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Fiscal Firehouse Introduciton:
Welcome to the Fiscal Firehouse,

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a podcast dedicated to promoting
financial literacy to firefighters.

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I'm your co-host, John Beatty, executive
board member of Local 1309, a lieutenant,

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and also a certified financial planner.

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With me, I have the other co-host of the
fiscal firehouse, Louis Barella, executive

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Board member of Local 1309 ambulance
driver, and want to be financial expert.

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Together, John and I hope to bring
clarity to the world of personal finance,

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specifically relating to firefighters.

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Firefighting is a
difficult job making sound.

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Financial decisions shouldn't be.

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Jon Introduction: In today's episode
of the fiscal firehouse, John and

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Louis kicked things off with some
lighthearted banter, talking about

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college football drama, pro football
rivalries, and the realities of

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getting older as a sports fans.

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Before shifting gears into a topic
we get asked about all the time,

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the taxable brokerage account.

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What exactly is it?

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How does it work and
when does it make sense?

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Compared to retirement accounts like the
4 57 plan, we break down the flexibility,

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tax considerations, and real world use
cases that matter most to firefighters.

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And as always, our goal is to cut
through the noise and help make smarter

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financial decisions that fit your life.

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Without further ado, let's kick it
over to local 1309 studios and the

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recording of the physical firehouse.

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Jon: Welcome back to another episode
and recording of the Fiscal Firehouse.

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I'm your co-host John Beatie
with me as always, mixing it up

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a little bit across the table,
wearing his, big D for the Donkeys.

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Big game.

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Big

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Louie: hate week.

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It's hate week on the podcast.

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Jon: dude.

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We got a lot of stuff to talk about.

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We're actually not gonna talk
about anything financial.

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We're just gonna talk.

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Shit.

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Basically the whole episode because
we got a lot of stuff to unpack here.

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It has got nothing to do
with personal finance.

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Louie: No, nothing.

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Nothing.

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Jon: where do you wanna start
off with I, this is the first

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time since I've known you, Louie.

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I mean, we're going on a four year
friendship here and he's always

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worn the maze and blue everything.

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Blue Michigan stuff.

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Tough times to be a

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Louie: You know what?

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It's never been a better
time to be a Michigan fan.

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Let me tell you something.

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College football season's almost over.

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Thank God.

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Uhhuh, we got

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Jon: But you guys have basketball.

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Louie: We're the number
one team in the country.

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We're gonna go to the final four.

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We're probably gonna win it all.

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You could take that to the bank.

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Dusty May and Michigan basketball.

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We're a basketball school.

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All right.

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Jon: Forget

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Louie: Football also a hockey school.

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We're ranked top two or three.

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We're, we might win a
hockey championship too.

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We're going for it all.

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We're going for the big leagues.

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And then, yeah, we just got a couple
things on the football side to figure out.

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it's not looking too good on that

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Jon: side.

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Oh my God.

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Louie: You know what though?

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it's a sad story.

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It really is.

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I don't know if you've been
following the whole Sharon Moore

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thing in Michigan, but it is

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Jon: No.

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Gimme some backstory.

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I mean, I just saw that he was arrested.

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He

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Louie: was arrested.

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It involved him cheating
on his wife with a staffer.

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Probably involves hush money.

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It involves, unfortunately, and this
is where it's really not a joke,

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especially in the fire service, but
there was some suicidal things that

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were said he was placed on hold,
not trying to make light of that.

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It's just, it's a crazy story.

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It really is.

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Jon: But, so he's in jail right
now waiting to be arraigned

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Louie: a mental health hold.

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I think he was on an M1 hold.

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he kind of went crazy.

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But, yeah, they, it was all involving an
affair that has been going on for maybe

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quite some time, like, not just the last
couple months, but maybe longer than that.

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So, you know, don't wanna say
anything too much more than

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that, because, it's all hearsay

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Jon: Yes.

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Prove innocent.

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You know, I assumed to be innocent
until proven guilty kind of thing.

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Louie: But it's a terrible situation.

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And so now Michigan has to
go look for a new coach.

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And it's not the best time to
look for a coach right now.

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So

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Jon: I feel like there's something, the
podcast we put out into the universe,

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and I'll talk about these two things.

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So first of all is head football coaches.

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So, Louis went to Michigan and many
of you know that I attended many

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division one universities, one of mine
being Ole Miss, and dude, all right,

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football coach said pack my bags.

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See you guys later.

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Dude.

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It is been nothing but drama for
Louis and I for the last month just

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dealing with, head football coaches.

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So

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Louie: and college football is
better than any kind of TV drama

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or soap opera or reality TV show.

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It is.

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It's all the scandals and all the drama.

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it's great.

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Jon: It is great.

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Yeah.

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And the one thing that's interesting
about the NCAA and something that I

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didn't really think about until this
whole Lane Kiffin Ole Miss thing,

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fiasco showed up is like, you know,
in the NFL, you can't talk to another

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coach until their season is over.

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Yeah.

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that is not permissible.

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Why the NCAA continues to let
these coaches wheel and deal

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while they're still midway through
the season or in the playoffs?

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It just, I mean, they're
eating their own right now.

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They're cannibalizing

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Louie: Themselves.

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it's a weird situation.

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It's a weird situation.

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So

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Jon: so

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Louie: there's that, and then there's
pro football, which it's hate week.

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We got Denver versus Green Bay.

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Yes.

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You are an exclusively Green Bay guy.

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Like you don't cheer for any
of the NFL teams, do you?

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Jon: No.

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So I am 100% bleed green and yellow.

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Okay.

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so that is who I always root for.

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But you know, if Green Bay is not playing,
I will root for the Broncos for sure.

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I live here, I've lived here for 25
years, so, you know, my wife's a huge

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Broncos fan and my kids are split.

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One of 'em likes the Broncos and
the other one likes the Packers.

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So there is such thing as
a favorite child for sure.

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So

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Louie: know who it is in

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Jon: we know who it is
in the Beatty household.

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so huge week.

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And unfortunately though, and this goes
back to just kind of the, where we're at

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with finances, but like, I was like, man,
it'd be really cool to go to the game.

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You know what the tickets are running.

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No, I

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Louie: I didn't even look.

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Jon: no.

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Cheapest one in section 500, which is
in the top bowl, was like three 50.

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That's X fees.

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So by the time you pack in
fees, you're looking at 400.

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By the time you pack in parking, maybe
a drink or two and some food, you're

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looking at, you know, 800 bucks, six 50.

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You know, dude.

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So I'm just like, no,
we're not doing that.

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We're gonna watch it on the couch.

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We're gonna have some family fun and,
we're just gonna watch it that way.

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At least the weather
is gonna be beautiful.

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Louie: I'll tell you this, I.

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This is a sign that I'm getting old.

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Right, of course.

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But man, I have enjoyed going to
the stadium less and less, whether

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it's mile High Stadium, whether
it's the big house in Michigan even.

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I just feel like it's fun.

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It's great to do like once a
season or maybe twice, but I feel

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like the experience is top to
bottom, better watching it at home.

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Like now

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Jon: way more comfortable.

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Louie: You can buy an ole tv, you can buy
a 4K TV package and you can watch these

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games and eat better food, drink better
beer, all from the comfort of your home

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without dealing with drunks, without
dealing with idiots, without dealing

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with parking for a fraction of the cost
like that, that would cost you one game

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to probably have that set up for a tv.

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Nice food, nice beer, and no idiots.

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Yeah.

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Versus that's just one single game,

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Jon: It is, it's crazy.

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And I think things changed for me,
significantly when I had kids and

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then bringing your kids to the games.

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You want a different experience
than when you're in college.

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Right.

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Like, and that's maybe
just where we're at, right.

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Doing our life cycle.

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It's having younger kids and
not wanting them to be a bunch

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rounded drunks that are just, you
know, it's just, it's not kosher.

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It's the kids don't enjoy it.

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You don't enjoy it, and it's way
cheaper to just sit on your couch

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Louie: and you guys know us, we're cheap.

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Like that's why we have
a podcast on finances.

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So Of course we're like,
we need just save that

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Jon: Yeah.

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I've vest that over 35 years at 7%
compounding like you're gonna end up with.

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Louie: I could put that in a
Roth IRA or a brokerage account,

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which, Ooh, foreshadowing.

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little foreshadowing there.

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Jon: I love that.

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So that was the one thing
that I wanted to talk about.

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Football.

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The other thing, and this has
definitely been a fan favorite.

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So the lottery episode, man, we were
firing on all cylinders apparently

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'cause we got a lot of good feedback.

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but they must have been listening
to us, the old Lotto Commission.

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And you know what they
did after our podcast?

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They did.

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They made it even easier to gamble.

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and what I mean by that is now you
can buy your co Colorado lottery

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tickets, Powerball, mega Millions.

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On your phone

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Louie: Mm-hmm.

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Jon: and you can use credit.

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You no longer.

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You always, you know, basically
since the dawn of time, if you're

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gonna purchase a auto ticket, you
either had to have coal hard cash,

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or you had to have a debit card.

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You could not use credit to purchase this.

00:08:01.810 --> 00:08:02.200
Nope.

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Now you can go ahead and
max out a credit card.

00:08:05.890 --> 00:08:06.550
Go all in.

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Louie: new Age.

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It's a new age, gentlemen.

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Let's do it.

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Let's do it.

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Let's just go all in on lottery tickets
on our phones through credit cards.

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Sounds like what could go wrong.

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Jon: No,

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Louie: what could go wrong.

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Jon: it's a whole episode onto itself.

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But I was like, man, I feel like we're
really throwing some stuff out there.

