Will Housing Prices Fall In 2026?

Summary

Podcast Summary: Ask The Compound

Episode: Will Housing Prices Fall In 2026?

Date: December 3, 2025
Hosts/Guests: Ben Carlson (A), Duncan Hill (B), Bill Sweet (C)

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Overview

In this special 200th episode, Ben Carlson and Duncan Hill—joined by recurring guest and resident tax expert Bill Sweet—field real questions from listeners about the state of the U.S. housing market, early retirement strategies centered on Roth IRAs, Gen Z’s love affair with Roth accounts, behavioral finance issues around saving versus spending, using home equity in retirement, and insights into the surprising financial behaviors of U.S. military members.

Discussion is lively, candid, and packed with data-driven insights, memorable anecdotes, and a healthy dose of humor, providing practical perspectives for both seasoned investors and those new to the world of personal finance.

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Key Segments and Insights

1. Will Housing Prices Fall in 2026?

[02:57–11:38]

Key Points:

• Housing prices are at record highs since the pandemic, despite mortgage rates rising from sub-3% to over 6%. Ben calls it “the worst housing affordability we’ve ever seen.”

• Even with high rates persisting for years and “buyers going on strike,” national home prices haven't budged down.

• Listener Rob’s question: Will 2026 finally be the year housing prices fall? Redfin says sellers outnumber buyers by 37%.

• Ben points to Robert Shiller data: prices only fell 7 times in 76 years (since 1950), only during the 1990/91 S&L crisis and the 2008 crash, despite recessions.

• Price softening is evident in select markets (Austin, Punta Gorda, New Orleans, Cape Coral), where some have dropped 14–25% after booming over 70% during 2020–22.

  "I just like to caution people who are holding out hope for a housing price crash... housing prices rarely ever fall." – Ben ([05:20])

• Ben's base case: Expect widespread stagnation, not a crash. Regions that saw the biggest run-ups may see more declines; elsewhere, expect flatlining so that incomes can catch up.

• Mortgage rate declines could unlock demand—unless falling rates signal a recession, which might depress prices differently.

• Demographics: The 32–36 age group (peak home buyers) is the largest, creating a “floor” under housing demand.

  "Demographics probably put the floor under any heavy selling pressure." – Ben ([08:28])

Memorable Moment:

• "So, Duncan, your best bet is to probably move to southwest Florida." – Ben, after a deep-dive into regional housing market data ([09:00])

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2. Early Retirement Strategies Using Roth IRAs

[11:40–15:55]

Key Points:

• Listener Ethan asks if a 50-year-old with $4M in Roth IRAs can live off their contributions before 59½, while simultaneously converting a $1M tax-deferred 401(k) to Roth in low tax brackets, thus avoiding major taxes/penalties.

• Bill Sweet, dubbed the "Roth Man," enthusiastically affirms the strategy:

  • Roth IRA withdrawal rules: Contributions come out first—anytime, tax/penalty-free.
  • "Benjamin" in the scenario can distribute his $1M in Roth basis at any age, using it for living expenses while converting the 401k.
  • This allows for tax optimization and penalty avoidance.

  "Ben, this concept is absolutely wild and I don't like it. I love it." – Bill Sweet ([13:24])

• Reminder: High Roth balances often due to big portfolio winners (e.g., "Did Nvidia have something to do with it?").

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3. Gen Z and the Rise of Roth Accounts

[16:06–19:57]

Key Points:

• Fidelity finds 95% of Gen Z's retirement contributions now go to Roth accounts, versus 75% for Millennials and 66% for Gen X.

• 1 in 5 401k participants (and 20% of Gen Z) now use Roth 401(k)s.

• Hosts note the trend reflects both pop-finance social media and deeper understanding of compounding and tax-free growth.

• Roths are attractive for flexibility (withdraw contributions anytime), crucial for young people facing uncertain life expenses.

• Importantly, Roths pay off best when funded early in one's career (lowest tax rates, longest time to compound).

  "A Roth IRA will always pay off given long enough time. And you just, you don't have any longer timeframe than your early working years." – Bill Sweet ([19:01])

Memorable Moment:

• Bill: "I am shocked. I was 95%? ... I am frankly shocked and impressed." ([18:08])

• Duncan jokes about social media: “It’s Roth, it’s Roth, it’s Roth. It is, it’s very trendy right now too.” ([19:57])

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4. The Psychology of Saving vs. Spending in Retirement

[21:51–27:29]

Key Points:

• Listener asks: Are retirees prudent or just overly conservative for not spending much of their wealth?

• Data: Even wealthy retirees (<$200k–$500k+) often spend only 12–27% of their portfolio over 18 years; most just spend the income, not principal.

• Hosts note the psychological hurdle from saver to spender is deeply ingrained.

• Real-life uncertainties (health care, longevity, bear markets) make caution rational, but can lead to under-enjoying wealth.

  "Saving is a skill. It's a habit. It develops over a lifetime...it's very, very hard to flip that switch and go from the accumulation phase to the distribution phase." – Bill Sweet ([24:39])

• Value of advisors is to encourage course corrections: “Perfect is the enemy of good… I’m a big proponent of good enough versus trying to be perfect and optimize.” – Ben ([25:45])

• In retirement, time is the most limited resource:

  "At some point, you run out of time faster than you run out of money.” – Bill ([27:08])

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5. Selling Your Home to Rent in Retirement

[27:36–33:16]

Key Points:

• Listener Charles asks if selling a home in retirement (and renting instead) is a good idea.
• For most, primary residence is their biggest asset (especially below top 10% net worth).
• Ben and Bill note:
  • Selling unlocks equity, avoids future repair costs, and removes illiquidity.
  • Section 121 of the tax code: $250k (per person) capital gains exclusion for a primary residence.
  • Renting provides flexibility, less hassle, covers ongoing costs from the invested proceeds.
  • Downsizing and moving to a city (Bill’s personal plan: “move my ass to New York City!” ([31:03])) offers conveniences and reduces maintenance.
• Downsides: Rent inflation, possible forced moves. As Duncan says, “You don’t know if you’re still going to be in the same place in a year from now...”

Memorable Quotes:

• “Do you know what old people don’t want to do, Ben? In my 80s, I don’t want to be mowing my yard. I don’t want to be shoveling snow.” – Bill ([30:39])

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6. Military Members and the Surprising Growth of Wealth

[33:40–39:19]

Key Points:

• Ben raises a WSJ article on military members day-trading and investing in stocks/crypto. Is this new?

