Rich Habits Podcast: Q&A Episode Summary Episode: Q&A: $10MM Net Worth, Recasting a Mortgage & Expense Ratios
Release Date: January 30, 2025
Hosts: Austin Hankwitz and Robert Croak

1. Episode Overview

In this Q&A edition of the Rich Habits Podcast, hosts Austin Hankwitz and Robert Croak delve into various financial inquiries submitted by their listeners. The episode covers topics ranging from investment strategies and retirement planning to portfolio management and family financial discussions. Throughout the episode, Austin and Robert share their expert insights, personal experiences, and actionable advice to empower listeners to take control of their financial futures.

2. Market Updates: Navigating Volatility and Embracing AI 2.0

Timestamp: [00:21] – [03:48]

The episode kicks off with a discussion on recent market turbulence triggered by the Chinese AI startup Deepseek's activities. This event led to a significant sell-off in Nvidia stock, dropping 17% on Monday before rebounding by approximately 7-9% the following day.

Robert Croak emphasizes the importance of maintaining composure during market volatility:

"We always encourage everyone to zoom out and avoid knee-jerk reactions when markets experience turmoil." ([01:14])

Austin Hankwitz reinforces their foresight regarding market trends:

"We predicted the onset of AI 2.0, shifting investor focus from AI hardware stocks like Nvidia to AI software names such as Snowflake and Cloudflare." ([02:39])

The hosts highlight that AI 2.0 signifies a transition towards software-centric AI investments, which have seen impressive double-digit gains. They attribute their accurate market predictions to diligent analysis and preparation, encouraging listeners to stay informed and adaptable.

3. Q&A Section 1: Heather M. on Dollar Cost Averaging and Fractional Shares

Timestamp: [04:18] – [09:55]

Heather M.'s Question:
“I want to dollar cost average into an index fund such as VOO. However, my brokerage doesn’t offer fractional shares, limiting me to purchasing one share every few months. Neo’s funds are cheaper but come with higher fees. How should I decide which to buy, and how are these funds and taxes handled? Should I reinvest dividends if I only have a few shares?”

Austin Hankwitz addresses the importance of dividend reinvestment:

"Dividend reinvestment is one of our favorite strategies. Over the last ~80 years, about 78% of the S&P 500’s total return was due to reinvested dividends." ([04:18])

Robert Croak advises on the practicality of fractional shares:

"If your current brokerage doesn't offer fractional shares, switch to one that does, like public.com, to facilitate consistent monthly investments." ([05:49])

Austin further explains ETF expense ratios and the benefits of NEOS funds:

"Paying a fee for an ETF isn't extra money out of pocket; it's deducted from the investment's overall returns, seamlessly integrated into your growth." ([07:20])

The hosts conclude that utilizing brokerages offering fractional shares is crucial for maintaining consistent investment habits, especially for beginners with limited funds.

4. Q&A Section 2: Darrell B. on Portfolio Tracking

Timestamp: [09:55] – [21:19]

Darrell B.'s Question:
“I’ve diversified my portfolio with property, stocks, ETFs, cryptocurrency, artwork, and whiskey. I’d like to track my portfolio’s overall progression and individual asset performance but haven’t found suitable tools beyond spreadsheets. Any recommendations?”

Austin Hankwitz suggests leveraging specialized apps:

"Consider using the app 'Getroi,' which allows you to connect various accounts and assets, providing a unified dashboard for comprehensive portfolio tracking." ([09:55])

Robert shares his preference for traditional methods:

"I’ve used spreadsheets for the past 25 years. It’s straightforward and customizable, fitting my needs as an elder statesman in financial management." ([09:55])

Despite differing preferences, both hosts acknowledge the effectiveness of both digital tools and manual tracking, emphasizing the importance of consistent monitoring to manage a diversified portfolio effectively.

5. Q&A Section 3: Mario R. on Transitioning to a Roth 401(k)

Timestamp: [10:20] – [13:13]

Mario R.'s Question:
“My employer now offers a Roth 401(k) alongside the traditional 401(k) with a 3% match. Should I switch to the Roth variant and pay the taxes now, or continue with the traditional 401(k)?”

Robert Croak's Advice:

"Leave your traditional 401(k) as is, pause contributions temporarily, and maximize your Roth 401(k) to benefit from tax-free gains." ([11:06])

Austin Hankwitz elaborates on the steps:

"First, ensure you receive the full employer match. Next, max out your Roth IRA, and then contribute to the Roth 401(k) if possible. Your current $150,000 in the traditional 401(k) can grow into millions over 20 years with proper investment." ([11:40])

Robert adds the advantage of Roth 401(k)s:

"The Roth 401(k) has no income limits, allowing high earners like you to contribute without restrictions as your income grows." ([12:55])

The hosts advocate for transitioning to Roth accounts to capitalize on tax-free growth, especially beneficial for individuals anticipating higher income and tax rates in the future.

6. Q&A Section 4: Susan W. on Recasting a Mortgage vs. Investing

Timestamp: [13:13] – [16:53]

Susan W.'s Question:
“I’m considering recasting my mortgage. For every $100,000 I apply, I save $700 monthly at a 7% interest rate. Should I invest that money instead?”

