How Elon Musk Made Them Rich... But Risked Their Retirement

Summary

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Money Guy Show – August 3, 2026

Episode: How Elon Musk Made Them Rich... But Risked Their Retirement
Hosts: Brian Preston & Bo Hanson
Guests: Mindy and Carl (from Bigger Pockets Money)

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Episode Overview

In this episode, Brian and Bo dive deep into advanced personal finance planning with Mindy and Carl, a nearly deca-millionaire couple whose unconventional, high-risk investing in Elon Musk companies has propelled their wealth but also set up potential retirement pitfalls. The discussion spans their journey, portfolio choices, liquidity challenges, Roth conversions, and the psychology of moving from aggressive wealth building to risk-optimized decumulation—all with practical insights for high-net-worth listeners facing similar crossroads.

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Key Topics and Discussion Points

1. Introducing Mindy & Carl: The Real Life Case Study

[02:11–04:21]

• Mindy and Carl share their background: Carl is a retired software developer (retired at 43, now 52), Mindy is 53, a part-time real estate agent and podcast host, still working and loving it.
• They’ve accumulated ~$9.8 million net worth, mainly through aggressive investing.
• They maintain a frugal lifestyle but are currently building a $1M house and funding college for two daughters.

2. The Achiever’s Trap: Tax Optimization Gone Awry

[03:19–04:21]

• Brian notes that retirees like Mindy and Carl often “maximize, maximize, maximize” for tax deferral, unintentionally setting up a future tax bomb with large required minimum distributions (RMDs).

“Every year y’all maximize, maximize to minimize taxes...but it has created this potential tax issue for the future.” — Bo [03:20]

3. Retirement Journey, Work, and Lifestyle

[04:24–10:49]

• Carl transitioned from W2 to contracting, which enabled outsized 401k contributions.
• Retiring early offered freedom, but brought new time and investment management challenges.
• The couple funds day-to-day expenses with Mindy’s and Carl’s modest current incomes; larger expenses (house, education) are being financed creatively.

4. Funding Expenses: Loans, Margin, and Liquidity Risk

[12:11–17:26]

• House construction is funded by a $400k personal loan and a $500k margin loan against their Robinhood after-tax portfolio.
• Margin and HELOC strategies nearly led to disaster during 2022’s market drop.
• The hosts highlight the dangers of over-optimizing and underestimating the value of real cash for emergencies and opportunity.

Quote:

“When it rains, it pours typically. So your stock market can get crushed. The banks can write you a Dear John letter on your home equity line.” — Bo [16:14]

5. Risk, Concentration, and “Elon Exposure”

[28:34–34:13]

• Their “liquid” portfolio (~$7M) is incredibly concentrated:
  • ~40% in SpaceX (some in Roth, some in tax-advantaged accounts)
  • ~12% in Tesla
  • Additional large positions in Meta, Google, Amazon, and a private space startup.
• 86% of liquid assets are in just 5 holdings; 70% rides on Elon Musk companies.
• Despite claiming to love index funds, their behavior reflects a concentrated, high-risk style—acknowledged as lucky, not a repeatable model.

Quote:

“How about the fact that 70% of your total is all Elon? ...you guys are like, you’re ride or die with Elon.” — Bo [30:15]

6. The Future Tax Bomb: RMDs and Massive Tax Bills

[42:52–44:03]

• Without changes, their first RMD (age 75) could be ~$840,000/year, pushing them into the top tax brackets and creating vast tax drag and legacy inefficiency.

7. Roth Conversions as the Strategic Move

[44:47–48:57]

• Brian lays out a Roth conversion strategy: annually convert up to the 22% bracket (or possibly higher), moving tax-deferred assets into Roths each year as income allows, especially in “gap” years before Social Security/RMDs.
• This could massively reduce future RMDs (from ~$850k/year to $300k/year) and preserve ~ $3M more for heirs through tax savings.

Quote:

“It actually adds almost $3 million in present value dollars to what your kids would inherit one day.” — Brian [43:48]

8. Liquidity, Mindset, and the Search for Balance

[48:57–57:09]

• To do these Roth conversions, they need more actual cash (not just access to credit/margin).
• Hosts challenge Mindy & Carl to shift from “tax minimization at all costs” to “optimize for risk and lifestyle” at this stage—don’t hoard risk for marginal gains.
• Emotional hurdles: The hardest part for high-saving achievers isn’t building wealth, but learning to spend it and be “okay” with paying some taxes.

Quote:

“You have to be careful to where you at least have real cash on hand. Because things can happen. When it rains, it pours typically.” — Bo [16:14]
“You’ve already won the game...Maximize life, because you’ve won. We still can do it in a strategic way that does it well. But I want you to live your best life.” — Bo [57:09]

9. Gifting, Legacy, and Teaching the Next Generation

[60:36–64:56]

• Brian & Bo suggest annual gifting of appreciated stock to children, especially while they’re in low tax brackets, and teaching them compounding and delayed gratification via parental Roth matches.
• Family money talks, legacy planning, and the importance of balancing support with encouraging self-sufficiency.
• Conversation about the “Die with Zero” philosophy: use money for experiences and support with intention, don’t defer everything to posthumous inheritance.

Quote:

“We’ll help you, but this help isn’t going to come for another decade or two, like maybe your 30s. But you got to get out there, go get good grades, and then...we’re rich. You’re not.” — Carl [64:04]

10. Tax Details, Timing Withdrawals, Donor-Advised Funds

[68:34–71:12]

• Detailed discussion of the tax calculus for selling after-tax stocks vs 72(t) vs qualified charitable distributions after 70½.
• Optimizing DAF contributions by bunching gifts to exceed standard deduction some years.
• Practical withdrawal order for high net worth: first after-tax (brokerage), then 401k/IRA, then Roth last.
• Acknowledging the often-overlooked benefits of brokerage accounts for flexibility, especially with changing capital gains rates and needs.

Memorable quote:

“A brokerage account...is kind of like, similar to a Roth but even better because it doesn’t have the restrictions as long as you stay under that amount.” — Carl [69:27]

11. Final Recommendations and Homework

[76:35–82:09]

• Build up cash: Consider $500,000 (5% of NW) to support upcoming expenses and opportunities.
• “Dollar cost divesting” – systematically selling appreciated and concentrated positions over time.
• Annual end-of-year tax projections to plan conversions and withdrawals.
• Continue frequent, open conversations with kids about money—modeling healthy wealth behaviors.

Quote:

“Please pay that forward into your daughters as well. Because y’ all understand how money works. Please put it in their head, because if you don’t, somebody else will.” — Bo [78:31]

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Notable Quotes/Moments by Timestamp

• “A great life just won’t come to you. You have to build it for yourself. But it’s fantastic. I would not trade it for anything.” – Carl [04:42]
• “When it rains, it pours...your stock market can get crushed. The banks can write you a Dear John letter on your home equity line.” – Bo [16:14]
• “70% of your total is all Elon... you guys are like, you’re ride or die with Elon.” – Bo [30:15]
• “It actually adds almost $3 million in present value dollars to what your kids would inherit one day.” — Brian [43:48]
• “Part of our job is to basically hammer you on why... no, focus on the energy, focus on the time... so you can live your best life.” — Bo [57:09]
• “We’ll help you, but this help isn’t going to come for another decade or two, like maybe your 30s. But you got to get out there...we’re rich. You’re not.” – Carl [64:04]
• On teaching kids: “The best thing I did with my daughter...was I started priming the pump by doing a dollar for dollar match on Roth contributions.” – Bo [64:06]

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Timeline of Key Segments

| Time | Segment Topic | |-------------|-----------------------------------------------| | 02:11-04:21 | Introducing the case: Mindy & Carl's situation| | 10:49-17:09 | Borrowing, Margin Risk, Importance of Liquidity| | 28:34-34:13 | Risky Concentration in SpaceX/Tesla | | 42:52-44:03 | The Impending RMD and Tax Bomb | | 44:47-48:57 | Roth conversion strategy and long-term taxes | | 57:09-63:45 | Mindset shift: From accumulation to enjoyment | | 68:34-71:12 | Withdrawal/tax strategies, donor advised funds | | 76:35-82:09 | Final takeaways and specific action items |

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Takeaway Messages

• For High Achievers: Over-optimizing for taxes and investment growth can set up future risk and regret. In late-stage wealth, focus must pivot to liquidity and risk optimization.
• On Concentration: Massive wins like Tesla & SpaceX can create lottery ticket wealth—but concentration risk must be diffused before it's too late.
• Liquidity is King: Cash isn’t just for emergencies—it enables tax optimization, seizing opportunities, and stress-free living.
• The Power of Planning: Systematically paying taxes (Roth conversions, capital gains harvesting) outweighs clinging to every last percent.
• Parenting & Legacy: Open financial conversations and gifting strategies can multiply the next generation’s financial capability—don’t delay sharing wisdom or strategic support.
• Enjoy Success: The hardest phase for wealth builders is enjoying the fruits of decades of discipline—don’t let old habits rob you of fulfillment when you’ve already “won the game.”

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Practical Action Items

1. Boost Cash Holdings: Target 5% of NW (~$500k) to cover upcoming tuition, home costs, and opportunity buys.
2. Start Systematic Divesting: Use dollar cost averaging to reduce concentrated positions, especially in after-tax accounts.
3. Annual Tax Projections: Review earnings and conversion opportunities each fall to maximize Roth benefits within optimal brackets.
4. Withdraw From Brokerage First: When funding big expenses, sell appreciated stock (accepting cap gains), preserving tax-advantaged accounts for strategic conversions.
5. Teach Money Management: Engage children with Roth matching and open conversations; consider efficient annual gifting of appreciated assets.
6. Consider Donor-Advised Funds: To give appreciated stock and maximize charitable tax deductions, especially by bunching for deduction optimization.

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For high net worth listeners approaching retirement: This episode is a masterclass in “playing the back nine” of wealth—avoiding hidden risks, maximizing legacy, and embracing stability and fulfillment over endless optimization.

Transcript

[Mindy]

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[Brian Preston]

This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50 page restoration block. Or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it, ready to make anything online make sense. There's no place like Chrome. Check responses setup required compatibility and availability various 18. You can see right now you guys are creeping right up on Deca millionaire status. And I thought it'd be helpful for us just kind of understand perhaps where some of these assets came from. Cash on hand that you have, I see $70,000 and I just heard that we're building a million dollar house. Something does not seem aligned right here.

[Bo Hansen]

Things can happen. When it rains, it pours.

[Carl]

We're big believers in index funds, but

[Brian Preston]

I didn't know are you though I

[Bo Hansen]

think y' all say on paper you have a dial with zero mentality, but when I look at how you're structured,

[Brian Preston]

it's more of and a die with as possible.

[Bo Hansen]

Those two don't coexist when you're in the consumption side of your life. Mutants. Today we have something extremely special for you.

[Brian Preston]

Yeah. We recently had Mindy from Bigger Pockets Money and her husband Carl into the studio to do some real life financial planning for them.

[Bo Hansen]

It ended up being one of the deepest dives we've ever taken on camera and some of the things about their high risk portfolio, their unique money philosophy and even their journey to wealth were absolutely eye openening.

