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

Summary

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

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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.

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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.

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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.

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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]

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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]

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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.

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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”).

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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.

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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]

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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 |

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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.

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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.”

Transcript

[A]

Hey everyone and welcome back to the Rich Habits Podcast Question and Answer edition brought to you by public.com these Thursday episodes are all about answering your questions in real time. We find a bunch of questions that you guys ask us via Instagram dms@rich habits Podcast or via email at rich habits podcastmail.com we pull them all together, we pick the most random ones we can and we try and answer them here on the show every single Thursday. And we have so much fun doing it.

[B]

I love these episodes. I say it every week because I feel like it really expands our minds into, you know, we always say personal finance is personal. And when we answer these questions, we're really digging deep on all of these crazy different topics around finance and business and mindset. So these episodes are just a blast to make.

[A]

They are. And again, these are kind of like off the dome. We don't really pull too much together here. We review a couple of them if we have any like lingering questions. But this is Robert and I's raw thoughts. But Robert, before we jump into the episode, it's really important that everyone understands the reality that if you ever want to retire right, stop trading time for money. You need to have a nest egg that's growing for you over time.

[B]

And the easiest way anyone can begin investing towards their Future is on public.com they make it incredibly simple to build a multi asset portfolio including ETFs, stocks, bonds, crypto options and more. They also offer access to industry leading yields of up to 3.8% APY for your emergency fund.

[A]

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[B]

Fund your account in 5 minutes or less by heading to public.com rich habits to claim your 1% match today. Paid for by public investing and full disclosures in the podcast description.

[A]

So our first question comes from Mandy. Mandy says hi all, this is Mandy. I love your show and I like to get some clarification on a question. A couple episodes ago you mentioned direct indexing and that everyone that owns Voo should direct index into the S&P 500 instead. So I was wondering, do we go and sell our VOO or maybe even our QQQ in our portfolios and start direct indexing it. I've got about $100,000 in QQQ, VGT, things like that. So should I put all $100,000 into direct indexing? Do I do half and half and keep some ETFs? What do you guys think? So Robert, great question, right? We had Steven Sykes from Public.com he's their chief operating officer on the show recently to talk about their new direct indexing product. And it's, it's awesome. So essentially with as little as a thousand dollars, you can begin to direct index some of your favorite indices. They've got over a hundred indices over there. Go check them out. Now what is cool about direct indexing is again, instead of owning an etf, right, like who then goes and owns the s and P500, which means that you don't have any control of those underlying 500 names, you're just kind of tracking their performance by direct indexing. You go and you buy the 500 names directly yourself in your broker. And by doing that it allows you to automatically tax loss harvest. Why that's important is when names come down a little bit, other names move around volatility, whatever. You could take Advantage automatically on public.com with what these moves do to a portfolio to say, hey, you know, we had some volatility in April of this year with the Trump tariff tantrum. You can now maybe take advantage of some of that volatility by realizing losses that then offset capital gains in the future. For example, Robert and I have been direct indexing in the past for the last maybe I think it's been about 15 or 16 months. Robert and since doing that, we've tax loss harvested just about $2,300 against the initial 20,000 invested, which by the way is now worth about 26,000. So we realized 30% increase in the portfolio as the S and P went up. We tax loss harvested about 2,300 bucks along the way. And it's all automatic, all cool stuff. And so public is now offering that same service. So what would I do in your situation, Mandy? I would probably stop buying net new shares of ETFs and just take that new capital and direct index it instead. I'm not saying to go sell your shares of VOO or QQQ because that would be a taxable event. I don't think that's smart. Just keep rocking and rolling. Long term capital gains are your here, but net new capital I think should be deployed toward a direct indexing type of protocol or strategy allowing you to take advantage of those tax loss harvesting efforts.

[B]

Yeah, I think your breakdown is perfect. Any net new capital I would put in the direct indexing, but any capital that you currently have in VOO or QQQ I would leave put. Now if I was starting from zero and I had $100,000 I probably would break it down and maybe do 50, 60% V and then the rest in the direct index. Because keep in mind direct indexing does have higher fees. It does have some little things that are different, but overall I think it's a great strategy to have both but all net new capital. In this instance I would definitely agree with Austin put it into the direct indexing.

[A]

Now our next question comes from Emma G. Emma says, hey Robert Nassen, I hope you can settle a debate. My friend and I follow your strategies. We have our brokerage accounts fully funded emergency funds of $15,000. We have maxed out Roth IRAs, we've matched our 401ks and we have our bridge account. Here's where we have a conflict. We don't know how much to keep in our checking account at the end of each month. For example, at the end of the month I like to bring my balance down to about 3,000 and then invest any amount of money above that figure. But my friend keeps 10,000 in her checking account and invests anything above that. My argument was that Even though my 3000 might seem a little high since we have credit cards that can cover immediate purchases until I pull funds out of my emergency fund, she thought that 3,000 might be too low. So I think it's too high. She says it's too low. What are your thoughts? Thanks in advance. P.S. my newest toxic trait is multiplying all my expenses and my friend's expenses by 70x because you guys say that every dollar invested in your 20s turns into 70 in retirement. Best episode you've published, hands down. Well, thank you so much Emma. We really appreciate that. That's so funny, Robert. That is a toxic trait.

