Home Prices Are Being SLASHED (What You Need to Know)

22:13And then that's why I do like those milestone shows is because part of what we try to give you here is the why component as well. What is your money supposed to do since it's only a tool? Well, part of the 25 % is to free you to get outside of the analytics of this and live your best life. So I would go through some of the soft exercises of what is this, why am I saving? What am I saving for? This is all part of step seven of the Financial Order of Operations. If you haven't gone and checked out Millionaire Mission, I really, like I said, that chapter is the chapter that really sets up the, thank you, Beau, for the prop.

22:54Chapter seven, you know, when we talk about step seven, hyperaccumulation, it really does give you the why exercises. sizes so you can stay motivated. But then you get to, from there, you get to do what you want, when you want, how you want. You know, if you want a nicer vacation, you want to drive a nicer car, you want to get into residential real estate or commercial real estate, this is going to set you up to kind of do those type of things. But it's not supposed to feel constricting. It's supposed to feel freeing that now you get to go live your best life. I feel like so many things out there in the financial world, people get caught up in, you know, I have to be so rigid and I, you know, And to do this is going to say no and take away.

23:32I want you to have that abundance mindset where we're going to do this. So now we get to do more and you get to live your best life, both in this decade, plus the decade as you save for your 50s and 60s, you're not going to have regrets.

23:44Brian Preston:Love that. Excellent. Well, the second rush, thank you for your question. I hope that helps you think through what to do next. Millennium Interests has a question. what's your take on the current projections from vanguard showing a zero to three percent real returns for the u.s stocks over the next decade i know the mantra is to always be buying but does this impact strategy can we put the i need to get on the calendar the the date that vanguard puts this out because i feel like every year i get to oh yeah to answer this is what so and i i think it's brilliant on vanguard's part in the fact that they they They post this.

24:24They get all kind of press on it. I mean, so it gets a lot of attention, probably a lot of eyeballs, a lot of clicks go to Vanguard's website. But the thing is, is that I just shared with you guys, and if this turns into highlight, that part won't show up, so I'll reiterate it one more time, is we just came through a 20 % recovery in the last quarter. I mean, do you think about that? And here we are sitting at the point we're recording this where most of the indexes like the S &P 500 are up right around 6%, I think, year to date after having 11 % second quarter. So to hear 3%, I've been hearing 3%, by the way, last year.

25:07I heard 3 % the previous year. Vanguard, you can almost set your clock to the low expectation setup that Vanguard does. And the truth is they don't know. If you've ever seen the analysts that predict interest rates, the analysts that predict where the equity market's going, I would much more look at what is the historic normal return that you see out of these index funds. And then think about the law of accelerating returns is that as innovation and technology and economies continue to expand, how are you going to be able to capture that? Don't try to beat it, but can you just be part of that growth?

25:44That's what I'd be focusing on. So, yes, once again concludes, always be buying, making it automatic for the people is definitely one of those things you ought to be empowering and taking charge of.

25:55Brian Preston:I just get so frustrated because I feel like this happens over and over and over and over again. While I was rapidly doing some research over here, because what I remember is it was like circa 2010, maybe something like that, when I remember the Vanguard article coming out. You never can find the old history of it. I couldn't. Were you able to find it? I just found it. Good for you. I was trying to remember what year it was. If you remember, 2009 was a recovery year coming out of the Great Recession, and the market, even though it was down really bad at the beginning, it went gangbusters. And in 2010, Vanguard came out like, hey, we're going to expect lower returns moving forward, and it gave a number of different reasons why that was the case.

26:36Brian Preston:So I just went and asked, hey, what was Vanguard's investment outlook in 2010 moving forward? And it said, in 2010, following the 2008 crisis, Vanguard published research suggesting that the annualized real returns over the next decade would most likely be like 6 % for stocks and 0 % to 2 % for bonds. So you think about if you had like a diversified portfolio there, you're earning less than 6 % moving forward. I just very quickly said, hey, what was the annualized rate of return since 2010 for the S &P 500? and in reality it has been like 12.5 % to 13.5 % annualized, double what Vanguard said.

27:11Brian Preston:And so I think what ends up happening is, my guess, and I don't think you said this, but my guess is they operate under the assumption, hey, we're going to over-promise and we're going to under-promise and over-deliver. No one's going to be mad if we tell you the outlook for the stock market is going to be 4 % to 5 % and then the outlook actually turns out to be 9 % to 10%. But if we say it's going to be 9 to 10 and it turns out to be 5 to 6, well, then everyone's going to be up in arms. So they're setting themselves up not to let anyone down. When in reality, law of large numbers would suggest if you look at the way the market has performed for the last 40, 50, 60, 70 years, it tends to be pretty consistent.