[Brian Preston]

In all honesty, we thought it was so powerful and fascinating that we actually wanted to share it with you guys right here on our channel.

[Bo Hansen]

So we hope you enjoyed this special episode of Making a Millionaire.

[Brian Preston]

There's a lot of people out there when we kind of go through the numbers and be like holy cow, I would trade places with you guys. But there are some things that with some strategic thinking and some strategic planning I think you're going to be able to solve for. So it's not as perhaps dire as maybe it sounds, but there are some things that you're going to be able to do. And I don't think there are a lot of folks that are dissimilar to this. They find themselves at the stage of life you are saying, oh, wow, we have this ticking time bomb. What are we going to do about it?

[Mindy]

Well, and I think people aren't thinking 20 years ahead. If I do nothing and the stock market returns, you know, the rule of 72. And I could be facing incredibly large RMDs required minimum distributions where I am now paying a lot of taxes to the government. And frankly, I'm a better steward of my money than the government is. So I don't want to do that. I think that there are ways to pull money out of the 401k so that I can reduce my RMDs down the road. Plus, we have two children and I don't want to leave them a pile of traditional money when I could leave them potentially a pile of Roth money.

[Brian Preston]

It's way better to do it that way.

[Bo Hansen]

I wanna hear more of y' all's story, but I do think just for cause, people are gonna jump in and go, what's this trap that y' all are talking about? And I consider it. You said the middle class, but I think it's more of an achiever's trap is because you guys in a lot of ways every year and we see this with prospects all the time. Every year y' all maximize, maximize to minimize taxes, but to help build and grow assets by owning stuff. That is great, but it has created this potential tax issue for the future. And then y' all are also getting squeezed probably on your liquidity to some degree too. But I want to hear before we get into. I just want to tease up some of the big overarching. That's why I love that your self awareness already. You kind of know because you're living this, you know what y' all are struggling through, even though it's a. It's kind of a blessing or a good problem to have. But we want to know more about Yalls story so that people when they watch this can also figure out how they can apply this to their own life as well.

[Brian Preston]

Because if I understand, Carl, you're retired, is that right?

[Carl]

That is true.

[Bo Hansen]

Not a bad place to be.

[Brian Preston]

Not a bad place to be. What were you doing in your previous life?

[Carl]

I was a software developer.

[Brian Preston]

Software developer. How long have you been retired now?

[Carl]

Oh, it was April of 2017. So coming up on 10 years.

[Bo Hansen]

Wow.

[Brian Preston]

Retired for a decade. For those out there that are thinking about retirement, how's it been? Do you recommend it?

[Carl]

Oh, it's been great. You have to work at retirement just like you have to work at your job. A great life just won't come to you. You have to build it for yourself. But it's fantastic. I would not trade it for anything. There's no amount of money that would make me go back to conventional work. So I tell people I work harder than ever. But I do work on my own terms and it's things I really want to do. Like right now I'm building a house and I just installed a hydronic floor system and a water heater. So I love it.

[Bo Hansen]

Did you do it yourself while the house is being built? That's great.

[Carl]

Yeah, yeah, I did. I'm putting up solar panels now because I'm cheap and don't want to pay a big electric bill. All those data centers are coming online, so I'm just going to nip that one in the bud. I do work. I probably work harder than ever, right?

[Mindy]

Oh, yeah. I don't know how we ever had the time for a job.

[Carl]

I don't like people telling me to work. Just you.

[Mindy]

I guess you don't like that either.

[Bo Hansen]

I am curious though, because I noticed some of the big retirement retirement accounts in your name. So were those big earning years back before you retired?

[Carl]

Yeah, I was a software developer and then at the very end of my career, I was a contractor. So I went from W2 employment to a contractor. They're like, hey, we want you to change the nature of your employment, so you need to become a contractor. I was doing consulting and they're like, but we'll double your pay. So I was making like 85,000 a year. And they're like, we'll give you $85 an hour. I'm like, okay, great. So at that time, I'm like, let's really maximize these retirement accounts. Let's go for the self directed 401k, which we did, and we totally maxed that out. And I was subject to the. I think at the very end, I was subject to the highly compensated employee. But when you have your own thing, you can go up to, what is it, like 55,000. You can do the 25% employer match. So we took advantage of all that. And because I was the breadwinner and we were fortunate that Mindy was able to stay home and raise the kids, we just piled as much as we could in there. And I'll back up and say one thing. I think the reason we're here is because I never planned on this early retirement thing. We just thought we would work until we're 65, and then this whole thing wouldn't be an issue. And then I discovered this whole other life. I'm like, I don't need to work till I'm 65 because we have the money. But then all of a sudden, the money's locked up till we're 59 and a half.

[Bo Hansen]

But was it your choice? I mean, did you choose? Because I have a lot of clients in technology, and unfortunately, that industry is known for kind of retirement early. Yeah. Recommending the exit sooner. It's a great, you know, lucrative while you're in it. But then it does seem as you get grayer, they kind of show you the exits earlier than you anticipate. Did you get to choose when you left?

[Carl]

I did. I chose. I dodged a couple bullets. My first job was with Sears, and we all know how that worked out. I was there for the downfall of that.

[Bo Hansen]

Those catalogs come out. Oh, my gosh. This is my whole childhood Christmas time with circling Sears catalogs.

[Carl]

You could go in there by under and a lawnmower. All under the same row.

[Brian Preston]

Yep, same car.

[Carl]

It was a great place. But unfortunately, they didn't evolve with modern times. Shopping malls went down the tubes, but, yeah, I never. I was always. I've got a lot of financial insecurity, which explains some of our net worth, too. So I'm like, we need to save, save, save. And it turns out all that worrying and financial insecurity was for nothing because I never lost a job. I left on my own.

[Brian Preston]

You've been retired for a decade. How old are you right now?

[Carl]

I am 52.

[Brian Preston]

Mindy, how old are you?

[Mindy]

I'm 53.

[Brian Preston]

53. And what does your retirement time look like? How long before you enter into this phase?

[Mindy]

I really love my jobs. I host the Bigger Pockets money podcast. I get to talk about money in real estate all day long. That's not a bad gig. And I say all day long. I have pretty low hour commitments. I probably work five or six hours a day, three days a week, and it's doing something that I love, so I don't anticipate leaving that in the next 10 years. I am a real estate agent. I also really love helping people buy a house. I think there's no shortage of real estate agents who aren't as good as me because they're just kind of pushing People into a house. Oh, just buy it. Just buy it. I really want to help somebody find the house that works for them. I point out issues and like, hey, this is gonna be hard to sell when you go to sell it, so maybe let's not buy it in the first place kind of thing. I usually only work with one client at a time. I probably sell 12 houses a year.

[Carl]

Okay.

[Mindy]

I make a lot of money doing it, and I can just say, no, thank you when somebody comes and wants to work with me and I'm busy.

[Brian Preston]

From a lifestyle standpoint, you're still working. You plan on working for the next 10 years. Does your income cover the lifestyle needs that you guys have, or are y' all living off the portfolio? Like, how are you paying for the bills right now?

[Mindy]

Well, so outside of building a house, our. My income. My income. He makes. He makes some money too. How much do you make, sweetie?

[Carl]

Like, $500 a month.

[Bo Hansen]

Yeah.

[Mindy]

So that's groceries. Some groceries, some. No. Our income covers way more than what we're spending outside of building the house. Building the house. You want to talk about where that money's coming from?

[Carl]

Yeah. So, as Mindy alluded to, our core expenses are pretty cheap. This beautiful hair. I cut it myself. And then he cuts it myself.

[Bo Hansen]

Is that like a flow bead?

[Brian Preston]

Do you cut it yourself?

[Carl]

These good looks don't come from a fancy hair place. So our daily life is pretty frugal. And, like, we don't go out to eat a lot. We cook, so our taxes are cheap. We own our cars, so our daily life is pretty cheap. But we do have a kid in school now, and we decided to build a house, which is something I never thought we'd do, but here we are. That's almost done. And that costs about a million dollars.

[Bo Hansen]

As a general contractor, you're for yourself. Since you're doing all this work or did y' all work with somebody?

[Carl]

Kind of, sort of. I'm like a co. General contractor.

[Bo Hansen]

Okay.

[Carl]

I'm doing some of the big money items on there. Cause I'm still pretty cheap, and I don't want to pay someone $120,000 to install floor heat when I can do it for 20,000. So most of our life is pretty cheap except for when we do these big projects or when our kids decide to go to school.

[Brian Preston]

Got it?

[Mindy]

Yeah. Because we didn't put any money in a 529.

[Carl]

And so to answer your question, her income is not covering. And my income, too. My $500 a month is not covering tuition and the cost to build this house.

[Brian Preston]

So income is covering living expenses and seems likely it'll do that for the next 10 years. But for any big stuff, homes, travel, education, that's probably gonna be portfolio or some other source is where that's gotta come from.

[Carl]

Yes.

[Bo Hansen]

Okay, you mentioned one daughter, two daughters. I mean, what do y'. All. Two daughters. And where are the ages and what are they? What stage of life are they in?

[Mindy]

One is a sophomore going in to be a junior in high school, and one is entering sophomore year of college.

[Brian Preston]

Oh, so you're in the front end of college.

[Bo Hansen]

You're in the old.

[Brian Preston]

You got a college to pay for and then another college to pay for.

[Mindy]

Yes, we have seven more years of

[Bo Hansen]

college because I got caught up. Junior in high school, soft. Just finished sophomore year of college, so

[Mindy]

no starting sophomore year.

[Bo Hansen]

Oh, so, okay, so we got three years of college still too. Okay, rising sophomore, seven years of school. Yeah, seven years.

[Mindy]

At least seven years, depending on what they do.

[Brian Preston]

Well, you guys are in a fantastic financial spot. You were kind enough to share a net worth statement. So we thought we'd kind of look at where you guys are present. And you can see right now you guys are creeping right up on deca millionaire status. Total net worth right now about $9.8 million. And I thought it'd be helpful for us just kind of understand perhaps where some of these assets came from. Because the very first thing that I noticed right off the bat is when I look at cash on hand that you have, I see $70,000. And I just heard that we're building a million dollar house and we have all these other obligations, kids in college. One of these does not. Something does not seem aligned right here. Walk us through what's going on here.

[Carl]

I would say we've always had a very, very aggressive risk profile. A friend told me that I should be in bonds. I'm like, can you tell me about that? He's like, well, you must know about them. I'm like, no, actually not. So we've always been very aggressive. That's why there's hardly anything in cash. And almost everything is in stocks and a lot of scary ones. I'll back up a second and say we're big believers in index funds, but I didn't know.

[Brian Preston]

Are you though? Well, no, no, because in a second

[Bo Hansen]

we're going to talk about concentration risk.

[Brian Preston]

Our plan is I want to look at a high level of your account, but you were kind enough to even share what's inside of these accounts. And that was for us, eye opening. But, but before we get into like risk profile of the investments. So you've never had a lot of cash, You've always been pretty lean on cash. So how are you like you're building this million dollar house, how are you funding that? Or you have tuition payments coming up. How are you guys stroking the check for that? Are you selling assets and creating liquidity? What's going on there?