[B]

I love it. But I'll take this one first. Here's my take on this and people get this wrong. Most people get this wrong. They feel they have to have all this money in a checking account to make it available like all their other money in a high yield savings or their brokerage account or whatever it is is unavailable. And it always bothers me because I always say you want to make your money work as hard for you as you work to get it. So in this instance, I think you're both Somewhere in the middle, I would say instead of 3,000, I would up at the 5, and instead of 10, I would come down to 5, because I think that's a great sweet spot where you have some cash on hand so you feel comfortable. But always remember, for those of you that are sitting on fifty thousand, a hundred thousand, two hundred thousand in your checking account, you're leaving money on the table. You don't need that much money. I can go to my brokerage account right now and in two to three hours get a hundred thousand, five hundred thousand, whatever I need for something that would come up. So don't let that much money sit. I agree. 10,000 is too much. I would park it all at 5,000, and then that way you'll be safe and everything will be great.

[A]

Yes. Well, I just logged into my bank account. It's November 3rd when we're filming this right now. So the month of October has wrapped up. I've paid off all my credit cards. I've done everything like, like I do on a monthly basis here, right? And I've got 4400 bucks in my checking account. So that's my real number. My real kind of like what I do on a month to month basis. Is 3,000 low? Not really. I mean, if you want to have three, that's fine. Is 5,000 too high? No. Is 10,000 too high? I'd argue yes. Right. I think once I get above like the 5, 6, 7,000, then I'm like, okay, wait a. I need to like put this money somewhere. So it's growing for me. It's not just sitting in my checking account. So, yeah, I'm kind of right in the middle there. 4400 bucks is what I've got in my checking account. We just wrapped up October, just paid my bills, paid everything normal. I haven't paid myself yet for the month of November, but that's what I got in my checking account. I think it aligns right, with what Emma says at three and what Robert says at five. So a general framework that I like to think about here is about one and a half months worth of what I would make on a monthly basis, right? So like, let's say, for example, you're someone that you're. You're Ireland and you're making about 4,5000 doll a month. I think it's totally fine to keep 4, 5, or $6,000 a month in your checking account any given time. Like, that's like just a good place to be. Now if you are someone who's Making a whole lot of money and you're really saving and investing a lot of it. Sure. Like make sure that you're not putting aside too much. But Robert's general framework here of 5,000 at the end of the month, obviously I follow that. I'm very close to that 3,000. I've had months where I'm around three as well. I'm a little bit more aggressive on those months. But at the end of the day, as long as you aren't having thousands of dollars more that could be saved, that could be invested. Right. That's genuinely eating a hole in your pocket thanks to inflation, you're going to be just fine. There's no like perfect rule for it. Just don't be too cash heavy.

[B]

Yeah. I remember my ex one time, she wanted to see all of my bank accounts and I show them freely and she's like, why don't you have any money in your checking accounts? I'm like, why would I? And she's like, oh, well, my parents always keep a minimum of $100,000 in their checking accounts in case of emergency. I go, that's what an emergency fund is for. I want my money to be active and you have to make sure you're always deploying it. Yesterday I had a little bit of extra capital that came into an account and I was like, what am I going to do with this above the threshold that I like to be at. And I just moved it around, put it into public.com, move some other things around. And now I feel good again because my money is working as hard as I work to get it.

[A]