27:51Brian Preston:There are ebbs, there are flows, there are ups, there are downs. We have a great illustration. This is not one we have in the coffers, but shows like if you just look at market performance on a year by year basis, it's absolutely chaotic. There is no rhyme or reason to how it works. But if you didn't look at three year rolling periods and then five year rolling periods, and then you look at 10 and 20 year rolling periods, it becomes very, very, very, very consistent through time. You just have to give it time to do that. So I'd be careful letting someone else tell you they know what the future is going to Hold, because I don't think that that's the case.

28:25What feels risky in the short term, historically, in the long term, can be much safer because it protects you from inflation and other things. And then what feels safe in the short term can actually be very risky in the long term because of those exact same factors. Yep.

28:40Brian Preston:It's not about what you feel when it comes to the stock market. That's what I heard. I'm going to, can I just take a, can I pause the show for a moment to do a note for my content team over here? You can. hey we ought to think about putting together doing some like research to go find historical van vanguard i'll be picking on vanguard because that was where the well they do it every year i mean this is go pull their predictions and then let's just like back test them because so often people don't get back tested to go see that um that'd be interesting i i'm gonna take a risk here i love it i had someone uh there's someone here visiting the other day yesterday and i went out there to meet him and i was talking to him like hey started listening to a couple years ago really really love the show i thought it was so interesting i went and listened back in the very beginning like circa 2006 2007 2008 careful and you know it was wonderful that she said she goes man you guys are saying the same stuff like like it's pretty if you want to go back test hey the things that we say and the things that we subscribe to about how money works go back and listen to a show from 10 years ago you'll be like oh wow this is pretty consistent but you realize there's troll comments they're like these guys don't say anything new so it cuts both ways it It really does.

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30:45Brian Preston:Subject to terms and conditions. Details at Lowe's.com slash terms. Subject to change. All right. You ready for another question? You're not. You have another thing to say. No, no. Wait a minute. Here he is. Oh. Nice. There it is. I just wanted to. It's time for the second drink. Someone in the comments this past week said, you know what, Bo? Why don't you just have like a nice pregnant pause, open your drink, and that way no one can complain about it and you'll be able to stay hydrated. Oh, yeah. Because we beat Bo down around here all the time. Poor Bo. It's pretty rough. Humble Bo. Well, you didn't open it while anyone was talking today.

31:17Brian Preston:So props to you. Okay. Donovan H. says, have you heard of the extra mortgage payment a year to help lessen the principle of the loan to lower paid interest? Would you recommend this strategy for a household currently in step six of the FOO? Brian, you start. I want Bo to start. No, I mean, yes, this is a common trend. And look, with interest rates being where they are on houses, if you're paying the 6.8 % right now, obviously this is a good strategy. And I love that you shared that you're in step six. I'm not a minimum payment type of person myself. So I've been rounding up my payments for years.

32:04The difference is, and this is where Bo's going to jump in, and that's why he wanted me to go first, just so I could fall into the trap and then he could snare me and make fun of me. I mean, I have a 2.5 % mortgage. By the way, the mortgage is, I just pulled it up because I had an insurance claim and we had to do this stuff and I had to get the insurance, the goofball mortgage company involved, even though I owe 50 grand on my house. But I even told the insurance adjuster, I was like, I'll just write a check to pay this thing off. But I was like, it's just so hard when I owe 2.5 % interest.

32:34Brian Preston:Could you imagine being Brian's insurance adjuster? No, he was great. Why are you talking about your mortgage? No, we had a great rapport. I met him out at the house. We went over everything. We talked. I mean, when I had an issue with the check, I called him up. We're on first name basis now. You think he's in the live chat right now? Is he a fan of the show now? I don't tell him what I did for a living. Oh, but you got to say, hey, you ought to check out the movie show. No, I don't. When you meet anybody, like we have somebody painting at the house right now. By the way, have you seen the podcast?

32:59I do it at the grocery store. Somebody's bagging my groceries. If you meet me, like I met my brand new neighbors. I have no idea what they do for a living. and they don't know what I do for a living. No, you don't walk around and be like, hey, have you seen my YouTube channel? No, I don't say that.