[Carl]

Ooh, you're gonna love this. So to build the house, we borrowed $400,000 from a friend. The friend who said I should be at bonds, he's like, oh, I get like 4% or 5% through bonds, so I could get the same amount from you if you want a loan. So we'll pay him off when we sell our current house. And the rest, this is where it gets really interesting is a margin loan from Robinhood against our post tax portfolio.

[Bo Hansen]

Oh, and that's 400,000 on the margin loan or how much is on the margin loan?

[Carl]

It's around 500 at this point.

[Bo Hansen]

500,000 on the margin loan?

[Carl]

Yeah.

[Brian Preston]

All right, so.

[Bo Hansen]

And what's interest rate is built into that one?

[Carl]

I think it's 4.25%. It's very competitive, but it is variable. So if we see rates go up, that will go up. The other thing I think we're going to do real quick is we're going to get a mortgage against this house. I think it's 5.4%.

[Mindy]

Yes, something like that.

[Brian Preston]

Like once it's finished, you're going to.

[Carl]

Yes.

[Brian Preston]

Get traditional financing to clear off some

[Bo Hansen]

of the debt in a month for the outstanding portion. I'm assuming just swapping essentially that 500,000 on the margin. You just swap that for a primary.

[Carl]

Exactly. I don't want to be like margin could. We did that once before and we almost got called out on it. Even though I thought we were being very conservative, we weren't conservative enough. And with rates going up, I'd rather be locked into 5.4%.

[Mindy]

Yeah, that was 2022, when the market had a really bad year. We had so much space in our margin, so we borrowed and then we watched our margin go down and it gets to here and I'm like, we should probably get a HELOC on our house just in case because we had borrowed to buy the house that was there and then we tore that down and rebuilt it. But we're getting real close. So we get HELOC and we take some money out of the HELOC and throw it at the margin to bring it back up. Otherwise it would have gone negative and they would have called us out.

[Brian Preston]

Yeah. And for those that don't know, if you do, if you don't have enough collateral inside the investment account to substantiate the loan, they will do what's called a margin call, where they're going to say, hey, you got to put some money in here. Well, if you don't have any liquidity anywhere, you either have to sell assets to cover while they're down. 2022 is not the best time to sell assets or you got to come up with capital somewhere. So it is a useful tool most often for short term borrowing, but very risky. I don't love hearing that it's there, but I love hearing that you have a plan for it to go away. So it is kind of a short term bridge right now.

[Bo Hansen]

And I don't mind sharing. When I wrote Millionaire Mission, the home equity lines, they are great on paper too, but sometimes stock markets get beat up at the same time that banks are getting squeezed. I got a. Because I thought I didn't keep any cash and I had access to cash was my brilliant scheme with a home equity line, because I had six figures plus in a home equity line. And then of course, you know, in 2011, I think it was, I think it was, I remember, I think it was 2011, May 4th of 2011, I got a note from the bank saying, hey, that home equity line that you value so much because your house has been crushed, we're going to freeze it.

[Brian Preston]

Like, no more access, no more access.

[Bo Hansen]

That checkbook, that debit card completely gone. And I'm sitting there going, no, I mean, this is, this is my cash, you know, this is all my emergency funds. And I thought I was so smart because both things that you're leaning on are what we consider access to cash, not cash. And I don't mind you being y' all are great because I think it's because you're so disciplined. When worse comes to worse, you can, you know, circle the wagons and y' all can make your, your, your spending so small that you feel like you're really not taking that much risk. But the problem is, is that you have to be careful to where you at least have real cash on hand. Because things can happen. It. When it rains, it pours typically. So your stock market can get crushed. The banks can write you a Dear John letter on your home equity line. Y' all are at the stage of life and success I want you to maximize. But let's also Keep some liquidity just to keep you safe too.

[Brian Preston]

Well, it's not about how much you can make at this point anymore. You've kind of already won the game for sure. You've rounded third heading towards home. Now you gotta make sure you don't trip. You want to make sure you don't start showboating and gloating and end up getting yourself in trouble. It's more about how much you get to keep in your back pocket, not how much you get to add to your front pocket at this point.

[Carl]

I really appreciate these comments, Kos Mindy will tell you about this endlessly, but one of the things I struggle with is optimization in all parts of my life, especially money. That's why we see there's no cash. I'm like, cash earns 3%. I think I can probably do a lot better than that with other things. But again, as you just said, we won the game. There's no need to play these games anymore. Although I still enjoy them.

[Brian Preston]

Well, one of the things people often think about optimization in terms of growth and accumulation, there is also risk optimization. And I would argue that you have not optimized for risk where you are in your current circumstance.

[Bo Hansen]

I mean, just look at your net worth, your cash holdings as a percentage of your net worth.

[Brian Preston]

Is rounding error negligible?

[Bo Hansen]

I mean, you see that that's a problem. I mean, we're not even. Was that one? It's less than 1%.

[Carl]

Yeah.

[Bo Hansen]

I mean, we probably ought to have at least a few percent to cash. I mean, just so you know, because,

[Brian Preston]

well, remember he has all those bonds that are keeping him protected too.

[Carl]

Right.

[Bo Hansen]

But we've turned our cash into a rounding error and that's. That' that's not really that big of a safety net.

[Mindy]

So I am a member of a group online called Long Angle. I don't know if you've heard of them. It's a closed forum for people who have a net worth, a minimum net worth of $3 million or more. I went in there and I asked them, how much cash do you keep? Cause I was looking at these numbers too. I'm like, $70,000 seems like a lot of cash. We probably spend between 65 and 100,000 a year, not including kids, school, and not including building a house. 70,000 is a whole year's worth of expenses. That's a lot of money to keep in cash. And like he said, it's only making 3% when we can do so much better in the stock market. And I asked in the longangle group, how much cash are you guys keeping? Because it seems silly to have a percentage of your net worth when that's your net worth. And they were saying around 5% is what people. They did an annual poll of their members and they said around 5% is what people are keeping in cash on average. And I thought that's a lot of money.

[Bo Hansen]

But you're thinking in terms, you're not thinking in terms of your net worth, you're thinking in terms of spending, of your spending. And I keep hearing you bring it back to the grounding of, hey, that's a full years of our spending. But where is. You have a blind spot to. No, it's not just the spending. It's the $35,000 for your daughter's next year college for the next three years. There's 70. I mean, if you think about 35,000 times three, we already have exceeded $100,000 just on her education. And by the way, you got another one coming right down the pipe, probably 35 to $40,000 a year because, you know, so, so you just, right there, we've told you that within the next three years, you have well into 100 plus thousand dollars of need that you'll have to. We got a house that's being built, that we have $500,000 of debt that we have to. And you need to have margin to cover the underwriting period, you know, when you're turning this into a loan.

[Brian Preston]

Let me speak to the optimizers in you. We're going to talk about some tax planning in a moment. One of the things that you're going to need in order to actually be able to implement that planning is having liquidity, which you don't have right now. So you have to figure out how do we find liquidity to satisfy the necessary mechanism to do some of that tax planning. But we're going to get there.

[Bo Hansen]

I do want to say one more statement on cash, though, because some of my biggest opportunities that have changed my financial life, you should actually boost up cash. Not because it's, it's bad, but because it creates huge opportunities when others are struggling. And I don't want you to be a miser and have all cash, but y' all are big enough now that that 5%, maybe even a little beyond 5%, that the next time things go ugly, you're going to be like pig in slop. So happy. I mean, you really are. I mean, because you're just like, oh my gosh, I can't believe I can get what for that, you know, and that's. That's the most amazing thing in the world.

[Brian Preston]

Think about how much different 2022 would have felt if you weren't thinking, oh, gosh, we got to go take money out of our home equity line to go pay on this margin call. What if you're thinking, man, we have cash and capital we could deploy at these unbelievably attractive prices while everything's getting beaten up.

[Bo Hansen]

The clarity of chaos, too, is because now when you are. When you're liquid in chaos, everybody else is scrambling, and you're like, it's a superpower. It really is. And that's something. Now, I don't want people out there hoarding cash because they're waiting for the next. No, that's timing the market. But there is something too. When you're in step eight of the financial order of operations is to be frothier after you've already taken care of a lot of your other financial foundations. Think about Warren Buffett. Why is everybody watching the airport, you know, the FBOs whenever the market goes down? Because they want to know what airport, you know, who's flying into Omaha to come to the feet to talk to Uncle Warren for money, because they know he's sitting on the cash. I mean, there is something to that when you're talking about the power of cash as a kind of a contra wealth builder in a lot of ways,

[Carl]

we actually encountered that back in 2011. We saw, we don't want a 12,000 square foot house, but we saw one that had just been built, and they're like. Like, the first person to show up with $400,000 gets this thing. And I'm like, we could buy this, hold on to it until all this. All these dark clouds pass and sell it for $2 million. But we didn't have $100,000.

[Brian Preston]

We didn't have the cash.

[Bo Hansen]

Nobody else does either.

[Mindy]

That's why it's selling.

[Carl]

Yeah, the townhouse in Breckenridge, $250,000. That thing would be 2 million now, but nope, no one would give us cash.

[Brian Preston]

Cash gives you opportunity money. It gives you the ability to capitalize on opportunities. Other people. People can't capitalize.

[Bo Hansen]

And nobody does it. I mean, nobody has cash when we hit these. These horrible periods in the economy.

[Mindy]

So you said that 5% or maybe even a little bit more sounds good for us. And then you said, you don't.

[Bo Hansen]

I didn't say for you.

[Brian Preston]

You guys.

[Bo Hansen]

You guys have. Don't, don't. Because I was trying to create a teachable concept there. But you guys have some unique things. All of your stuff is highly appreciated. Y' all have done, y' all not only done a good job of minimizing taxes, but then even in your after tax assets, it's all highly appreciated assets. So anything and everything you touch is going to create taxes now. So it's time to pay Uncle. We have to figure out how we do this in a strategic way. So I don't want to, I don't want to say, yeah, go to have 5, 6, 7% cash and then like, well, how you go do that without generating a big tax bill that creates a friction cost that we got to get a little cute and creative with.

[Brian Preston]

I want to make sure I understand because right now, so we're showing the net worth here. But realistically, we've got a $400,000 personal loan to a friend. We've got another $500,000 loans, we got about $900,000. Any other debt that we're not aware of or is that it? Just that 900,000.

[Carl]

Our house now is worth about a primary house, 800,000 and we owe like 280,000 on it.

[Brian Preston]

Okay.

[Mindy]

At a like 2.3% loan, it's going

[Carl]

to break my heart to sell that house.

[Brian Preston]

You're selling that house, right?

[Mindy]

We will sell that house.

[Brian Preston]

And then I imagine that the equity from that house is going to pay off the personal loan and you'll get traditional financing for the margin loan. Is that the idea?

[Mindy]

We should be almost clear of debt once the one house sells and we move into the new house.

[Bo Hansen]

Perfect.

[Carl]

Yes. And once we refi that house.

