← Rich Habits Podcast
Rich Habits Podcast
Q&A: $950K Net Worth Working in Government, Career Burnout, & Ditching a Pension
00:50:21
Loading summary
Transcript37 lines
- [00:01]
Sponsor Host
This episode is brought to you by Indeed. Stop waiting around for the perfect candidate. Instead, use Indeed Sponsored Jobs to find the right people with the right skills fast. It's a simple way to make sure your listing is the first candidate. C According to Indeed data, Sponsored Jobs have four times more applicants than non sponsored jobs. So go build your dream team today with Indeed. Get a $75 sponsored job credit at Indeed.com podcast terms and conditions apply.
- [00:29]
Score more with the College branded Venmo Debit Card and earn up to 5% cash back with Venmo Stash. Got paid back with the Venmo Debit card. You can instantly access your balance and spend on what you want like game day, snacks, gear, tickets and more. The more you do, the more cash back you can earn. Plus, there's no monthly fee or minimum balance. Sign up now@venmo.com collegecard the Venmo Mastercard is issued by the Bancorp Bank NA Select Schools available Venmo Stash terms and exclusions apply at venmo me stashterms max $100 cash back per month hey everyone
- [00:59]
Austin
and welcome back to the Rich Habits Podcast Question and Answer Edition brought to you by public.com these are our Thursday episodes where every Thursday we answer your questions, five, six, seven of them that you ask us on Instagram in the DMS. That's Rich Habits podcast or via email at rich habitspodcastmail.com We've got, I think like, I don't know, maybe four or five email questions, one or two Instagram DMS. We're all over the place today, but we're really excited and these episodes are our favorite. We've got some really good ones actually. Some like really in depth questions here that we think you guys are really going to enjoy.
- [01:38]
Robert
Yeah, it's come a long way if you think about these episodes from where we started, when people would ask the most basic questions about what do I do about starting a Roth ira or how should I handle getting into crypto. Now we have these full laid out really, really intense questions and I think it's just great for the audience in general because it just shows people are growing in their knowledge and still relying and trusting us with their questions for their future. So that's what I love about it.
- [02:05]
Austin
Absolutely. And as a quick reminder, we started Wall Street Favorites.com, which is the easiest way to understand what Wall street thinks about your own portfolio. Upgrades, downgrades, price targets, what institutional hedge funds are buying and selling your stocks in your portfolio. So go to wallstreet favorites.com get get free access to all of this information and whatever you don't get free access to, you can do a seven day free trial. Literally it's completely for free for seven days for a premium subscription. There's a link in the show notes below. Wall Street Favorites.com this is our platform. We created this as a way to say thank you to you all for supporting the show. So before we jump into it Robert, we gotta give a shout out to our friends over@public.com the investing platform for those who take investing very seriously. Because on public you can now build a multi asset portfolio of stock, bonds, options, cryptocurrency and now generated assets which allow you to turn any idea into an investable index using AI.
- [03:07]
Robert
And it all starts with your prompt. From renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20% year over year, you can literally type any prompt and put the AI to work. It screens thousands of stocks, builds a one of a kind index and lets you back test it against the S&P 500 or all with just a few clicks.
- [03:28]
Austin
Generated assets are like ETFs with infinite possibilities. They're completely customizable based on your thesis, not someone else's. So if you're interested please go to public.com rich habits earn an uncapped 1% bonus when you transfer your portfolio over to Public and go try those generated assets. There's so much fun. That's public.com rich habits to get that uncapped 1% bonus when you transfer your
- [03:53]
Robert
portfolio Paid for by Public Investing. Full disclosure in the Podcast Description so
- [03:58]
Austin
our first question comes from an anonymous listener. This is via email. Our anonymous listener says hi Robert and Austin. Please keep me anonymous. I'm so glad I stumbled upon your podcast earlier this year. I'm absolutely hooked and I've been binge listening daily to catch up on older episodes. I'd love your perspective on what feels like the next phase of my life. I'm a 46 year old woman working in corporate America, currently in supply chain. I've had a successful career so far, but I can't imagine doing this for the next 20 plus years. I feel the burn and I really desire autonomy over my life. I feel like I may need a big change financially. I'm in a very stable position. I make 130,000 a year, not including my bonus. I have $850,000 invested across my 401k, my rollover IRA, my Roth IRA and my savings. And my only debt is my mortgage of $218,000 at a 2% interest rate. I have $366,000 in equity in my home. Now, over the past year I've been exploring the idea of buying an existing small business around a million dollar purchase price. I'd likely pursue an SBA loan and bring in an investor to cover the 10% equity requirement. As I've researched the process, I've begun to realize just how complex it can be. Evaluating the deals, negotiating the purchase price, the financing, all the due diligence involved. I've even considered working with a firm that specializes in helping first time buyers acquire a small business, though that obviously comes with an additional cost. So my general questions here for you guys is at my age here of 46 and my financial stage of hundreds of thousands in retirement, does it make sense to pursue buying a small business? Is it a reasonable path or is it unnecessary risk? And if it is a viable path, would you recommend working with a professional to help source and evaluate the deals or try and learn the process and pursue opportunities independently? Or am I completely crazy and just stay in my W2 job and maybe go have a side hustle or something like that? Thank you all so much. I really appreciate it. Robert, what a cool situation our anonymous listener is in. They're making 130,000 before the bonus, 850,000 in retirement, 366,000 of equity in their home, 218,000 of mortgage debt at a measly 2% interest rate. What an incredible situation.