• Bill, drawing from his own military experience, isn’t surprised:

  • Military has huge financial perks: free health insurance, tax-free housing, GI Bill (education), and traveling perks.
  • Young military have low living expenses, few financial responsibilities, and (in Bill’s words) long periods of boredom—making it easy to experiment with risk assets like stocks and crypto.
  • He points out it's actually a good time in life to “take risks with your finances.”

• Many now are transitioning into more traditional “boring Ben kind of stuff” like index funds after “getting it out of their system.”

  "These are people...taking risks with their lives. Yeah, they might take some risk-adjusted behavior with their portfolio too.” – Bill ([38:06])

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Notable Quotes and Time Stamps

• “This is the worst housing affordability we’ve ever seen in this country.” — Ben ([00:00])
• “You can see that since 1950, there have been 11 recessions. So even when there’s a recession, it’s highly unlikely that housing prices will fall.” — Ben ([05:09])
• “If I was in Florida or Texas, I'd be offering, I'd put in lowball offers all over the place.” — Ben ([11:36])
• “[A Roth withdrawal strategy] is absolutely wild and I don’t like it. I love it.” — Bill ([13:24])
• “Roth is very trendy right now. So I think a lot of young people who probably have no idea what Roth even means are selecting it when they see it as an option.” — Duncan ([19:57])
• “Perfect is the enemy of good in these conversations and these decisions.” — Ben ([25:45])
• “At some point, you run out of time faster than you run out of money.” — Bill ([27:08])
• “In my 80s, I don’t want to be mowing my yard. I don’t want to be shoveling snow.” — Bill ([30:39])
• “You have long stretches of extreme boredom punctuated by moments of extreme terror.” — Bill on military life ([35:25])
• “People hate paying taxes more than they like making money.” — Bill ([40:22])

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Conclusion

This episode delivers a wealth of actionable, level-headed advice for listeners navigating a strange housing market, considering early retirement optimization, wrestling with financial anxieties, and more. The conversation blends data, stories, and policy perspective with a distinctly human touch. Whether you rent or own, save or spend, just started working or are planning your 80s, Ask The Compound leaves you better equipped to handle what comes next.

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Listen to the episode for the full experience and deeper discussion. Questions? Email askthecompoundshowmail.com or join the live chat Wednesdays at 1pm Eastern.

Transcript

[A]

Welcome to Ask the Compound, the show where you ask and we answer. I'm your host, Ben Carlson. Housing prices have risen more than 50% since the start of the pandemic. Mortgage rates went from sub 3% to now over 6%. And they've been there for a while. You could make the case and I would make the case. This is the worst housing affordability we've ever seen in this country. Yet nationwide housing prices continue to hit new all time highs despite the fact that mortgage rates have been high now for three plus years. Buyers seem to be going on strike. Housing activity is slowing. Is is 2026 finally the year we see lower housing prices? I will answer that question and more straight from you on the show today. Let's do this.

All right. Our email here is askthecompoundshowmail.com on today's show, we'll be answering questions straight from the Compound audience. As always, Duncan informs me this is our 200th episode.

[B]

Happy 200.

[A]

Carry the math. We've probably done well over a thousand questions at this point. Had a few from this live chat shows. We did more than five.

[B]

That's a lot.

[A]

Probably talking 1100 questions or so. So we appreciate everyone in the live chat as always showing up here on Wednesdays. People stayed with us when we went through that. It was a tough time when we switched from portfolio rescue to ass to compound. Those are really dark days here. But we made it. We survived.

[B]

Yeah. It's hard to believe. I think our first episode, if I remember, I was just looking October of 2021. So we've been doing this a while.

And. Oh yeah, there you go. Thanks, Dan.

[A]

That's episode one.

[B]

Yeah.

[A]

Okay. And Bill Sweet was our very first guest.

[B]

Yeah. Yeah. It's fitting. Very fitting.

[A]

Rock and the V. So Bill will be on here today too.

[B]

Also, I'm gonna use this as a good moment to remind everyone to go review us on Apple podcasts. I was looking through a collection of some of our best ones. Dan hit us with those. Well, I don't know if you can read them that well, but my favorite is there's one in the middle that says my favorite podcast, but it's four stars. Four out of five stars. And then they go on to say how much they love the podcast. It's like, wow, tough critic. But thank you.

[A]

Okay. I just have to ask, are you wearing an oldie hat today? I am in the chat one.

[B]

I'm glad you noticed. I'm glad you noticed.

[A]

Thank you. That for being like one of the top Shareholders?

[B]

No, I wish. They don't care about me.

[A]

All right, let's get to the questions.

[B]

Okay, so up first today, we've got one. Well, wait, you didn't plug Compound Insider.

[A]

Oh, sorry. I was too busy. All right. Yeah. Today's sponsor is the Compound Insider. So if you go to the compoundnews.com every week we're sharing all the podcasts, YouTube videos, blog posts, charts, and more from me, Josh, Michael, and others. We produce so much content here, so the newsletter is a great way to keep up with everything. It's coming out on a weekly basis, so if you go to the compoundnews.com subscribe you can, and your email come to your inbox every week. It's totally worth it. They do a great job there. So, yeah, stay up, stay in touch with us.

[B]

There we go.

[A]

All right.

[B]

Nailed it.

[A]

Yeah. 200 episodes and I'm still learning. Let's do it.

[B]

All right, up first today, we got one from Rob. Do you think we'll finally see housing prices fall in 2026? Redfin says there are way more sellers than buyers, and people with 3% mortgages can only hold on for so long. I know prices don't fall very often, but it seems like a softening labor market mixed with sky high prices could finally make it happen. What say you, Ben? And I have to say, whenever I see what say you? I picture someone like in a. In a smoking jacket with like a pipe. And, you know, it sounds very fancy. What say you?

[A]

I feel like that that has to be like someone who's 50 and up at least, right? Like that. I don't think people.

[B]

It's someone who pontificates. Someone who pontificates.