33:12Brian Preston:I'm like, hey, do you love personal finance? There's a show that I really like. It's called The Money Guy Show. You should check it out. And then when they pull up and they see me and you there, wouldn't that seem like the most ridiculous thing ever? Well, you know. You're funny. Anyway, what were we saying about mortgages? No, no, so I love that answer. Because there's a mathematical approach to this, right? Mathematically, okay, yes. Can I pay an extra mortgage payment and pay down my mortgage faster? Yes, that is true. And that is a strategy. Is that optimal? Well, it depends on what your dollars could earn outside of the interest rate you're paying on your mortgage.

33:48Brian Preston:So there's an arbitrage situation. If you're someone in your 20s, there's a good chance that you could put your money to work and it could have a higher rate of return than what you're paying on your mortgage. So there's a positive arbitrage situation there. Having said that, having said that, I think a lot of people play like little mortgage games and I'm not going to fight you on this. And so maybe your mortgage game is I make one extra payment. Or maybe your thing is I pay every two weeks. I'll tell you mine. And I'm not even a mortgage prepaid kind of guy. I round up. So every year, you know, property taxes and insurance or whatever.

34:20Brian Preston:My mortgage payment comes out and say that it's like, you know, my mortgage was$190. I round it up to$200. He wouldn't give us his real mortgage payment. I love it. He got himself in a pickle there. He's like, do I tell him my real mortgage payment? Because you know our smart audience has gone back into how much mortgage he has. You see how quickly that way. So yeah, so I round up. Again, it's not a strategy to prepay, and I do it just so I can, in my mind, mentally account for what my mortgage is. But if those sort of things allow you to stick to your plan and make you feel good about the decisions you're making, I'm not going to fight you on that.

34:55Brian Preston:But if you're doing that, if you're doing that extra mortgage payment instead of your Roth IRA or that extra mortgage payment instead of your HSA, then I start to have a little bit of pause and think that maybe you're operating suboptimally. Do you think I'm at the point I should just pay off the mortgage since it's down to 50 grand? Yeah. Even you? I mean, honestly, I mean, just because like, you know, we're at the point I hear so much about it, right? You know what I mean? It's basically a meme at this point. Right. You've been like, I think I might pay it off. You know what's funny is Megan's sitting over there, and I remember when we were starting the book tour, which was June of— Over a year ago.

35:35Basically a year ago. I was like, my goal is I'm going to have the mortgage paid off so I can tell everybody on the tour that I paid off the mortgage. But for some reason, I just didn't do it because that 2.5 % just really— I mean, I would have thought interest rates would have been down further now on cash, so it was going to be a much easier decision. but yeah you can still make if you know where to put the money you can still make over four percent

35:56Brian Preston:on your cash it seems crazy um i kind of there there are a lot of financial things though where i kind of subscribe to forrest gump methodology of hey it's one less thing so even though like at that at where your mortgage amount is right now if you know just pay it off and hey it's just one less thing you know what i mean i agree with that where you are just one less thing let us know if you decide to actually do it keep us posted we're gonna lie i gotta get through this Can we live stream you paying it off, clicking the button? That would be funny. I might do it soon. Why not? One last thing.

36:31Brian Preston:I think it's because Bo told him to do it. I still wouldn't be debt-free because of all our commercial real estate, though. No. That's right. It's not even going to go on Dave's show and do a commercial, you know, a debt-free scream because I owe commercial debt. It's just about. That's what I'm going to hear. Larry, we go do our debt-free scream and we're like, I'm debt-free, except for all the commercials, though. Not actually. All right. Ready for the next one? It's from Carrie. She's 45 years old with a 2-year-old and a 4-year-old kid. 2-year-old and 4-year-old kids. I will be 59 plus when they need funds for college, etc.

37:03Brian Preston:Is saving extra money for this in my Roth 401k and Roth IRA okay? It seems more flexible and lower cost than a 529. Thanks. um so here my question would be uh what what what caused you to draw the conclusion that it's more flexible and lower cost than 529s because 529s have changed a bunch over the years and now 529s i think they're offered by all 50 states right you can actually do one at all 50 states depending Depending on the state in which you live, because by the way, we love Roth IRAs and we love Roth 401ks. We love the fact that you put the money in and it can grow tax deferred. And if you draw it after 59 and a half, you can actually pull the money out completely tax free.

