Ask The Compound: “Where Should I Put Cash After the Fed Rate Cut?”

Date: September 24, 2025
Hosts: Ben Carlson & Duncan Hill

Episode Overview

In this episode, Ben Carlson and Duncan Hill tackle a timely and practical set of personal finance and investment questions sourced from the audience. The main theme: how investors should think about cash management, asset allocation, and expectations in the wake of a Federal Reserve rate cut. The duo also addresses Social Security’s role in portfolios, career advice for young finance professionals, strategies for deploying real estate profits, and the philosophy behind setting long-term return assumptions for financial planning.

Key Discussion Points & Insights

1. Where Should I Put Cash After the Fed Rate Cut?

(02:08) Question from Chris with a K

• Fed Cuts and Cash Yields:
  The Fed’s 25 basis point rate cut (with signals of more to come) means yields across instruments (Money Markets, CDs, T-bills, high-yield savings, etc.) are dropping.

• Money is Still Pouring into Money Markets:
  Despite rate cuts, money market balances are at a record $7.3 trillion.

• Should You Keep Cash in a Roth IRA?

  • You can withdraw Roth IRA contributions tax- and penalty-free, but you still need to pick an investment inside the account; there’s no high-yield savings equivalent in an IRA, just money market funds or similar vehicles.
  • Accessibility and liquidity are easier with high-yield savings or brokerage accounts for emergency funds.
  • Quote:

    “A Roth IRA can be a great like backstop break in case of emergency. I don’t know that you want to use it interchangeably as that type of cash fund.”—Ben (05:42)

  • Keeping cash in a Roth to avoid taxes is only effective if you invest it in higher-return assets.

• Risk Management:
  Don't take undue risk with cash. Complexity isn’t worth it just to chase a slightly higher yield in a Roth; simplicity and liquidity usually win out.

2. Should Social Security Count as Fixed Income in Asset Allocation?

(06:57) Question from Andy Jacobson

• Social Security’s Role:

  • Social Security is a major component of household wealth, especially for the bottom 50% by wealth percentile (accounts for 20% of household wealth in the US as of 2022).
  • It acts more like an annuity or pension stream than a bond.

• Fixed Income or Not?

  • Social Security is illiquid—you can't rebalance or sell it—so it doesn't fulfill the same portfolio role as bonds.
  • It can allow you to take more risk with your investible portfolio, but shouldn’t be considered in the exact same bucket as fixed income allocations.
  • Quote:

    “It provides income like fixed income, duh. But it doesn’t really have the same... it doesn’t dampen your volatility of your portfolio.”—Ben (08:34)

  • Use Social Security as a factor in determining portfolio withdrawal needs, not as part of the 60:40.

• Social Security Future:

  • Despite political noise, both hosts are confident Social Security will remain intact.
  • Quote:

    “It’s one of the best programs we’ve ever enacted. If politicians decided to get rid of it, it would be a very, very bad idea for a lot of people. That’s my stance.”—Ben (10:36)

3. Do Fed Rate Cuts Directly Lower Mortgage Rates?

(10:47) Duncan’s Follow-Up

• Relationship Explained:
  • Fed cuts affect short-term rates (overnight cash yields).
  • Mortgage rates are more closely linked to the 10-year Treasury yield, not the Fed Funds Rate (short-term).
  • Mortgage durations average 7-10 years, hence the tie to 10-year Treasuries.
  • Quote:

    “The average... duration of most mortgages... is like seven to 10 years. That’s why mortgage rates follow the 10-year Treasury more closely than anything.”—Ben (12:42)

  • Mortgage rates can rise after a Fed cut if long-term yields rise.

4. Career Advice for a Young CFA Candidate

(13:39) Email from a 22-Year-Old Listener

• The Situation:

  • 22-year-old, CFA Level 3 candidate, $250-300k net worth, ran lawn-mowing business and investing since 17.
  • Feels unfulfilled as a portfolio analyst; prefers math/Excel over client interaction; introvert; struggling after parents' divorce.

• Key Advice:

  • Commendation for achievement:

    “At 22, I did not have any of this stuff locked down at all. Well done.”—Ben (15:03)

  • With current net worth and investment timeline, even modest compounding will lead to a multi-million-dollar portfolio by retirement.
  • Taking a break after CFA Level 3 is sensible and won’t jeopardize long-term wealth.
  • Career Ideas:
    • Risk management (quant/math-heavy roles)
    • Analyst at fund companies or family offices/institutional funds (exposure to diverse portfolios)
  • The Importance of Learning to Sell:
    • All jobs require communicating your ideas and value.
    • Even running your own fund requires selling your strategy.
    • Quote:

      “In some way everyone is in sales. None other than Warren Buffett himself said the most important skill in finance is salesmanship.”—Ben (17:18)

  • Find a mission or group that matches your values; “blogging is selling for introverts.”
  • Reassure that not having it figured out at 22 is normal—try varied roles and give yourself grace.