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And the universe is just giving it
back and being like, man, what we're

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talking about is really resonating
with society in a multitude of ways.

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So there you go.

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Louie: John, I also got big news.

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I just kind of dropped this on you
before I, this is big news for me.

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Jon: Oh yeah.

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Louie: got here, but I have
given up coffee and just caffeine

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in general, which is crazy.

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Right.

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Jon: Tell me why, because it's not
a, I mean, tell me the why behind it.

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What, is it a health

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Louie: No.

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No, it's not.

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It's not for sleep.

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I just was like, you know what?

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I'm drinking a lot of coffee.

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We drink a lot of coffee, right.

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Jon: Yeah, dude, you work with Captain

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Louie: Oh, Reed.

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Oh

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Jon: I mean, who can go ounce
for ounce with this guy?

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And I,

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Louie: Reed was mortified.

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Like when I told him I was giving it up
and I was like, I'm, 'cause I was started

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doing a little bit less coffee each day.

00:09:05.025 --> 00:09:08.355
I was drinking fewer and fewer grams
every day to try to like wean myself off.

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I couldn't

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Jon: Did you have massive headaches?

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Louie: I did have headaches when I
got to about 10 grams of coffee a day.

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Okay.

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and then, they kinda went away after
a day or two, but I was telling

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Reed this and he's like, why dude,
why are you doing this to yourself?

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Don't do this.

00:09:20.405 --> 00:09:21.245
Like, he was concerned.

00:09:21.275 --> 00:09:24.485
Jon: there's health effects, there's
benefits of drinking, caffeine.

00:09:24.485 --> 00:09:26.675
I mean, if you don't want the
Alzheimer's, that's what you do.

00:09:26.825 --> 00:09:27.275
Louie: what you do.

00:09:27.275 --> 00:09:28.025
Right.

00:09:28.025 --> 00:09:28.055
Uhhuh?

00:09:28.145 --> 00:09:29.795
Well, I already have some timers.

00:09:29.825 --> 00:09:31.925
I don't have Alzheimer's yet,
but I have some timers, so

00:09:31.925 --> 00:09:32.915
maybe I'll need to start again.

00:09:32.915 --> 00:09:34.505
I don't know how long
I'm gonna give it up for.

00:09:34.505 --> 00:09:38.075
But you know what I've noticed, the
biggest difference that I've, realized

00:09:38.075 --> 00:09:39.995
is I feel better in the morning.

00:09:39.995 --> 00:09:43.685
Like when I wake up, I don't feel
as like groggy, foggy or groggy.

00:09:43.685 --> 00:09:43.985
Yeah.

00:09:44.255 --> 00:09:48.515
I just feel like I'm more alert
and more able to cope with the

00:09:48.515 --> 00:09:49.895
boys and with what they want

00:09:50.000 --> 00:09:51.680
Jon: So how long have you been doing this?

00:09:51.905 --> 00:09:53.075
Louie: I'm on day three of No.

00:09:53.750 --> 00:09:54.380
Caffeine.

00:09:54.440 --> 00:09:55.040
Day three.

00:09:55.070 --> 00:09:55.730
Day three.

00:09:55.760 --> 00:09:55.790
Okay.

00:09:55.880 --> 00:09:56.270
Yeah.

00:09:56.390 --> 00:09:56.960
So, so

00:09:56.960 --> 00:10:00.080
Jon: still fresh, we're still, there's
still plenty of time for you to have an

00:10:00.080 --> 00:10:02.960
espresso martini at the holiday party on

00:10:02.990 --> 00:10:04.670
Louie: beer in the morning now.

00:10:04.760 --> 00:10:06.080
But you know, you can't have it all.

00:10:06.140 --> 00:10:06.800
You can't have it all.

00:10:06.800 --> 00:10:08.930
You gotta have a vice, you
gotta have something going on.

00:10:09.230 --> 00:10:13.130
So yeah, the cost of giving up caffeine,
I guess was drinking beer in the morning.

00:10:13.130 --> 00:10:15.020
But, you know, besides that,
things are going great.

00:10:15.050 --> 00:10:16.160
It's the holidays.

00:10:16.370 --> 00:10:17.270
I'm feeling good.

00:10:17.270 --> 00:10:17.750
Thanks man.

00:10:17.755 --> 00:10:17.795
I

00:10:17.900 --> 00:10:18.440
Jon: you look

00:10:18.470 --> 00:10:19.070
Louie: feel good.

00:10:19.460 --> 00:10:20.360
Jon: refreshed.

00:10:20.360 --> 00:10:22.790
You got a nice little, you
know, couple day shadow there.

00:10:22.790 --> 00:10:23.630
Little stubble.

00:10:23.635 --> 00:10:23.705
10

00:10:23.780 --> 00:10:26.000
Louie: day middle of a 10
day, so gotta love that.

00:10:26.060 --> 00:10:26.870
Things are going well

00:10:26.870 --> 00:10:29.430
Jon: And, what's going on for the
holidays at the Barella household?

00:10:29.750 --> 00:10:32.150
Louie: We have family, Kate's
family's in town right now, but

00:10:32.150 --> 00:10:33.170
then we're not doing anything.

00:10:33.170 --> 00:10:34.370
We're staying here.

00:10:34.430 --> 00:10:37.430
We have our big tamale fest, which
we talked about traditions last year.

00:10:37.610 --> 00:10:40.370
I think this is our 47th
year, 48th year, I don't know.

00:10:40.650 --> 00:10:43.140
but we're doing that this coming weekend.

00:10:43.140 --> 00:10:45.900
So we're doing the tamale making
at our house on Saturday and then

00:10:45.900 --> 00:10:47.830
the big sing along, on Sunday.

00:10:47.890 --> 00:10:48.400
So.

00:10:48.500 --> 00:10:49.385
Yeah, it's going great.

00:10:49.615 --> 00:10:50.335
Jon: Oh, nice.

00:10:50.335 --> 00:10:51.325
I love to hear that.

00:10:51.325 --> 00:10:51.625
Yeah.

00:10:51.860 --> 00:10:52.550
Louie: Anything new with you?

00:10:52.760 --> 00:10:53.150
Jon: yeah.

00:10:53.150 --> 00:10:53.600
Everything.

00:10:53.600 --> 00:10:55.190
And then some we will, same thing.

00:10:55.190 --> 00:10:55.820
Holidays.

00:10:55.820 --> 00:10:57.350
I think my dad will come over.

00:10:57.410 --> 00:10:57.980
We'll have some.

00:10:58.080 --> 00:11:00.690
I think that's really it for the
family and Katie's parents I think.

00:11:00.690 --> 00:11:03.900
And we'll actually hang out with
her brother and, my sister-in-law

00:11:03.900 --> 00:11:05.370
and their kids, so that'll be good.

00:11:05.370 --> 00:11:07.500
And then we're gonna go off to the old St.

00:11:07.500 --> 00:11:10.130
John, for a week, after Christmas.

00:11:10.130 --> 00:11:11.660
So yeah, it'll be nice.

00:11:11.660 --> 00:11:14.630
This was, yeah, so I've never been
to that part of the Caribbean,

00:11:14.630 --> 00:11:16.460
so we're super excited about it.

00:11:16.650 --> 00:11:17.595
Louie: been to the Caribbean at all, so

00:11:17.740 --> 00:11:20.170
Jon: Yeah, well, it's not
easy to get from here.

00:11:20.230 --> 00:11:24.010
Like there's a reason that people
go to Mexico and other places from

00:11:24.010 --> 00:11:25.630
Colorado because it's so much, yeah.

00:11:25.690 --> 00:11:28.930
So much more convenient to get
there, rather than have to take like

00:11:28.930 --> 00:11:30.850
two planes and three time zones.

00:11:30.850 --> 00:11:34.210
And I mean, these are first world
problems, don't get me wrong, but we

00:11:34.210 --> 00:11:35.830
always wanted to try someplace different.

00:11:35.830 --> 00:11:38.650
So that's kind of our goal every
year around Christmas time,

00:11:38.650 --> 00:11:39.940
is to try someplace different.

00:11:39.940 --> 00:11:41.350
So I'll report back

00:11:41.375 --> 00:11:41.735
Louie: Boom.

00:11:41.945 --> 00:11:42.425
Sounds good.

00:11:42.425 --> 00:11:42.575
What

00:11:42.580 --> 00:11:43.330
Jon: that's all about.

00:11:43.330 --> 00:11:45.280
So, love holiday season though.

00:11:45.280 --> 00:11:47.950
Although it, man, it definitely does
not feel like holiday season here, dude.

00:11:47.950 --> 00:11:49.570
It's fricking 64 degrees.

00:11:50.080 --> 00:11:52.450
Like people are up there skiing on rocks.

00:11:52.450 --> 00:11:53.920
I mean, it's not good.

00:11:54.280 --> 00:11:57.550
We definitely need some, we could
re we could use the precipitation.

00:11:57.630 --> 00:11:57.920
Louie: Yeah.

00:11:58.235 --> 00:11:58.505
Yeah.

00:11:58.565 --> 00:11:59.195
Totally agree.

00:11:59.245 --> 00:12:00.365
we need, we need the rain.

00:12:00.365 --> 00:12:01.685
We need the snow.

00:12:01.890 --> 00:12:02.910
Jon: oh my God.

00:12:02.910 --> 00:12:07.110
So, what are we actually to talk
about financial, financially today?

00:12:07.110 --> 00:12:08.520
What do, what's on the old dock?

00:12:08.525 --> 00:12:09.250
Louie: what's on the docket?