37:52Brian Preston:But for a lot of people, if you live in a specific state that has state income tax, there's a chance that not only can you get that same Roth type benefit for 529 tax free growth, you can also get a deduction on the front end if your state has an incentive for doing that. So, Kerry, not knowing what state you're in, that would be one of the considerations I would make is, okay, should saving to a 529 be part of my strategy? Because there's an extra little tax benefit there that I want to do. Now, here's what I want to make sure you're doing. Saving for that college education needs to come above and beyond what you were already saving for your future financial independence.

38:35Brian Preston:Meaning this is like, after you're at your 25%, do I want to save even more to my Roth 401k or even more to my Roth IRA? And I bet if you think through it that way, by the time you get through your Roth IRA, you've already saved 7 ,000. Well, you can't really use that because that's going to be like financial independence money. And so maybe depending on your income inside your Roth 401k. Yeah, maybe you could plus that up some if you have room, but there's a good chance if you're saving 25 % doing the thing that you're supposed to be doing, you're going to need the 529 capacity anyways, to make sure you're not actually cannibalizing your future retirement assets to pay for college.

39:13That's why I think you have to keep them separated. I mean, that's why I love the, cause they have different goals. I mean, And 529s in college saving is a step eight. You know, these abundance goals, prepaid future expenses. Whereas your Roth IRA, your Roth 401k, those are steps five and six of the financial order of operations. And what I worry about is if you are just throwing them all into the Roth assets and you think you'll create some weird dynamics for yourself in the futures. Because, first of all, every person I know who has Roth accounts, it's like you're precious. You don't like to pull money out of those.

39:47You're hoping you die with those. and then your beneficiaries get to let them grow for 10 years before they pull out of them. So Roth assets become very valuable, and you just don't want to walk away from them. And I just worry you get a false sense of security because your accounts are going to look so good, but then you start pulling this money out for college, and all of a sudden you gutted one of your biggest retirement assets. That's why if you keep them separated and they have a goal and a purpose, you won't do that mental accounting where you have a false sense of security. Because, you know, because maybe sometimes to save more for college beyond what you have to do for yourself in retirement is kind of a selfless act that's going to require discipline and require some sacrifice.

40:32I don't want you just feeling like, hey, I'm in this and I'm loading up my Roth. I'm loading up my 401k. This will also cover college. And then, like I said, you got it. and whereas maybe if you just started a little earlier and felt the pressure of keeping them separated and knowing man in addition to my retirement i got to save for the kids college you might have made some different decisions on your consumption on your lifestyle um so i that's why i like keeping those things separated so those goals can can live each their best life but be accounted for um appropriately so you don't get this convoluted jumbled up all for one goal out of my Roth account.

41:12Brian Preston:Love that. Yeah, it would be kind of a bummer just thinking through this like practically because it is the precious thing. Like most people I know, most clients I work with who have retired and they're in their early 60s, they do not like to pull out of that Roth. I mean, it's only if like, okay, if I do another distribution, I'm going to trip Irma or I'm going to cause my social security be touted or whatever the strategy we're employing is if they can avoid it they do and so writing those tuition checks out of that that's gonna suck i mean it's just roth feels like you're getting away with something yeah and then it's just hard to to want to pull that money out i'm just telling you from our client experience people don't like to pull money out of the wrong even myself i mean i'm not that i'm pulling money out but just watching the account grow i'm like what can i do to get that roth account up to seven figures because i wanted to be a seven figure um Roth account I think that would be just a cool stick it to the man legally type thing same no that's a good experience share um Carrie thank you for the question and I hope that that helped you out too Tyler H says I was saving for a large expense that I ended up not having to pay I saved around 20k and I have also right around 20k of high interest what are we doing here at 8.6%.

42:32Brian Preston:Should I just use the full amount to pay off the debt? This is the easiest one. Yes. Yes. Well, I mean, wait a minute. First, obviously go through the financial order of operations. What do you have in steps one and four? But without a doubt, I mean, if I had 8.6 % and this was money above and beyond emergency reserves, extinguish it. You know what? Yes. Agreed 100%. Just behaviorally. One of the things I'd like to think about, Tyler is this large expense that you were saving up for. I don't know what the expense is. Behaviorally, though, I would ask myself, man, if it was saving up, oh, I'm gonna buy a new car, I'm gonna pay for a trip, I'm gonna do whatever.