Now our next question comes from McDonough. McDonough says, hi, Austin and Robert. I'm a big fan of the show and really appreciate how you break down real life financial situations with clarity and perspective. I'm 52 years old, married, and my wife is a stay at home mom. We have two boys, ages 13 and 10. And here is our financial situation. We have 1.5 million in a 401k, 1.7 million in our bridge account, 1.3 million in employer stock with about 850,000 of that vested, 275,000 in the 529 accounts for our two kids. Our house and our cars are fully paid off and we spend about $10,000 a month on our living. All the advances in AI and the current economic situation, I'm increasingly worried about a potential layoff. My plan is to work another three years or so, but if that becomes difficult, could I retire today and still maintain A comfortable lifestyle. Thanks again for everything you share. I really enjoy the show and would love your perspective on my situation. So, Robert, I'll kick this one off. If you wanted to retire today and live a comfortable lifestyle, you probably could, but it'd be a little close, right? So let's say you have to take in roughly $150,000 portfolio income. That's then taxed as a long term capital gain at 20%, just to be conservative, keeping you at that $120,000 per year in spending on your, you know, monthly expenses here on that credit card that you had sort of laid out for us. So you have to make $150,000 a year in portfolio income before taxes to sustain your lifestyle. The 4% rule tells us you would need about $3.8 million invested into stocks and bonds, allowing you to take off that 4% and never run out of money. Right Quote unqu There. So theoretically you've got the 850,000 of employer stock. You've got 1.7 million in your brokerage accounts. Like that gets you to about two and a half million, which is great, but it's not that 3.8 million. So could you retire today? You absolutely could retire today, but your spending would have to come down every month to about 6,800 because that would then keep you into an after tax 4% rule kind of range. Now you don't have a mortgage, you don't have a car payment, you're not contributing to the 529s anymore. Like what does one spend $10,000 a month on today? Like I couldn't tell you, right? Having no debt. Like what are you spending ten grand on? Like that's a lot of money. So like, oh my gosh, we have to like tighten our belts a little bit and raise our 13 and our 10 year old on just, you know, 6,800 bucks a month, assuming no mortgage payment, no car payment, no debt at any. Like everything says fully paid off. So I think you could do it if you needed to. But here's my advice. Work until you're 59 and a half. Let the 1.7 grow. It'll probably double in that next seven year period of time. So now we're talking about 3ish million. Let the 1.3 million employer stock grow as well. Maybe it's closer to 2 million over the next seven years. Let the 401ks grow. That'll do. You know, let's call it now that's from 1.5 to 2 and a half or 3 million. So let this money grow. Now you have 3, 6, 7, 8 million dollars. In seven years from now when you can actually touch the money. At 59 and a half, you are super rich at that point. Six, eight million dollars. Oh my gosh. You are having a really good time. Everything's pa. You go travel the world. You buy whatever you want to buy. You made it. Congratulations. But I would work for the next three, five, seven years if you could. At least until you can tap into that 401k. But Robert, what's your take on the situation?

[B]

Yeah, I think you killed it. They're doing great. They do need a little bit more money, so they need to keep multiplying and working a few more years. But here's what I would do. This is the only thing I would add. Everyone watching this episode needs to be concerned with what is AI going to do to their job? Is it going to displace their job? Is it going to change their job? And in this instance, you have time at 52 years old, you could spend the next 18 months in whatever job you're in because I don't think it shows what, what you do. And you could really get dialed in, in AI to be the best at it, at your company, in your division or whatever it is you do. And then there's a world where maybe you even make more money and don't have to worry about this displacement or worse, getting laid off. That's the only thing I would add. Everyone has to understand AI is, is here. It's happening. You can't get around it. So embrace it, learn it, and see how you can benefit from it rather than worrying about it. But also prepare, like we're talking about in this question. Because if you do lose your job, you have to have more money than you anticipated. Because, you know, before AI, you probably thought you were on easy street for the next 10, 15 years at your position. That goes away with a lot of positions and a lot of sectors in business with the advancements in AI. So prepare, educate, and get ahead of it.

[A]

