Rich Habits Podcast — Q&A: Scammed by IULs, Investing My Rent Money, & What To Keep In A Checking Account

Hosts: Austin Hankwitz & Robert Croak
Date: November 6, 2025

Episode Overview

In this lively Q&A episode, Austin and Robert tackle some of the trickiest financial questions from their community, ranging from the pitfalls of Indexed Universal Life Insurance (IULs) to the best use of cash set aside for rent, optimizing checking account balances, and retirement readiness. The duo blend candid personal takes, practical advice, illustrative calculations, and a few passionate rants to help listeners make smarter financial decisions while sharing their own experiences and the mindset differences that inform personal finance.

Key Discussion Points & Insights

1. Direct Indexing vs. ETFs (VOO, QQQ)

[02:01]

Listener Question: Mandy asks if she should sell her ETF holdings (VOO, QQQ, VGT) to begin direct indexing, or just start deploying new capital there.

Austin’s Take:

• Direct indexing allows investors to own each stock in the index directly, enabling automatic tax loss harvesting.
• Gave personal example: Invested $20k via direct indexing, now worth $26k after tax-loss harvesting ~$2,300.
• Advice:
  • Don’t sell existing ETF positions (would be a taxable event).
  • Deploy new capital into direct indexing instead.

"Just keep rocking and rolling [with your existing ETFs]. Long term capital gains are your friend, but net new capital I think should be deployed toward a direct indexing type of protocol." — Austin [04:25]

Robert’s Take:

• Prefers a mix if starting from scratch, suggests maybe 50–60% ETFs, the rest into direct indexing (due to higher fees with direct indexing), but agrees with Austin for Mandy’s case.

2. How Much is Too Much (or Too Little) in Your Checking Account?

[05:19]

Listener Question: Emma G. wonders if keeping $3k in checking is smart, while her friend argues for $10k—who is right?

Robert’s Advice:

• Don’t let excess cash idle. Most people overestimate how much they need.
• Sweet spot: $5,000 in checking, not $10k. Invest the rest.
• Reminds listeners that brokerage account funds can often be accessed quickly if needed.

"You want to make your money work as hard for you as you work to get it." — Robert [06:34]

Austin’s Practice:

• Keeps around $4,400 in checking after bills (shares exact number to be transparent).
• Framework: One and a half times monthly expenses is a safe spot; $3–5k range works for most, but above $7k is usually too much.

"Once I get above like the 5, 6, 7,000, then I’m like, okay, wait a sec, I need to put this money somewhere so it’s growing for me." — Austin [07:55]

Memorable Story:

• Robert’s ex was shocked he kept little in checking, having learned to always keep $100k “just in case”—he calls it unnecessary if you have proper emergency and investment accounts.

3. Am I Ready to Retire Early?

[10:00]

Listener Question: McDonough, 52, worries about layoffs and wonders if he can retire now with $1.5m in 401(k), $1.7m in a bridge account, $1.3m in company stock, and no debt ($10k/month expenses).

Austin’s Analysis:

• Breaks down the 4% rule—ideally need ~$3.8m to support $10k/month (after taxes).
• McDonough has ~$2.5m easily accessible today, so immediate retirement would require cutting spending to ~$6,800/month.
• Recommendation: Work until 59½ to let investments grow (potentially doubling), then retire “super rich.”

"You are having a really good time. Everything’s paid off. You go travel the world. You buy whatever you want to buy. You made it. Congratulations." — Austin [12:11]

Robert’s Suggestion:

• Learn and leverage AI at work to increase job security and future income.
• “Prepare, educate, and get ahead of it.” [13:59]

4. Indexed Universal Life (IUL) Policies — “Scammed” or Sound Strategy?

[14:50]

Listener Question: Zufan H. and her husband, both 29, bought 3 IULs (combined $7m death benefit) for $3,800/month, shocked at the high fees and now wondering if they should surrender these policies.

Austin’s Breakdown:

• Numbers show: If invested in the S&P 500 instead of IULs, their $3,800/month would yield $14m–$17m from age 29 to retirement.
• IUL fees substantial—$8k in 8 months just on fees.
• IUL’s cap on returns (10.25%) further limits growth.
• Insurance’s only goal: replace income in case of death, not grow wealth.
• Recommends term life insurance instead; much cheaper, appropriate for covering income loss.
• Advice: Surrender IULs (accept the “stupid/silly tax”), buy term, invest the rest.

“Call it a silly tax, call it a stupid tax, call it a ‘I've learned my lesson’ tax… Get rid of the policy.” — Austin [21:22]

Robert’s Perspective:

• Echoes disapproval for IULs, calling them “not investments” and “fee machines".
• Repeats: “Anyone that sells you that [an IUL is an investment], you should unfriend them… and never trust them again.” [22:56]
• Suggests investing most of the freed-up money and possibly putting $1k/month toward the mortgage (“7% is right at the cusp”).