• Duncan adds:

  • You owe it to yourself to pause, reflect, and not “just grind away for five years.”
  • It’s ok for your journey to diverge from finance—maybe even into a landscaping empire!

5. How to Deploy Real Estate Profits?

(21:37) Question from Alex

• Background:

  • Couple, early 30s, $107k in profit from selling old home; maxing out retirement accounts, strong incomes, healthy emergency fund.

• Suggestions from Ben:

  • Use your windfall for:
    • House renovations (best before kids arrive!)
    • A pre-parental vacation (“...once you have a kid, traveling becomes way, way harder.”)
    • Start a 529 college savings plan (even before birth)
    • Fund your HSA (health savings account)
    • Add to brokerage/emergency fund for margin of safety
    • Treat yourself: allocate a portion specifically for discretionary fun
  • “Asset allocation” your windfall:

    “I think of it like an asset allocation, right? 15% is going in the vacation fund, 20% into savings, 25% into the brokerage account...” (24:45)

    • The exact percentages and categories can be customized.

• Fun Moment:

  • Duncan jokes about buying a $25,000 Porsche.
  • Light teasing over word pronunciations (“museum,” “Porsche”).

6. Should Financial Planners Use Historical Returns or Projected Capital Market Assumptions?

(26:08) Question from CJ

• The Dilemma:

  • Firm is shifting from using historical returns to projected capital market assumptions for financial planning.
  • Listener wonders if 30- to 40-year plans are actually better off using history rather than shorter-term projections.

• Ben’s Perspective:

  • All return assumptions are, in the end, guesses—no model predicts the future with certainty.
  • History is full of surprises: returns over the past 10-15 years far exceeded consensus projections from early 2010s.
  • Monte Carlo simulations (common in planning software) need an input, but expected returns are just one way to provide that input.
  • Range of return scenarios (base, best, and worst case) is more informative than a single-point estimate.
  • Quote:

    “No one has this process completely figured out. No one. You’re making educated guesses and that’s okay as long as everyone realizes that ahead of time...” (28:36)

  • Financial planning should be a process, not a one-time event—adjust with outcomes.

Notable Quotes & Memorable Moments

• On Roth IRAs as cash storage:

  “I think adding an extra layer of complexity and another step in getting that cash back is to me not probably not worth the hassle.”—Ben (05:24)

• On Social Security’s purpose:

  “It can allow you to take a little more risk, but it doesn’t give you everything a bond allocation can give you.”—Ben (08:43)

• On the necessity of sales skills in finance:

  “Everyone in some ways is in sales and marketing, right? Finding a good job is about selling yourself and your strengths. Finding a spouse is about marketing your good qualities, right?”—Ben (17:18)

• On allocating windfalls:

  “If you plan it out a little, then it makes the blowing it on yourself part great because you already got all these other things taken care of.”—Ben (25:27)

• On planning and uncertainty:

  “You just have to make course corrections along the way as expected returns turn into actual returns... It doesn’t exist, the perfect solution.”—Ben (28:36)

• On introverts podcasting:

  “Can I point out how hilarious it is to me that two introverts are almost 200 episodes into a podcast, a weekly podcast?”—Duncan (21:20)

Recommended Listening Segments & Timestamps

| Topic | Speaker(s) | Timestamp | |-------|------------|-----------| | Roth IRA as cash storage | Ben & Duncan | 02:08–06:57 | | Social Security in asset allocation | Ben & Duncan | 06:57–10:47 | | Fed cuts & mortgage rates | Ben & Duncan | 10:47–13:39 | | Career advice for young CFA | Ben & Duncan | 13:39–21:20 | | Deploying real estate profits | Ben & Duncan | 21:37–26:08 | | Setting long-term return expectations | Ben & Duncan | 26:08–30:30 |

Tone & Language

The episode is friendly, practical, and filled with personal anecdotes. Ben delivers advice with both humility and analytical rigor, while Duncan provides humor and relatable interjections. Listeners are encouraged to be realistic, flexible, and self-compassionate as they navigate their financial lives.

For more details or to submit your own questions, reach out at askthecompoundshowmail.com or comment on their YouTube channel.