- [06:24]
Robert
Yeah, I love this situation. And I could, we could do a whole episode just on this one question. But I'm going to keep it short and sweet. You're crushing it. 46 years old. You could go out and do the business, buy the business, get up and running and not put any more money currently into your retirement accounts and into your investment accounts and still become a multimillionaire at retirement. But I'm going to lay a little bit of groundwork. Yes, I think you should do it. If you have this yearning to go out and own a business and do your own thing, just make sure you buy wisely. And I think the best way to do that for you if you want to learn from professionals, is join the Rich Habits Network because there's a ton of people in there that own small businesses. We have lawyers and CPAs and real estate people and people like myself in Austin in the community to help you learn on how to properly acquire a business. So that's first and foremost what I do. Number two, I would make sure that you understand your buy box. You mentioned a million dollar business. I would make sure if that's what you want, you stick to that. Because too many people, when they make their first business purchase or build their first business, they don't have any guardrails. And they end up going backwards financially for sometimes years because they didn't have a plan to go, hey, I just want to buy a business. And then you let it creep up to 1 million, 5 or 2 million dollars, you need more money out of pocket, and all of a sudden you're going in and dipping into your retirement funds and not allowing yourself to let that portion of your wealth keep growing. So those are a couple I would look for. And then number three, probably the most important thing when acquiring a business is make sure you understand the numbers. And do hire an attorney or your CPA to help you with that. Because a lot of businesses either have shady books or their books lack. And you want to truly understand what the value of the business is. And AI can be your friend there doing a lot of the research for you.
- [08:21]
Austin
That's a great perspective. I think I'll answer these one by one. So does pursuing small business acquisitions seem like a reasonable path or is it unnecessary risk at your stage? I do not believe it's unnecessary risk to what Robert said. You have $850,000 invested. The rule of 72 tells us your money will double every seven years or so in the stock market. Assuming you aggressively invest it, you will have millions upon millions upon millions of dollars in retirement at 66 years old. So over the next 20 years. Right, you could stop, you could just go all in on this business and live off of whatever the business makes and literally not add another dime to your retirement accounts and you're going to be just fine. So no, this is not unnecessarily risky in that sense. Now, when it comes to the path forward by working with professional team, let me just make it clear. Yes, inside the rich habits network, we've got people that are small business owners. But come if I'm wrong, Robert, no one inside the rich habits network is going to do due diligence for you. Hold your hand, source a deal like, that's not what we do. So do not join the network with that expectation. Now, if you can find a business professional who does the sourcing, they look at the buy box, they figure out the deal, they do the due diligence, they've got a whole thing for you here. I would rather pay. It's kind of like having a realtor and like hiring a realtor to like go buy a home or sell your home. It's like having someone that's done this, that's high octane. This is not their first Rodeo. They've got 30 under the belt just in the last six months, right? They do this stuff all the time. For a fee. They can help you save tens of thousands, hundreds of thousands of dollars of a mistake by going out and making the wrong moves when purchasing a business. So I would encourage you, if you have a trusted professional that does this and you know someone that can help you figure this out, I would encourage you to work with someone like that. Especially since it's your first time. I don't really have a perspective to share on, like the fees they might charge. It might be a transaction fee, actually like a percent of the total business purchased. I think that's probably how they would price it. I'd be surprised if it was just like a flat fee. The only thing that I would really want to encourage you to do is as you think about what you want to buy, ask yourself, what is my unfair advantage when I own this business? What does that mean? Do I have a unique experience, a unique perspective, something that gives me an unfair advantage by owning this business against my competitors? For example, maybe your dad grew up in a world where he had a mechanic shop and you spent all your weekends in that mechanic shop and under your dad, you hated it, you didn't want to do it, but he taught you all these things about owning a mechanic shop. That's your unfair advantage, right? You're going into perhaps buying a mechanic shop with this advantage of all this experience that maybe your father might have taught you, right? This is just an anecdote, example, but maybe you've got experience as it relates to something you did when you were in college. Or maybe you. I have no idea what your unfair advantage is, but figure out what your unfair advantage is when it comes to owning this business and try and buy a business around that advantage. Because I think a mistake people make is they say, hey, I see these TikTok videos about owning a laundromat. I see these TikTok videos about owning A ATM route or a vending machine business or, you know, whatever the other sexy ice creator business things where they at a beach, right? Like, I see all these cool videos about the passive income and the business route. That's so fun. Like, I can go do that maybe. But like, what if you suck at it, you hate it, and you have no interest in it. So, like, what is, to Robert's point, the buy box. And as part of that buy box, what is your unfair advantage where you're going to just thrive when you own and buy this business? Again, I can't tell you what that is, but I'd really encourage you, our anonymous listener, to reflect upon your career, perhaps working in supply chain. That seems like an unfair advantage to me. And perhaps own a business around some of the techniques or strategies or things that you learned throughout your career that are going to translate into more profits now to the business because of your unfair advantage.