Memorable Rant:

"Why do you have to borrow money that’s yours anyway?... it literally makes my blood boil…" — Austin [25:40]

5. Mega Backdoor Roth Solo 401(k): Who Qualifies?

[27:27]

Listener Question: Nico S. can’t get the mega backdoor Roth solo 401(k) due to non-discrimination rules—wants to know workarounds.

Austin’s Explanation:

• Mega backdoor Roth solo 401(k) is best suited for S-corps with only the owner (and possibly spouse) as employees.
• Non-discrimination law: You can’t favor the owner over employees in employer 401(k) match.
• Workaround: Form a separate LLC (as S-corp), make only owner/spouse employees, pay yourself via consulting fees from your main business, use salary for big Roth contributions.

"Go create another LLC, make it an S corp. Make you and your spouse the only employees..." — Austin [30:41]

Robert’s Reminder:

• Always seek a second opinion (CPA/another advisor).
• “Don’t pick up pennies while dollars fly by.” [34:08]
• The right structure and advice are worth the fees for long-term gains.

6. Saving for Rent — Should I Invest or Play It Safe?

[34:28]

Listener Question: FJ, a college sophomore, has $10k set aside for senior-year rent. Should he try to grow it or play it safe?

Austin’s Approach:

• Keep the rent money safe in high-yield savings.
• Use brokerage account funds to max future Roth IRA (tax-advantaged growth > standard brokerage).
• Prioritize rent over risky growth.

Robert’s (Contrarian) Angle:

• Would put $6–7k into high yield savings, but invest $3k in crypto (BTC, ETH, Chainlink) since the risk/reward is favorable at FJ’s young age.

"[At your age], I think it would be worth the risk to risk $3,000 of that to get some really outsized gains..." — Robert [37:20]

Austin Disagrees (“rent money is more important than crypto money”).

7. 529 Withdrawal Timing and College Funding Strategies

[37:45]

Listener Question: Christine S. has $60k in a 529 for her son’s $120k college, can cash flow the rest; asks about best withdrawal timing.

Robert’s Strategy:

• Use 529 to cover first two years, let rest of cash grow in high yield accounts or CDs while preparing for last two years.
• Compounding and interest can lighten future cash outlays.

Austin Adds:

• Move 529 to cash or short-term T-bill ETF for safety and some yield.
• Pay tuition annually from 529 as needed, avoid leaving it invested in risky assets.
• If your state allows tax deductions for 529 contributions, run tuition payments through the 529 for last two years to optimize tax benefits.

"Make sure all $60k is in some sort of short-term T-bill account... that’s how you get an extra, let’s call it, you know, two grand per year and just yield..." — Austin [41:02]

Critical Note:

• Austin questions the wisdom of paying $120k for a bachelor's—reminds listeners to always scrutinize the value.

Notable Quotes & Memorable Moments

• On Direct Indexing:
  “Tax loss harvest automatically. Why that's important is... you could take advantage automatically on public.com with what these moves do to a portfolio…” — Austin [03:01]

• Checking Account Habits:
  “You're leaving money on the table. Your money is not working for you if it’s sitting in checking.” — Robert [06:38]

• On Retiring Early:
  “If you do lose your job, you have to have more money than you anticipated... That goes away with advancements in AI.” — Robert [13:49]

• The Great IUL Rant:
  “Insurance policies are not investments—they’re insurance, right? Just like understanding the difference between this is an investment strategy… or this is an insurance policy…” — Austin [19:25]

• On Advisors:
  “If you’re relying on Bill down at the corner at Morgan Stanley… you’re making a mistake.” — Robert [32:21]

• On Risk and Youth:
  “With your age and situation, I think it would be worth the risk…” — Robert [37:30]

Timestamps for Key Segments

| Segment Topic | Timestamp | |----------------------------------------------------------|-----------| | Direct Indexing vs. ETFs | 02:01–05:19 | | Checking Account Balances | 05:19–10:00 | | Retirement Readiness | 10:00–14:50 | | Indexed Universal Life (IUL) Policies | 14:50–27:27 | | Mega Backdoor Roth Solo 401(k) Eligibility | 27:27–34:28 | | Rent Savings vs. Investing for College Student | 34:28–37:45 | | 529 Withdrawals & College Funding | 37:45–43:56 |

Tone and Language

The episode mixes straightforward, practical financial guidance with conversational banter, candid confessions, and energetic rants; both hosts stress transparency and humor while pressing on financial principles: don’t leave idle cash, beware complex insurance-based “investments,” optimize for taxes, and always seek second opinions.

Summary for New Listeners

If you missed this episode, you’ll find actionable frameworks for investing (and avoiding costly mistakes), honest stories about financial missteps, clear formulas for decision-making, and passionate debates. Whether you’re planning for retirement, college, or just wondering how much money should be in your checking account, Austin and Robert offer not only answers but mindsets—the very foundation of “rich habits.”