I could not agree more. And I think the, the big thing that you need to consider here is having that honest budget as well that breaks down between the necessities like the needs and the wants. Right? I need to pay my mortgage every month. I need to put gas in my car. I need to buy groceries. I need like, I don't know what the ratio you on this $10,000. Like I live off of $7,000 a month and I pay a mortgage. I pay Like, a lot like, you know what I'm saying? There's a lot of fixed expenses in that. In that 7,000. So, again, you've got two kids I don't like. There's a lot of things to talk through there. But I think at the end of the day, it's really important to say, if I do lose my job, how much of this 10,000 can I. Can I trim down so that if I do need to live off of my investments for a while or retire early, I can do that adequately at that, you know, 5,000, 6,000, $7,000 thousand dollars a month range versus this 10,000. And now you're sort of being reactive and not proactive. So our next question comes from Zufan H. Zufan says, hi, Austin and Robert. My husband and I recently discovered the Rich Habits podcast, and our minds are blown. We really wish we'd found you sooner. Starting in March of this year, we purchased three indexed universal life policies with a combined death benefit of 7 million. Together, we're paying three $800 per month in premiums. Eight months in, we've contributed about 29,000 in total. But after fees and deduct deductions, only 21,000 of that has actually gone into the investment accounts. Each policy also has a cap on returns of 10.25%. Now, after listening to your Q and A episode where you discussed your views on IULs, we're realizing this may not have been a great investment decision. Our big question is, do we surrender the policies right now and accept the loss on what we've already paid, or do we wait until the 12 months are up after the initial purchase where we can reduce the premiums to the minimum, which is $1,200 per month, and keep the policies alive? For context, we' both 29. My husband earns 220,000 a year. I earn 65,000. We bought an investment property earlier this year with a $200,000 down payment. We have a $275,000 mortgage at about 7%, currently renting for 3,000amonth. We've been paying down the mortgage aggressively about 10,000 toward principal each month, and the balance is now about 200,000. If we free up money by canceling or cutting back the IULs, would you recommend putting that toward a backdoor Roth IRA, paying off the mortgage faster, investing in a taxable brokerage account instead? Thank you so much for your insight. We really value your perspective. So I love this. I love that you guys are thinking critically about where your money's going. Robert, let's talk through it, and let's explain to them with numbers, right? Facts, not just opinions here. Facts on what could happen in their situation. So they're 29 years old, and let's say that instead of taking this 3800 bucks a month in premiums to have a combined death benefit of $7 million, they just took. Took the 3, 800 bucks a month and they just invested it into the s and P500. And let's say the S and P grows at about nine and a half percent per year from 29 to 67. You're talking about $17 million. That is your money that you get to now pass down to your children or anyone else you want to give the money to when you die, right? There's no. Like, this is your 17 million. Congratulations, right? That's what 3,800 bucks a month from 29 to 67 turns into. Let's say it's 29 to 65. It's still 14 million. So whatever you want to figure that out, you've got over 10, 12, 14, 15, 16, $17 million of your money. Now compare that to the 7 million you'd have in this investment account with the death benefit or whatever. Like, okay, so we're talking about twice as better by just keeping it in your own hands. You even talked about how you've already paid $8,000 just in eight months on. On fees alone, which I think is absolutely ludicrous. So you're essentially saying, though, hey, guys, do we keep the policy? Keep paying the 1200 bucks a month and then use the other. Let's call it $2,600 a month and figure out what to do with that. Like, do we keep the policies in general? Our answer, Robert, has always been no to Iuls and yes to term life insurance. And here's why. What is the goal of insurance? What is the goal of life insurance in general? The goal of life insurance is to provide income in case someone dies, right? So now you've got someone in your family that you depend on. You said your husband earns $220,000 a year. If your husband passes away, you now don't have $220,000 a year. So what do you do? If you had a life insurance policy of $3 million or $2 million, you could take that 2 or 3 million. Let's call it 2 and a half million on average here, Put it in the stock market, take out 5% per year, and you now have $125,000 to add to your 65,000. That is how you now survive until you can figure out your now new situation without a husband. Life insurance is to supplement the income of the person who died, right? What if you can now self insure, right? What if you already have so many millions of dollars invested that you don't need to have this lump sum? The two of you now already have so much money that if one of you dies, the other person can live off of the existing, you know, sort of nest egg that you've created. And that to me is what term life insurance does a great job of executing upon. So term life insurance says, hey, for the next 20 years I'm going to pay. I think right now, Robert, I pay like $110 a month for my term life insurance. I have a $2 million policy myself. So it's like I pay 110 bucks a month. If I die, $2 million goes to the beneficiaries and rock and enroll in there. Then that can get the 5%. You know, we're talking about hundreds of thousands of dollars at that. At that point in your situation you could do the exact same thing for 110 bucks, 150 bucks, 200 bucks, whatever it is, it's a lot cheaper than 3,800, right? So now you've got this ability to have this massive nest egg in case someone dies. And then while you are over the next 20 years, during the term, right? You take the difference there. So that 3,800 minus the, let's call it 200 bucks a month, just to be conservative. Now it's $3,600 a month. You can park in a brokerage account over a 20 year period of time, assuming absolutely nothing. In this brokerage account right now you now have $2.5 million, which is the exact amount of money you just insured yourself for. Congratulations, you don't need term life insurance anymore. You now have two and a half million in a brokerage account in the. You know, at 49 years old you are self insured and now you can continue to grow your wealth. It's a common misconception to think that people can get rich with insurance policies. They think that insurance policies are investments and they're not. They're insurance. They're insurance, right? So just like understanding the difference between this is an investment strategy which are real investments into a public brokerage account or a Roth IRA or whatever else, or this is an insurance policy that ensures that if I die, X amount of things actually happen. When you begin to combine the two, that's when you start paying fees, that's when you start, you know, get front loaded on the wrong things. And they put you in the wrong things. It's just a recipe for disaster. So please, Zufon, highly recommend surrendering the policy, taking the hit on what you've paid. Call it a silly tax, call it a stupid tax, call it a I've learned my lesson tax. Whatever. We've all paid them, Robert, and I certainly have paid them. And get rid of the policy. Take that $3,800 a month. Take 200 or 150, whatever it is, get a two or $3 million policy, term life insurance policy on you and your husband specifically. And then, Robert, I now want you to tell our friend here what they should do with the other 3,600amonth. Think that they should pay down the mortgage at 7%? Do you think that they should be, you know, pay down the mortgage plus then start investing? Maybe half and half? How do you, how do you think about that?