- [12:22]
Robert
I love that takeaway. And it reminds me of a scene from Billions when Bobby Axelrod's wife, do you remember that scene where he's telling her, he goes, you have no market advantage, you have no expertise, you have no this, no that. And you expect just because of my name, you're going to get all, all this money and succeed. I love that. But also, you brought up a really good point with supply chain. Right now, as more and more people are going it alone and building small businesses and brands, I think our anonymous listener could go out and do a supply chain consulting business based around technology and AI to help smaller businesses like under 5 million a year in sales really figure out their supply chain and how to do it the most profitably. So that's another just off the cuff idea, using the unfair advantage and expertise that you spoke of, maybe.
- [13:10]
Austin
Or do they hate supply chain and that's why they're making this, this whole flip out of it and they want to do anything related to it. But there's some sort of advantage here that you have, our anonymous listener. And maybe it comes from your supply chain work, maybe it comes from a previous job or previous experience. But the most important thing here is to make sure that you are not just a Joe Schmo acquiring a laundromat or a Joe Schmo acquiring a frozen yogurt. Right. Like you are someone who has a plan and you're going into this very, very intentionally so. Our next question comes from Daniel M. Daniel says, hello, Austin and Robert. My name is Daniel. I've got 50 Solana in my Coinbase wallet and I've got the opportunity to sell them right now and harvest some capital losses. I was thinking of selling them, waiting 31 days, then putting the money into a Quest Trade TFSA where I can invest into a Solana ETF. This way any future growth will be tax free and there doesn't seem to really be a downside. I've got the room available in My TFSA contribution and my total portfolio consists of this and about $31,000 in an RRSP carried over from an old job I used to have. I'm 44, I'm self employed, and I'm just starting out my investment journey. Thanks for the great podcast, Daniel. What a cool situation to be in. So you're over here saying, listen, I've got $5,000 of Sol Go put it into the American equivalent Roth IRA, because you're in Canada. So you want to sell your Solana for a capital loss, realize those losses, use those losses to perhaps offset capital gains elsewhere in your taxable portfolio, and then use the money, the $5,000, deposit it into this TFSA, invest it into a Solana ETF, and then just let it ride. You've got 31,000 invested already. In my humble opinion, I would rather see you build your base. We talk about building our BAS the time here on the show, which just essentially means getting $100,000 invested across all your different accounts into the index funds in ETFs that go up and to the right over a long period of time. Voo, qqq, the Dow Jones Industrial Average. Right. Things like that. So while you could take this $5,000, put it into this retirement account and have 16% of your portfolio all in Salana, which roughly aligns with the 5 to 15% range we give people, I'd rather you use that money to build your base first. But Robert, what's your perspective?
- [15:37]
Robert
Yeah, I agree totally. At the age right now at 44, I would rather see the base built than just flipping around Solana into the tfsa. But if you're going to go ahead and do that, Daniel, and you don't want to listen, I would say I would rather see you flip the Solana into Bitcoin because I think longer term you're going to see more stability and more upside for the long haul. But I agree with Austin 100%. I would take that money, I would get it into building your base, because we want to get you above that hundred thousand dollars saved and invested for retirement and your future. So I agree 100% with Austin, but if you're not going to listen, I'd rather see you do the Bitcoin.
- [16:18]
Austin
So our next question comes from William N. William says, I started investing in Fidelity. Normally I would invest to an ETF like voo, but I see that Fidelity has index funds that track the S&P 500 just like Voo does. And there's one index fund called FXAI X. So my question is, why would I invest into VOO when FXAI X has an expense ratio half of the expense ratio of voo? Thank you for the podcast in educating us in finance, Robert. This is such a good question because a lot of people I'm sure are in a similar situation investing on Fidelity or Schwab or all the other difference. Maybe you can explain it to William here.
- [17:03]
Robert
Yeah, I think it's a great question because if, if you're looking at FX aix, which is a mutual fund, low cost mutual fund, versus voo, which is an etf, yes, it has a lower expense ratio. There's really no big advantage one to the other. FX AIX might be great if you want to just set it and forget it and leave it go. Whereas VOO has more liquidity and is a little more for active people that are adding and subtracting and moving their money around. But I think either way works because you're still investing into the S&P 500 and we want to make sure, sure everyone is capitalizing off of the growth of the top 500 companies in the United States. So that's how I would look at it. FX Aix I think is 0.15 basis points and Voo is 0.03 basis points. Both very low, both very affordable and great products.