[A]

Yeah. I don't think I can pull off what say you, Duncan? That. That you have to be British. I feel like Rob is British. I think it's a fair question. And I have to be honest, if you would have told me the setup, like the fact that housing prices have remained so resilient after we saw like 55% housing price gains in two or three years, and then mortgage rates went from two and a half percent all the way to 8%, and they've been above 6% since, I think, October of 2022. And so if you'd have told me that housing prices would continue to hit all time high after all time high, I would have said you're nuts with knowing that. Now, obviously, after the fact, coming up with the reasons is easy. Well, people stayed in their homes. They don't want to sell, and you know, there's not enough supply anyway. So according to Robert Shiller, US housing prices were up 6% in 2023, 5% in 2024, and I think almost 2% this year. I think you could make the case that buyers are finally fighting back a little bit and saying enough is enough. Like, we need either lower housing prices or lower mortgage rates or both to make this transaction make sense. So that's why housing activity has been so low. So Rob mentioned the Redfin data. So, Daniel, let's do a chart on here. So they show the number of buyers versus sellers. I don't know where they come up with the buyer number for, but they show that since they've been tracking this in 2013, this is about as high as it's been. You can go to the next chart. So they say 37% more sellers than buyers, which is a big number. So I think buyers. There's still activity going on, let's be honest, but just not as much as usual. And I think people have finally said, all right, I need. I need better economics to make this work. So the Wall Street Journal had a piece recently that looked at the slowing sales in the new home market similarly. So let's do a chart on for this. They're talking about how these home builders are offering suite deals on mortgages as low as 4%, and inventory is still rising. It's skyrocketing. People are, even with lower mortgage rates, are saying, no, I want to wait. These prices are too high. I can't take it. Chart off. So it does feel like we're in something of a buyer strike. The question is, does will it finally matter to home prices? Maybe. Probably not. I just like to caution people who are holding out hope for a housing price crash like Duncan that housing prices rarely ever fall. So let's do a table on here. This is US housing prices since 1950 by year. These are nominal, not real. Again, this data comes from Robert Shiller. He updated this online database going way back. I did it since 1950 for sort of modern economic times. And you can see that there's basically two periods. You can see the red there. So seven times, seven years out of the past 76 years, housing prices have fallen on a nominal basis. And that happened in two distinct periods. One was 1990, 91, where you had, like, a savings and loan crisis. You had a minor recession, and it was a kind of a real estate shakeout. And then you have the one, of course, everyone knows about 2008, housing prices crashed. So really, two periods now it should be noted in this 76 year time frame, since 1950, there have been 11 recessions. So even when there's a recession, it's highly unlikely that housing prices will fall. Chart off, please. That's the, that's the bad news for people hoping for housing price fall. But this is nationwide housing prices, as we know housing is local. In certain parts of the country, housing prices are already falling. Lance Lambert tracks this at Resi Club, which is his subset. Let's do a chart on here. So he looks at the different metro areas and he's trying to figure out where housing prices rising and falling. And he calls the peak of activity in 2022. And he's saying, how have housing prices done since then?

[B]

Wow, look up there in my neck of the woods.

[A]

Yeah, me too. The Midwest and the Northeast. Now here's the thing. Housing prices didn't rise as much there either. So housing prices are still rising there. But you look at places in the Southwest, in the south and the Southeast, and housing prices look like they're crashing. So in Austin, they're down more than 25% from the high places In Florida, Punta Gorda, that's where my grandparents used to live for a While, down almost 25% as well. New Orleans, down 14% from the peak. Cape Coral, down 18%. So there are places where housing prices are falling now. Again, most of these places had huge housing price growth. So from 2020 through the summer of 2022, Austin saw housing prices rise almost 75%. Now they're down 25%. So it was just things were a little nuts. So we're starting to see some sanity regained in the housing market. So I think that's a positive. So I guess my base case would be nationwide housing prices will stagnate some to allow incomes to play catch up, but there's going to be a wider divergence in the places that saw these big moves. I also think you have to account for what's going to happen in mortgage rates. If mortgage rates fall, you'd think that would unlock some demand, right? I think we get to like the fives below five. I think then you could start really seeing people come off the sidelines. But what if mortgage rates fall because we're going to recession? Is the labor market, as Rob mentioned, is that going to cause housing prices to fall? Because people say, well, I'm not going to buy now, my job's in trouble. So.

I don't know. So I think my best guess is though, even if prices do fall, it would be A minor flesh wound more than all crash situation because you have to account for the demographic tailwind. So do one more chart on here, Daniel. This is from John Burns, who is a real estate research firm. And they look at demographics and they say the largest population group is 32 to 36 in 2024. Okay. That's peak house buying years. Okay. So I think demographics probably put the floor under any heavy selling pressure. Chart off, please. So, Duncan, I'm sorry to say I don't think we're going to see a crash, but I think in certain areas it's probably becoming more affordable because so many people moved to these areas and housing prices got ahead of themselves. So, Duncan, your best bet is to probably move to southwest Florida.

[B]

I mean, hey, Florida doesn't sound that bad. I think politicians are terrified of doing anything that make housing prices fall is what I've seen. It's like people, they're really, really afraid of that because people take it so personally for some reason, even though most people aren't selling their house anytime soon. So having their home prices drop by 10% literally doesn't really change their life, you know, at that moment.

[A]

Yeah, I tend to agree with you that the. A lot of people are like, why are politicians not doing anything about this? This is for a lot of young people, this is a crisis. Right. This is changing the way that they view politics. It's. It's adding a lot of volatility to their lives. And I think the reason for it is because there's a 65% homeownership rate. So the people who already own homes, they're the bigger constituent and obviously the other constituent is going to grow. And there's going to have to be something done in the years ahead, you would assume. But I think that's why there's. It doesn't seem like this should be a hair on fire situation. And it's not yet. And yeah, I tend to agree with you.

[B]

Seems like you guys talk about how it's healthy for the stock market to pull back from time to time. It seems like that should hold true for the housing market too. But yeah, it just keeps going.

[A]

Yeah. And everything just. This was a perfect storm of everything happened so fast. Right. I think we were going to get these housing market gains anyway with all the millennials buying homes. It just got compressed into this such a short window of time and period that it in mortgage rates went up so quickly that it really screwed with people. And instead of having this happen over a decade, it happened in two and a Half years. And that's that. That move was just so unhealthy.

[B]

Also, am I crazy or. I mean, housing prices going down, I'm not saying anyone wants their house to cut in half. I'm not saying anything extreme. But having housing prices come down a little bit, doesn't that make your taxes go down? So does that actually help homeowners?

