A]

Okay, maybe, maybe that, maybe that changes.

[B]

But, but that's also about the colleges you pick, right? I mean, go to an in state school and you're getting a much better deal.

[A]

You know, I, I don't necessarily feel, I do feel that the college experience for young people may. Is going to be maybe more important than ever again in this AI world. And the best teachers will, I think, learn how to use it in their classrooms and still teach people, teach kids the more important things of communicating and selling themselves and interacting with other people and how being more creative, like that's where the best teachers are going to shine in the future. Not just the. Can you memorize this? Can you follow these steps in these directions? Because AI will be better at that, obviously.

[B]

Yeah, I think, I think it's going to bring back Liberal arts more. Right. Where we're more. Instead of kids being so focused on like just doing the bare minimum or getting things done so they can pass a test or they can get that they can go off to wall school or whatever, I think more people are going to actually, you know, have a favorite impressionist painter and maybe know how to like actually build things with their hands and. And more in like a broad. Get a broad liberal arts education instead of being so hyper focused and you know, something just, you know, to, to try to get into grad school or to try to pass a certain test or, you know, that kind of thing I think would be good for humanity in general.

[A]

The best advice has been like, niche down, keep niching down. And you're an expert on this one topic. And now it could be like, no, diversify more and get more creative to get.

[B]

You can use AI, right?

[A]

Yeah. Sean in the chat says Ben needs to update the wealth of common sense audible voice. Guy needs someone with more pep in their step. Listen, Sean, you're in luck because this week I was recording the audiobook for risk Reward, which comes out in about eight weeks now seven weeks comes out in mid May. And let me tell you, I have, I have some more respect for the people who read those books. That's not easy. My brain felt like absolute mush by the end of the day. I'm in a studio all day reading my own words.

[B]

1. And you, you talk super fast, so I'm sure you were able to get a wide direction without slowing down.

[A]

I. I told them, I said, listen, just so you know, I'm a fast reader. I've always has been. I have been. I. I know I am. So just if I'm doing going too fast, tell me to slow down. And they did many times, I bet. But it was kind of fun. You're right. I put more inflection. I tried to make it like I was teaching instead of reading. So it was kind of fun.

[B]

Nice. I'm looking forward to that anyway.

[A]

All right. Good to be back. We haven't done this in a while. Just the old setup and because we were live on and it was fun doing it live. Last week in Miami, a little hectic. We had four wheelers driving by and planes overhead and helicopters almost walking in

[B]

front of a camera.

[A]

People walking by the camera. Yeah, but we did it. Now we're back to normal. If you have a question.

[B]

Hold on, I got a bonus question. I saw Bill asked you questions, bonus questions and stuff, so I got a bonus question for you. So say you have a friend who's down like 40% in a software stock right now. What are you doing? You holding it or are you selling it and just cutting your losses? What are you doing?

[A]

Here's what I would ask that friend. When you bought this software stock, were you planning on making it a trade? Were you making it an investment? What's your time horizon?

[B]

Yeah, I think they thought they were going to be in it a long time and then it just started dropping like a stone.

[A]

So this is the question I ask for all people when they're dealing with a loser. Would you be willing to put more money into it now? Would you lean into the pain? If you're not going to be willing to lean into the pain, why would you still hold it if you're not going to buy more? I used to, used to say this to the investment managers that we used to manage. If you're not willing to rebalance into the pain and buy more, if you don't have the confidence to do that, why do you have the confidence to wait for it to come back? I think the whole idea of I'll just wait for it to break even, then I'll sell is one of the biggest mistakes you can make as an investor.

[B]

Buying more is the only reason they're not down 50% in it. So yeah, I'm just curious, I'm just curious what you think.

[A]

Is the thesis still the same? Has it changed at all?

[B]

It's one of the disruptible, disruptible ones because of AI or whatever. It's one I've talked to you about. It's a finance related software stock.

[A]

All right, good luck is all I can say. Ask the compoundshowmail.com is our email. Thanks to everyone in the live chat as always. It was hopping as usual and we'll see you next time, people.

[B]

Thanks everyone.

[D]

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.

[E]

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[A]

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[E]

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