- [17:56]
Austin
100%. So fx aix to your point, Robert, is half the price, right? Quote unquote from the expense ratio as voo. And if you are on Fidelity and you're using Fidelity, you can invest into FX AIX in your Roth, in your taxable and your traditional like, you can take advantage of that. That's just like a perk they give you for being on their platform. Is investing in the S and P essentially at no cost. Now what does it actually cost? Like, are we like. Let's talk about the numbers here because that's really important. You mentioned the expense ratio for FX AIX is 0.015% and Voo is 0.03%. So very, very small. What does that actually mean in real numbers? If you have $1 million cash and you invested $1 million into Voo, your annual expense ratio to just track the S and P paid to Vanguard via Voo is 300 bucks a year. So essentially, if you're putting it now into FX aix, that means your annual fee for a million dollars is 150 bucks. So we're talking about $150 difference between Voo and FX AX for a million dollars invested. So if you have a hundred thousand invested that's 30 versus $15. I don't know how much money you have, William, invested here, but that'll help put in perspective, you know, what you're actually paying on how much money. But yeah, just go buy fxaax. You're just rocking and rolling with the S and P. Build your base. We like to always encourage people to follow the core satellite portfolio strategy which e to 85% of one's total investable assets. Right. Are in these index funds, in ETFs we love. This is the core section of that portfolio. You can think about it as like a, a core, right. The core of the earth. And then you've got the satellites that are kind of orbiting around the earth. That's the satellite part of the core satellite portfolio. That means anywhere between 15 and 35% of a portfolio can be diversified into other asset classes, including blue chip, single stocks, fine artwork, real estate, precious metals, cryptocur, pre IPO companies like that's, that's where that kind of fits in. Right. But like let's call it 80% of someone's net worth is in the index funds and ETFs that go up into the. Right. Over a long period of time. The other 20% or so is diversified into non correlating assets that are hopefully going to outperform the S and P over a long period of time as well. So William, great situation to be in here and I hope the 150 to $300 difference there for the, the million dollar investment really puts in perspective how, how negligible it is in the grand scheme of things.
- [20:34]
Robert
Yeah. And I think one more little thing I want to add is when you think about VOO and why we mention VOO all the time for the S P500 is because we are buying and investing through different platforms and it's just kind of the generic version you can get anywhere. So and so I just really want to make sure it's clear of that. FX AIX is great. VO is great. Voo, you can just get through public or any of the other platforms we're talking about, whereas you might not be able, able to do that with FX aix.
- [21:05]
Austin
Yes. FX AIX to my understanding is it's only offered on Fidelity. And we know that people here use public use, Robin Hood use M1 Finance use Schwa. Like people are all over the place. And again, we don't care what platform you use. What we care about is that you go out and invest in the S&P 500. And the easiest way and the cheapest way to do that on any platform is voo, which is why we encourage people to do that. So our next question comes from Jacob fans. Jacob says, hi, Austin and Robert. I have a financial slash career question. My background is this. I'm 26, I make $51,000 a year. I don't exactly love my job, therefore I've been interviewing for other opportunities. I have an offer for $63,000 for a job much more aligned with my interests. However, my current job paid a majority on my student loans and if I leave before September, I would have to pay back $9,500 in student loans to my employer. I have 11,000 DOL, 401k, 19,000 in my Roth IRA and 30,000 in my Bridge account and about 17,000 in high yield savings. Do I bite the $9,500 bullet and take the new job or do I stick at my current job and wait until September and hope the market offers me another job then? Because this opportunity will not last forever. Any advice would be greatly appreciated, Robert. I'll let you kick this one off.
- [22:25]
Robert
This is a tricky one and I feel like you and I are going to be on opposite sides of the fence. My first thought is, Jacob, stick it out till September. You seem like a smart guy. You're going to find another opportunity so you don't have to pay back the 9,500. But then the math of it is if you take the new job and all of a sudden you're making $12,000 more a year just in year one, without any future bonuses or raises, it's going to pay off over the long term. But the number one thing I want to say here, because I've gone down this road with employees in the past past is think about it from this perspective. What if I leave now, get the new job because it has a brighter future with more earnings, and then I don't make it at the company and I lose the job in two, three, four months, then you gave up nine, five hundred dollars of money you've already received and you don't have the new higher paying job. So I just want to make sure you consider both sides of the math equation because long term, absolutely. If you feel great about the new job job, that's the move. Because within a year you're going to make that money back at 9,500. But there is the risk that you go there, you don't like the environment, they fire you or whatever. So make sure you consider both. But either way you're going to be fine because you're in a great financial situation, Jacob.
- [23:40]
Austin
What a situation to be in. And I appreciate Robert laying that out. So we're talking about a $12,000 per year increase in compensation here from 51 to 63 pre tax. That's 24%, 23% of an increase which is material when you're making $51,000. I mean I remember making $62,000 out of college. Like I, you get an extra thousand a month. Like that is changing your life really is. And at 51, I mean this is, this is a life changing. It's really going to impact you, especially at 26 years old. You've done a great job by the way. Got 70 something thousand dollars here saved and invested at just 26, working at 51,000, like that's incredible. Good for you Jacob. Job I would take the new job, I would use the 17,500 in my high yield savings to pay back the 9,500 of student loans. And then over the next 12 to 18 months after taxes and all the stuff that gets taken out, you will make back that $9,500 to replenish your emergency fund with. And now in perpetuity, assuming you get a 2 or 3% raise here and there, maybe a little bit of a