[A]

Yeah, it takes a little bit for that to see through. You don't get a one for one of your house price goes up and taxes go up. All of a sudden there's, there's like ceilings on that for some states. But yeah, I guess that would help. Yeah. And you're right, if, if housing prices nationwide fell 10% for all the people who had a house pre 2000, 20, 22, like that shouldn't impact you that much. Right? You have plenty of gains. It shouldn't be. It shouldn't be that. So that's, that's the hope is that eventually people who want and need to sell been sitting out, will go, okay, fine, I'll lower my price, right? I, I put it too high. I wanted to see what I would get. So I do think people who are in certain areas can still lowball people and see what happens. If I was in Florida or Texas, I'd be offering, I'd put in lowball offers all over the place. I guess it depends where you are though.

[B]

I might start looking around Florida.

[A]

All right, do another one.

[B]

Okay. Up next, we got a question from Ethan. I want Bill's thoughts on this. Assume you're 50 with $4 million in Roth accounts, a million dollar cost basis and $3 million of growth and $1 million and a tax deferred 401k? Instead of utilizing a brokerage account to live off of, could you not just pull out your basis from the Roth over the next 10 years? For example, in this case, $100,000 a year, while converting your tax deferred 401k accounts using the low tax brackets and pay little to no federal tax on those conversions. Assuming no growth in the tax deferred accounts, you would effectively convert that entire balance to a Roth by the time you're 60 and eligible to take distributions penalty free. Taking it a step further, could you also at some point withdraw your basis in a tax deferred 401k that was converted to a Roth? I don't understand this one at all.

[A]

So yeah, I think I got it. But let's bring on the Roth man himself.

[C]

Hey, Bill, did somebody say Roth ira?

[B]

I'm like sure, dude.

[A]

So, yeah, Bill, you were our very first guest on this show. You know, I think we actually taped. We taped like a pretend show that never happened. Remember the three of us, I don't know, we showed it to Josh and Michael to see if it would work, and then they said it did and let's do it. So.

I have to imagine one of the reasons you're such a big proponent of Roth IRAs is the fact that you get some flexibility, right? And I think that's what Ethan is going for here. He's saying like, hey, it sounds like he's going for an early retirement strategy here. That's my guess. Obviously he's saying, hey, 50 doing pretty well first, not to brag of the day. So it sounds like he wants to do the conversion and have like this perfect Runway by the time he's retired. Does this strategy make sense?

[C]

Yeah, Ben, this concept is absolutely wild and I don't like it. I love it. This came from Asset compound listener Benjamin. If you recall from our November 19th show, we answered a question along these lines. What our friend Ethan is talking about is a non qualified distribution from a Roth IRA, right? Anytime you're taking a distribution before age 60 or 59 and a half, more accurately, you're taking a non qualified distribution and that follows specific ordering rules. So, gentlemen, I've avoided doing this for 200 episodes, but it's now time. We must reference a section of the tax code. Can we please chart on?

[B]

Okay, everyone's falling asleep.

[C]

So 409 cap A, 408 cap A references Roth IRA ordering rules for non cooperative distributions, which is what Benjamin's talking about. And here, just very briefly, what I want to highlight is the first thing that comes out of a non qualified distribution is your contributions. And so in Benjamin's example, he's already funded a $4 million Roth IRA with a million dollars of basis. So therefore, at age 50, at age 40, at age 35, the first dollars that are coming out of a non coop distribution are basis. So in theory, Benjamin can distribute up to $1 million. And that happens tax free. To finish the chart, the next things that comes out is taxable Roth conversions, amounts. After that, non taxable conversion amounts, and then finally earnings. And you can see how those lay out on the chart. You see can as far as the tax and the penalty. But to answer the question very directly, yes, I mean Benjamin could live off the first million dollars, no matter his age. And so I think that's a really, really interesting strategy to consider Ben in retirement, right One of.

[A]

Yeah. So basically any contributions you make, you can take those out penalty free, tax free. This. Because we do get this question a lot from people who are thinking about retiring early. Like, hey, should I build up my taxable brokerage account to account for this? And the Roth can actually do that. And then you let the gains compound in a text. Exact manner. This does make a lot of sense. Obviously it helps that he's saying, I have a million bucks in contributions. Yeah. To Rothschild. Not to break that.

[C]

That's. Yeah, that's. That's. That's a big plan.

[A]

Right. So that part helps. But yes. And the other part is he's like, doing the contributions or, you know, doing conversions.

[C]

Yeah. Squad goals. Yeah. But as far as I can tell. Yeah, those in year conversions, you could. You could do that. You could fill up low tax brackets this year, up to roughly $120,000 married, and pay less than 10% effective income tax. So I think it's a really, really neat strategy. I mean, you obviously down and sketch this out with a tax professional, make sure that you're not tripping any wires. But as a concept, I love it.

[A]

Yes, this is. Someone in the chat asked if this is Peter Thiel. Like, how do you get $4 million in a. In a Roth?

[C]

But yeah, two ways grab, and then suddenly.

[B]

I'm betting Nvidia had something to do with it.

[A]

Yes, probably. But either way, nicely done.

[C]

Yeah, I love it. Godspeed, Benjamin.

[B]

Good job. Okay, up next, we got a question from Matt. Fidelity's latest Q3 2025 retirement analysis found that Gen Z is investing virtually all of their contributions, 95% in Roth accounts, compared to millennials and Gen X, who are contributing 75% and 66% to Roth, respectively. The analysis also found that almost 1 in 5 401k participants contributed to a Roth 401k in Q3, up from 15.9% the year prior to the. Younger generations are leading this trend. With 19% of millennials and 20% of Gen Z choosing to contribute to Roth 401K. Why do you think Roth accounts are gaining so much popularity right now, particularly among young investors? Are there considerations that investors should keep in mind when directing such a large sum of their investments to Roth. What does Gen Z's affinity for Roth accounts say about their investing outlook more broadly?

[A]

Okay, first of all, we gotta address the elephant in the room. Everyone keeps commenting on Bill's sweater, that Bill needs a glass of hot cocoa. You do look very comfortable today, Bill. Well, thank you.

[C]

Thank you very much.

[A]

Yeah, you look like someone who might.

[B]

Say, what say you?