00:12:09.280 --> 00:12:13.030
Well, we have something that I'm, I
don't know about you, John, but I can

00:12:13.030 --> 00:12:18.490
say that I probably get asked about
this type of account more than just

00:12:18.490 --> 00:12:21.700
about any other account, including
our retirement accounts that we have.

00:12:22.030 --> 00:12:23.860
And that is the taxable brokerage account.

00:12:24.160 --> 00:12:27.730
And the reason why I get asked about
that a lot is because people want

00:12:27.730 --> 00:12:29.680
to know like, Hey, what do I do?

00:12:29.800 --> 00:12:33.810
How should I save money if I need it
before retirement or if I'm trying

00:12:33.810 --> 00:12:35.580
to save for a house or a new car?

00:12:35.970 --> 00:12:38.880
And so people have heard about,
you know, brokerage accounts.

00:12:38.880 --> 00:12:40.770
They don't know exactly what that means.

00:12:40.770 --> 00:12:44.040
They don't know what a taxable brokerage
account necessarily does or what you

00:12:44.040 --> 00:12:45.810
use it for versus a retirement account.

00:12:46.290 --> 00:12:49.380
So I feel like I get a lot of
questions about saving money

00:12:49.380 --> 00:12:51.000
specifically in a brokerage account.

00:12:51.000 --> 00:12:52.230
So that's what we're
gonna talk about today.

00:12:52.315 --> 00:12:54.760
Jon: Yeah, and I agree, I
definitely get questions.

00:12:54.760 --> 00:12:57.940
I don't think, I think the name itself,
people when you talk about that, they're

00:12:57.940 --> 00:12:59.350
like, well, what the heck is that?

00:12:59.410 --> 00:13:00.220
Yeah, what the heck is that?

00:13:00.220 --> 00:13:01.690
And I'm like, you got a Robinhood account?

00:13:01.720 --> 00:13:03.135
They're like, oh, I got
one of them, of course.

00:13:03.340 --> 00:13:07.360
And I'm like, well, that is a
taxable brokerage account, a

00:13:07.450 --> 00:13:08.650
nerds, that's what we call it.

00:13:08.650 --> 00:13:12.610
But in reality, if I just mentioned Robin
Hood, I would say that resonates with

00:13:12.610 --> 00:13:15.730
like 80% of our listeners slash members.

00:13:15.980 --> 00:13:18.050
they definitely know what
Robin Hood's all about.

00:13:18.050 --> 00:13:21.170
So there's definitely some
confusion about how they work

00:13:21.410 --> 00:13:23.600
and potentially, uses for them.

00:13:23.970 --> 00:13:27.630
and I would definitely advise to
not use the gambler's mentality when

00:13:27.630 --> 00:13:30.480
you're thinking about your Robinhood
or your brokerage account, but

00:13:30.480 --> 00:13:32.040
there's definitely some benefits.

00:13:32.100 --> 00:13:35.400
And Louis and I will go through what
some of those benefits are, or just

00:13:35.460 --> 00:13:39.480
if you're considering saving money,
why potentially a brokerage account

00:13:39.480 --> 00:13:42.480
might be better than a retirement
account or other things like that.

00:13:42.480 --> 00:13:43.200
So definitely.

00:13:43.545 --> 00:13:46.005
This is something that I
think in our circles as far

00:13:46.005 --> 00:13:47.655
as are not talked about a lot.

00:13:47.655 --> 00:13:50.775
I think when you think about brokerage
accounts, generally speaking,

00:13:50.775 --> 00:13:53.655
you're thinking for really affluent
people that have a lot of different

00:13:53.655 --> 00:13:56.445
money and a lot of different assets
and a lot of different locations.

00:13:56.805 --> 00:14:00.075
And, that's what more people, you
know, tailor to the brokerage account.

00:14:00.075 --> 00:14:03.665
But, there's definitely some advantages
for firefighters specifically to

00:14:03.670 --> 00:14:05.225
have a bro a brokerage account.

00:14:05.225 --> 00:14:07.145
So why you'd want to use one.

00:14:07.175 --> 00:14:08.225
Louie: I like my brokerage account.

00:14:08.225 --> 00:14:10.675
It's not my favorite account,
but, we have a brokerage account,

00:14:10.675 --> 00:14:11.815
we've used a brokerage account.

00:14:11.815 --> 00:14:13.165
We still use a brokerage account

00:14:13.195 --> 00:14:13.405
Jon: Yep.

00:14:14.035 --> 00:14:14.995
Louie: and I think they're great.

00:14:14.995 --> 00:14:17.885
So, there's some caveats though, and
important things to know, which is why.

00:14:18.680 --> 00:14:22.280
We're doing this episode today, but I
think we should start by actually just

00:14:22.280 --> 00:14:23.840
talking about what we mean when we

00:14:23.945 --> 00:14:24.095
Jon: Yeah.

00:14:24.095 --> 00:14:26.675
What's the definition
of a brokerage account?

00:14:26.810 --> 00:14:27.140
Louie: Yeah.

00:14:27.260 --> 00:14:31.260
So, the definition that we're gonna
go off of is that a brokerage account,

00:14:31.260 --> 00:14:34.350
or a taxable brokerage account is a
non-retirement investment account that

00:14:34.350 --> 00:14:39.810
allows you to buy and sell securities
like stocks, bonds, ETFs, mutual

00:14:39.810 --> 00:14:41.910
funds, crypto, everyone's favorite.

00:14:41.910 --> 00:14:42.270
I guess you

00:14:42.290 --> 00:14:42.300
Jon: Yep.

00:14:42.735 --> 00:14:42.825
Mm-hmm.

00:14:42.990 --> 00:14:45.870
Louie: include that in there
using after tax dollars.

00:14:45.990 --> 00:14:49.470
So they do not offer an immediate
tax benefit like you would

00:14:49.470 --> 00:14:51.230
get with, Retirement account.

00:14:51.800 --> 00:14:57.350
but that means that any capital gains,
dividends or earned interest are taxed in

00:14:57.350 --> 00:15:02.780
the year that they are realized or that
they are incurred, if that makes sense.

00:15:03.080 --> 00:15:04.850
That's a really heady technical term.

00:15:04.850 --> 00:15:06.615
I know John's like shaking his
head like, yeah, we could have

00:15:06.735 --> 00:15:07.575
tightened it up a little bit.

00:15:07.575 --> 00:15:09.105
But that's, I guess, a
good working definition.

00:15:09.445 --> 00:15:11.755
but a lot of people out there
are probably like, I don't

00:15:12.175 --> 00:15:13.105
actually know what that means.

00:15:13.105 --> 00:15:16.535
You're talking about tax deferred
and you're talking about, realized

00:15:16.535 --> 00:15:17.795
gains and stuff like that.

00:15:18.035 --> 00:15:19.625
So maybe we should
unpack that a little bit.

00:15:19.625 --> 00:15:20.195
John, what do you think?

00:15:20.775 --> 00:15:21.195
Jon: Oh yeah.

00:15:21.335 --> 00:15:23.730
No, so that's definitely
what that's all about.

00:15:23.730 --> 00:15:27.540
And really it's just any source of
monies that you can come in from

00:15:27.540 --> 00:15:28.920
all sorts of different sources.

00:15:28.920 --> 00:15:30.360
It doesn't have to be earned income.

00:15:30.720 --> 00:15:33.930
It could be a windfall, it
could be from inheritance.

00:15:33.930 --> 00:15:36.990
It can be from, I don't know, you just
looked under your couch and found some

00:15:36.990 --> 00:15:39.090
money, like you can use that money.

00:15:39.090 --> 00:15:39.180
Mm-hmm.

00:15:39.315 --> 00:15:39.515
Right.

00:15:39.575 --> 00:15:43.580
And then you can invest it in a
multitude of different, avenues or

00:15:43.580 --> 00:15:47.090
vehicles, whether that's stocks or
bonds or crypto or whatever that is.

00:15:47.540 --> 00:15:51.410
And then what's really nice about this
is there's not a lot of the limitations

00:15:51.410 --> 00:15:55.760
that you have within a retirement account,
like when you can take out the money,

00:15:55.940 --> 00:15:56.510
Louie: how much you can

00:15:56.630 --> 00:15:58.730
Jon: much you can take out,
how much you can contribute.

00:15:58.960 --> 00:16:00.040
All those other things.

00:16:00.040 --> 00:16:04.420
It really is the most flexible of all
accounts that you can possibly have.

00:16:04.540 --> 00:16:07.800
similar to, if you want to think
about like a savings account, it just

00:16:07.800 --> 00:16:11.850
depends on how you're gonna get taxed
on the earnings of those investments.

00:16:11.880 --> 00:16:14.440
'cause hopefully, you know,
you're investing, for the

00:16:14.440 --> 00:16:16.300
potential for that money to grow.

00:16:16.360 --> 00:16:17.920
And then those are called earnings.

00:16:17.920 --> 00:16:20.520
And then when you take out those
earnings, you get taxed at a different

00:16:20.520 --> 00:16:24.220
rate, specifically depending on how long
you hold it and what that asset was.

00:16:24.220 --> 00:16:28.090
So that's really what makes it a little
bit different compared to like a savings

00:16:28.090 --> 00:16:30.010
account or some of these other things.

00:16:30.010 --> 00:16:32.800
But basically speaking though,
the best news is yeah, if you

00:16:32.800 --> 00:16:36.280
just got money lying around, you
can open up a brokerage account.

00:16:36.340 --> 00:16:41.620
Most of these places now, whether it's
at Robinhood or a more traditional,

00:16:41.720 --> 00:16:45.260
custodian like Fidelity or Schwab,
they typically don't have minimum.