43:13Brian Preston:Was saving up for that appropriate, given the fact that you have$20 ,000 of high interest debt at 8.6 %? I just want I just want you to think through because there's a good chance that if it was a large discretionary expense, it was wants, not a need, you probably should have knocked out that debt before saving for that. Because what I don't want to see happen again is you're going to do this, you're going to pay it off. I don't want to be in a live stream three years from now and all of a sudden Tyler H. asked a question like, hey, I got this high interest debt again. Like I want you to break that cycle.

43:44Brian Preston:I don't know where it came from or what happened. What type of debt was it though? Do we know? He just said high interest debt. I don't know if it's like student loan or credit card. Could have been a car, could have been a credit card. Could have been a room full of furniture. Could have been a room full of furniture. Yeah, I just, I want to, but the fact that you were saving up for another expense while you had that debt, I just, and look, it may all be completely on the up and up, but it's certainly worth taking a moment, having an assessment and saying, man, okay, am I doing, am I thinking about my money the right way?

44:13Brian Preston:And you, you may very well be, but it never hurts to just kind of work through the exercise to, to make sure that you are. All right. Good stuff. Tyler H. Thanks for being here. Thanks for asking the question. K-Y-P-A has a question. It says, can you break 23-8 if you're not paying rent? I'm a college student who's working part-time and I bought a used car. Is it okay to break the rules in this case? Well, you're not going to get arrested, right? I mean, like this whole, everyone asks, hey guys, can I do this? Sure. It's your life. You can, if you want to, you can do, you know, 1-7-19. right yeah but here's here's what he's really getting up is it what you should do can you go if you're living at home with your parents can you go buy that convertible mercedes that you've always wanted that will make you look really cool to your friends i mean you can you physically can the question is it's a should question it's a should question is it okay i just don't think i mean because i think that it's it's a it's a life lesson is if you're going out there and using this opportunity it is an opportunity if you're living at home and don't have to pay rent that do you realize how you could just be just just printing money just stacking in the background um and and running through the financial order of operations very quickly um but it just seems like a wasted opportunity if you go buy a nicer car just in this moment in time you can say you're a car person but man i just know as a person who who's now in my 50s consumption decisions like cars and those type of things just seem so just empty compared to having money in the bank so that I can live the most flexible and own my time and do what I want, choose to be what I'm involved with.

46:04That's going to pay so much more life dividends than just the feel good moment of in your 20s or even younger. I don't know how old this individual is since they're living at home, but of driving a fancy car.

46:17Brian Preston:Yeah, I just, I don't know. The 23-8, it's there because it's a helpful metric to help us, but some of it's also to protect us from ourselves. If you find yourself in the situation like, man, I can't save up 20 % for this car. Maybe you can't afford that car. Man, I can't get the payments inside of three years. It's just too, ah, maybe you can't afford that car. Man, if I do this, that's going to be high. Okay. Maybe you can't afford it. Some of it is to protect us from ourselves to make sure that we don't prematurely make financial decisions that we are not ready to make. Because I don't know your situation, your circumstance, but there's a really good chance if we were to fast forward 20 years in the future, I just don't think you're going to look back and say, man, I'm so glad I bought that more expensive car that had that higher payer with a higher interest rate.

47:08Brian Preston:I think you're probably going to say, man, I'm glad I made those wise, prudent decisions so that now at this stage of life, 20 years in the future, I can go buy that nicer car because I get to pay it off all in one year, same as cash. And I'm not actually faking it. I'm actually in the financial situation where I can do those sorts of things. Well, I think it's important. It's a mindset issue is that you quickly realize when you're young that the system is not going to protect you. It's actually designed to help you consume more. If you think about what's going on with car loans, where the average car loan is beyond$700 a month.

47:40The term of car loans has gotten where it's close to six years now. You quickly realize the guardrails are not there. So it's on you to develop the behaviors and the systems to set yourself up for the future because nobody's coming to rescue you. Nobody's coming to save you. So that's why it just troubles me when you're in this moment of opportunity, especially when, Tom, you're a billionaire of time, depending upon how young you are, where you can totally own the system that much sooner. And if you fall into that consumption trap and let the system with the siren song of, you'll look so cool, your friends will love you more, whatever the thing is, it's enticing you to live this fake life.

48:24Remember, it's better to be rich than to look rich. And I'm just telling you, don't fall into those consumption traps. That's great.