[C]

What say you about that, Duncan? Yeah, 200 episodes. It was time to bust it out.

[A]

All right. So I have to assume. And thank you to Matt because I didn't see these stats. So I think this is very interesting.

This has to be music to your ears, Bill. I've been saying for years that investing behavior is improving. I can see it. And I think young people are so much more informed about this stuff than previous generations. So this really doesn't surprise me. But it feels like saving and automatic contributions and buy and hold and staying the course. This whole thing has been just ground into people over time, right? Like thinking actual long term. And I think even the people who don't really know much about the markets have been like, it's been beaten into their head. Like, just invest in a Roth ira, right? Put it in a Roth. And I think even if they don't understand the benefits like we just have been going through, I think that's just something that is ingrained in a lot of people's heads now. So I think the fact that young people are doing this, it seems to me like they're setting themselves up for success. But I got to imagine that you're not surprised about this.

[C]

I know opposite. I am shocked. I was 95%. Are you kidding? I was not aware of this.

[A]

Okay. Yeah, you're right. That is a very high number.

[C]

I am frankly shocked and impressed. I shared this stat, Ben, from Matt with our Tax channel. And that's our folks, Bill Arts, Dom Everett lease at Dan. And they were floored as well. I think this is tremendous. And Ben, it does make sense if you sit down and think about it. If you were to look backwards, Ben, from your golden years. You're wearing a sweater, you're drinking hot cocoa, watching Ask the compound with Duncan Jr. And Ben Jr. And you have $100,000. And you can have that in a pre tax or Roth account. Which would you choose?

[A]

Right? Roth.

[C]

You choose a Roth account all the time. So, like, for me, yeah, rather than take that haircut at the end, just fund it now. And if you think about it generationally, like, when do you. It's not a question of do you want a Roth ira? Of course you do. The question is, when do you want to fund that? And I would argue when you're starting early career, you have the longest time to compound.

[A]

You.

[C]

You have the lowest tax rate likely of your lifetime. That's the time to do it. A great, great research study on this by I think it's Dan McQuery at the University of Toronto. A Roth IRA will always pay off given long enough time. And you just, you don't have any longer timeframe than your early working years.

[A]

So one of our more controversial episodes early on, Nick Magiulia came on and said don't max out your 401k. Remember that, Duncan? That was very early on. I remember people got really up in.

[C]

Arms about it, throwing a Molotov cocktail.

[B]

I mean he still says stuff like that on a pretty regular basis.

[A]

No, but, but Nick's. Some of his points, I don't agree with it, what he says, but some of his place resident and his whole thing is like when you're young, you want flexibility because you might have to buy a house, you have to pay for a wedding, whatever it is. I think that's one of the things that maybe young people like about a Roth is the fact that as we mentioned in the last question, it does offer you some flexibility. You can take those contributions out tax free, penalty free. So I think that piece of it does give you more flexibility with some of the account. And maybe that's why they're so much more popular with young people now than the traditional.

[B]

Also very. All these people on social media now making finance related or personal finance content who are saying like this one hack to being rich in the future. And it's Roth, it's Roth, it's Roth. You know, so it is, it's very trendy right now too. So I think a lot of young people who probably have no idea what Roth even means are selecting it when they see it as an option. I mean, in the long run.

[C]

But yeah, on this one I would argue the trend is your friend. Like this is a very good thing I think for a generation of investors and they will look back and be glad about this. The thing, Ben, about the choice, I think Magiulli has a point and I would love to debate it with him. Live on asset compound, it'd be great. But why wouldn't you want both flexibility and tax redistributions? Like why do you have to choose with a traditional. Yes, you have to choose a Roth 401K. You do have to roll that into a Roth IRA to get that favorable treatment we were talking about before. But guess what? Stereotypically a lot of young people do too. They change jobs. And so when you change jobs, it's a great opportunity to get that rollover done.

[A]

Yes.

[B]

Okay, I have, I have one thing to complicate the calculus. What if you are doing a traditional 401k. And you take the extra money if it hits your bank account every month and pay down your student loans. So you're paying off your student loans faster.

[C]

Yeah, it's a great thing to do. Absolutely. You know, not as much fun, not as sexy. I don't know if we're going to make a TikTok about that. Yeah, I mean, Generation Zulu has, you know, this one. Right. They love Roth IRAs, but they also love CCP, Fiware application, TikTok. So I'd say they're batting.500, you know, overall, so it's pretty good batting average. But yeah, let's. Let's get that stuff out of the country.

[B]

Also, I feel attacked Dan is making fun of me for saying fidelity. I guess I'm supposed to say fidelity.

[A]

Yeah, I noticed that. It's like Josh and finance. And finance.

[B]

Is it high fidelity or high fidelity?

[A]

Fidelity. Yeah.

[B]

I don't know.

[A]

That's another.

[C]

Yeah, that's a John Cusack film with Jack Black.

[B]

I don't know. Well, agree to disagree.

[A]

That must be a North Carolina thing. Fidelity. All right, next question.

[B]

Okay.

[A]

It's not a dog.

[B]

Up next. Up next, we got. Wait, do we have two from. Yeah. Okay. I don't see a name here. Okay. Every time I read an article about traditional savers not transitioning to being spenders, I'm left skeptical. Although I'm biased as a saver, citing some extreme wealth examples or referencing only first decades spending seems like weak evidence given the high cost and uncertain duration of end of life. Ltc is that long term care, I guess?

[A]

Yep.

[B]

In the United States with its second world medical insurance.

It seems to me that someone avoiding spending could be seen as exercising prudent risk management. What kind of objective thresholds or guardrails are there to distinguish between not spending enough versus being prudent about an uncertain future?

[A]

This is a good question.

[B]

I like this.