[B]

No, first, I love how passionate you are about this question. We haven't been asked about Iuls in a while, and I just want to talk about this just for a quick second because you crushed that. And that is an IUL is not an investment. And anyone that sells you that it is, you should unfriend them, never do business with them again, and never trust them again. Because at the end of the day, hey, if I invest in Voo in the S&P 500 and I invest $3200 a month and then stop, guess what? That money keeps growing forever and ever and ever, and it compounds on itself with an iul. When you miss those payments, your policy ends, your money is gone. And on top of it, which was highlighted in the question, you are paying a ton of fees. And don't let them kid you. These are administrative fees, policy fees, but also really high commission. So that is why I really struggle with people that sell Iuls. I think it's really, really bad. And they should not be able to sleep at night because it's not an investment. And it's definitely not fair or sound for the person's financial future. And, Austin, you did a great job breaking down the numbers. So to answer your question, Austin, I would do exactly what you said. I would not pay down the mortgage and pay extra on the mortgage just yet. And if I was going to do that, I would maybe only do that with $1,000 a month of the funds, because there is a world start to see these rates come down more and more. Over the next two, three years. And you could be lowering your principal over time by paying extra. But I would still keep investing in the market because I think there's a bigger win there. Like you illustrated with your numbers, Austin. So that's what I would do.

[A]

I like that a lot, Robert. I think at 7% interest rate, right. I understand that you want to pay that mortgage down and I think you should pay it down. It's, it's really at that cusp where it's like, if it's eaten at you, if you feel weird about having 7%, I'm not going to get mad at anyone for paying off a debt that's at 7, 7%. So let's just be clear on that. But to the same point that I just made and that Robert did a great job of illustrating, which is like, if you are not putting this $3,800 a month into these premiums, what are you doing with them instead? To ensure that you come out ahead on the back end in 20, 30, 40 years. That means you have to invest it, right? So go to public.com direct index it. That's what you do, Robert. You go to public, you direct index it. Now you're getting a double whammy. You got the money growing for you in the S and P and you're taking advantage of tax loss harvesting. Sounds good to me. So, so yeah, if you want to pay off the mortgage, you could do some of that. But at the end of the day, I would focus more on getting that money invested. Growing this $3,800 a month into 1 million, 2 million, 3 million, 4 million by the time you're in your, you know, late 40s, early 50s, and then say, okay, cool, like one, I don't need to have life insurance anymore. I'm self insured. And two, oh my goodness, could you imagine if we had this money still sitting in these Iuls, we wouldn't have access to any of this money. Because that's the thing. It's like, it makes me so mad. For Robert, if people want access to their investment account, they have to borrow it. Why do you have to borrow money that's yours anyway? It just, it, it literally makes my blood boil thinking about how people make so much money getting rich off of people's ignorance toward these indexed universal life insurance policies. It's. I just, I get so mad. We got to move on before, before I get even more. I'm going to turn into. I'm going to get green and turn into the Hulk.

[B]

Yeah, I could Keep going. We could a whole two hour episode on this. I looked at a contract a few months ago for a couple that was in a similar situation and it was so complex my team at Croak Capital could not figure out this company's cost structure and what the fees were. And that's intentional. Whereas we can go buy Voo on public.com and know exactly where our money's at, have access to our money and think about it this way, Austin, right now The S&P 500 is set to return over 20% a year for three years in a row. And so think about that from a perspective when people are worried about paying off a mortgage at 7% like you said, it's right on that cusp. But I do think there's a world where I would pay some of it down, put the rest into the S&P 500, do the direct indexing and never look back. But before we get into our next question, and I know that was very long winded Austin, and I love it. Listen up folks. You can lock in a 6% or higher yield with a bond account on public right now. Now. But remember your yield isn't locked in until the time of purchase so you might want to act fast. Lock in a 6% or higher yield with a diversified portfolio of high yield and investment grade corporate bonds [e-mail] rich.

[A]