[Brian Preston]

So when we look at your account structure, I do notice what seems to be a little bit of redundancy in terms of accounts. Like, Carl, you've got this 401k, but you also have this large rollover IRA. Any reason why those two are not consolidated since you retired?

[Carl]

The 401k is a self directed, solo 401.

[Brian Preston]

Oh, so you're still participating and adding to that one?

[Carl]

Yes, yes. And it holds some. We do want to close it eventually, but we have one more private company in there, so we'll have to wait till at least that company goes public or sells to dispose of that account.

[Brian Preston]

So the idea is once that's done, potentially you do have, or once you stop working, stop earning, there's some consolidation that could happen between those two accounts? Potentially, yes. Are you guys able to fund Roth IRAs every year based on income level?

[Carl]

Yeah, we could. We haven't been just because we've been using all our money for this house project. So the past this year and last year we did not. But we have done a lot with Roths in the past. One of those Roths is also a self directed Roth, hence why there are multiple of them on there.

[Brian Preston]

Yeah, walk us through what was the. So you have. So Most all Roth IRAs are, quote unquote, self direct. You get to choose where you put it. You get to choose the custodian is. But I think you did some unique stuff inside of your Roth, right, In

[Mindy]

terms of the investment. Well, the regular Roth IRA, the $109,000 Roth IRA is. I don't even know what's in there. There.

[Bo Hansen]

Well, that's, there's one, there's a, there's a one that says 285 and one that says 16,000, saying hers is 109.

[Mindy]

The 109 is just like regular stocks. The self directed Roth IRA is a SpaceX holding.

[Brian Preston]

Okay.

[Mindy]

And we were able to get into SpaceX in that account in 2024.

[Brian Preston]

Oh wow.

[Mindy]

And so when it recently went public.

[Brian Preston]

Exciting couple weeks for you guys.

[Mindy]

It's an exciting couple of weeks. When it went public, that's when it kind of exploded. Carl was able to get into SpaceX in 2022 through his 401k. That's a traditional 401k. And when the opportunity came up again, I said, is there any way we could put it into a Roth? Because you put your risk in your Roth. Right, right. I wanted that money to grow tax free. So we were able to do some financial monkey business to get that into the Roth IRA.

[Brian Preston]

So when we look at your 401k for Carl, a big chunk of that SpaceX. And it's in Roth.

[Mindy]

No, that's a traditional 401k.

[Brian Preston]

That's all pre tax.

[Mindy]

My self directed Roth IRA is. Is that all SpaceX?

[Carl]

Yes, that one is completely SpaceX.

[Brian Preston]

Okay, got it. So there's some reasons why there are multiple accounts that haven't been consolidated. Because there were some unique things going on there. Now, with the way that you were able to enter into your SpaceX exposure, are there limitations on your ability to move and consolidate now that it's public

[Carl]

publicly traded, there are lockup periods. The first one comes up in August, so we will start receiving our shares there. The last one comes up in December. So between August and December we will receive all of our shares. But Bo, as of right now, we cannot do a thing. They are locked up.

[Bo Hansen]

They recently because I know we had some clients who also bought SpaceX through these. Essentially they were buying them from employees as they left. These private investors who realized they could put together these groups, help buy out the employees. But we, there was some grayness on how long because I saw some disclosures that had come out post ipo. Now they might have clarified this. This has been a week or two since, since I got. But the first thing that came out from the private company that we were dealing with for a few of our clients was we think we're going to be able to get you access at these points. But there is a chance as we're getting clarification that we might be locked down in for a full 366, the first 366 days. Have y' all gotten a bunch of communication from on what your windows. Because it was gray initially, but maybe they've clarified that.

[Carl]

Yeah, we have and I think I might know what you're referring to. Certain employees and certain very early investors have more restrictive shares where they have to wait that full 366 days. In our case, we will have access.

[Bo Hansen]

Okay, so you'll have access earlier.

[Brian Preston]

Okay, and once you begin to have access to these shares, what are your thoughts? Because again, you were kind enough. Not only did you share a net worth statement, you shared sort of a breakdown of what you have in your accounts. And when we look at, when we look at your liquid portfolio right now, it's touch under $7 million. And when we look at the things that you actually own in there, we have nearly $4 million of SpaceX stocks and another $850,000 of Tesla, almost half a million dollars of Facebook, Google in there, Amazon there is this Impulse Space. I'm curious to know what's Impulse Space.

[Mindy]

That's a privately held company right now.

[Carl]

Oh no, this is a really good story. I'm a nerd. Feel free to cut this out. Thomas Mueller was SpaceX number one. Probably the most brilliant rocket scientist of our time. He developed the original engines for SpaceX. Unfortunately he became an employee and not a co owner because he was worried that the company wouldn't succeed. So he was only worth like I don't know, 50 billion instead of whatever he would have been worth if he would have done the whole thing.

[Brian Preston]

But anyway, I think he's going to be okay.

[Mindy]

Thomas, if you need help with your money, come talk to the money guy.

[Brian Preston]

That's right, we'd love to talk to you.

[Carl]

He started, he left SpaceX, he started a new company and I'LL get real nerdy for just a second. They bring stuff. It's very easy to get stuff to low earth orbit. Very difficult to get stuff to higher earth orbits. You need like a triple core rocket. I told the inert time. So this guy is deploying space tugboats. SpaceX will launch something, get into low earth orbit, and then his things in space bring it to a higher orbit in a matter of hours instead of the year long it would take. And yeah, we got in in the same round as Peter Thiel, which is pretty cool. And this was. Yeah, this whole thing was a bet on Thomas Mueller as most of her investments.

[Bo Hansen]

Well, and you know something about making a bet on people because let me give you something now, this is. I did some real back of the napkin math on some of this, but your top five holdings are about 86% of, meaning individual holdings are 86% of your total liquid assets. So when you said you were an index investor, we were like, no, y' all were pretty concentrate. And then. Let me, let me blow your mind if you think 86% with your first five holdings. How about the fact that 70% of your total is all Elon? I mean, between. If you look at SpaceX and Tesla, I mean, you, you guys are like, you're ride or die with Elon in a lot of cases. Which, you know, it's been a kind of a bumpy ride here in the last few years. It has been a bumpy ride. So incredible wealth building has happened and y' all have been actually the beneficiary of a lot of this.

[Mindy]

This.

[Bo Hansen]

But it is one of those things of. I wanted to get Yalls temperature on is this because obviously you have somewhat of an emotional attachment to these investments too, because you just. I could hear you telling the stories. I mean, this is. You're probably setting a table at Thanksgiving for impulse space at this point because you just told that story. You're pretty excited about it. What do you want to do with these holdings? Because you've got huge appreciation. We've heard some of these are in Roth accounts, some of them are in after tax accounts, some of them are in 401k. So you've got, you know, it's dealer's choice on account structure. What are your ultimate goals for these individual holdings?

[Carl]

Who I feel we feel stronger about some of them than others, but I would like to slowly get rid of them. I am a big believer in index funds and where I was going with that was we bought Tesla in 2012 for other people. Facebook was 2012, Google. I was a computer nerd. So we bought that company at IPO in August 2004.

[Bo Hansen]

Wow.

[Carl]

Yeah. 85 bucks to 15,000 if you don't account for. But yeah, just luck. I didn't run numbers or anything like that, but anyway, but oh, hold on,

[Mindy]

hold on, because I say this all the time. If you were going to invest in individual stocks, you need to be doing a ton of research on that individual stock because you're going to lose like most people are going to. Most people don't choose something. I mean, he had a loser stock once, once.

[Bo Hansen]

Carl's got a pretty good track record,

[Carl]

I'm about to say. Right?

[Mindy]

Carl's got a pretty good track record. I would like to say that I suggested Berkshire and Costco. Okay, thank you very much. They're at the bottom, but they're still

[Bo Hansen]

worth seven figures like Carl's picks are,

[Mindy]

you know, if you want to keep track with actual numbers. Carl is a little more successful at picking stocks than I am. But he also, I think he's downplaying. He reads tech news all day long. He reads. I mean, ask him anything about Tesla or SpaceX. He's done a ton of research. And our Tesla stocks was from 2012 when some random dude with a funny name was gonna make electric cars. And back then electric cars weren't cool, they weren't sexy. They were just like a pain in the butt because there was nowhere to charge it and they got like 40 miles of range and that was it. And this guy came out with, I don't know if you know this, but sometimes he makes grand declarations, I'm gonna change the world.

[Brian Preston]

I don't even see, does he really?

[Mindy]

But he said he was gonna put full electric cars on the road. Did he say he was gonna make them self driving back then?

[Carl]

It wasn't back then. It was a little bit later on.

[Mindy]

Yeah. So. And Carl wants the earth to continue to rotate and you know, let's get off fossil fuels and all of that. Sure, I'll throw some money at that. How much money do we have in Tesla? How much did it cost us to get that Tesla?

[Bo Hansen]

Can I have a guess?

[Mindy]

Yes.

[Bo Hansen]

I bet you put less than $10,000 in Tesla.

[Carl]

Yeah, I think it was about 2000. It was $2 a share. And where I was going with this is I discovered index funds in 2014 and that was after we had invested in most of these. So now when we do get money, almost all of it goes to index funds.

[Brian Preston]

And that's the question we Were going to ask is essentially what's happened is you guys have some winning lottery tickets here, right? You took a big bet, you took a risk. Those risks have obviously paid off up until this point. The question is what do you do moving forward? Especially as you're thinking about, I'm not going to say de risking because you're going to perceive that as being suboptimal optimizing for risk adjusted nature. Right? So when we optimize for risk, I do think probably one of the things, because you guys do have index funds, you were kind enough, you have another $1.7 million across various index funds. And all of these index funds happen to own a lot of the same companies that we just went through. But this is at least more broadly diversified than your other holdings. So what we'd love to see is as you guys age and as you move into retirement, now that you've kind of got this very healthy portfolio, how do you build a portfolio that doesn't just focus on capital accumulation but also has some sort of idea around long term capital preservation? I just think why take more risk than absolutely necessary?

[Carl]

I think the one thing we have the luxury of doing is because so much is in the 401k accounts, we could get rid of those holdings, move to bonds or VTI and not have any tax consequence. But I would like to get at some of the money so we could actually use it sooner than later too or start being tax efficient. I don't want a $2 million RMD in 22 years.

[Bo Hansen]

Well, what I was nervous you all were going to say was that you love having these holdings so much that you didn't want to sell. Because look, I get it. I mean especially when you, you make a two or three thousand dollars investment and I bet you've done, I mean we could do that with the Google investment or even the Meta, you know, with Facebook because you guys hit them right as they came up and then you just held them. I mean you permanent portfolio these things until they've created huge success for you. But what I was worried, as you say, I want to really keep these holdings because I really believe in these brands and we had kind of talked about this beforehand and is that that there's nothing that says that you couldn't if you had said that liquidated in the taxable form so we could actually have access and then you can go move things around in any of the retirement accounts and not pay taxes. But I actually like hearing it's the preferred answer is that yes, these have Created tremendous success. But I'm okay if we start diversifying our capital structure so that we can, you know, have access to this money and kind of optimize from a risk standpoint what we've got going on as well. So you did even better than what I was worried that you were going to be locked in on, because we see it all the time.