[A]

This one is obviously directed at me because we talk about this show, this idea a lot on the show. It's one of the most surprising things that I've ever noticed about my time in wealth management. People who have been savers their entire lives have a difficult time turning around and being spenders. And I've seen this in practice with clients. I've heard from the compound audience, my blog readers, for years about this. But it's also backed by data. So, Dan, throw up the stats. This is the famous EBRI study on how much people spend in the first 20 years of retirement. And this is people who have a ton of Money. And not like people with less than 200k after 18 years spend like 25% of their money. Right. People who have between 200 and 500 heading in retirement spend less than 27%. Even people with 500,000 or more spend less than 12%. And they say basically the median household spent the income from their portfolio and avoided taking any principal portfolio balance. So this is people from a wide range of wealth, you know, cohorts over 20 year period. And there's other studies that back this up that people just don't spend probably as much as they could or should. And obviously part of it is the psychological hurdle of shifting from being a saver to a spender. Listen, I decided to make that change in my 40s, so I don't know, this is like an early retirement for me because I'm spending more money now, right, Instead of making that shift to my 60s. But part of it is the inherent uncertainties involved in the retirement process as this. The person asked this question, like they talk about healthcare costs and I know we're really a second, second world country when it comes to health care.

[C]

It's just expensive.

[A]

Yeah, yeah, it is. So like when you're thinking about healthcare costs and longevity, those are two of the variables that are impossible to know ahead of time, right? There are a lot of other uncertainties, of course, like inflation and interest rates and what the stock market's going to do, timing of bear markets. So this person is saying, look, I think it makes sense, people are being more conservative. Ben doesn't know what he's talking about.

The question I think boils down to, okay, so what do I do about it? Right? I'm nervous about this stuff, but I still want to enjoy some of my money. So Bill, I'm curious how you think about this when it comes to clients, because we have these conversations with clients, right? People sometimes need permission to spend and you to go, it's going to be okay. Right. Without knowing ahead of time what the variables in the future and the landmines are going to be. So how do you think about this kind of stuff with client interactions?

[C]

Yeah, you're exactly right, Ben. There's not a clear answer because it really varies so much on so many people. But I think if I think about Ritholt's clients and I think about what value we're providing at the end, like if you boil it all down to its bare essence, I think it's that you're going to be okay and that the decisions you're making are financially Prudent that you are going to accomplish the goals that we've discussed and you've laid out in your plan. And that's a process that's not an event. So I do not think you can plug all of this into a chat program. You can't plug this into language model and get an answer because it's not quantitative, it's qualitative. And ultimately, at the end of the day, you need to have trust and faith that your plan is going to survive the ups and downs of the market. Ben, just one more quick point for me. I really echo the point that you made that ultimately, I think saving is a skill. It's a habit. It develops over a lifetime. And I've observed the same thing with a lot of our clients that a lot of individuals who have very successful in building wealth and been successful investors. It's very, very hard to flip that switch and go from the accumulation phase to the distribution phase. It's very unnatural. And so it's, again, it's not a button you can press. And I think at the heart of it, this is the value of a financial planner. Us or somebody else.

[A]

Yes. To like making course corrections along the way. So Dave in the chat, he had to bounce. I guess he's been here from the beginning with us. He asked Ben, when it comes to investing in retirement planning, what are your thoughts on trying to maximize decisions versus making decisions that are good enough? And I think that's the main point a lot of people get bogged down in. I have to have this with 100% certainty before I go spend. And you're never going to get that. I think perfect is the enemy of good in these conversations and these decisions. And I think if you get to the point of good enough. Listen, is, is this 5% allocation going to matter more than a 15% allocation if I spend 4.2% versus 4.3%. Like, I think if you're getting bogged down in those minor details, that's where you get the paralysis by analysis. And I'm, I'm a big proponent of good enough versus trying to be perfect and optimize.

[C]

Amen.

[A]

Yeah.

[C]

And at some point it stops being, do I beat the market? How do I win the game? Is not anything about that when you get to your 60s, your 70s or 80s. Ben, if I think about the clients I've been working with for almost 20 years, one of the things that really, I mean, honestly helps me sleep at night is I look at a client's portfolio in 2015, if I look at clients portfolio in 2020, they very typically have more assets today than they did in a distribution phase. And that just to me spends a lot of credence to the work that frankly, you're doing that. Michael Batnick is doing that. Barry, Josh, the whole crew, the whole team at Ritholtz. I really feel really great about what we're doing because I can see the success over more than a decade and it's very hard to put a number on that.

[A]

Yeah. But yeah, you're right. The one question that most clients come to us asking is, am I going to be okay?

[C]

Yep. Am I going to run out of money? Yep. Yep. So, yeah, so it's, it's a bit paradoxical, Ben, because a lot of the times, if you're being gauged on, you know, whether you're assets are higher at the end of the year, next year, two years, I don't think it's about that at some point, it's really about time because at some point you run out of time faster than you run out of money.

[A]

That should be a bumper sticker.

[B]

Yeah, that was good.

[C]

Hey, thanks. It was right here in the sweater. Somebody wrote it down.

[A]

He got that from ChatGPT. All right, next question.

[B]

Okay, up next, we got one from Charles.

Is selling your home in retirement and using the proceeds to rent a good strategy? Renting costs more per month, but those costs would be offset by the large amount you could invest. The other option would be to stay put and risk having to deal with more repair costs in an older home. What are your thoughts?

[A]

It is kind of funny because for a lot of people buying now, it's way cheaper to rent than buy in the existing home market. But for people who bought a long time ago, renting is probably way more than their mortgage. So I think how to utilize your home and home equity in retirement is going to be a huge growth industry and financial advice space in the years ahead. Because if you're in the top 10%, the stock market or equity in your business probably makes up most of your net worth. But if you're in the bottom 90%, your primary residence is by far your biggest asset. Chardonn Daniel, I've done this before. This is data from the Fed. Like you can see, stock ownership is a big percentage for the top 1%, the top rest of the top 10%. But for the bottom 90%, it's home ownership that's like the middle class for many of them. That's the bulk of their financial assets. And so I think chart off I think a lot of people are realizing that owning a home is a challenging financial asset to use in retirement. Right. Because I have this thing that's worth a lot of money. Maybe it's paid off. Do I take out a HELOC on it? Do I do a cash out refinance? Do I and say screw the kids and the grandkids, they'll pay it off? Do I take out like a reverse mortgage and then that asset is gone to my family, but I'm getting paid. I do have a feeling that they're going to be a lot of fintechs and banks in the years ahead trying to. Because there's like $37 trillion in home equity right now. It's like a mammoth amount of money. I think they're going to be trying to unlock that money for baby boomers. And so Charles wants to know if he should sell to become a renter. Obviously a lot of it is personal preference. I don't hate the idea. I like the fact that he's thinking about this in terms of future housing maintenance and upkeeps. Because a lot of baby boomers have lived in their homes for many years. Right. My parents have been in the Same House since 1991. Right. A very long time. They've probably spent more money upgrading the house than they have, than they did for what they paid for it. Right. I mentioned this in Animal Spirits, Bill. I came back from a lovely trip to Disney with my family. Theater was broken. Guess what? That was expensive. If you live in an old and my house is relatively new. If you live in an old home, I think that's actually probably not a bad strategy. I guess a couple questions I would have is like, what are you going to do with the proceeds? You have to invest them somehow and then maybe you can help. What are the tax implications of selling a home?