Habits so our next question comes from Nico S. Nico says hi Austin and Robert. My financial advisor is telling me that my wife and I do not qualify for a mega backdoor Roth Solo 401K. I have an LLC which is an S S Corp and the reason they said is based on my research and conversations. The mega backdoor Roth solo 401k strategy is very attractive but may be difficult to achieve its benefits due to non discrimination testing. Particularly only if the highly compensated employees are participating and the non highly compensated employees are not participating. So then Nico goes on to say do you have any idea how I can get around this? What do you think about the make a backdoor Roth Solo 401k versus just a backdoor Roth IRA? What do I do? So let's talk about this Robert. The mega backdoor Roth Solo 401k is essentially, I don't want to call it a tax loophole because it's not, it's in the tax code. But essentially what you can do is you can really really really turbocharge your retirement investing. Assuming you are an llc, an S corp and you are the only employee of your company. For example, me, I have an llc. It's taxed as an S corp and I'm my only employee, right? So, so I pay myself a salary and I pay myself owner's distributions and I pay taxes, you know, federal, whatever. Like, like I do all my normal stuff. But what's cool about how I've built this is if I want to, I can contribute up to, I think it's like 69 or $70,000 per year toward my mega backdoor Roth Solo 401K, which is after tax contributions, just like a Roth IRA. So I'm essentially contributing 10 times more on an annual basis than a normal IRA at 7,000 a year. Now, what are some reasons why you can't do this? Reason one, your tax structure is not set up correctly. Maybe you've got a, a partnership. You have like what? Like you gotta make sure it's an LLC escort be rocking and rolling that way. Two, you can't have employees. Now your spouse does not count. So if you do have a spouse and your spouse works in the company, you guys are owners, whatever, you both can have mega backdoor Roth solo 401ks. But if you have real employees that are on a payroll, like it's no longer a solo 401k, it's like, congrats, now you have a normal 401, you got to figure this stuff out. Now the difference is between a normal 401k that's like you know, you're doing versus the solo, the solo 401k. You can turbocharge that thing up to 70,000 or 69, whatever the number is there per year. Where if you have a normal 401k plan and you have employees, every single person that contributes to the 401k has the exact same match, including you. So you might say, hey, I want to like, I want to have my company match my contributions way more, more than my other employees. Because heck, listen, it's my company. I'm running the business, I'm running the show. I took on the risk, I did it all. I deserve the higher match. Unfortunately, and this is to how I understand it, I'm not a cpa, don't take this as bible, but how I understand it is if you do offer a 401k in your business and you have employees who are participating in that 401k, every 401k participant, including yourself and your employees, right? Including your highly compensated self versus your non highly compensated employees, have to participate the exact same way, receive the exact same match. Everything has to be the same. So it Makes sense why your financial advisor is telling you that the non discrimination testing, right. Is, is not going to allow you to pass this. So what are some ways around this? Go create another llc, make it an S corp. Make you and your spouse the only employees of that S corp. Pay yourself a reasonable salary and have the revenue generated to that new LLC come from, from the previous company. Right. So your existing llc, pay yourself like a consulting fee every month of like 5 or 10,000. I don't know how much you're moving around here, but you know, go put in 70, 80, 90, $100,000 a year into this new LLC. Run yourself a normal salary of 60, 70, 80, 90,000 as CEO and then literally all of the money that you make as a salary, just use that now as a contribution towards your mega backdoor Roth Solo 401 for this new company. I've seen that work. I think that might work. I'm not a cpa. Please do not take this as tax advice or accounting advice or whatever. Go talk to someone that can actually walk you through this. How I understand it is you can go consult this existing LLC where you've got all these employees. You're paying yourself a $5,000 a month consulting fee. Now you run that $60,000 a year salary to yourself as an employee. After taxes, you're taking home. Let's call it 40,000. All 40,000 of that K can be added to your solo 401K. Right. So like you got to make sure you work with someone right on this. But I, I think that, that this would work in your situation.

[B]

Yeah, I love that breakdown. And Nico and anyone listening, get a second opinion. Always get a second opinion. I always look at it this way. If you're a high earner and you're building wealth and you're relying on Bill down at the corner at Morgan Stanley or someone at Edward Jones to give you all of your tax advice, all your retirement advice, all your investing advice advice. You're making a mistake and likely leaving money on the table. And it's just like, you know, you have to understand, get a second opinion. If you go in for heart surgery, you're not going to take the first person's opinion. You're going to get multiple opinions because you want to make sure you do it right. Same thing should go with your money. That is why Austin and I do what we do every single day, is to spread the good word of financial education and to help people, because personal finance is personal. Austin, I think you did a really great breakdown. I think you are absolutely correct in what you stated and I would just get a second opinion. Nico, go find a cpa. Go find another financial advisor. I can link you up with a free call if you wanted to message us on Instagram with Croak Capital. But there's always a way to work around these things and build wealth the right way through these structures.

[A]

I couldn't agree more, Robert. And I think what's really important too is that you understand and it's okay to pay a pretty penny for some good advice, knowing that that good advice can save you or make you so much money on the back end. Right? So if you have to work with someone and pay them an hourly rate, that turns into several hundred, if not a couple thousand dollars to help you work through how this is all going to come to be. But now because of that, let's call it $2,000 bill you just had to pay, you can now extra invest 40, 50, 60, $80,000 a year into different accounts. You're doing these different things that turns out like, what's the phrase, Robert? People walk over dollar bills to go pick, walk over, you know, quarters to pick up pennies. Like, don't be that person. Like, it's okay to spend money for good advice. And we think that working with a good accountant is very, very powerful.

[B]

Yeah, don't pick up pennies while dollars fly by. And I love that. And it's, it goes to what Austin and I say all the time. It's not what you make, it's what you keep. And by having really strong structures and tax strategies, you will earn so much more and gain so much more in your lifetime and create so much more wealth by structuring things correctly.