00:16:45.260 --> 00:16:47.750
So you can, you know, they
can do fractional shares.

00:16:47.750 --> 00:16:50.780
So even with like 10 bucks or 20
bucks, you can start to open up these

00:16:50.780 --> 00:16:52.390
accounts and fund them that way.

00:16:52.480 --> 00:16:53.960
So that's really what that's all about.

00:16:54.015 --> 00:16:54.255
Yeah.

00:16:54.255 --> 00:16:57.215
Any, anything else to add as far as
the definition and then we'll get into

00:16:57.215 --> 00:17:01.585
here maybe some pros or some thoughts
about why you'd wanna open up account.

00:17:01.585 --> 00:17:04.945
But as far as the definition, you think
that most of our folks could probably

00:17:04.945 --> 00:17:06.085
wrap their head around what that

00:17:06.325 --> 00:17:07.135
Louie: yeah, I think that's pretty good.

00:17:07.315 --> 00:17:10.955
The only thing I would maybe add is that,
we generally call it an after-tax account

00:17:10.955 --> 00:17:14.975
in the sense that every dollar that you're
putting on it, you've already putting

00:17:14.975 --> 00:17:16.415
into it, you've already paid taxes on.

00:17:16.445 --> 00:17:20.075
So when you get your paycheck, tax
money is already gone and then you

00:17:20.075 --> 00:17:21.395
can use that money to contribute.

00:17:21.395 --> 00:17:24.695
So it's not like you can auto
deduct from your paycheck.

00:17:24.755 --> 00:17:27.455
It's not like you get a tax write
off or any kind of tax benefit

00:17:27.455 --> 00:17:30.365
now by putting it to that account
and you really don't get it later.

00:17:30.365 --> 00:17:32.945
You do pay taxes and we'll talk
about preferential taxes, treatment

00:17:32.945 --> 00:17:37.805
on brokerage accounts later, but you
are paying with after tax dollars.

00:17:38.065 --> 00:17:41.095
so yeah, I would just put that in there,
but I think that's good for definition.

00:17:41.095 --> 00:17:41.185
Yeah,

00:17:41.410 --> 00:17:44.080
Jon: No, so let's start
with, maybe the pros.

00:17:44.110 --> 00:17:49.590
So why you would want to consider a
brokerage account or a taxable brokerage

00:17:49.590 --> 00:17:52.200
account versus a retirement account?

00:17:52.260 --> 00:17:55.680
You know, specifically for our folks,
a lot of 'em, it's the 4 57 plan.

00:17:55.680 --> 00:18:00.000
Like why should I consider, you know,
putting my money inside a brokerage

00:18:00.000 --> 00:18:02.190
account versus a retirement account?

00:18:02.190 --> 00:18:03.510
So there's a couple.

00:18:03.870 --> 00:18:07.670
So first and foremost, and Louis and
I already alluded to it, but it's the

00:18:07.670 --> 00:18:09.620
most flexible account you can have.

00:18:09.710 --> 00:18:12.620
And what we mean by that is
it's very flexible in when you

00:18:12.620 --> 00:18:14.360
can take out your money, right?

00:18:14.360 --> 00:18:15.230
A lot of the other.

00:18:15.475 --> 00:18:18.535
Programs and plans,
retirement plans specifically.

00:18:18.535 --> 00:18:22.405
The 4 57 is, you really can't
access that money until you

00:18:22.405 --> 00:18:24.265
separate from service, right?

00:18:24.265 --> 00:18:28.045
That's the biggest thing with the 4
57 is, I mean, there is loans all,

00:18:28.195 --> 00:18:29.335
but we're not gonna talk about that.

00:18:29.335 --> 00:18:32.305
But realistically, you want
to think about your 4 57.

00:18:32.815 --> 00:18:36.835
Plan is not really being able to
touch until you separate from service,

00:18:36.865 --> 00:18:41.215
which is not great if you're looking
at like saving up for a down payment

00:18:41.545 --> 00:18:46.225
on a house or a vehicle or whatever
other your savings goals are.

00:18:46.465 --> 00:18:48.685
You want something that
it's liquid, right?

00:18:48.685 --> 00:18:52.365
That you can immediately access and you
don't have to worry about, prepayment

00:18:52.365 --> 00:18:53.955
penalties and all these other things.

00:18:53.955 --> 00:18:55.965
So the flexibility is key.

00:18:55.965 --> 00:19:00.095
So, and this is good because if you
think about it, for most, retirement

00:19:00.095 --> 00:19:04.535
plans, you have to be 59 and a half
until you can take out that money.

00:19:04.745 --> 00:19:05.675
Now, obviously.

00:19:05.880 --> 00:19:07.800
The 4 57 plan is different.

00:19:08.130 --> 00:19:12.480
You can take out that money
basically penalty free as soon as you

00:19:12.480 --> 00:19:14.280
separate for service from service.

00:19:14.280 --> 00:19:19.080
So most of our members will be under the
age of 59 and a half, but they can still

00:19:19.080 --> 00:19:24.480
access their 4 57 money and they don't And
they don't have to pay penalties on that.

00:19:24.480 --> 00:19:24.690
Yep.

00:19:24.690 --> 00:19:28.080
You don't, you have your 10%
early withdrawal penalty on that.

00:19:28.080 --> 00:19:33.030
So we've got things like buying land or
a cabin, which side note is we're under

00:19:33.030 --> 00:19:35.070
contract for a little piece of property.

00:19:35.340 --> 00:19:35.430
Nice.

00:19:35.490 --> 00:19:37.530
Back up there in Northern Wisconsin.

00:19:37.530 --> 00:19:39.360
So hopefully this time it'll close.

00:19:39.540 --> 00:19:40.950
So we brokerage money.

00:19:41.010 --> 00:19:43.440
We did use our brokerage account.

00:19:43.440 --> 00:19:47.420
To fund, the purchase of a little 10
acre parcel up there, which is great.

00:19:47.630 --> 00:19:51.170
Yeah, so we just ended up paying some,
long-term capital gains on that, which

00:19:51.170 --> 00:19:52.280
we'll talk about here in a minute.

00:19:52.590 --> 00:19:56.160
you could also use it for, you know,
where this, where the brokerage

00:19:56.160 --> 00:20:00.720
account really shines is in, you know,
I know a lot of the listeners here

00:20:00.730 --> 00:20:02.350
have heard about the fire movement.

00:20:02.350 --> 00:20:06.850
The financial independence retire early
and a lot of people in that space,

00:20:06.850 --> 00:20:10.840
they retire way before 59 and a half,
and they need to have access to money.

00:20:11.080 --> 00:20:14.560
So they're all about funding a brokerage
account 'cause they can take out that

00:20:14.560 --> 00:20:17.380
money penalty free whenever they want.

00:20:17.380 --> 00:20:17.710
So.

00:20:18.000 --> 00:20:21.450
A lot of people, I mean, just like
anything else, and I think you guys

00:20:21.450 --> 00:20:25.740
all lo know Louie and I, well enough,
like what we really believe in is we

00:20:25.740 --> 00:20:30.170
believe in low cost funds or basically
no expense when you're investing.

00:20:30.260 --> 00:20:32.540
And then also the diversification.

00:20:32.570 --> 00:20:36.860
Diversification in how you're investing,
and then the diversification within

00:20:36.860 --> 00:20:38.805
whatever location your assets are located.

00:20:38.960 --> 00:20:41.780
So whether that's a retirement
account or a brokerage account, a

00:20:41.780 --> 00:20:45.260
high yield savings account, it's
really nice to have different buckets

00:20:45.500 --> 00:20:47.030
that you can pull out money from.

00:20:47.080 --> 00:20:50.260
because at the end of the day, a lot
of these have different tax treatments.

00:20:50.260 --> 00:20:52.240
So that's probably

00:20:52.580 --> 00:20:53.195
Louie: those are the

00:20:53.490 --> 00:20:57.270
Jon: a huge reason is the freedom and
flexibility to take out that money.

00:20:57.400 --> 00:21:00.460
Louie: And then sometimes people
have to do it because they can't

00:21:00.460 --> 00:21:01.960
contribute it into another account.

00:21:01.990 --> 00:21:05.380
Maybe their workplace
doesn't offer a 401k plan.

00:21:05.690 --> 00:21:09.380
maybe they don't have enough earned
income to put it into an IRA.

00:21:09.780 --> 00:21:13.200
so you can always put money into a
brokerage account if that's the case, or

00:21:13.260 --> 00:21:14.850
sometimes, which we would love to hear.

00:21:15.060 --> 00:21:16.980
There are people that max out there.

00:21:17.190 --> 00:21:18.510
Retirement accounts.

00:21:18.540 --> 00:21:21.690
So you might max out your 4 57 plan.

00:21:21.930 --> 00:21:25.620
You might max out your Roth IRA after
that, and now you're still like, but

00:21:25.620 --> 00:21:27.420
I still wanna save for something.

00:21:27.840 --> 00:21:30.420
Of course, that's a small subsection,
especially of firefighters.

00:21:30.420 --> 00:21:33.120
There's not a ton of firefighters out
there that are maxing both of those out.

00:21:33.360 --> 00:21:36.210
But there are some, I've definitely
talked to some firefighters in our

00:21:36.210 --> 00:21:39.810
department who have maxed amount and
they're like, okay, what do I do now?

00:21:39.960 --> 00:21:42.660
And then the only place I can really
turn them to, I shouldn't say the

00:21:42.660 --> 00:21:43.770
only place, there's things, right?

00:21:43.770 --> 00:21:47.980
Like, there's HSAs through a spouse,
there's, you know, a spousal IRA.