48:32Brian Preston:good stuff and as usual kypa we appreciate you being here and asking your questions so we can chat about it on the show brian i thought it was interesting the financial mutants have spoken we asked a poll in our live stream that said should brian pay off his mortgage oh wow i didn't know we were gonna make this a community group project what did they say 64 said yes look at that you know what majority you know what i'll be i'm gonna go grab his checkbook i'll be right No, okay. I'm going on vacation. I'm in, by the way, realizing these seven inches seems a little short in this air condition. Vacation mode, Brian.

49:04I'm wearing shorts today because I'm going down to Florida and then I'm catching a cruise after the 4th of July. It's good living, man. I'm in a good mood. When I get back from the cruise, I'll figure out and I'll pay off the mortgage.

49:19Brian Preston:Kind of like before the book tour. Sorry, say first. As long as Bo, it was a big deal when Bo said you should pay. off because you have to understand bo and i in the background we're constantly talking and he's like you really gonna pay that thing off because i think when the book came out was it right around 100 grand there's a more a little bit more than 100 or maybe it's 90 grand i can't remember but here's the thing is i always so little now even my monthly payments just knocked down it gives a ton of it a ton of principal each each month yep one last thing one last thing it'd probably be paid off within a year anyway just yeah i'm not really cutting a lot off that corner right now Oh, man.

49:58Brian Preston:He's going to go write that check, the mortgage company. But Mr. Preston, this loan's already paid off. Well, I have to get through this insurance thing because I need the mortgage company to send me the insurance check back. I didn't, but y 'all have never done an insurance claim. If you have a mortgage, they put the mortgage company on the check. And it is a pain. Because I wrote on there for deposit only. Well, as soon as I wrote for deposit only, now I have to, the insurance company said they can't take that check. So I had to get the, I mean, the, yeah, it's, I mean, the bank wouldn't, they said they needed the endorsement from the mortgage company.

50:31The mortgage company wouldn't take the check because I wrote for deposit only on it. So thank goodness I have the resources to cover all these repairs without this insurance check. Because goodness gracious, it's an act of Congress to get this thing.

50:45Brian Preston:Good to know. Yeah, if you have a roof claim or something, come see me. I can give you all the details. the details. And then I can talk about my underwriter that we're first name basis with. There we go. Let's add that to the content idea. How to have a roof claim. What I had in the content calendar. Ruby got real excited about that one. I just fell asleep hearing that title. Sick burn. All right. Let's do another question from Codiferous. It says, can you explain if a solo 401k is better than a SEP IRA for a 1099 employee? Okay. I can explain it. Oh, okay. Yes, I can explain it. I thought he was saying, yes, it's better.

51:25Brian Preston:Yeah. Can you explain it? Yes, he can explain it. Hey, Ron, you're the CPA, man. Walk us through this. Well, I mean, look, there used to be some subtle differences that made SEP IRAs better than SEP 401Ks for specific certain people. It's like if you're a procrastinator and you made a little extra money, you get to go do your taxes and the accountant or tax preparer is like, man, we got to find some way to lower your tax bill you could whip out your handy dandy sep ira um and and it was like a time machine you go back in time let you set it up as long all the way if you extended the return all the way up until april i mean october 15th um well now they've updated because the solo 401ks in the past had to be set up by year end now they've changed that you can actually go back in time i don't think you can go back in time on your salary deferrals is that because that's the w-2 decision if you're if you're a w2 employee it depends on if you're w2 employee depends on how your compensation is structured but but but and realize the contribution from a sep and a solo on the profit sharing side are pretty much the same thing because it's um it's a version of your net profit after you take into account self-employment taxes or or payroll taxes so that's why it's it's it's so funny i'm old enough that i've seen so much of the system progress is because when I was younger, this sounds so ridiculous, but SEP IRAs were the go-to for everybody.

52:48And then you saw people then transition to solo 401ks. Now it's gotten to where I think solos just dominate this process. Now the only thing we remember with solos, there's some caveats we've got to talk about. The only employees for the company can be you and your spouse. Even if you've got your kids working for your company, That kind of blows this all up. You got to go traditional, more of a, you have to have a plan document and all the other things that go with a 401k. SEP IRA, you still, if you have employees, can still use it. But you realize whatever you do for yourself as a percentage, you have to do for your employees at that same because it's an employer-only contribution.

53:27Your employees are not making any contribution when you do a SEP IRA. It's all employer-only fed. Solos are a mix because it's not only the employer portion, which is the profit sharing, but it's also your salary deferral, which is at$23 ,500. If you're 50 and over, or you're turning 50 this year, you get that catch-up of$7 ,500. Did I get all those numbers right? They had them all. Look at me.