[A]

So our next question comes from Fred S. Fred says, hey, Austin and Robert, you can call me FJ. All right, what's up, FJ? FJ says, I've been listening since April 2023 and will never stop. Let's go, FJ. That's so high. FJ says a little about me. I'm a sophomore finance major at a private University in Fairfield, Connecticut. I have a question about what to do with $10,000 in cash that I've set aside for rent my senior year. So FJ says, I've already signed a lease for an off campus house that's going to cost me 18,000 dol for nine months. I'll have seven other roommates. Yes, it's $144,000 for the school year. It's ridiculous, but it's one of the cheaper townhomes and cheaper than living on campus. Right now I'm 20. I have 7,900 in a Roth IRA that's maxed out for 2025, 10,200 in a brokerage account, 300 in crypto, 7,000 in savings that I'll use during the school year. I usually make about 15,000 each summer, but I earned 33,000 this summer from an internship. Part of that 33,000 was a $16,000 bon bonus, 4,000 of which I still hold as equity in the company. My main question is, what's the best way to grow the 10,000 over the next two years to help pay my rent? Or would it make more sense to use this money to max out my 2026 Roth IRA contributions, save as much as I can for rent, and take out loans to cover the remaining amount? Thank you and looking forward to hearing your thoughts. So you've got 10,000 set aside for rent your senior year, and you've got 10,200 in your individual broke brokerage account and then 7,000 in savings that you will use for the. So here's what I would do. If you need to set this 10,000 aside to help pay rent, set it aside in a high yield savings account and then use the money that's in your individual brokerage account to contribute to your Roth ira. Right? I'd much rather see you have a maxed out Roth IRA of $7,000 a year in 2026 than 7,000 in a taxable brokerage account. Right? And you have 10,000 in this taxable brokerage account. So use that money to max out the Roth ira. Oh, no, it's taxable. I got a. Sell my holding and I'll pay. Cool, whatever. Pay your taxes, congratulations and profits. Move that money into a Roth ira. Let that money now get invested correctly because that's going to really grow and be tax free when you're, when you're in retirement. And so don't even worry about like using this, you know, 10,000 for rent money to go invest the Roth IRA. You've already got the Roth IRA. Not figured out. Now it's like, cool, what do I do with this 10,000? Put it in a high yield savings. Get your three and a half, maybe 4%, depending on if you can get a little promotional deal there. Congrats, you're now making three or four hundred bucks extra a year on it. And then once you have to pay rent, you pay some rent and hopefully you don't have to take out that much in loans. What do you think? Robert?

[B]

Yeah, I like that take. Austin. The only thing I would change is I would probably take the 10,000, I would put 6 of that, 6 or 7,000 of that into the High Yield Savings account and then I would take 3,000 of that and I would split it between Bitcoin, Etherium and Chainlink to get some risk on assets in crypto because, you know, with his age and situation, I think it would be worth the risk to risk $3,000 of that to get some really outsized gains over the next couple years and catapult him into a better situation for this rent. Coming up senior year.

[A]

That's what's fun about the show. We're allowed to disagree. I disagree. I wouldn't take on the risk. I think rent money is more important than crypto money. But Fred or F.J. rather, you've got your. You got our takes. So our final question comes from Christine S. Christine says hi, Austin. Robert, first of all, thank you. I started listening to you two years ago and you've changed our lives. Thanks to your advice, we have managed to save hundreds of thousands of dollars between our 401k IRA 539 and we also have set up a brokerage account that has just taken off due to all of your advice. I'll be grateful to you for my entire life. Geez Louise, this is insane. Thank you so much. Christine S. What kind of kind words. I'm so excited. We didn't do anything. You did it all. We just gave you some information. You're the one that took notes and took action. So congratulations. Christine says. Now here's my question, and I don't think you've addressed it yet on your podcast. Our son is a senior in high school. He'll be attending college in the fall of 2026. We'll have about $60,000 in his 529 by then. But that won't pay for all four years. It'll only pay for about two years. We're high earners, so we will not qualify for any aid. We can afford to pay the rest of his college with money that we earn from our jobs. We're not going to take out any loans. Don't worry. I've heard y' all talk about this one debt free education. Finally, we're in a great position with little debt and we are set to retire early, maybe even at the age of 59 if all goes well. So here is my question. Do I withdraw all 60,000 out of the investments, keep it in CDs and other money markets to grow inside of this account for over the first two years here. So we can pay as we go the first two years or should I withdraw the money in four year increments and then pay for the rest of the education through our salaries and things of that nature? All right, Robert, so let's talk through this. So Christine's essentially saying, hey, I've got 60,000. It's going to cost 120,000 for our son to go to college and we can cash flow the remaining 60,000 ourselves with our salaries. And so we're trying to figure out, hey, do we completely cash out the 529 account and use it to pay for the first two years years, or do we only cash out a portion of it and then, you know, use our salaries to do the rest? What's your take on this one, Robert? This is an interesting situation.