00:21:47.980 --> 00:21:49.120
There's other things like that.

00:21:49.120 --> 00:21:52.000
But outside of that, let's just assume
that they've maxed out their retirement

00:21:52.000 --> 00:21:55.240
accounts and they still want money
to, or to put money somewhere to grow.

00:21:55.720 --> 00:21:57.160
The brokerage account is a great option.

00:21:57.190 --> 00:21:58.450
Yeah, for all the reasons you said.

00:21:58.450 --> 00:22:02.080
Plus, there's no restrictions on how
much you can put in, when you can

00:22:02.080 --> 00:22:03.820
put it in, when you can take it out.

00:22:04.240 --> 00:22:07.630
So you're basically giving this
account that you kind of hit the

00:22:07.630 --> 00:22:09.700
nail on the head when you said it's
basically like a savings account,

00:22:09.700 --> 00:22:11.050
but you wanna invest your savings.

00:22:11.050 --> 00:22:12.640
That's really what it kind of is.

00:22:12.640 --> 00:22:12.790
Like.

00:22:12.790 --> 00:22:13.960
You can open an account anywhere.

00:22:14.400 --> 00:22:17.100
Have this money invested and then
take it out anytime you want.

00:22:17.100 --> 00:22:19.520
So yeah, it's really
good for those reasons.

00:22:20.145 --> 00:22:22.995
Jon: So that's, I would say that's
probably highlight number one.

00:22:23.155 --> 00:22:29.605
highlight number two is, there are
no required minimum distributions.

00:22:29.635 --> 00:22:32.545
These are also abbreviated as RMDs.

00:22:32.665 --> 00:22:35.605
And I know many of you're like,
what the heck is that term?

00:22:35.605 --> 00:22:36.625
How does that apply?

00:22:36.985 --> 00:22:41.325
So Required minimum distributions
are applicable to retirement

00:22:41.325 --> 00:22:46.065
accounts, specifically 4 0
1 plans, or your 4 57 plan,

00:22:46.265 --> 00:22:47.135
Louie: traditional IRA,

00:22:47.745 --> 00:22:48.555
Jon: all that stuff.

00:22:48.555 --> 00:22:52.665
And basically what this is a way for the
government to finally start recouping some

00:22:52.665 --> 00:22:56.895
of the money that you've been deferring
for so long, and these rules have changed

00:22:56.895 --> 00:22:59.325
since the Secure Act and then secure 2.0

00:22:59.325 --> 00:23:02.685
Act as far as when RMDs
actually take a place.

00:23:02.685 --> 00:23:07.005
I think currently it's 73 and I think
within the next year or two, that's

00:23:07.005 --> 00:23:09.825
gonna be up to 75, depending on your age.

00:23:09.825 --> 00:23:13.995
But it's not till way later in
your career or your lifespan that

00:23:13.995 --> 00:23:15.585
these RMDs start taking effect.

00:23:15.585 --> 00:23:17.715
But basically what the
government says that, what the

00:23:17.715 --> 00:23:20.205
IRS says is you can only defer.

00:23:20.445 --> 00:23:24.645
That income for so long before we finally
need you to start taking out some money.

00:23:24.690 --> 00:23:25.710
Louie: Uncle Sam needs to get paid

00:23:25.845 --> 00:23:26.535
Jon: eventually.

00:23:26.640 --> 00:23:27.900
Louie: this debt, we got this debt.

00:23:27.900 --> 00:23:29.370
We need to pay these bond holders.

00:23:30.150 --> 00:23:30.870
Pay us our money.

00:23:30.885 --> 00:23:31.785
Jon: Pay us our money.

00:23:31.785 --> 00:23:35.475
So what that means and why that's a
big deal, and especially if you have

00:23:35.475 --> 00:23:39.135
been a saver and you have a lot of
money in a traditional retirement

00:23:39.135 --> 00:23:43.965
account is, you know, by the time
you get to 73 or 75, and this is all

00:23:43.965 --> 00:23:47.955
based on actuarials as far as the IRS
tables for how they calculate this.

00:23:48.405 --> 00:23:52.335
But if you have a couple million dollars
in those accounts and you hit to 75, like

00:23:52.335 --> 00:23:55.875
you can start, they start making, you
take out a significant portion of that.

00:23:55.875 --> 00:23:59.055
I mean, we're talking sometimes
hundreds of thousands of dollars that

00:23:59.055 --> 00:24:01.095
you have to take out mandatorily.

00:24:01.375 --> 00:24:04.165
and that can really affect
your taxes when all of a sudden

00:24:04.165 --> 00:24:05.095
you've been in a pretty low

00:24:05.200 --> 00:24:07.090
Louie: especially if you have a
pension, if you're a pensioner.

00:24:07.150 --> 00:24:07.510
Yeah.

00:24:07.730 --> 00:24:11.390
Jon: Like there's potentially the
room for you to have to actually

00:24:11.390 --> 00:24:14.660
end up paying the IRS quite a bit of
money because they're gonna mandate

00:24:14.660 --> 00:24:16.640
that you start taking this money out.

00:24:16.640 --> 00:24:18.980
So it's a good problem to
have, don't get me wrong.

00:24:18.980 --> 00:24:21.020
Like if you've been a really good
saver and all of a sudden you have

00:24:21.020 --> 00:24:24.070
a lot of this mo you have a lot of
money inside your retirement accounts,

00:24:24.070 --> 00:24:25.270
that's a great problem to have.

00:24:25.270 --> 00:24:26.230
But it can definitely.

00:24:26.825 --> 00:24:30.965
Your tax liability and how much you end
up paying in taxes later on in your life

00:24:31.320 --> 00:24:32.880
Louie: So you can wipe your tears
away with the a hundred dollars

00:24:32.880 --> 00:24:36.090
bills that you're forced to
take outta your traditional IRA.

00:24:36.335 --> 00:24:37.205
Jon: exactly right.

00:24:37.205 --> 00:24:41.975
So that's one thing that is also nice
that inside a brokerage account, so

00:24:41.975 --> 00:24:46.175
taxable brokerage account, your Robin Hood
account, your Fidelity account, right?

00:24:46.535 --> 00:24:48.665
These ones, they do not have RMD.

00:24:48.665 --> 00:24:51.815
So you can continue to grow
those assets as much as you want.

00:24:51.815 --> 00:24:54.335
And you don't have to, you
don't have to pay that out.

00:24:54.395 --> 00:24:58.680
And, this is a little bit further advanced
when you're thinking about it, but a.

00:24:58.970 --> 00:25:02.760
Why that matters is, if you're
thinking of legacy planning or they

00:25:02.760 --> 00:25:06.180
also call it estate planning, like how
you're, the people that you leave your

00:25:06.180 --> 00:25:07.800
money are gonna inherit that money.

00:25:08.100 --> 00:25:13.380
It is much better for you to pass on
your assets in a brokerage account.

00:25:13.760 --> 00:25:15.890
Than a pre-tax retirement

00:25:15.915 --> 00:25:16.155
Louie: account.

00:25:16.185 --> 00:25:16.275
Mm-hmm.

00:25:16.730 --> 00:25:19.520
Jon: because there's this
concept of step up in basis.

00:25:19.700 --> 00:25:20.180
Alright?

00:25:20.180 --> 00:25:24.980
And why that matters is, let's say I,
let's say I die and I have a million

00:25:24.980 --> 00:25:26.810
dollars inside my brokerage account.

00:25:26.810 --> 00:25:30.670
Like that was the value that was left in
that account that the date of my death.

00:25:31.030 --> 00:25:37.030
So whoever inherits that money basically
inherits it at that value of $1 million.

00:25:37.240 --> 00:25:40.360
They're not gonna pay anything
in taxes on that million dollars.

00:25:40.360 --> 00:25:41.170
I gotta step up in

00:25:41.285 --> 00:25:42.620
Louie: gotta step up in basis is what

00:25:42.790 --> 00:25:46.030
Jon: Now obviously if it grows beyond
that million dollars and they don't

00:25:46.030 --> 00:25:48.490
start taking it out until after
the fact, then they're gonna pay

00:25:48.490 --> 00:25:52.360
tax on that difference at a capital
gains rate, which is less than what

00:25:52.360 --> 00:25:53.980
your normal wage income would be.

00:25:54.290 --> 00:25:55.040
but that's pretty great.

00:25:55.040 --> 00:25:59.650
That's a great way to leave assets to
your kids or your wife or whoever, your

00:25:59.650 --> 00:26:01.600
spouse or your loved ones or whatever.

00:26:01.600 --> 00:26:02.260
So that's great.

00:26:02.500 --> 00:26:05.290
Versus if it was pre-tax
money that was left.

00:26:05.295 --> 00:26:08.295
That way they don't get
that step up in basis.

00:26:08.415 --> 00:26:08.775
Alright.

00:26:08.775 --> 00:26:12.650
And there's also a certain amount of time
that they have to take out that money.

00:26:12.890 --> 00:26:17.300
There's inherited IRA rules that take
place that basically says that if you're

00:26:17.300 --> 00:26:21.050
a non-spouse or some of these other,
circumstances that you leave, leave

00:26:21.050 --> 00:26:24.710
your money to is you have to liquidate
all that money within like 10 years.

00:26:24.710 --> 00:26:27.470
So there's different like, inheriting
rules that, you know, maybe

00:26:27.470 --> 00:26:28.730
we'll talk about at a later time.

00:26:28.730 --> 00:26:33.110
But that's like from a legacy standpoint
or an estate planning standpoint, like

00:26:33.110 --> 00:26:37.940
RMDs or, having a brokerage account is
a way better way to leave your assets

00:26:37.940 --> 00:26:39.950
than a traditional retirement account.