[Carl]

Yeah. Thank you for saying that. These companies are near and dear to my heart. You can tell I'm obsessed with some of this tech, but I think going on a nice trip, like we're taking our kids on a trip to Japan and going on a trip to Japan with our children sounds like more fun than owning Tesla or SpaceX.

[Brian Preston]

I love that. That's what. So the reason why we build the wealth is so we can actually use it to do the things we want to do and have the experiences we care about with the people we care about. And you guys have obviously done that. Now you're at that stage where you get to enjoy some of that stuff. But that doesn't mean you have to walk away from optimization altogether. Brian, this is literally it. What we're doing right now is literally one of my favorite things that we get to do. Sitting across from other real people talking about their finances.

[Bo Hansen]

Yeah, you guys get to see this on Making a Millionaire, but we also do this for our clients every day at Abound wealth.

[Brian Preston]

We get to dig in where they're at, figure out where the gaps are, and find where we can optimize and build a plan that works specifically for them and for their financial goals.

[Bo Hansen]

If you've been watching this and thinking to yourself, hey, I want that. I want a professional with decades of experience in my corner looking at my specific situation. We're here to help.

[Brian Preston]

Yeah. Here at Abound wealth, we are fee only fiduciary advisors. That means that we are legally required to work in your best interest. And we, we love helping our clients optimize our army of dollar bills so that they can live their best lives.

[Bo Hansen]

If you've reached a point where you're ready for some help, go check us out@ aboundwealth.com or click on the link right below. We'd love to connect and see if we're a good fit for you.

[Brian Preston]

That's right. Head to aboundwealth.com and let's see if we can do this for you too.

[Mindy]

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[Brian Preston]

Sponsored Jobs this episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50 page restoration block. Or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it, ready to make anything online make sense. There's no place like Chrome. Check responses, setup required compatibility and availability various 18 because you've already said, hey, we've got this problem, right? And fortunately we have solved. We're able to kind of model out this problem for you. So what we looked at is based on where you guys are now, your retirement is no longer pass fail. It's no longer are we going to have enough to be able to retire? Are we going to be able to be financially independent? I think we've already answered that question in spades. Now it becomes how do we optimize and make sure that we're making the right decisions early enough that it can have a meaningful impact over the long term? So what you can see on the screen every year, this is just a projection of based on the living expenses you share with us, portfolios you shared with us, what we anticipate basically your tax return looking like every year. Each one of these blue bars is like an active tax, your active tax base that you'd be paying tax on now. We didn't know about what your working life was going to look like over the next couple years. We just made some assumptions like, okay, if we're earning a decent amount, we said for five years and that goes away, really all of your income turns into capital income from the portfolio. For a lot of folks, depending on how your portfolio is structured, a lot of people pay 0% capital gains taxes, right? In the early years they retire. So your tax bill kind of goes next to nil. If your portfolio is structured correctly, that would work wonderfully and you guys could retire and you could live off of your brokerage assets. You could begin selling at 0% cap gains, generating some capital so that you can pay for the things you want to pay for. But eventually that becomes exhausted and you would have to start pulling off of your retirement assets at some point. But what really gets you guys is right there in your mid-70s, right there in your mid-70s because your qualified accounts are so large, you're going to have these huge RMDs that are going to take place. And we actually went and looked at the number in nominal dollars, your RMD based and we did a very conservative, think six and a half percent rate of return, like very, very conservative, something like $850,000 year. One of your first RMD I think was 2049, $840,000 of income. You'd have to recognize that you may or may not want to recognize. And what that's going to do is it's going to now jump you into the highest tax bracket. You're going to go through the 24% bracket, 32% bracket, and ultimately you're going to even into the 37% bracket under current, current tax cut code. So we said, okay, there's no point in all this tax deferred savings. You guys have done your entire life to try not to pay taxes, to only spend the last 20, 30 years of your life paying way more taxes than you want. Right. So one of the ways that we think about helping clients figure out how they pay less taxes over their lifetime is what strategies are available to begin minimizing that lifetime tax bill. And for most of our early retirees who retire before a pension kicks in or before Social Security starts, before we have to do RMDs, Roth conversions are a great solution that might be available to you. And we just said if all we did for you categorically was let's just think about maxing out the 22% tax bracket. Now there's an argument to be made. We could go up to 24 and max that out. We just said just max out the 22% bracket. What does that look like? Like conceptually and if we started doing that this year and we did it all the way until you got to age 75 or got to RMD age, what does that change about the plan? Well, now you can see you never actually cross into those 30 plus percent tax brackets. You never actually have that tax bomb take off because you're converting so much of your pre tax assets, assets to Roth. Well, if you run this through the scenario and you look at what does this mean tactically for you guys, if you were able to implement this, you're able to convert all of those pre tax assets or a lot of those pre tax assets, your required minimum distribution at in the first full year you had them goes from like $850,000 distribution to like a $300,000 distribution. It's like a $500,000 annual income offset because now you shifted them to Roth. And what you can see is by doing this at the end of your plan, when you guys leave this earth and we just used age 95 as our mortality assumption, it actually adds almost $3 million in present value dollars to what your kids would inherit one day. Because now you've paid tax at lower rates, they've grown tax free, and your cumulative tax bill drops by over $1.1 million in present value dollars by doing this Roth conversion strategy. So when we look at this, it seems like a slam dunk, right? Right.

[Bo Hansen]

Well, the legacy factor is huge because your kids, because, you know, with the new update, updated beneficiary rules, 10 years is what you get to continue to let the assets grow after your passing. So they inherit Roth assets and then they can grow for 10 years if they so choose to optimize. I imagine you'll have probably instilled a lot of these behaviors in them as well. But it's just a huge legacy win too, because when they inherit a 401k now, they have these inherited IRAs that they would have to take distributions off of life expectancies as well. Whereas this lets them say, hey, how do we use these assets but also optimize these assets? From a tax planning standpoint, it's a pretty cool win.

[Carl]

And from a selfish standpoint, if we convert to a Roth, and for your audience too, we can use the money after five years right there, the money we move over.

[Bo Hansen]

So, yes, technically you can, but I'm telling you, everybody who, once you get big Roth assets, you hold them like Gollum and you know, it's just so hard to, to use Roth assets because you just know how powerful that growth is. That's where your tax nerdiness, maybe it's. I just know when we plan it. That's why I'm always amazed when we, when we, when we do deal with like Coast Fire and others, everybody's like, well, I'll just use my Roth first to bridge me. I'm like, you think you will, but you're probably not going to want to burn through all those because that's just from a legacy standpoint. Now, look, I know y' all also have the die with zero type mentality, and we'll talk about that too, because I think there's some better assets that you can gift, especially with the 0% capital gains while you're, you know, assuming your girls have lower taxes, there's some ways you can make gifts, maximize theirs their lack of income. To give some of these highly appreciated assets. That's so much better than just giving, you know, burning through your Roth assets.

[Mindy]

Yeah, I would like to leave them as much Roth money as possible and to get it out of the 401k as soon as possible so that it can be in the Roth. The only issue is we, you alluded to this earlier. We have a liquidity problem and we don't have the money to pay the taxes. I mean, we have the money to pay the taxes, but we have to find it somewhere. So doing a Roth conversion at our age, we have to pay those taxes next year. If we Roth convert. How do we do that?

[Brian Preston]

Yeah. So one of the things that we think is important, whenever we do a Roth conversion analysis, we always set out like best laid plans, like, hey, our strategy, our goal is gonna be to convert at this bracket, whether it's 22% or 24%. But what happens in reality, even though we lay out this life playbook of what we want to have happen in practice, the way it actually manifests is that every single year, it's a year by year decision based on the unique things that go in this year. Maybe in one year you sell 10 houses instead of 12 houses. Maybe it's a 2022. We were able to harvest a lot of capital losses, so there's no capital income. What we do for our clients, and this is like what we get to do, like for our day jobs, is every year, towards the end of the year, on October, November, we'll actually do an analysis of where your income is for that year and you begin doing tax projections to figure out how much could you convert in reality and what would the associated tax bill pay for and then how do you pay for it? For you guys, we wanted to put together an illustration, just kind of give you an idea of what that tax bill could look like under this scenario. But the numbers would change. And so we just picked a random five year period. I say random, we assume that you worked for five more years and then you retired. Right. So from 2031 to 2035, if you did nothing, you had no other income coming in and all of your income was strictly capital income. And it was structured in a way that you weren't generating tons of capital gains or tons of dividend income. You're going to have a relatively muted tax bill. It's just not going to be a super large tax burden for you guys. And so if our goal was to then convert at the 22% bracket for you guys, that would mean about a $211,000 conversion every single year, roughly. Obviously it changes every year based on your income, but the associated tax bill due on that would increase by about $60,000. Right. So your effective tax rate on that income, because a lot of your income is going to be capital gains income at 0%, you run through that and then you have 15, you're still not even hitting an effective tax rate of greater than 20%. So it makes tons of sense. What you have to figure out with is, figure out is when you get to 2031, how do you begin paying that tax bill? How do you begin doing that, that $60,000? I'm going to argue that right now while you're still earning, if you're a higher income earner and you look at your taxes and there's not a ton of room to convert. I don't know that converting in these years are the years that make the most sense. What likely is going to make the most sense is when your earnings drop or in specific down years where you do have low income years and you begin doing that from now out until age 75 or 73, whenever you're whatever age your RMDs have to start. Does that make sense?

[Mindy]

That makes sense.

[Brian Preston]

I don't think that doing it again, high income and we get. People love Roth. They love Roth. They love Roth. We always remind them, you're likely going to have better opportunities in the future to convert to Roth than these current years if you're a higher tax earner. Now, if you have the thought process that I'm always going to be a high earner or tax rates are going to meaningfully go up within the next 1, 2, 3 administrations, then there's an argument to be made for that. Maybe you could look at, okay, we're going to earn income at this level and we'll convert up to 24 and we're going to be comfortable with that. But if you begin doing that, you have one of two options to satisfy the tax bill. You either have to start saving up cash from your earnings every year to be able to pay the tax bill, or you have to start slowly divesting out of your taxable brokerage assets and begin using those to pay whatever. The associated tax bill would be also going to be kind of hard to do in a year that you're paying for a bunch of college. And in the year that you're building a million dollar house.

[Bo Hansen]

But. But to bring it to a simpler form just to understand is that I think you have to, you guys need to go ahead and start playing the mind game with yourself is I have to get comfortable that we're going to just have to pay capital gains on some of these after tax assets because it's going to. I mean it's the easiest, lowest cost access to capital because it's 15% on a married couple with Yalls income. That's a pretty low bar if you think from a tax standpoint you've won a lot of this. You just have to kind of know that's the toll you have to pay to get access to this liquidity. And I think that that's okay because I know y' all had asked when we were trading emails, you'd asked about 72T and some other things like that. And those concepts are powerful.