[C]

Yeah, Ben, that's where I was going. This is great conceptually, Charles, and I love it because renting gives you flexibility. And the tax angle here is pretty important. Section 121 of the Tax code. I'm going to read it verbatim here because it's also in my sweater is a capital gains exclusion, up to $250,000 per person. And so ultimately one of the things you can do, Ben, if you've been successful, if you've been in that house since 1991, you paid $40,000 for a house worth 600k. Now you can basically get that more or less capital gains tax free or at least with a very large exclusion. And and so, Ben, you can take those assets, you can then invest them into an investment plan and generate money to basically pay for your rent. And then you're free. You know, you're not tied down to a specific location. Do you know what old people don't want to do, Ben? In my 80s, I don't want to be mowing my yard. I don't want to be shoveling snow. Old people don't really need to be getting in a car and driving to the supermarket.

[A]

Right.

[C]

And getting in and out. So can I tell. Gentlemen, can I tell you my personal plan? This is my personal retirement plan. I'm going to pick up, I'm going to move my ass to New York City. I don't need a car. There are museums and restaurants that are world class in New York. Parades. The Veterans Day parade is a number one must hit the Thanksgiving. 2. We have three great airports that get you anywhere and among the best health care facilities in the world. And old people need a lot of health care.

[A]

Plus you can get like 500 square feet easy there.

[C]

Easy. And that would be a palace. Yeah. Palatial estate in Manhattan or Brooklyn.

[A]

No, I agree. The city thing is it makes your life easier. I think downsizing, you get rid of a lot of your junk too, that you've accumulated over the years. It just gives you more flexibility. I like the strategy too.

[C]

Yeah. So. And maybe it's just my military background. Right. I've been moving for my whole life. I've been moving literally since the day I was born. But I look at this house and I love it. It's a great place to live. I'm going to raise my kids here and then I'm going to leave. Like, that's very much part of my mentality. I do not want to stay here for the rest of my life. You know, maybe life will change, maybe things will change. Maybe I'll get more emotional as I. As I age. But ultimately, I think thinking about your house as an asset and transitioning that, that into flexibility and basically rental income stream. Great idea, Charles. I'm all for it.

[A]

Bill, you'll be in New York, but I'll see you in Florida in the winter.

[C]

That's too.

[A]

We can't handle the cold this long.

[C]

Joking about Florida, Duncan, heading down there. I said in the chat I would get front row seats.

[A]

As long as it's not underwater. In 20 years, I'll be in Florida. How's that?

[B]

Well, the thing I was just going to say to keep in mind with the renting as Someone who's been renting since 2010 and has lived in 10 or 11 places in that time. You know, when you're renting for most people that rent, you don't know if you're still going to be in the same place in a year from now ever. You don't. Your landlord could decide to sell the building. You can have a landlord. I've had rent go up by 15% year over year one time. You know, like there are all kinds.

[A]

Of things that basically rental inflation is certainly a new budget item.

[B]

Right. Like, mean that you're basically out of that place and that's not something you have to worry about. Typically speaking, if you own a home, you know how much, yes, your heater might break, but you're not going to have your rent go up some massive amount or you're not going to have the landlord say, I'm selling the building or, you know, you're not. True. You're not going to have, you know, these, these extraneous things happen that basically drive you to have to move, which.

[A]

Is raining on Bill's retirement plan.

[B]

Well, I'm just saying I don't think old people, I don't like moving. I think old people especially probably don't like having to pack up everything and move from one place.

[C]

Yeah. Like, flip side, flip side. When Ben goes to his retirement home in Boca and the heat doesn't work, the air conditioning, he just calls the landlord, says, hey, come down here and fix it. So, Duncan. But exactly right there, there are, there are absolutely trade offs.

[B]

In my case, it took 30 days to have the AC fixed by my landlord, but, you know.

[C]

Oh, God. Yeah, it's brutal.

[A]

All right, we got one more question.

[B]

On that note, I should say we. I got a lot of really nice messages over the last, like, weeks talking about, like housing and renting and stuff. And a lot of, a lot of listeners, you know, giving me all kinds of arguments for why renting makes more sense. And I appreciate that. It does make me feel better. And there are a lot of good points there.

[C]

But yeah, the mosquitoes in Florida too are also disgusting. Like, I'm going to be in Nevada where it's strike.

[B]

Okay, Nevada sounds good.

[A]

All right.

[B]

Okay, last but not least, we got one from Ben. I'm curious if Bill Sweet has any thoughts on the story in the Wall Street Journal about military members trading stocks and crypto. Bill has mentioned that he got to start giving financial advice in the military. So I wanted to know if he's at all surprised by this development okay.

[A]

This one is actually from me, so Ben, get it. So we get a lot of questions. We get, I read the story and we get a lot of questions from service members and I comment how thoughtful those questions are. Bill, you've shared your story here before about like being in a leadership position in the army and that led you to offer financial advice to some troops who had a bunch of money for the first time in their lives and nothing else to spend it on. So I want to read you some passages from in stats from the article and get your thoughts on it. So it says service members are making fortunes in tech stocks and bitcoin. They're trading tips on obscure cryptocurrencies from the decks of aircraft carriers. Base parking lots are peppered with new Porsches and Humvees as they market hits new all time highs. And social media influencers and fatigues tell followers how they too can become rich. And they show they somehow looked at like the addresses of people around military bases that had more crypto changes on their tax returns. And it was a very high number, right? Yeah. So anywhere. And they have these, these stories about all these. Of course, they give the individual stories about people. I thought one was interesting. They said this guy joined the air Force in 2015. He had no savings. Now him and his wife have a net worth in a solid six figures thanks in part to stock index funds. And he says they're totally set for the future at 31 years old. So a lot of these have transitioned from being like meme stocks, crypto trading to like more reasonable, boring Ben kind of stuff. So I got to imagine that you're not very surprised by this, this kind of behavior. When you're a young person, you have money for the first time, probably some free time. I don't know. How much free time do you have when you're first, when you're on the.