Robert Croak weighs the options:

"Investing the $100,000 could potentially yield higher returns through compound interest, possibly making more than the $700 monthly savings from lowering the mortgage payment." ([13:43])

Austin Hankwitz adds a nuanced perspective:

"Recasting your mortgage offers an 8.4% cash-on-cash return. However, consider what you'll do with the $700 saved each month. If you can reinvest it effectively, investing might be more advantageous." ([14:52])

Austin emphasizes strategic use of savings:

"If the $700 can be reinvested to generate additional growth, keeping the mortgage as is and investing the funds may lead to greater long-term wealth accumulation." ([14:52])

The hosts highlight the importance of evaluating personal investment strategies and the potential benefits of both reducing debt and maximizing investment returns based on individual financial goals.

7. Q&A Section 5: Hannah B. on Portfolio Growth and Entrepreneurial Risks

Timestamp: [16:53] – [21:19]

Hannah B.'s Question:
“At 23, I have $118,000 in investments, diversified across various assets, and can invest aggressively with my income. I feel stuck playing it safe. Should I take more risks or continue focusing on investing?”

Austin Hankwitz encourages entrepreneurial ventures:

"With your substantial investments, consider taking risks by expanding your role in the family business or pursuing side hustles. Your financial cushion allows for experimentation without jeopardizing your retirement goals." ([19:19])

Robert Croak reinforces the value of taking calculated risks:

"At 23, you have the freedom and time to explore entrepreneurial endeavors. Even if you fail, the experience is invaluable, and your investments will continue to grow." ([19:19])

Austin shares personal experience:

"I quit my finance job at 24 to pursue entrepreneurial goals. With a solid financial foundation, I was able to take risks and build something meaningful without financial strain." ([20:35])

The hosts advocate for leveraging early financial success to pursue passions and entrepreneurial opportunities, emphasizing that a strong investment base provides the safety net needed to explore and innovate.

8. Q&A Section 6: Kirk H. on Disclosing $10MM Net Worth to Adult Children

Timestamp: [21:19] – [29:15]

Kirk H.'s Question:
“My wife and I have a net worth approaching $10 million and are nearing retirement. Our adult children are financially responsible. When and how should we disclose our financial details to them?”

Robert Croak advises caution:

"Be careful when disclosing financial details to avoid potential infighting. Ensure all estate planning documents are in order before having transparent discussions with your children." ([22:46])

Austin Hankwitz advocates for open communication:

"If your children are financially responsible and lack entitlement issues, have these conversations early. It allows them to benefit from your wealth and plan effectively for their futures." ([24:41])

Robert suggests practical steps:

"Consider gifting strategies, such as the annual $16,000 tax-free gift per child, to help build their wealth without complications." ([27:43])

Austin emphasizes the benefits of early dialogue:

"Discussing your financial plans with your children now can prevent misunderstandings and help them utilize resources effectively, such as buying their first homes or funding education." ([28:24])

The hosts underscore the importance of balancing transparency with strategic planning, recommending that parents openly communicate their financial status and intentions to foster trust and responsible wealth management within the family.

9. Q&A Section 7: Aaron J. on Teaching Investing to Students

Timestamp: [29:15] – [31:55]

Aaron J.'s Question:
“I teach high school government and personal financial literacy. Students frequently ask about investing, but I lack comprehensive resources. What materials do you recommend for beginners?”

Austin Hankwitz recommends foundational resources:

"Investopedia.com is an excellent starting point for understanding investment terms and strategies. Additionally, 'The Little Book of Common Sense Investing' by John C. Bogle provides clear insights into index funds and long-term investing." ([30:48])

Robert Croak adds supplementary materials:

"Consider classic books like 'Think and Grow Rich' and 'One Up on Wall Street.' Also, revisit our early podcast episodes, particularly episodes five and seven, which cover essential investment principles." ([30:48])

The hosts encourage leveraging a combination of online resources, literature, and podcast episodes to build a comprehensive curriculum that equips students with the necessary knowledge to navigate investing confidently.

10. Conclusion and Final Remarks

Timestamp: [31:55] – [33:02]

Austin and Robert wrap up the episode by thanking listeners and encouraging them to engage with the Rich Habits community through various platforms, including Instagram, email, and their Rich Habits Network. They highlight the importance of sharing the podcast to help others gain financial literacy and reiterate their commitment to providing valuable, actionable financial advice.

Robert Croak emphasizes community growth:

"If you find value in our episodes, share them with friends and family. It helps us reach and assist more people in achieving financial success." ([32:33])

Austin Hankwitz concludes with encouragement:

"Keep your head on straight. Despite the week's market craziness, stay focused on your financial goals. Thanks for tuning in!" ([33:02])

Notable Quotes

• Robert Croak on market volatility:
  "When in doubt, zoom out and don't panic during market turmoil." ([01:14])

• Austin Hankwitz on AI 2.0:
  "We're transitioning from AI hardware stocks to AI software names, which are now seeing significant market gains." ([02:39])

• Austin Hankwitz on dividend reinvestment:
  "Dividend reinvestment is the smartest strategy, contributing to the majority of the S&P 500's returns over decades." ([04:18])

• Robert Croak on investing vs. mortgage recasting:
  "Investing the money could potentially yield higher returns through compound interest compared to saving on mortgage payments." ([13:43])

• Austin Hankwitz on entrepreneurial risks:
  "With your financial cushion, consider taking risks to pursue your passions and entrepreneurial ventures." ([19:19])

Final Thoughts

This episode of the Rich Habits Podcast provides invaluable insights into managing investments, optimizing retirement plans, handling significant financial decisions like mortgage recasting, and navigating family financial dynamics. Austin and Robert's expertise and practical advice equip listeners with the knowledge to make informed financial choices and cultivate habits that lead to long-term wealth and stability.

For more detailed discussions and personalized advice, consider joining the Rich Habits Network or reaching out via their official communication channels.