00:26:40.150 --> 00:26:42.700
Louie: And just so we don't lose the
strain too much while we're on that

00:26:42.700 --> 00:26:46.210
subject, Roth accounts are also,
they also have the same advantage

00:26:46.270 --> 00:26:47.470
when you leave them to your heirs.

00:26:47.470 --> 00:26:47.560
Yes.

00:26:47.920 --> 00:26:51.940
So it's, those are also good
accounts to leave to your estate

00:26:52.000 --> 00:26:53.590
or to your children or whatever.

00:26:53.920 --> 00:26:57.610
Both brokerage Roth accounts are good
for that Traditional retirement accounts

00:26:57.610 --> 00:26:59.110
or pre-taxed retirement accounts.

00:26:59.140 --> 00:26:59.890
Not so good.

00:27:00.100 --> 00:27:00.640
Still good.

00:27:00.660 --> 00:27:00.990
Jon: gonna pay

00:27:01.215 --> 00:27:01.795
Louie: you're gonna pay taxes.

00:27:01.795 --> 00:27:01.805
Yeah.

00:27:01.805 --> 00:27:02.955
You're gonna pay tax on
it, so it's still good.

00:27:02.985 --> 00:27:05.145
Just not as good as those other accounts.

00:27:05.150 --> 00:27:05.320
Correct.

00:27:05.595 --> 00:27:08.805
Jon: So as you're kind of going
through that, so as we're talking

00:27:08.805 --> 00:27:14.445
about taxes, so one of the advantages
of a taxable account, so a brokerage

00:27:14.445 --> 00:27:18.555
account, is you get some what they
call preferential tax treatment, right?

00:27:18.615 --> 00:27:19.455
On that growth.

00:27:19.725 --> 00:27:23.925
So there are different rates at
which you will pay based on kind

00:27:23.925 --> 00:27:27.515
of what tax bracket you sit in
and how long you held that asset.

00:27:27.995 --> 00:27:31.955
So really in order for this to really
work out to your advantage to be the

00:27:31.955 --> 00:27:37.205
most preferential for tax treatment is
you wanna hold assets, what they call

00:27:37.205 --> 00:27:41.645
long-term and what the IRS defines that as
is you gotta hold it at least for a year.

00:27:42.005 --> 00:27:42.485
Alright?

00:27:42.485 --> 00:27:45.785
So if I'm gonna hold a stock, you
know, a really good rule of thumb is

00:27:45.785 --> 00:27:50.135
in order to get the best tax treatment
is to hold it for at least a year.

00:27:50.225 --> 00:27:53.085
And then you're gonna get
more preferential rates, if

00:27:53.085 --> 00:27:54.765
you don't hold it for a year.

00:27:55.095 --> 00:27:59.235
Basically, whatever that growth
with whatever that growth was.

00:27:59.630 --> 00:28:05.090
On your earnings, you're gonna pay at
whatever your marginal tax rate is.

00:28:05.090 --> 00:28:10.880
So if I'm in, let's say the 24% tax
bracket and I made $10,000 on a stock

00:28:10.880 --> 00:28:15.860
and I only held it for six months,
I'm gonna pay 24% basically on that

00:28:15.860 --> 00:28:18.410
$10,000 because I held it short term.

00:28:18.410 --> 00:28:19.910
So I held it for less than a year.

00:28:20.180 --> 00:28:24.470
They basically just add it to whatever
your earned income was, and then that's

00:28:24.470 --> 00:28:25.910
the rate edge which you're gonna pay.

00:28:25.910 --> 00:28:25.940
Okay.

00:28:26.240 --> 00:28:27.440
Which is not great.

00:28:27.500 --> 00:28:28.580
I mean, 24%.

00:28:28.580 --> 00:28:30.260
I'm like, that's not super great.

00:28:30.290 --> 00:28:31.610
if there's better ways to do it.

00:28:31.670 --> 00:28:32.660
And there is.

00:28:32.690 --> 00:28:36.770
So if you hold it long term,
there's basically three different

00:28:36.800 --> 00:28:38.810
rates at which it can get taxed.

00:28:38.810 --> 00:28:39.410
It can actually get.

00:28:39.675 --> 00:28:41.445
Taxed at 0%.

00:28:41.445 --> 00:28:45.645
So potentially if you are in a
really low income bracket, you

00:28:45.645 --> 00:28:47.325
don't have a lot of earned income.

00:28:47.325 --> 00:28:51.015
So maybe you had a bunch of, you funded
a Roth account for a long time, so

00:28:51.015 --> 00:28:52.515
you're taking out that Roth monies.

00:28:52.545 --> 00:28:54.855
Those don't count towards
your taxable income.

00:28:55.185 --> 00:28:58.545
You could then take some money out of
your brokerage account for potentially

00:28:58.665 --> 00:29:00.825
0% up to a certain amount of money.

00:29:01.000 --> 00:29:01.750
Which is great.

00:29:02.080 --> 00:29:03.790
I mean, that's as free
money as you can get.

00:29:04.040 --> 00:29:06.350
the more common one is the 15%.

00:29:06.355 --> 00:29:06.435
Yeah.

00:29:06.435 --> 00:29:10.520
This is really gonna say, like my
general rule of thumb is I tell most

00:29:10.520 --> 00:29:13.380
people if they've got a brokerage
account, and they held it for at

00:29:13.380 --> 00:29:17.310
least a year, pretty much count on
15% is what you're gonna get taxed on.

00:29:17.310 --> 00:29:17.370
Yeah.

00:29:17.430 --> 00:29:20.250
Like that's, that makes up
a huge tax bracket, right.

00:29:20.250 --> 00:29:24.750
From like 10% all the way
up to 35% pays that 15%.

00:29:24.840 --> 00:29:26.720
And then if you're a super, affluent.

00:29:26.950 --> 00:29:29.830
A person or you've got a lot of
income to report, potentially it

00:29:29.830 --> 00:29:33.860
could be up towards 20% is basically
the max rate at which you'd get

00:29:33.860 --> 00:29:35.330
taxed on that, which is still better.

00:29:35.510 --> 00:29:37.790
I mean, if you're in the 37% tax bracket,

00:29:37.925 --> 00:29:38.315
Louie: still better

00:29:38.360 --> 00:29:39.200
Jon: and that's better.

00:29:39.250 --> 00:29:40.810
20% is way better than that.

00:29:40.810 --> 00:29:42.310
And there's other caveats to this.

00:29:42.310 --> 00:29:43.120
Like everything else.

00:29:43.120 --> 00:29:46.890
There's the, the Medicare sur charge
tax, which we won't talk about that.

00:29:46.890 --> 00:29:49.050
So it'd even be a little bit
higher than 20%, but it's

00:29:49.050 --> 00:29:51.690
still way less than your 37%.

00:29:51.690 --> 00:29:53.500
So those are super important Yeah.

00:29:53.500 --> 00:29:54.250
To consider.

00:29:54.310 --> 00:29:56.260
Louie: So let's do this, let's
just do a little walkthrough

00:29:56.320 --> 00:29:56.470
Jon: you can

00:29:56.470 --> 00:29:56.980
Louie: tell me this.

00:29:56.980 --> 00:29:58.240
We're gonna do a scenario here

00:29:58.270 --> 00:29:58.510
Jon: Ooh.

00:29:58.690 --> 00:29:59.290
Case studies.

00:29:59.290 --> 00:29:59.830
All right.

00:29:59.880 --> 00:30:00.570
I need a beer.

00:30:00.570 --> 00:30:01.050
Gimme that.

00:30:01.050 --> 00:30:02.070
Fire Captain Beer.

00:30:02.160 --> 00:30:02.490
Yeah.

00:30:02.540 --> 00:30:05.510
Louie: I'm not married to a pa so
we're just gonna say that I'm not

00:30:05.510 --> 00:30:08.090
in that really high, long term.

00:30:08.090 --> 00:30:10.130
30 per 20% bracket.

00:30:10.130 --> 00:30:11.390
Let's just say I'm a firefighter.

00:30:11.450 --> 00:30:13.250
Married to like an electrician

00:30:13.520 --> 00:30:14.330
Jon: Oh, nice.

00:30:14.360 --> 00:30:14.660
Okay.

00:30:14.660 --> 00:30:17.900
Which maybe are making more
than PAs and physicians now.

00:30:17.900 --> 00:30:18.410
Not for this

00:30:18.695 --> 00:30:19.100
Louie: No, not

00:30:19.100 --> 00:30:19.460
Jon: Okay.

00:30:19.970 --> 00:30:21.080
Louie: I'm subject to 15%.

00:30:21.140 --> 00:30:22.100
So let's do this.

00:30:22.160 --> 00:30:25.810
Let's say I buy a, in my brokerage
account, I buy a share of, Costco stock.

00:30:25.810 --> 00:30:26.050
We love

00:30:26.215 --> 00:30:27.205
Jon: Oh, you do?

00:30:27.205 --> 00:30:28.375
Are a Costco rep.

00:30:28.375 --> 00:30:29.185
Through and through.

00:30:29.230 --> 00:30:30.880
Louie: So buy it for a thousand dollars.

00:30:31.310 --> 00:30:33.950
and it goes up within the first
six months that I sell it.

00:30:33.950 --> 00:30:35.270
It goes up to.

00:30:35.675 --> 00:30:36.605
$1,100.

00:30:36.605 --> 00:30:36.725
Okay.

00:30:37.265 --> 00:30:38.405
So I sell it.

00:30:38.410 --> 00:30:38.730
Mm-hmm.