[Brian Preston]

Did you have a thought process? What were you guys thinking when you brought up 72t?

[Mindy]

Just access to the 401k? It's a taxable access, but it's not a penalized access. Because I don't like to pay taxes, I super don't like to pay penalties.

[Brian Preston]

Sure.

[Mindy]

So I don't want to just pull money out of the 401k but it's a way to generate a little bit of income because we do have that liquidity problem this year. A way to generate income and take money out of the 401k that isn't a Roth conversion. Because the Roth conversion we can't access for five years and we have to pay taxes on that. That's the opposite of helping us with our liquidity problem.

[Bo Hansen]

But your ordinary income tax rates plus your earned while you're still working because that's more than likely if you did something like this on Carl's assets because he's retired, you're still working. It's such a higher barrier, higher tax rate. Whereas these ordinary income rates are gonna

[Brian Preston]

be higher than capital gains because you're

[Bo Hansen]

earning money as well. So. So it's going to run you through the tables or at least the capital gains. I mean it's. You don't get into the 20% tax bracket until yalls combined income is around $600,000. So it would be 15 now that, look, there's the Medicare surcharge and other things. Maybe it's, I'm oversimplifying this to a degree, but it is still lowest cost of access to capital and that's. That's kind of where you, you have to go through the, the triage of, of thought matrix of how am I going to get access to money? That's the easiest area to probably do it.

[Brian Preston]

Yeah, we talk about, we use the financial order of operations as a mechanism to help you think about how you accumulate. Well, when you begin decumulating, you kind of pull money out in the reverse order that you put money in most often. So for most folks, the first money they ever save is the Roth money because they open up a Roth IRA when they're young or whatever. That's probably the last money you want to pull out in the accumulation. The second money that people start putting in is their 401. I started maxing out my first 401k getting my employer match. That's probably going to be the second money that you want to pull out in retirement. And the last money that most people often put in are the taxable brokerage assets. Once they're the savings mechanism or have an opportunity to do that, that's the first bucket you want to pull from. And I think that's going to be true for you guys. Even though capital gains are present because capital gains tax rates are going to be lower than whatever your 72t tax rates are going to be. While it does give you access to that, I'm going to argue you rather than pulling those assets out early and paying the tax and uncaptivating from this tax incentivized structure, you'd rather use taxable assets, preserve those tax deferred assets that you can then convert to Roth when your income does go lower. Because you're going to love having those Roth assets later on.

[Carl]

Yeah, that's a good point. And a lot of the stuff I would like to get rid of is in our brokerage account too. So that just makes a lot of sense.

[Brian Preston]

And it's also not an all or nothing because of a lot. You guys do not seem like you have anxiety around selling these things, but a lot of folks do. They're like, oh, I can't sell SpaceX now it's going to do this or I can't sell Tesla now it's going to do this. Whenever there's emotion in decision, we try to remove emotion as much as we can by adding a system. For us, the system, even when there's highly concentrated, highly appreciated positions, is something like a dollar cost divesting strategy. Same way that we would put cash to work. Hey, we're going to sell $10,000 a quarter, every quarter of this stock. And we're going to do it on an automated basis. So that way whether the stock is going up or down, we're not having to time it to figure out, okay, is now the right time to sell or not the right time to sell? You kind of COVID all your bases.

[Mindy]

That's interesting that you say it like that. I've never heard dollar cost averaging for the withdrawal as well. But I mean I talk about the dollar cost averaging into it, like automate it and then you don't have to like you maybe.

[Brian Preston]

That's right.

[Bo Hansen]

It's the exact same thing. Instead of. Because people sometimes need to take the emotion out of buying because they're worried that they're buying at the worst time or so forth. This is the exact same thing, just in reverse order. We're taking the emotion out of you guys feeling like when's the best time to sell? Let's do it in a systematic way. So now it's not a human, it's more of an automated process.

[Mindy]

Yeah. And we've made the decision to sell one time and you set it up and it just happens.

[Carl]

That's right.

[Mindy]

Can you do that?

[Carl]

Yeah. I think Brian hit on something important a while ago. And to back up a second, I had healthy income as a software developer but we were super cheap and super frugal. So we just minimized our taxes so much we hardly paid anything because we would max out our self directed 401. So my struggle, perhaps my biggest one, perhaps I need a therapist instead of a cfp, is just to get over the paying taxes thing.

[Brian Preston]

Exactly.

[Carl]

Like I've got a friend who works for SanDisk and he told me he's got like, he's going to have a $500,000 tax bill, he's got to write a check to Uncle Sam. And that made it a little bit easier because ours won't be anywhere near that. But it's still a struggle. Like we spent so many years absolutely minimizing that and now we're going to have to pay up and it's going to be okay.

[Brian Preston]

Well, I still think you're going to minimize it.

[Carl]

Right.

[Brian Preston]

You're still like obviously in your highest earning years. If you were trying to do some of the stuff, your capital gains rates might have been 23.8%. Right. It would have been there. But you are still paying taxes, but you want to pay as little tax as possible in the sense that makes the most sense. Right. And you're still going to be able to do that.

[Bo Hansen]

I'm going to challenge Y', all, from a mindset standpoint, it's because all the things that have rewarded you in the past to some degree, you have to rewire or reprogram because y' all were. You were rewarded for being as minimalistic as possible. But. And I love that y' all gave me the notes that y'. All. Y' all have read the book Die with Zero. And look, I pick on that because a lot of people I, I love the concept, but a lot of people, it makes some assumptions. You have to be high income and you can go grab capital very. Or make capital very easily. And for most Americans, that's just not the case. You know, the, the. The. The ability to turn on and off how much money you make. You guys can't.

[Carl]

Can.

[Bo Hansen]

You've already won the game. So I do agree with the Die with Zero. For you guys to challenge you. Is that because you got to think about the fact that you have your time, which is diminishing for you guys. I'm the same age as y', all, so I understand that, like sick burn, bro. I deal with this. Success at this age is unique because you still feel so healthy and so good. But you also know where you are from. A chronological. So time is a limited resource. Your energy, how well you can go and do activities and things like that is also, as you found out as soon as you retire, you're like, holy cow, I don't have time to do work because I'm so busy. And then you've got your wealth. The one that's probably of the three that's the most valuable to you guys is the two that I just mentioned. It's your time and then the energy to go live your best life. So. So don't think in terms of maximizing or minimizing the taxes. Maximize life because you've won the game, we still can do it in a strategic way that does it well. But I want you to live your best life because I think you'll say on paper you have a die with zero mentality. But when I look at how you're structured, it's more of as much as possible. How do I get keep from paying uncle taxes? And those two don't coexist when you're in the consumption side of your life. My favorite clients is because I see it and I am a therapist in some ways. I'm not licensed and I'm not trained. It's more of on the street training. But it's most people who are really successful. You've been rewarded for Being so good with how you allocate capital that when it comes time to actually start, you've been rewarded to build that capital. When it comes time to consume the capital, you. You lose your mind a little bit because you're just not used to it. You don't know how you feel guilty, you feel weird. And that's what I have to. Part of our job is to basically hammer you on why. No focus on the energy, focus on the time and the diminishing capability you have with that so that you can live your best life.

[Brian Preston]

We get to tell people it's okay to do things that doesn't naturally feel hey, it's okay to spend money. Hey, it's okay to have a bunch of money in cash. Hey, it's okay to pay taxes when it makes sense to pay taxes. Even though that grinds against builders natural inclination.

[Bo Hansen]

Well, I mean y', all, y' all know because when I was watching I love personal finance content too and before we were do all doing the podcasting, YouTube and stuff, there was Susie Orman out there, you know, on her nightly show and every. They would have that segment where people would say can I do this? And and we all loved hearing to go no. You know, because that's what that's the whole segment was just her killing dreams, you know and that's what's funny is that once you do this for a living you realize my job is actually just the opposite. I think people think a financial planner is going to tell you no, we're actually like please go do this because I'm going to show you statistically why you're actually your chance of success is still like pegged at 95 plus percent. Let's go do more. You'll just have to free your mind to feel okay with that.

[Mindy]

That's the problem that we are having.

[Bo Hansen]

That's the achiever's trap is just you've been rewarded for building to consume hurts. And that's why I do like the D with zero mentality for successful people is you have to figure out how you create the balance on that.

[Mindy]

Yeah. With die with zero it's more like we want to do experiences with our kids and maybe buy them a house when they're 30.

[Brian Preston]

Sure.

[Mindy]

As opposed to leaving them a giant pile of cash when they're 65.

[Bo Hansen]

I like 50 year olds reading that book. I don't like 20 and 30 year olds reading that because. Because that's the problem is that when you're 20 and 30, you probably more than most Americans anyway. Now there's, look, I was somewhat miserly in my 20s and 30s, but now I'm looking at my life, I'm like, thank goodness I was kind of miserly because that's where I'm getting the dividends of my money. Working harder than I do in a lot of aspects. But to tell that to a 20, 30 year old is probably the wrong message. It's that stage of life and it's

[Brian Preston]

even, you know, diet with zero. One of the things they say is, hey, we want to be able to use the money now. We want to be able to see the money get used now. I want to be able to help our kids. You guys are in a great situation. You have young kids. If you wanted to start doing some sort of like annual gifting strategy, you can gift up to the annual gift tax limit to each of your daughters. And one of the really efficient things you could do, Brian already alluded to this, is you could gift them appreciated securities. Because whenever you do a gift of an appreciated securities property, the basis that you have in it carries over. So you have something that has a very low basis but a very high price. You gift that. If they were to sell it, they're now going to sell that at their tax rate, not at your tax rate. So if they're not earning a ton of income, if they don't have high, you know, not in a high tax bracket, there's a good chance they're going to be able to sell up to that $20,000 gift that you give them and not pay any tax on that to be able to liquidate it.

[Carl]

Ooh, that's a great tip.

[Bo Hansen]

Well, especially your college age daughter who probably can stand on her own more, you know, because there is some things with kitty taxes and other things, but for, you know, adult children who are more independent and filing their own taxes and stuff, there's some big planning opportunities there.

[Carl]

Yeah, I was just talking to someone this week who has a wealthy relative and he said, I think this person has multiple kids and three kids. And he said, oh, the kids. I've heard them talk like they're looking forward to this guy's death because then they'll get a lot of money. I don't want anyone to look forward to my dad.

[Brian Preston]

You want your kids pulling for it. You want your kids to. Man, I hope mom and dad stay around for a while.

[Mindy]

They sure are nice. Yeah.