bonus. But you keep the job, everything's great, you will make tens of thousands of dollars more. Like you will make so much more money by 30 by taking this new job than by staying at your existing job until 30. But oh, I got to, you know, they paid off my student loans. Like there's so much more upside by taking this new job. In my opinion, the part that is tricky, I don't know what the new company is related to the old job. So think about it like this. I have someone close to me that works at a very established company that makes like, like 60 or 65,000 a year. They could go get a job making maybe 80 or 85,000 a year. But nine times out of 10 when they look for that job, it's a startup that's hiring for that or it's, you know, it, it's some sort of like not that established company that's hiring for it, which means, and they've had this happen to them in the past where they would go work at a startup making 80, 90, 100, 120,000 a year. But after 9, 12, 18 months the startup fails or they can't get funding or the business doesn't grow how they thought and they get LA off, right? And so right now they're In a situation where it's like yeah, I make a little bit less, but it's super locked in and I know this company is going to be here for a long time. That could be you right now at this 51,000. Right? It's a little bit less, but maybe it's, it's a established company and you see that they're going to be there for a while. Especially now with all the layoffs that are happening with AI like that could be, that could be important to consider here where now with this $63,000 offer that does align more with your interest, is it at a company that you believe is going to be around in five years, years or 10 years from now? Right. Or is it a startup that just raised their series A funding and they're trying to hire people so they could grow, but the real like, who knows. So that's another thing I would, I would really weigh. But if it's like apples to apples comparison between well established company A and well established company B and well established company A is paying your student loans. If you leave, you got to pay back the 9500 bucks to go make literally so much more money at, at well established company B. I would pay back the money you owe. You've got the cash. You don't have to go to debt for it. It's in your high yield savings account. I would then start this new job. I would live on the exact same budget I've been living on as if I was making 51. So this extra thousand dollars a month, now you're making pre tax, let's call it 800 bucks a month post tax. Who knows? That all goes back into replenishing the high yield savings. And once it's back to that 17,000, you are going to be in a situation where you are saving and investing almost a thousand dollars a month more now at 26 or 27 years old, depending on I guess where you are and where your birthday lies on the calendar. When you take this job, you're going to be in a great situation. Super, super excited for you. I would take the new job. And then also Robert, what else should Jacob think about as it relates to like moving jobs? You know, there's a lot that goes into that. It's not just your compensation but also like 401k match is important. There's also benefits to consider. There's also the commute to consider, the work environment. There's, there's a lot. So maybe Robert, you should talk about that.
- [27:46]
Robert
Yeah, we talked about this earlier when we saw this question. And that is you have to consider everything when you're changing roles in changing companies because the new company right now might have free parking and you just pull up and you go into your office and you go to your job and it's great. But did you check the job offer company, the new company that's going to give you more, do they have free parking? It may sound like nothing, but if you think about it, what if this new parking cost you $50 a week? You have to take that into consideration. Then you have to look at, like Austin alluded to, 401k. Does the current company give you a 4% match and the next company does not? So make sure, just like when buying a home, you understand the total numbers of the decision. Think about gas prices. They're at all time highs right now. What if your current job is a three minute drive and the new job is an 18 minute drive with traffic? Traffic. All of these things have to be in a consideration for your quality of life, but also other external spending that you have to do to get this additional $12,000 a year. So just make sure you consider everything about it to make sure it's the right decision.
- [28:55]
Austin
And just to reiterate, Jacob, all of this falls apart if you inflate your lifestyle to match your new earnings. You eventually can do some of that, but only after you get the 17,000 back in your high yield savings. And you are, you know, taking a couple hundred bucks more now a month and investing it like you should inflate your lifestyle as you make more money. Like I get that, that's cool. But you're not in a situation to do that right now, especially if you have to go pay back $9,500 and your emergency fund is depleted. So pay back your emergency fund, weigh all the options here. We've tried to help you think through all the different scenarios and we're wishing you the best. Congrats on the new job offer. That's actually really, really exciting. Especially as we, you know, hear all the looming scary headlines of job going away because of AI. Now, before we jump to our next question, speaking of AI, did you know that public uses AI to create generated assets which are essentially strategies that align with your specific investing theses and interests. You can say I want to invest in companies that are building data centers in 2026, right? What's the infrastructure behind that? And it will find you all the companies of all the, you know, value stack of the components, the wiring, the networking, the switches and It'll find all those companies for you, you and it'll put your money into data center companies or maybe something to do with water. A lot going on right now in the Middle East. We've heard about some sanitation stuff, you know, with the straight of Hormuz and, and things of that nature. Perhaps you want to invest in sanitation companies in the Middle East. Anything, anything you think about, you can just type it in to generated assets on public.com and you can say, I want to invest in ABC. It's going to use AI to find those things for you and then make it easy and automatic to invest consistently into those strategies. So go to public.com rich habits to earn an uncapped 1% bonus when you transfer your portfolio to public. Highly recommend doing it. Public is awesome. Easiest way to get invested. Go check out public.com rich habits.