00:30:39.030 --> 00:30:43.205
And I've basically made myself
a tidy little sum of $100.

00:30:43.685 --> 00:30:43.715
Okay.

00:30:43.805 --> 00:30:46.025
But I only kept it for six months, John.

00:30:46.025 --> 00:30:50.975
So how much am I paying
for selling that stock?

00:30:51.665 --> 00:30:54.935
Jon: So, yeah, you're no longer
gonna get your preferential treatment

00:30:54.935 --> 00:30:57.065
as far as long-term gains, right.

00:30:57.065 --> 00:30:59.165
Because you only held it for six months.

00:30:59.465 --> 00:31:01.445
You didn't hold it for
at least the whole year.

00:31:01.775 --> 00:31:06.785
So basically whatever rate you are
gonna file your taxes at for that year,

00:31:06.790 --> 00:31:11.135
Louie: So if I'm at the 22% marginal
tax bracket, you're saying I'm

00:31:11.135 --> 00:31:13.705
gonna pay 22% on that whole $1,100?

00:31:13.705 --> 00:31:13.765
No.

00:31:13.945 --> 00:31:16.765
Jon: not on the whole,
no, just on your earnings.

00:31:16.765 --> 00:31:19.795
Because this goes back to
the concept of basis, right?

00:31:19.795 --> 00:31:23.695
And we all know that this is all
after tax money, not pre-tax money.

00:31:23.695 --> 00:31:27.895
So that a thousand dollars that you
had in, in order to invest in Costco,

00:31:28.225 --> 00:31:29.695
you've already been taxed on that money

00:31:29.875 --> 00:31:30.325
Louie: Oh, that's right.

00:31:30.325 --> 00:31:33.145
I put in after tax dollars, so
I'm not getting double taxed

00:31:33.145 --> 00:31:33.565
Jon: No.

00:31:33.565 --> 00:31:36.625
So there's no such thing as
double taxation when it comes

00:31:36.625 --> 00:31:38.435
to the, brokerage account.

00:31:38.495 --> 00:31:38.945
All right?

00:31:38.945 --> 00:31:43.145
So you have your basis of a thousand
dollars, that's what you put into it.

00:31:43.145 --> 00:31:44.585
So you're not getting taxed on that.

00:31:44.975 --> 00:31:47.585
It's only on the gain of that.

00:31:47.585 --> 00:31:51.305
So the a hundred dollars,
okay, so basically $22 is what

00:31:51.305 --> 00:31:53.225
it's gonna cost you in taxes.

00:31:53.230 --> 00:31:54.010
It's not so bad, right?

00:31:54.150 --> 00:31:57.035
Out of, so you're still gonna
show a net profit of $78.

00:31:57.215 --> 00:31:57.245
Okay?

00:31:57.245 --> 00:31:57.575
Right?

00:31:57.575 --> 00:31:58.775
So not bad.

00:31:58.830 --> 00:31:59.875
Louie: So then same scenario.

00:31:59.875 --> 00:32:02.845
Let's say I buy the stock,
goes up, a hundred dollars.

00:32:02.895 --> 00:32:03.135
Jon: Mm-hmm.

00:32:03.305 --> 00:32:04.745
Louie: it took, it went
up and down a little bit.

00:32:04.745 --> 00:32:06.925
It took a year and a day to get to 1100.

00:32:06.925 --> 00:32:08.005
So then I sell it.

00:32:08.455 --> 00:32:08.545
Yep.

00:32:08.635 --> 00:32:10.135
Now I have my $1,100.

00:32:10.135 --> 00:32:11.185
That took me a year.

00:32:11.365 --> 00:32:12.745
How much tax do I pay on that?

00:32:13.630 --> 00:32:17.260
Jon: So you're still, you still had a
difference of a gain of a hundred dollars.

00:32:17.410 --> 00:32:17.920
Correct.

00:32:18.040 --> 00:32:21.430
And, but you held it
now for over 365 days.

00:32:21.430 --> 00:32:27.700
So full year you're gonna pay 15%
on that gain rather than the 22%

00:32:27.700 --> 00:32:30.940
because you got the preferential
treatment because you were smart

00:32:30.940 --> 00:32:33.070
and you held it for at least a year.

00:32:33.370 --> 00:32:36.695
So super, super important when you're
thinking about when you wanna sell things.

00:32:36.725 --> 00:32:38.935
and all of these, platforms are great.

00:32:39.175 --> 00:32:42.025
I can't speak for Robinhood 'cause I
don't use it, but I have to imagine

00:32:42.025 --> 00:32:45.475
just what I've heard, like they're
technically very savvy, but like I

00:32:45.475 --> 00:32:48.595
know on Fidelity and all these other
ones, like it'll tell you exactly

00:32:48.595 --> 00:32:51.965
whether or not it's gonna be qualified
for a short term or a long term gain.

00:32:51.965 --> 00:32:55.675
Like they categorize that all very
nicely, which is great when you're

00:32:55.675 --> 00:32:58.325
selling things that you can actually
make sure that whatever you're

00:32:58.325 --> 00:33:01.685
selling at the holding period for
whatever you thought it was gonna be.

00:33:01.685 --> 00:33:03.485
So whether it was a year
or less than a year.

00:33:03.815 --> 00:33:05.595
Louie: so I think the important
thing in that is that.

00:33:06.300 --> 00:33:09.030
We did this little exercise so we
can kind of show you how much you

00:33:09.030 --> 00:33:10.350
would pay under different situations.

00:33:10.350 --> 00:33:13.470
So like a hundred dollars gain, if
you sell it in the short term, a

00:33:13.470 --> 00:33:16.240
hundred dollars gain, you have to
pay, your marginal tax rate, which

00:33:16.240 --> 00:33:20.200
could be 22%, 24%, maybe less if
you are in a lower tax bracket.

00:33:20.200 --> 00:33:22.150
But for firefighters,
that's probably a safes

00:33:22.255 --> 00:33:25.375
Jon: that 22 to 24 is where the
majority of our folks are at.

00:33:25.420 --> 00:33:28.420
Louie: But if you kept another six months,
or if you kept it longer than a year,

00:33:28.780 --> 00:33:32.200
you would only pay $15 per $100 a gain.

00:33:32.230 --> 00:33:34.510
So it is worth it to keep money.

00:33:34.510 --> 00:33:35.705
I mean, I don't know about you John.

00:33:35.705 --> 00:33:37.325
I don't really ever sell short term.

00:33:37.325 --> 00:33:38.310
I don't, I'm not a day trader.

00:33:38.640 --> 00:33:42.300
I would never pay that tax rate
when I could hold onto it anyway.

00:33:42.300 --> 00:33:45.480
And John, you and I are both
buy and hold investors anyway,

00:33:45.480 --> 00:33:46.560
so we're not trading stocks.

00:33:46.560 --> 00:33:48.300
We buy things to hold
'em for the long term.

00:33:48.305 --> 00:33:48.615
Correct.

00:33:48.660 --> 00:33:51.510
So all of my stuff in my brokerage
account, besides the stuff that

00:33:51.510 --> 00:33:54.210
I just bought, is long term.

00:33:54.270 --> 00:33:57.360
So it's gets that
preferential tax treatment.

00:33:57.660 --> 00:34:04.570
Jon: Very rarely have we ever sold
stocks, that were for short term gains.

00:34:04.620 --> 00:34:05.340
most of the time.

00:34:05.340 --> 00:34:08.610
Like I said, I'm very similar to
Louie, where we buy and hold, we

00:34:08.610 --> 00:34:11.190
believe in index funds and just
kind of set it and forget it.

00:34:11.190 --> 00:34:13.710
And then if you make some money and
you need some money, you liquidate it.

00:34:13.710 --> 00:34:14.280
And that's great.

00:34:15.420 --> 00:34:17.760
Occasionally we've been
speculators to some degree.

00:34:17.820 --> 00:34:17.910
Sure.

00:34:17.910 --> 00:34:20.460
This is more, my wife
that does this and not me.

00:34:20.460 --> 00:34:23.900
But, we've done, we've definitely sold
some stocks, that took some pretty big

00:34:23.900 --> 00:34:27.570
hits, like right outta the ch so, that
kind of takes us, we're kind of skipping

00:34:27.570 --> 00:34:32.520
ahead, but one thing that you do have, as
an advantage in a brokerage account that

00:34:32.520 --> 00:34:38.460
you do not have in a retirement account
is this concept of tax lost harvesting.

00:34:38.790 --> 00:34:40.440
You've heard that term Louis, haven't you?

00:34:40.440 --> 00:34:40.500
Yeah.

00:34:40.620 --> 00:34:41.010
Oh yeah.

00:34:41.250 --> 00:34:46.080
Why is that, how is that advantageous
to Joe Schmo firefighter?

00:34:46.080 --> 00:34:50.790
why would they want to consider that
concept or that strategy, or what is that?

00:34:50.850 --> 00:34:51.120
Well,

00:34:51.360 --> 00:34:54.540
Louie: when you sell a stock at a
loss, or when you sell any kinda

00:34:54.540 --> 00:34:59.490
investment at a loss, you can use that
loss to help offset your tax bill.

00:34:59.610 --> 00:35:04.140
So, you know, you know how you pay
tax on a gain while you basically

00:35:04.170 --> 00:35:08.100
get that, you get the reverse
treatment when you sell at a loss.

00:35:08.460 --> 00:35:12.420
So if you're selling at a loss, you
can use that loss to help offset

00:35:12.420 --> 00:35:14.640
because you're losing money and you
don't get to pay tax on that money.

00:35:14.640 --> 00:35:17.280
You get like a, it's not a
credit, it's really an offset.