[B]

It is a really great question. Here's my take. If you have enough for the first two years, I would do that. I would pay for everything the first two years and take the equivalent amount that you're going to be investing for the last two years. And I would start getting that moving next now, rather than splitting it up over the four years because then you have compounding, you have interest, you could put it in CDs, maybe Treasury bills, high yield savings, depending on which one's paying better. That way you're gaining value over time and building more money. So it's not as much out of pocket for you. Rather than splitting it up in four years where then every year you're coming out of pocket. That's what I would do because I believe the math is going to really work out in your favor even if you're only making 3, 4 or 5% on the money. Because that way for the first two years you've got to cover and for the last two years you have that 24 months to grow this money.

[A]

Yeah. So how I'm thinking about this is like, okay, Great, you have $60,000 in this Five29 account. One make sure that it's not invested anymore. Right. It's been invested for years now. It's grown into 60,000. Cash in on those investments and make sure all 60,000 is in some sort of like short term T bill account that's paying 3 to 4% year. So that's how you get an extra, let's call it, you know, two grand per year and just yield by having your money sit in the right cash accounts inside of your, your 529. So one cash out of the investments make sure it's like cool. We now have the 60k rock and roll. And it's earning a little bit of interest for us along the way. In my opinion. I would keep it like that. And then like cool. Year one for college, 30 grand. So we're going to take 30,000 out of that. So we're going to sell whatever those like little, you know, cash ETFs that we're sitting in. We're going to sell the ETF. So we get 30,000 of cash we're going to deposit into our checking account and we' to pay for first year. Awesome. Now it's the second year, 30,000 again we're going to cash out. I guess the rest of this account use that to pay for the second year. Now we have two more years of school where we do not have another $60,000 to pay for it. So yes, cash flow. If you got an extra $30,000 that you and your, your spouse can, can take from your salaries to pay for that rock and roll. Same thing with the final year there in year four. The only thing that I would add to this is depending on the state you live in, sometimes you're able to get, get some like tax benefits from contributing to the 529. So instead of, and it's not like this in Tennessee unfortunately, so I don't have like a good example to give you. But like I know some states you get to write off a percentage of those contributions or up to a specific amount of those contributions against your earned income, your taxable income. So instead of paying for college tuition straight from your personal checking account, deposit that amount into the 529 and then pay for it out of that account. So that when you go to your accountant and you're able to like, you know, do your, your taxes and your fil billings and stuff, you can say yes, over the last two years of my son's college we contributed 30,000 in year three, 30,000 in year four. We can write off however many thousands against our taxable income, saving us an extra couple thousand dollars along the way. That's how I would try and optimize for it. But you're not going to earn money on this. It's just using it as like a pass through account so that you can take advantage of those tax situations. But no, you did a great job. Congratulations on getting so much money invested and being so diligent. The only thing, and again, call me crazy, I know you already addressed it here. $100,000, 120,000 even, right? 120,000 for a college education is bonkers to me. Absolute bonkers. I don't know what college your son's going to. I hope he becomes a doctor for. I. I don't know. Right? But 120 grand is a whole, whole lot of money to pay for a bachelor's degree that's going to earn your son. Let's call it $75,000 a year out of college. I would like to see that much closer to 35,50,000. Maybe it's an out of state school, I don't know. But who cares? You paid for it. You know, he's not taking on any debt. All is well. You guys are doing great here. But geez Louise, that's a lot of money.

[B]

Yeah, I didn't want to go down that road of is it the right idea or not? Because we could go 15 different directions on what to do with this money. But what a great episode. So many incredible questions. Thank you all so much for following along and always engaging with us. We love, love love getting all these complex questions questions so we can break it down and really just try to bring as much value to each and every one of you that we can. So we appreciate you following along. Always make sure to share the podcast with someone that maybe needs a little nudge in the right direction financially. We're here for it. Get them involved. Join the Newsletter we still have the seven day free trial going right now for the Rich Habits Network, which is awesome. We spent two and a half hours, two, two and a half hours every single week going through what we invest in, what we're thinking about, what are the markets doing. So if you haven't checked the IT out yet, the Rich Habits Free Trial link is in the show notes below. And thank you all for joining us.

[A]

Thanks everyone again for hanging out with us on this Thursday Q and A episode. Please go check out public.com please go check out the Rich Habits Network and if we provide value to you in these shows, please consider leaving us a five star review on Spotify, Apple Podcasts subscribe to the YouTube channel. Leave this video a thumbs up, all the fun stuff just to show support. The show's completely free. It's funded by advertisers, which is incredible. So nothing that you guys need to pay for. Ado. Just please continue to show support. We really, really appreciate it. Thanks everyone and really sorry to admit we will not have a Rich Habits Radar episode come out tomorrow. Robert and I are spending the week in New York City with Google, which is really exciting. So we'll give you guys some updates on that for the podcast next week. So we won't have time to film this week's episode of the Rich Habits Radar. Regardless, stay tuned. We'll see you Monday back to regular programming, and thanks. Have a great weekend. Sam.