- [30:47]
Robert
Yeah, we've been talking about public for years. We've worked with them for a very long time and they just create the best tools out there to help the everyday retail investor figure out what to do with their money and what to invest in. So make sure you check out public.com
- [31:02]
Austin
so David is our next email. David B. David says hi, Austin and Robert. I'm a new listener after discovering Austin on the Money Money Guy show. Let's go. David, thanks so much. Little collab crossover there. If you're not yet watched my episode with Brian and Bo from the Money guys, definitely go do that. I think it's on YouTube. Go check that one out. David says, I have thoroughly enjoyed the podcast thus far and the content that you guys provide. My questions related to a rollover. I'm 31 years old. My wife is 29. We live in California, have an estimated net worth of 950,000. Holy smokes. Good for y'. All. That's a lot of money to have that 31 and 29. That's incredible. David says we have a combined salary of 300,000. I've worked in government for nine years and my wife works in sales. I plan to leave the public sector at the end of the year to pursue a career in finance. My retirement accounts have the following 47 in an IRA, 82,000 in a Roth, 401k, 91,000 in a Roth 457b and 162,000 in a defined benefit plan, the Calpers pension plan. My pension plan formula is a retirement formula at 2.7%. At 57 years old, I have almost 10 years of service when I leave my current job. So I will collect 27% of my salary once I turn age 57, calculation on this comes out to $3,500 a month, subject to inflation. My pension plan provides the option to roll over this 162,000 to an IRA. With my retirement being 25 years away, am I better rolling over the 162,000 into an IRA that I can control and invest in myself, or should I just leave the money in the pension plan and collect the guaranteed benefits at 57 of 500 bucks per month? Thank you for your time and I love the show. What a first off, just cool situation to be in.950,000 at 31, in 29. I mean, you as the money guy show would say you're definitely a financial mutant. Good for you. That's a lot of money in your net worth. Awesome salary. You are crushing it right now. So the crux of the question, right, hey, guys, I've got 162,000 in this pension plan. I'm guaranteed to make 3,500amonth when I retire at 57. Do I leave it, let it grow? However, the pension plan might grow to get that $3,500 a month, or do I roll it over into an ira, an account that I have autonomy over, invest it how I want and see what happens, see if that's a better outcome. So Robert and I, we actually sat on this one for a little bit and we really wanted to give you a good answer. So we did the math for you. We, we. I'm sure you've done this math yourself, but we're kind of just. This is important math. And for people listening, like, you got to think about the opportunity cost, because that's what this is, Robert. It's an opportunity cost question.
- [33:49]
Robert
100%.
- [33:49]
Austin
Do I keep in the pension plan? And if so, what's the opportunity cost of not rolling it over into that IRA? So if you roll over that $162,000 into an IRA and you have autonomy over it, and that $162,000 from age 31 to 57, because that's the apples to apples comparison here for that 20 grows at 7% of a real annual return after inflation, which we think is super doable, over the next 26 years, it'll be worth about 950,000, an 8% real return, which is also pretty doable with inflation and what the stock market is, right? 1.2 million. And at a 10% real return, which is pretty aggressive, but still worth mentioning here, $1.9 million. So at a 7%, 8% rate. We're talking about a million. A million one that's going to be in this IRA at age 50. Now you're saying, okay, cool, so I've got a million bucks. A million one like that. That's exciting at 57. But what does that mean for me and how do I compare that to the pension? Because the pension pays monthly. The IRA is just a lump sum of money. Well, Robert, that's where the 4% rule comes in. We talk about the Trinity study all the time. This is a very important study that was done at Trinity University where they tried to figure out, assuming a 60, 40 split between equity equities and fixed income, right? So stock market and bonds, how much money do I need to have invested to withdraw 4% every single year and not run out of money for like 30 years? So the 4% withdrawal rate is what you want to be thinking about here. For that ira. What does that translate into? And how does that compare to the pension? Your pension is $3,500 a month at 57, which is about $42,000 a year, which means at a 4% withdrawal rate, you need about a million dollars to withdraw the 42,000. You see what I did there? 4% of a million is that 42,000 or so. So if you annualize 7 to 8% returns between now, in the next 26 years, which over a long period of time, I think you certainly will, you will break even against this pension. So anything above that is now gravy. Now, here's why I believe you should roll it over. There's, I'm sure, a lot of little specific nuances when it comes to pensions in California and like things that I don't know here, so I'm not going to pretend I do. But when somebody dies and they have an ira, their heirs, their beneficiaries get that money, they get the total value of that IRA. And if your IRA at 57 is worth $1.1 million, and maybe you don't want to withdraw against it, you just want to let it grow, right? It's going to double and triple in value and quadruple in value over your life here, there could be a world where you tragically pass away in your late 50s, early 60s, much of the pension plan is lost, right? Where if it was in an ira, all of it would go to your beneficiaries. So in my opinion, I think the best way to approach this is to have the autonomy, roll it over to an IRA, park it into index funds and ETFs let it grow over time. Don't get fancy, right? Just let it grow. Low cost index funds and you will be 57 with a million or a million 2 depending on what the market does. You can do your 4% rule if you want or can continue to grow over time. And what's going is when you pass away you will have this account, this massive nest egg that will be then given to someone else in your family, your beneficiaries, if it's your wife, your children, whatever. Where when it comes to a pension, I'm sure there's some percentage of it that would go to a wife, you know, a spouse or a child maybe, but I don't think I truly could be wrong here. But I don't think it's the full 100%.
- [37:27]
Robert
That is an incredible breakdown. I'm just going to layer a little bit more on it. I love the fact that you called out the IRA goes directly to the spouse or to the family or whoever is assigned to be the heir if something were to happen. Whereas that doesn't happen with the pension. I don't know what percentage of the pension value would go to them, but it's definitely not 100%. But also something else in the math that I really like that you broke down is you were calculating this based on 7 or 8% over this 26 year period. Whereas traditionally the S P 500 many, many times is going to be more like 9, 10 or 11% year over year. So there is additional funds there that would outweigh it. A break even between the pension and the Roth and going it alone. But then I think the most important thing for me here is we don't know the long term funding concerns or issues that could happen with a CalPERS plan. With the government, things change, they're insolvent and all of a sudden that money starts to go away or you get way less. So I love it. I agree with Austin 100%. I'd squirrel the money away way I would do the ira. You have total control and autonomy so you can build it out the way you want, have total control over it and be able to know you get all of it in the end. God forbid if something were to happen.