[Bo Hansen]

Well, I will tell you, there is a curse though of success, is that you do need to go ahead and start having and surely y' all have already been doing it. With the girls being the age that they are, I've had to start talking to my daughter about money much because there's something about growing up in a successful family. Now, you guys live a tight lifestyle, but you're successful. It's pretty obvious that y' all have a big net worth and you want to start just planting those seeds because you don't want your kids best life to be while they're under your roof. You still want them to have drive to kind of create. That's. I think there is. Look, we both grew up without any money, and I know you both shared. Y' all come from very humble beginnings as well. So I think we all want to make our kids lives as easy so they don't have the struggles, but we need to still have enough struggle in there that they get all the fulfillment. When you get to go do all the big experiences of life, when you buy your car, your house and stuff, there is something that hedonic treadmill that I know you've probably talked about that concept before. You always remind people, spread out the good stuff as much as possible. So every time you get that dopamine hit, it's actually as healthy. And that's why you don't start with the Lamborghini or the Mercedes, you know, or even the fancy BMW, you know, or something with a roadster. You start. You start with the smaller cars, you know, and then that way, as you're going up the train, you know, it's the same way with vacations, you know, you're hoping your kids. Now, I love giving experiences, but you're hoping that they also, as they're going through their own life, you know, have some achievements built in there so they get to live their best versions of themselves.

[Carl]

We've put some carrots out there. I'm trying to. What's the term? Wag the dog or whatever. I'm like, hey, girls. Because we've been open with money and we've told our girls, hey, you have to make it on your own. We will help you. But you've got this help isn't going to come for another decade or two, like maybe your 30s. But you got to get out there, go get good grades, and then we're rich.

[Brian Preston]

You're not. I love it.

[Bo Hansen]

Our money do parental matching, though. That's one of the things, probably the best thing I did with my daughter when she was 15 and started babysitting. And then she started working fast food at Chick Fil a all through high school. Was I started priming the pump by doing a dollar for dollar match on Roth contributions. It's been huge because now, I mean, she's full time employed out of college, and she's still like, she's loading up Roth IRAs and doing other things. So the priming of the pump, you know, just like you'd pour a little gas in the carburetor to get things going. You do the same thing with your kids with parental matching, and it works beautifully because you're modeling that behavior. And then they start seeing the power of compounding growth, and it sticks. It's nothing. When you realize your children are hard workers and they understand the value of deferred gratification and investing, man, that is. It's like parental dividends right there.

[Carl]

Heck, yeah. They'll take over the world.

[Mindy]

I will say you have to be very clear with your kids what you're talking about. I had told our youngest just started at Taco Bell like a week ago, and I told her, yeah, dad, and I will match your salary dollar for dollar. And she's like, this is great. And then we were having a conversation

[Bo Hansen]

a little bit later.

[Mindy]

I'm like, oh, you think I'm just gonna give you.

[Brian Preston]

No, no, no.

[Mindy]

That's double salary.

[Brian Preston]

That's not what's happening.

[Mindy]

You have to put it in your Roth ira, right?

[Brian Preston]

Oh, oh, I don't get to. I thought I was making double time.

[Mindy]

She thought I was just gonna give her cash.

[Bo Hansen]

That's hilarious. But think about the learning experiences on that, because that's deferred learning. The concept of putting a little bit away that you just don't get access to, but you get the value of watching it grow and build so you don't have to work so hard in the future.

[Mindy]

Yeah. And I understand. I mean, the whole reason I want to do that is she's 16 years old. 60 is 1000 years for her. When she can actually get access to this money, she's like, that's so far away. It is. I hope that you make it to 59 and a half. And I would love for you to have a lot of money in your Roth IRA when you do it.

[Brian Preston]

I love that.

[Mindy]

So that's why we have talked about doing that. Our oldest one actually doesn't have any taxable income right now. So you said something about your daughter was babysitting. Did you do this when she was babysitting too?

[Bo Hansen]

Yeah, I mean, well, those years. Because, you know, when you're doing neighborhood stuff, you have to file a tax return. For and report claim that there's not really any taxes due on it except for self employment, you know, for Medicare and Social Security, but you just had to file. So you, you qualify then for doing the custodial Roth IRAs.

[Mindy]

Okay.

[Bo Hansen]

Yeah. It's a great planning thing for, for anybody who has children who are starting to work earning money, go ahead and let them know that a portion of that ought to be working for them going into their army of dollars so that they can get that behavior and that habit. And then what I always did, we get the statement, I look at it and we look at the change, especially on good months. And I'd be like, you see, you made $300 on that, that what you put in over the, you know, a year ago. And like you'd have to work if you're making $10 an hour. That's almost, that's almost. You think about that's like two weeks worth of work part time work for you. You just made without doing absolutely anything. I mean, and that's when you start building those connections in the brain. You see the fireworks that are going on. That's what we all have kind of figured out is that yes, it's fun to spend money, but what's really cool is when your money can grow so it can, you can spend without having to work. Because, because everybody I know, you know, I come from a public accounting background. Everybody, all the public accountants I know that are still working in public accounting, they might be worth $1,000 an hour on what they can bill, but they all hate that they have to go work that hour to bill that hour. And I think that we all get tired at a certain age that you don't. It doesn't matter what your bill rate is. You won't eventually to be able to say I don't have to work. And it's the only way you can do that is if you have money in the bank that can do the work for you.

[Mindy]

You.

[Bo Hansen]

And, and that's the, the biggest game that I always share with people. And this is more of the educated because you guys knew this and you, you instinctually knew it. This, if you come from nothing own stuff. That's, that's the secret to success. Whether it's real estate, whether it's index funds, whether it's the five biggest names. Because Carl's just brilliant without realizing he's brilliant at picking all the big wins. How, how about you didn't know Nvidia? You didn't, you didn't feel like, hey, I was Going right. You didn't want to go and grab that one too because you got a pretty good track record here.

[Mindy]

Don't want to be greedy.

[Carl]

I whiffed on that one. And anthropic.

[Brian Preston]

Someone told me about anthropic a couple

[Carl]

of years ago and that was a. Yeah, not moving on. That one was bad.

[Mindy]

Nice job, Carl.

[Carl]

Thanks for nothing.

[Brian Preston]

I'll say you turned out okay. Any other questions we can answer? Any other things that you guys are curious about that we could speak to?

[Mindy]

The comment about the long term capital gains versus 72t income is. Is kind of eye opening. I know the long term capital gains tax rates are 0, 15 and 20% and income tax is more and it didn't click. I really appreciated that comment. Did you hear that part about selling after tax stocks?

[Carl]

I did, yeah. Capital gains rate is like 98,000. When does capital gains kick in? Like for a married couple? 98,000.

[Brian Preston]

Something is around there.

[Carl]

Yeah, it's pretty high.

[Brian Preston]

Do you have your tax?

[Bo Hansen]

Yeah, got it right here. It's the zero percent. Let me see on here. I was just looking. Oh, capital gains, married jointly, $96,700. This is for 2025 though, probably. Yeah, it's 2020. So we're a year off from an index. If it, you know, they index that.

[Brian Preston]

So right under $100,000.

[Bo Hansen]

Right under $100,000, yeah.

[Carl]

That's huge. I think people don't appreciate a brokerage account because it's kind of like if you're not a big spot, similar to a Roth but even better because it doesn't have the restrictions as long as you stand or that amount. I guess the only other thing we talked about was we'd like to be charitable. We're going to start a donor advice fund, all that.

[Bo Hansen]

Those are brilliant. Yeah, we both use those. I mean, I love to nerd out on those things because you feel like it's a win win. You're giving appreciated assets. So the charity gets full access to whatever the market value is. But you get full charitable deduction for it. Never pay the capital gains tax on it. So it's with you guys having huge capital appreciation, you get the huge benefit on that.

[Brian Preston]

And the one thing I would think through is depending on the level at which you want to give, you know, a lot of people, you guys have appreciated holdings. So it's going to make sense to use a donor advised fund no matter what. You ought to review how much you think about giving because some folks, they give an amount every year, but because of the standard deduction is so high now, they're not even able to take advantage of the charitable deduction from that. So whenever we review one of our clients tax returns and we see that going on, we say, hey, instead of you giving to the donor advised fund every single year, let's make a donation every two years. So if they're given $15,000 a year, instead of giving $15,000 every year and never taking the deduction because standard duck's so high, we'll give 30,000 one year and zero the next year. And 30,000 one year and 0 the next year, allowing them to itemize standard deduct. Itemize standard deduct. It allows you to still get the tax deduction and you can still give the money to your charities on whatever cadence you want to. So they can still go out every single month. Even in that year you're not contributing. You're basically just bunching those donations.

[Bo Hansen]

Does that make sense? You know, you're given throughout the period so that the charities, because they kind of count on your, they know who their givers are and they start expecting that. So you can still fund it throughout, give distributions throughout that with the donor advised fund.

[Carl]

Yeah, that makes a lot of sense. Okay, so we'll do huge gifts and then zero gifts for the couple.

[Mindy]

Is there any way to get the money out of the 401k into the DAF or there is.

[Brian Preston]

You have to be 70. Well, not in the daft, but when you turn 70 and a half, there is a really, really efficient way that you can start giving. You can do qualified charitable distributions, QCDs where you take money out of an IRA or out of a 401k and rather than it coming to you directly, you can have it go straight to the charity. And if you do that again, this is after seven and a half, when the money goes to charity, it never shows up on your tax return. So if you give $10,000 as a qualified charitable distribution to a charity, it goes from your IRA, from your 401k to the charity, no tax ever.

[Bo Hansen]

So it doesn't even show up on your tax return. Really. The benefit is, is that that's just less forced income that year because you know when you get to those required minimum distributions, you know how big that pushes it up. So it lets you meet the, you get the to fund the charity and lower your not have the taxable income hit your tax return.

[Brian Preston]

So most folks are who are giving in a tax efficient way. They're donor advise fund. Donor advise fund. Don't Advise fund until they hit that age and then they switch over to qualified charitable distributions.

[Bo Hansen]

Okay, you're a little too. Y' all are young. It's nice being called young. You're too young.

[Mindy]

He calls me old and young in the same episode. So one last question about Roth conversions right now, because I'm 53 and he's 52, if we Roth convert, we have to pay the taxes. I thought I heard something about at age 59 and a half, you can Roth convert and then you're not. You can take. Pay the taxes from what you converted. Oh, no, you can't make that up.

[Bo Hansen]

I mean, you can still pay the

[Brian Preston]

tax from what you converted. No, you can still convert to Roth right now. Same as if you were after 59 and a half. What happens after 59 and a half is now your Roth assets come into play if you needed to take distributions from them. Like, you could actually begin using Roth assets if you needed to. Brian calls it like your Gollum precious. You don't ever want to use it. Where we see clients practically do it is in years where you're doing tax planning. Something comes up. Oh, we had to replace the car. All right, well, I want, I need to pull out $40,000, but man, I really don't want to trigger any more capital gains or I don't want to make a distribution from Iraq. I'll use Roth dollars to do that so that I can still keep in the same tax tax strata that I'm trying to stay in.

[Bo Hansen]

And the reason people talk about Roth as The bridge pre 59 and a half is because you can always get access to your basis. You mean your contributions can come out tax free. So that's why Everybody's usually talking 59 and a half. You know, the key dates, 401ks, if you're still employed, is 55 for. If the plan is written right. And then for all IRA and other retirement and so forth, it's 59 and a half for access, penalty free.

[Mindy]

Talk to me about that 55, because we are. We have a self directed 401k which is where his SpaceX is.

[Bo Hansen]

Right.

[Mindy]

If it's written right and we can get it at 55, that's like three years for him.