53:51Brian Preston:Only thing I'll add to that is, are solos better than SEPs? In our experience, solos allow you to save more money at lower incomes than SEPs. So if you have a$30 ,000 income or$30 ,000 net profit coming through, with a SEP IRA, you're only going to be able to save about 20 % of that as an employer contribution. Again, it depends on how you're compensated. With a solo 401k, you can do a salary deferral all the way up to 23 ,500 of that 30 ,000 plus you can do a profit sharing contribution based on the net operating profit. So at high incomes, you can save the same in both. You're going to run into the section 415 limits, but at lower incomes, solos allow you to save more.

54:34Brian Preston:So that's why they often have more advantage. Another big advantage to solos is if you have a solo 401k and you're funding that, you will not run afoul of backdoor Roth pro rata rules. If you have a SEP IRA and you're trying to do backdoor Roth, you're going to kind of run into some pro rata rules you have to think through. So it provides a planning opportunity there. And now some custodians actually offer Roth solo 401ks. So not only can you do salary deferrals in there, you can do Roth salary deferrals into your solo 401k, which is a kind of an interesting thing. Now, here's the one caveat you need to be aware of, Brian.

55:07Brian Preston:You started to mention this, but I don't think you mentioned this exact one. Once your solo 401k gets over$250 ,000 of combined assets, and that's you and your spouse, then you have to annually file Form 5500 before July 31st every single year. Now, there are no taxes due. There's not like a cost to doing this, but there are penalties if you fail to do it. So you have to make sure that if you are over $250 ,000 of total assets, you are filing a form 5 ,500 every single year, either having your accountant do it or you doing it directly. So long as you make sure you've checked those boxes, they are a fantastic and wonderful savings opportunity for you.

55:47Brian Preston:Well done. I mean, I was sitting there going, man, every one of those, I was like, I don't think I left much meat on the bone for Bo and then you came back and on top of it that's that's well dynamic duo that's what we do love to see it that's why you know that's why we're here every Tuesday 10 a.m central so be sure you subscribe not only to know when we release personal finance videos but also to know when Brian pays off his mortgage there we go ever does I am I'm gonna do you posted we'll come back the suntan version of myself is gonna pay off the mortgage the suntan I like this. I like this idea.

56:19By the way, if anybody's going to be on the Utopian of the... Am I saying that right? The Utopian of the Seas? Utopian of the Seas? Is that the name of it? I haven't been on the Royal... I mean, I haven't done Royal Caribbean in a while, so we're doing Royal Caribbean after the 4th of July.

56:31Brian Preston:Utopian of the Seas. Or Utopia of the Seas? It's one of those Oasis-class ships. Me and like 6 ,000 other people. It's a Royal Caribbean International's newest cruise ship, part of the Oasis-class. Second largest cruise ship in the world. It's known for... It's short, three and four night itineraries to Nassau and perfect day at Coke. Okay. Thank you. Great time. Okay. Wait, I've never had a coconut and lime drink, but this was those things are really, I've watched a lot of YouTube videos. So we are ready. Got to try one. That's awesome. Guys, remember a lot of the why money is only a tool we want it to, so you can do live life on your terms, do what you want, when you want, how you want, and really kind of know what you value and how to own your time that much sooner.

57:16That's what we're creating here. So go to moneyguy.com slash resources. And then if you have, because realize, we give you so much free advice. They'll be like, what's the catch here? Here's the catch. It's called the abundance cycle. We recognize we can give you all this simple advice that is going to create true abundance for you. But just natural success is going to create complications. And when that happens, we're going to leave the porch light on for you. And we hope that you will fulfill the abundance cycle. and consider giving us a shot to be your fee-only fiduciary financial advisors.

57:48I'm your host, Brian Preston, Mr. Bo Hanson, Reby, and the rest of the content team. Money Guy, out.

57:54Brian Preston:The Money Guy Show is hosted by Brian Preston and Bo Hanson. Brian and Bo are partners with Abound Wealth Management. Abound Wealth Management is a registered investment advisory firm regulated by the Securities and Exchange Commission in accordance and compliance with the securities laws and regulations. Abound Wealth Management does not render or offer to render personalized investment or tax advice through The Money Guy Show. The information provided is for informational purposes only, may not be suitable for all investors, and does not constitute financial, tax, investment, or legal advice.

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