- [38:52]
Austin
Yes. I'm doing a bit of research, live here on the pension, you know, survivor who, what percentage? So there's I guess the option to take and offer 100% of the pension to a spouse spouse if you pass away. But your monthly payments that you're, that you are receiving the 3500 is much less where if you give them 50% when you pass away, it's, it's more. So I don't know if you chose the 50 or the 100% with this 3500 example. So I guess you can run some numbers against that as well with the 4% rule. But regardless, it's like, okay, it goes to your spouse. What about your children? What about your children's children? Right? Like we're talking about generational wealth here is what we're trying to build. And I think again, even now knowing this information still, I would still lean toward very much lean toward rolling that 100 in. I think it was $62,000. Yeah, 162,000 into an IRA, having it be with an advisor, like whatever is going to just earn 7, 8, 9, 10% over a long period of time. You don't want to have these knee jerk reactions, right? It's one thing to say, oh yeah, I got money in a pension, but like, I can't touch it. It's another thing to say, I got $162,000 here. Technically I can touch it. I just get, oh, I need to go buy a boat. What do we do? Kitchen remodel. Right? What I. Right. Just make sure you don't fall for that. So our last question comes from Ian N on Instagram. Ian says, hi, Austin and Robert. My Name's Ian, I'm 18 and I just discovered your show. I love it and I'm learning a ton. I'd recently got a student loan Discover credit card, trying to build some credit as well as putting money into the stock market like the S&P 500, looking for some of those long term investments. I'm also working two jobs this summer. I'm attending college in the fall at my state school and I'm majoring in business. However, I'm very worried, worried about the rise of AI in the business field. Although I haven't chosen a specific concentration right now, which is broad business, I'm open to anything in the business field. I wanted to get your opinion on AI and the impact on finance and business jobs in the workforce and how it could impact my future as well as any tips for my major so I can continue to grow wealth through a young age. Robert and I put our heads together before this episode and we looked at, so the state school that I went to, which was the University of Tennessee, Knoxville, Govals. We looked at their, their majors and all the different concentrations and stuff and we came up with what we thought are top three majors that are Like AI proof. So we'll give you those here at the end. But before we do that. Yes, business, Robert, talk about how AI is just going to continue to disrupt finance, business, all that stuff.
- [41:27]
Robert
Yeah, I think it is the most important transition we're making in the next 10 years is right now. Because if people do just lay in the weeds and don't get ahead of this and think about what should I be doing different to stay ahead of the curve in AI, it's going to be problematic. And in my opinion, I think finance, I think legal in a lot of these white collar jobs are going to get wrecked over the next two, three, four, five years because all the learning and all of the pass through of learning is going to be negligible and not really have value anymore. And it's going to be the people that, that top, they're going to be able to maintain their jobs. But most of the people coming out of college in finance and legal and stuff like that, there just isn't going to be a place for them. And I think there's going to be less and less jobs for those people. So I think everyone listening this podcast, especially if you're younger and you're getting a degree, you should really be looking at is this degree going to have any value when it's finished in three, four, five years? And if the answer is doubt, full or no, then I would pivot right away to a degree that we believe is going to still have tremendous value down the road because AI is here, robotics are here, all of these things are happening and you just need to get ahead of it. And I think finance is one degree that I would not get moving forward because you can go in and find all the information as if you're getting it from a top level. The best financial people on earth, right. In Cloud or ChatGPT or any of the AI platforms that are available now. So that's my biggest concern and what I would look at if I were someone like Ian here. That's thinking about a finance degree.
- [43:12]
Austin
Yeah. So finance, I would not get a finance degree. I agree with you. Right. Because finance degrees you can do essentially three things with. You could work as an investment banker, which I would argue a lot of those analyst and associate roles are now being maybe not augmented, but certainly enhanced with AI. I've seen a lot of Excel. I mean that's all you're doing is putting data into an Excel spreadsheet and then creating a presentation on PowerPoint or whatever. And I think a lot of that's going to get automated and done with AI at least enhanced, right? So investment banking I feel like is something that AI is definitely going to disrupt, especially for those entry level roles. Next thing you can do with a finance degree is be a wealth manager, be a financial advisor. I think a lot of the financial advisory roles will, they're definitely going to be needed. But information is free, information is a abundant and as you think about the next 4, 6, 10, 12 years of your life, which is like you're early in your career, you're rocking and rolling like I don't think being a wealth manager is going to be that big home run for you. I think a lot of people are going to be able to if it's with AI in wealth management, Robo advisors, like there's going to be a lot of like transformation there. So again, wealth manager, I don't think there's really like a crazy cool career with that. I mean, yeah, sure you can like go work at a Amer Prize or you know, something like that inherent or buy a book of business, whatever, but I just, it's not that AI proof, if that makes sense. And then the other one is like FPA financial planning and analysis you can do, which is what I did out of college. And I would argue that job is going to just be super disrupted. If I was looking for the job that I was hired to do out of college right now, I doubt that anyone would be hiring for it because so much of it could be disrupted by AI. So those are like the three main paths for a finance business, right Major. And I think all of them are super, super disruptible with AI. We just saw anthropic CE CEO. Actually this was several months ago, but anthropics Claude, right CEO Dario said 50% of entry level white collar jobs within the next one to five years will be completely displaced. Think about that. 50% between now and 2030, let's call it. They just won't exist because companies will be able to be so much more efficient without human labor and using these AI tools and platforms and things to augment a lot of this white collar work. We're seeing that with openclaw, we're seeing that with Perplexity Computer. We're seeing that with all the cool things that are going on right now. And it's just 2026, you're 18, you haven't even gone through college yet, right? You got four more years. So Robert and I put our heads together and we thought, okay, what majors? If I was, I literally asked Robert, I said Robert, if you were going to college, what majors would you be studying right now to be AI proof? Right. What would be those specific majors or concentrations that you think are going to be there in four years, 10 years, 15 years down the road, because who knows what's going to happen after that. But Robert, I'll let you go with your three and then explain why and I'll share my three as well and we'll go from there.