[Carl]

And it's kind of squishy though, because don't you have to like close it and be disconnected from the company, in which case, yeah, you're basically.

[Bo Hansen]

You have had separation from the company at the that point. But it's back to. For you guys specifically, it's back to Tax rates. You know, you're. You'll pay ordinary income tax rates when you pull out that money versus still capital gains. So you could create that as a penalty free access point. But from an optimization, I don't know if it will be the ideal choice for you guys.

[Brian Preston]

Okay, so at 55, if you were separated, you could access your 401k, so long as you were employed in the year that you turn 55 and then you stop. So like so long as Carl's actively participating until that point turns 55 and then retires, then he could access it. Much more efficient way, much cleaner way than trying to do 72T distributions. Because it's not a thing that's fixed in time. You can do it ad hoc, but like you said, you're still paying ordinary income tax rates which are gonna be less attractive than your capital gains rates.

[Mindy]

Okay.

[Carl]

Okay.

[Mindy]

Well, I think we now have a lot of things to talk about.

[Carl]

Yeah, one closing thing, we were talking this. We talk about money all the time, including on the walk here. But one thing I think I asked you about yesterday or the day before, I said, do you feel wealthy? What was your answer?

[Mindy]

No.

[Carl]

Yeah, but I think part of the reason we don't feel wealthy is the reason we're here. We've got this, but we're too afraid to like the monkey, like grabbing the food, the monkey trap or whatever.

[Brian Preston]

You don't want to put your hand in the cookie jar, but it would

[Carl]

feel good, good to actually be able to use.

[Bo Hansen]

I would say, you know, we harped on a little bit, but we didn't actually give you the action point on it. I do think y' all need to boost your cash just because the college you got, you got things you can't get away from. With the college tuition coming up, y' all probably should boost that cash up just so you. The volatility of. Because you have to make the tuition payments anyway. The volatility of some of the things that are coming. It's a good time. With markets as good as frothy or frothy's not the right word because I've just been on trend of saying frothy.

[Brian Preston]

The markets are up.

[Bo Hansen]

They're up right now. So it's a good time. So you don't have regrets. Just in case it turned into a rainy day, it'd be nice to have a little more liquidity.

[Brian Preston]

Yeah. I'll put a few little homework items for you guys if you're interested.

[Carl]

Absolutely.

[Brian Preston]

Homework item number one. Talk about building your cash up. I wrote down the number $500,000 only because that's 5% of 10 million. Right. That's not prescriptive. But as you guys think about, like, an appropriate cash goal to have, as you think about some of the stuff

[Bo Hansen]

they about threw up in their mouth.

[Mindy]

Yeah.

[Brian Preston]

As you think about how you're earning and what you're doing with real estate commissions or what you're doing with those sorts of things, rather than going and deploying those dollars, I might consider thinking about building up your cash holdings to the extent that you can. In doing that, if you do decide to put together some sort of, like reverse dollar cost averaging or dollar cost divesting strategy, I would think through your overall allocation, you guys are 100% equity, 0%. Anything else? So perhaps is there some way to maybe mix in, you know, what we're talking about? Optimization. Maybe it's not bonds. Maybe it's like municipal bonds. That's like a sexy way to say bond without just saying bond. So there's some opportunities there. It's less about rate of return, more about risk mitigation. But review your allocation. I do think you guys are at the stage where every single year around October, November, you ought to be doing an end of the year tax projection. Hey, what's everything we earned this year? What's it all look like? What are all the dividends that have come in, all the capital gains that have come in. How much room do we have? And whatever bracket we're in, if we're already in the 24, how much? Because even if you're doing small Roth conversions, oh, we can only convert $15,000, that's still 15,000 that you're able to convert in that tax bracket. So it's worth doing the exercise every year to see where you fall. And then I said, talk with your kids about money, which you're already doing. But if you are trying to figure out how can they begin using some of these dollars now or begin having access to these dollars at some point in the near future, are there efficient ways that we could begin doing that even today without them having to wait until we leave this planet?

[Bo Hansen]

Yeah, and I'll put an exclamation point on that one, because we work with a lot of successful families, and they're.

[Carl]

That's.

[Bo Hansen]

Y' all are the tail end of the influence you have on these girls. Please have those conversations now, because we, look, we have conversations all the time with wealthy families. They're like, I screwed up. I didn't talk about money. I didn't talk about money early enough. So now they have these misunderstandings about money that somebody else placed in their heads. Y' all have been very successful with how you've allocated your capital. It would behoove you to please pay that forward into your daughters as well. Because y'. All. Y' all understand how money works. Please put it in their head, because if you don't, somebody else will. And it might not be the ideal way to be because then when you get spouses and other things, you know, it gets very. It gets very inefficient. And so this is your moment in time to make good things happen.

[Carl]

I laugh because we had that conversation on the way here, too. Like, with the whole prenup thing. For. We specify that our kid must have a prenup so they don't have to. But that's a whole. Yeah. If you talk to our kids, they would say, mom and dad will never stop talking about money.

[Bo Hansen]

By the way we talk about. I haven't pitched you guys. But when you start getting into this stuff, this is the perfect reason why you should have a financial planner is because. Do you realize how often I'm the bad guy when we talk about prenups and other things? Is because we're instead of you. Because you have to eat Thanksgiving and Christmas with these people. So it's nice if you have a big bad boogeyman that I don't really

[Brian Preston]

want to do this, but throw it right and said I have to.

[Bo Hansen]

No, we've had. I've had some adult marriages that we are brought in to, kind of because it's an uncomfortable thing, but we're also. It's a legal protection that needs to be. And we're all about to become one. I mean, we are. If you listen to any of our content. I love joint accounts, but I also think that if you come into marriage with assets, you also have to be smart and realistic on. On protecting that stuff as well.

[Carl]

And I've never wanted a CFP more than I do right now. Like.

[Bo Hansen]

But that's the thing. Everybody always, always, you know, I'm always. I think most people don't need a financial planner while you're building, but once you get to close to seven figures, you'll realize no matter how simple you've tried to create your life, it gets complex with success.

[Carl]

I can picture it now. Talk to Uncle Brian about this.

[Brian Preston]

That's right.

[Carl]

Talk to Uncle Bo.

[Brian Preston]

There you go.

[Bo Hansen]

That's a true thing.

[Mindy]

How do you feel about having $500,000 in cash and what does in cash mean. Because

[Bo Hansen]

on a $10 million portfolio, put the context on it, yes.

[Brian Preston]

So high yield savings account or high yield money market fund, like right now, where my cash is, if you hold over a million dollars or if you hold over $100,000 in cash is like 3.47%. So it's like three and a half percent yield on that. If you want to get real, like, you know, sophisticated, you can look at treasuries and do some sort of ladder. I mean, you can make it complicated if you want, but no, no, don't tell him.

[Mindy]

He can make it complicated. Did you see this?

[Brian Preston]

I know he's going to cleaned up, but just readily available liquid cash paying somewhere between three and a half to four percent right now. And it's just kind of sitting there for when you need to pay for things or write checks or when opportunities present themselves. And it's kind of one of those things like your portfolio is not going to start growing. So even as you use that 500, maybe you have to use 100 of it for tuition or whatever, as you're selling securities over here, you replenish it, right? So it kind of is like this revolving door. We go down a little bit bit and then come back up and go down a little bit and come back up and that's okay. That's the life cycle of what your total portfolio allocation should look like.

[Mindy]

So how does that feel?

[Carl]

It feels good now that I talked to Uncle Brian and Uncle Bull. Sorry, you're younger than me, so it's a bit awkward.

[Bo Hansen]

That's all right.

[Carl]

Weird family dynamics. Some people start young.

[Mindy]

I really appreciate the time that you took to make all these fun slides and to look at our situation. I mean, obviously we know that, that we probably have a little too much money in Elon controlled companies or a lot too much money in Elon controlled companies. And the 70,000. When I saw this slide, I was like, wow, we really only have 70,000 in cash. And that's, I mean, that sounds so snotty to say, oh, we only have 70,000. But compared to our net worth, that's probably not enough. Compared to our upcoming known expenses, that's a rounding error. Seven years of college, at least the next seven years.

[Carl]

And I think it's actually less than that because I paid a bill this week.

[Brian Preston]

So I think it's more while you're

[Bo Hansen]

building a house, by the way, which if anybody's ever built a house, it's like your builder is like, yeah, I can do that. But it's going to cost you back. When I built my last house, it was probably like three to $5,000. Now, with inflation, it's probably, yeah, but for $10,000, $15,000. So you can make that disappear with four upgrades, probably.

[Carl]

One of the workers pulled up in a new pickup truck this week. I'm like, wow, that's better than any of our cars. And it's probably from the last bill I paid.

[Bo Hansen]

They're great finance for the next seven

[Carl]

years, if you're listening. You guys do great work, so I'm not throwing you under the table, but, yeah, enjoy the pickup truck.

[Mindy]

The orthodontist also drives a really nice car.

[Carl]

We don't drive a nice car. I mean, they're okay.

[Mindy]

You have a nice car.

[Brian Preston]

35,000.

[Carl]

It's a tough Tesla Model Y.

[Mindy]

Of course.

[Bo Hansen]

I figured, of course.

[Brian Preston]

You never say that. We all knew. We all knew.

[Carl]

It drives itself. I don't drive it.

[Mindy]

The Money Guy show is hosted by Brian Preston and Bo Hansen. Brian and Bo are partners with Abound Wealth Management. Abound Wealth Management is a registered investment advisory firm regulated by the securities and Exchange Commission. In accordance and compliance with the securities laws and regulations, Abound Wealth Management does not render or offer to render personalized investment or tax advisor through Making a Millionaire. The information provided is for informational purposes only, may not be suitable for all investors, and does not constitute financial, tax, investment or legal advice. All investments involve a degree of risk, including the risk of loss. The guests featured on Making a Millionaire are not clients of Abound Wealth Management. At the time of recording, their participation should not be considered a testimonial or endorsement of Abound Wealth Management.

[Bo Hansen]

Close your eyes. Exhale. Feel your body relax. And let go of whatever you're carrying.

[Mindy]

Well, I'm letting go of the worry that I wouldn't get my new contacts in time for this class. I got them delivered free from 1-800-contacts. Oh, my gosh, they're so fast.

[Bo Hansen]

And breathe. Oh, sorry.

[Mindy]

I almost couldn't breathe when I saw the discount they gave me on my first order. Oh, sorry.

[Brian Preston]

Namaste.

[Mindy]

Visit 1-800-contacts.com today to save on your first order.

[Brian Preston]

1-800-contacts. Hey, it's Ryan Reynolds here for Mint Mobile. Now, I was looking for fun ways to tell you that Mint's offer of unlimited Premium Wireless for 15amonth is back. So I thought it would be fun if we made $15 bills, but it turns out that's very illegal, so there goes my big idea for the commercial. Give it a [e-mail] Switch upfront payment

[Mindy]

of 45 for 3 months, $90 for 6 months or 180 for 12 month Plan required 15 per month equivalent taxes and fees Extra initial plan term only greater than 50 gigabytes. Me slow when network is busy. See terms.