[C]

Base, there are long, long stretches of extreme boredom punctuated by moments of extreme terror. So yeah, but Ben, to your point, not totally surprising to me, I think old think is digging a ditch ain't making me rich.

[A]

Right.

[C]

So you don't join the military to become wealthy. But I wonder if we need to rethink that because a couple of benefits you get, gentlemen, when you sign up and you enlist or become an officer number one, you don't have to pay for your health insurance, right? Uncle Sam foots the bill for your health care and you better believe they're going to take care of you to the point in which every morning you need to go to formation and run two miles.

[A]

Right.

[C]

I mean they are very much into that active lifestyle.

[A]

Free housing. Right?

[C]

Tax free housing. Correct. And whether you live on base and you get a barracks or you move off base and you get basic allowance for housing, that's a tax free benefit. Doesn't show up on your pay stub.

[A]

Right.

[C]

You're not paying income tax on that benefit. And yeah, it's a stealth benefit as housing prices or dunking against. You mentioned rental prices have skyrocketed since 2020. The basic allowance for housing has increased as well, commensurate with the cost of.

[A]

Living also they've increased that. Interesting.

[C]

That's a huge relative zip. Yep. 3.

[B]

And do you get to choose whether you live on base or off at a certain point?

[C]

It depends on your position, Duncan. But very generally, yes, you may choose now. You can't live two miles, you know, 22 hours away.

[A]

Right.

[C]

You need to be local. But yes, very generally once you get a certain rank, you're able to do so. But point three, G.I. bill, guess what? You can go out and basically get the government to finance a large part of college. So Duncan, you mentioned paying off student loans. You know what you have to. Don't worry about if you are military service members, student loan debt. Another factor that I think is really, really cool is that you get the ability to do space A, you can travel basically for free standby on military airplanes. So there's a long list of laundry listed benefits. So Ben, I Wonder if post 2020 maybe all of those things have added up to create a significant advantage potentially for folks who enter the military. I do wonder if this is a Gen Z phenomenon. I don't know if you can isolate this. Right. But really, really interesting and I do not find it surprising. Final point for me, when do you want to take risks with your finances?

[A]

Right.

[C]

When. When you were investing six figures or when you're starting out and you can learn. We've had a really great run. I don't think it's a bad thing for people to experiment and take some.

[A]

Chances and not a lot of responsibilities. But yeah, you're right for those people, the young people who are sort of fed up with the system and the costs are all building up on me. Like you're right. That's a, that's a great way. Guess what? You have to put in some time and effort for it. But if those things really are weighing on you, the military is not a bad option.

[B]

Well, and to your point, Bill. Yeah. A young person with a high risk tolerance they put a few hundred doll to options or something with asymmetrical upside. Okay. Worst case scenario, they lose $500 or $400. Best case scenario, it goes up to 10 or 20 or $30,000 or something.

[C]

Right.

[B]

Something crazy.

[C]

Yeah. I mean, once the dollar amounts get higher, I would recommend having a more nuanced approach. I think the index fund route is great. But yeah, it's not exactly shocking that individuals who, A, are obviously patriots, B, that are looking to do risky things. I mean, these are people who are flying aircraft carrier airplanes, they're firing weapons, they're taking risks with their lives. Yeah, they might take some risk. Adjusted behavior with their portfolio too. All the power to them. I would just say diversification is a key concept.

[A]

Sounds like a lot of them are settling down. Eventually they get that out of their system. Maybe they settle down, they get married, then they become more reasonable.

[C]

Great article. Really interesting. And yeah, I had not thought about it.

[B]

And in the military, do you get access to the thrift savings plan? Yeah.

[C]

Tsp. Yep, exactly. Yeah. In fact, they re. They revamped the pension plan in 2015. Now, effectively, it's like a supermatch. I believe it's 6% on any contributions of your pay go into a TSP. Now in lieu of a pension, you can opt back into the pension and there's some hybrid model or something of that nature. But yeah, I think that change was very generous, especially for folks who don't spend 20 years in the military. Folks like me, frankly.

[A]

So that's why, like Bill Murray and Harold Ramis and John Candy joined the military in stripes. Right, Exactly. Looking for a good retirement plan. Exactly.

[B]

So, Bill, do you want to take like 30 seconds and do a viral video of, like, tips for how people in the military can get rich?

[C]

I absolutely don't, but I want to.

[A]

Show you the original influencer on the base for financial advice before TikTok even existed.

[B]

I don't know about it.

[C]

Originally, I was following big footsteps, but I did want to show you guys 200 episodes. I want to say thank you very much. It's been an honor and a privilege to be part of the crew here this whole time. Can we chart? On my last chart, I did want to show you guys. Just. I got this done a couple years ago, and unfortunately it hasn't aged well. But again, I wanted to say thank you. The other thing, I went back and watched the episode. If we go back to episode one of Portfolio Rescue, we ended this. Ben, with you getting mad at your neighbor. I think they stole your Christmas tree. And I said, this is how we handle it Carlson style.

[A]

Right?

[C]

We get the job done always. So, yeah, I wanted to revisit days have passed. So thank you very much, both of you gentlemen. We've mentioned before, Travis, John, Nicole. Yeah, our whole crew. Daniel.

[A]

Yeah, we appreciate everything we've mentioned before. The most questions we get about taxes. People really care about this stuff and want to learn. So we appreciate having Bill all the time as our expert.

[C]

People hate paying taxes more than they like making money.

[A]

Ben. Yep. If you have a question for us, remember, join us in the live chat on YouTube. Look at that.

[B]

Oh, nice.

[C]

Very sweet.

[B]

Nice job, Dan.

[C]

Makes a great Christmas guy.

[A]

Holding the chart. That doesn't look familiar to me.

[B]

Dan.

[A]

All right, join us in the live chat on YouTube. Join us on Twitter live every week. We're here 1pm Eastern Wednesdays at the compound. Ask us a [e-mail] the holiday season is upon us, but we'll be still here every Wednesday live all the way through Christmas Eve. We'll take one week off and then we're back at it in the new year. See you next time.

[C]

200 more. Let's go.

[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 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.