- [46:10]
Robert
I just want to say before I answer, this episode is giving me chills because it is so in depth and so awesome. And these are all questions from our audience. So we just love this. I really do love it. It's very emotional for me because it's so important for people to figure this out. So my three that I told Austin would be nuclear engineering. Engineering something because I want to specialize in where I believe energy is going with nuclear and fission and all of that stuff. So nuclear engineering, I think cyber security is still going to be really good things that you can be in that field because we're going to need more and more of it. And then last for me would be biomedical engineering, like right in the healthcare technology sector because as we get more and more efficient and medicines become better and better and equipment becomes better, people are going to live longer and we're going to need more and more talent in that field because of how much longer I believe people are going to live in the future.
- [47:09]
Austin
There we go. I think all, all three of those are great. My three AI proof jobs, the first one's nursing. I do not think that humanoid robots, I just don't think we're going to see those in hospitals in the next 10 to 15 years, maybe 20 years from now, who knows? I genuinely cannot predict that far into the future with how fast things have changed, but I think nurses are definitely going to be needed for the next dec or two. So I think nursing's pretty locked down. Electrical engineering, this kind of complements the nuclear engineering, the data centers, the infrastructure. You know, we've got such an old and dilapidated grid. You've heard about the grid here in the United States. I think if we're going to have to upgrade the grid, a lot of electrical engineering is going to take place there. So electrical engineering would be something to study. And then the last one, I'm thinking AI proof, pre dentistry, go become a dentist, a dds, right. I don't know about you, but I'd be very surprised if in the next 10 to 20 years we're going to have humans, humanoid dentists. That are poking around in my teeth. Like I just don't think that's going to be a thing. I, I truly think that being a dentist, you're pretty good for the next decade or two, just like you are for nursing. It's, it's interesting, right? Healthcare. Think about that, that healthcare side of it and how important it is to humans and, and just how hard it will be for AI. You know, we think about embodied AI, right? Because right now if you think about what's going on with Dario's statement of 50% of all entry level jobs, that's very much a white collar. If you're doing it on the computer, it can get displace anything humans are doing on computers right now, open claw. Just prove this perplexity. Just proved this AI can do it too. Full stop. I don't care what you do on a computer. AI can do your job if you do it on a computer. But that's not yet happened with embodied AI. It's getting cute and sexy with the Waymo and the self driving and like the figure and the apptronic and the unit tree. Like it's cool, it's fun. It's like I think we're a decade away from having a humanoid robot take care of me bedside if I go to the hospital or, or a humanoid robot poking his fingers in my mouth as a dentist. Right? I think we're at least a decade away from that. I could be wrong, but if I was going into college right now and I had to pick a major, those are my three nursing, electrical engineering because the grid needs upgrading and dentistry.
- [49:15]
Robert
And the only pro tip I would add to this that we didn't really talk about would be maybe there's a world where it makes sense to get ahead of real world assets and tokenization and you could go get like an MBA or degree in cryptology and blockchain. So you understand and you could be one of these advisors for companies that are integrating blockchain and crypto into their ecosystem and into their financial guardrails within their company, if you will. So that's another one as a pro tip that I would throw in.
- [49:44]
Austin
Everybody, thank you so much for joining us on this week's episode of the Rich Habits podcast. Question and answer edition. Do not forget seven day free trial at the Rich Habits Network. Seven day free trial for Wall street favorites dot com. Go see what Wall street thinks about the stocks in your own portfolio. What HED funds are buying and selling them, what analysts are upgrading and downgrading them, giving them specific price targets, all that stuff. Wallstreet Favorites.com A ton of the websites completely free, but if you upgrade to premium, seven day free trial, no charges to your account for seven days, I mean literally, it's the, it's the most no brainer thing ever. You should go check out Wall Street Favorites. It is. It's awesome. We built it for you guys and we're super, super grateful.
- [50:22]
Robert
I think Wall Street Favorites is the best aggregator, cheat code for people to figure out what they should be investing in, what their portfolio looks like, is it the right balance of what they should own. I really love it and I think everyone should check it out and there is that seven day free trial. Thank you guys all for stopping by each and every week. We love all of you. We appreciate the support and we're going to keep bringing you value like this every single week for many, many years to come.
- [50:51]
Austin
With that being said, we'll see you guys tomorrow for our Friday episode of the Rich Habits Radar.