00:35:17.280 --> 00:35:17.370
Yep.

00:35:17.740 --> 00:35:22.360
so where that can come in
beneficial is, let's say in your.

00:35:22.635 --> 00:35:25.845
Taxable brokerage account, you have
all these gains for the year, but you

00:35:25.845 --> 00:35:28.155
had one stock that just stunk it up and

00:35:28.205 --> 00:35:30.420
Jon: big bologna skin, just augered it in

00:35:30.520 --> 00:35:32.470
Louie: a thousand dollars on that stock.

00:35:32.470 --> 00:35:33.790
So the value went down.

00:35:34.120 --> 00:35:39.040
You can sell that stock and
then use that loss to offset

00:35:39.040 --> 00:35:40.930
the gain from your other stocks.

00:35:40.930 --> 00:35:41.050
Oh, does

00:35:41.105 --> 00:35:42.065
Jon: Oh, okay.

00:35:42.125 --> 00:35:42.665
Yeah.

00:35:42.820 --> 00:35:42.880
Louie: Yeah.

00:35:42.940 --> 00:35:44.530
So I'm trying to keep it as
simple as possible because

00:35:44.530 --> 00:35:46.000
tax loss harvesting is a very.

00:35:46.360 --> 00:35:50.140
It's become a very big deal lately
and you have these roboadvisors

00:35:50.140 --> 00:35:53.160
and stuff like that tout the
benefits of tax loss harvesting.

00:35:53.710 --> 00:35:57.880
the truth is, it really is more for
people who buy and sell individual stocks.

00:35:57.880 --> 00:36:00.730
Like that's when you can really take
advantage of tax loss harvesting.

00:36:01.030 --> 00:36:04.750
If you are one of those people, which
once again John and I would suggest

00:36:04.750 --> 00:36:08.050
you buy low cost index funds for the
majority of your saving and investing.

00:36:08.380 --> 00:36:11.920
But if you're one of those guys that
like to have like 10% of your portfolio,

00:36:11.920 --> 00:36:14.590
you want to just explore and play and
see what you can do and you have these

00:36:14.590 --> 00:36:19.600
individual stocks you could potentially
use tax loss harvesting to, offset any

00:36:19.600 --> 00:36:22.840
other gains you have in your portfolio,
your taxable brokerage portfolio.

00:36:22.880 --> 00:36:23.210
Jon: Yep.

00:36:23.450 --> 00:36:24.740
No, I think that's well said.

00:36:24.740 --> 00:36:27.350
So that's the biggest, that's the key
differentiator with this one though.

00:36:27.350 --> 00:36:28.610
So don't get this confused.

00:36:28.880 --> 00:36:30.980
You cannot do this with
a retirement account.

00:36:31.100 --> 00:36:31.460
All right?

00:36:31.460 --> 00:36:34.970
So you cannot do tax loss harvesting
with a, an a retirement account, which

00:36:34.970 --> 00:36:39.140
is another reason why it's not great to
go all in on individual stocks within a

00:36:39.140 --> 00:36:42.710
retirement account because you can't take
advantage of this thing goes to zero.

00:36:43.200 --> 00:36:44.460
it's no benefit to you.

00:36:44.710 --> 00:36:45.850
so if you are one of those.

00:36:46.285 --> 00:36:49.735
One of those, investors that likes
to invest in individual stocks for

00:36:49.735 --> 00:36:51.265
whatever reason, like that's your jam.

00:36:51.575 --> 00:36:54.725
the brokerage account is a much
more efficient way of doing that.

00:36:54.725 --> 00:36:58.385
So you can kind of take advantage of
your winners and then offset your losers

00:36:58.385 --> 00:37:01.595
to keep your, the amount of taxes that
you're gonna pay or the amount that

00:37:01.595 --> 00:37:03.095
you're gonna have to report way less.

00:37:03.095 --> 00:37:04.625
So just something to consider.

00:37:04.685 --> 00:37:07.835
but this is definitely something that,
you know, the investment industry and the

00:37:07.835 --> 00:37:10.145
finance industry is really gleaning onto.

00:37:10.445 --> 00:37:13.615
Is it can optimize some of your
tax strategies when you're looking

00:37:13.615 --> 00:37:17.165
at trying to minimize your gains,
by selling some of your losses.

00:37:17.165 --> 00:37:20.285
So definitely something to, we would
be remissed if we didn't talk about

00:37:20.285 --> 00:37:22.970
the advantages of tax lost harvesting.

00:37:22.970 --> 00:37:26.510
That's probably one of the most common
cited things when you're considering

00:37:26.510 --> 00:37:28.095
a taxable, a brokerage account.

00:37:28.815 --> 00:37:33.015
and then this is kind of the last, if
we're doing a top five, really advantages

00:37:33.075 --> 00:37:37.725
of a brokerage account, and that's really
man, the world is your oyster, so to

00:37:37.725 --> 00:37:39.765
speak, as far as what you can invest in.

00:37:40.035 --> 00:37:40.905
We already talked about it.

00:37:40.905 --> 00:37:47.565
Individual stocks, exchange traded funds,
mutual funds, real estate funds, options.

00:37:47.625 --> 00:37:49.905
I mean, you, crypto, like, you name it.

00:37:49.905 --> 00:37:52.135
Like, it's almost, it's almost too much.

00:37:52.135 --> 00:37:55.135
Like you literally anything that
you can possibly think about, like

00:37:55.135 --> 00:37:58.135
this is the access point or the
vehicle in which you can access

00:37:58.135 --> 00:38:00.415
those, which is great for if you're

00:38:00.490 --> 00:38:00.690
Louie: be great.

00:38:00.740 --> 00:38:01.330
Could be great.

00:38:01.615 --> 00:38:02.275
Jon: could be great.

00:38:02.335 --> 00:38:02.735
It could be great.

00:38:02.780 --> 00:38:03.000
It

00:38:03.005 --> 00:38:06.215
Louie: also gives you access
to some tools like margin.

00:38:06.590 --> 00:38:11.420
And, you know, some options trading
and stuff like that, that you

00:38:11.810 --> 00:38:13.190
can get in a lot of trouble with.

00:38:13.190 --> 00:38:13.280
Yes.

00:38:13.680 --> 00:38:17.290
but you basically have the keys
to the entire investment world

00:38:17.290 --> 00:38:18.520
if you have a brokerage account.

00:38:18.520 --> 00:38:21.910
And so you can do some crazy
things, some risky things.

00:38:22.160 --> 00:38:24.230
there's a lot of people that have made a
lot of money, but there's probably even

00:38:24.230 --> 00:38:27.500
more people that have lost a lot of money
with their taxable brokerage accounts.

00:38:28.260 --> 00:38:28.590
a lot of pain.

00:38:28.590 --> 00:38:31.410
If you go on wall streete bets,
subreddit and you look at what people

00:38:31.410 --> 00:38:32.730
have done with their brokerage accounts.

00:38:32.775 --> 00:38:36.525
Jon: What I feel like I, I don't know if
this is right or not right or wrong, but

00:38:36.525 --> 00:38:41.095
I just feel like the brokerage accounts,
and I've mentioned Robinhood a lot because

00:38:41.095 --> 00:38:44.955
Robinhood, like, you know, I've actually
listened to their founders and why they

00:38:44.955 --> 00:38:49.585
really got into it and they really wanted
to democratize, investing to like the low

00:38:49.585 --> 00:38:52.825
person, right, to like the commoner, if
you will, that didn't have hundreds of

00:38:52.825 --> 00:38:55.885
thousands of dollars to invest and have
a broker and have all these minimums.

00:38:55.885 --> 00:38:59.185
Like they really wanted you as
a common person to be able to

00:38:59.185 --> 00:39:03.205
invest in an Apple stock, but you
didn't have $450 to buy the stock.

00:39:03.565 --> 00:39:06.355
They were the ones that really
helped create fractional shares.

00:39:06.355 --> 00:39:09.595
So you could literally, if you
had $2, yeah, we'll give you,

00:39:09.595 --> 00:39:13.855
you know, one, 1000th of a, of
an Apple share, which is great.

00:39:13.945 --> 00:39:17.315
Everyone really needs to have
access to the, stock market.

00:39:17.335 --> 00:39:21.735
Like we've noticed like the, the,
the distribution and wealth and, the

00:39:21.735 --> 00:39:23.205
inequalities that they talk about.

00:39:23.205 --> 00:39:27.195
And it's really people that have,
access to invest in appreciable,

00:39:27.505 --> 00:39:30.835
assets like stocks that really have
an advantage versus those that don't.

00:39:30.835 --> 00:39:35.515
And Robinhood has definitely done
that, but I do feel like Robinhood has

00:39:36.025 --> 00:39:40.295
gamified, trading and that's truly what
it is, where people are trading stocks

00:39:40.295 --> 00:39:42.515
daily, sometimes multiple times a day.

00:39:42.875 --> 00:39:46.535
And that, in my opinion, is really
where you become more a speculator.

00:39:46.805 --> 00:39:46.895
Yeah.

00:39:46.895 --> 00:39:49.985
And not so much an investor where you
see something, it goes up by a little

00:39:49.985 --> 00:39:52.565
bit, you sell it, and then you buy
something else hoping it's goes up.

00:39:52.615 --> 00:39:55.465
and it really just creates some
challenges when you're thinking

00:39:55.465 --> 00:39:57.445
about buying and holding long term.

00:39:57.445 --> 00:39:57.835
So

00:39:57.845 --> 00:39:58.775
Louie: that's a fool's errand.

00:39:58.775 --> 00:40:01.925
And I'll just say this right now, this
might be controversial, but if that's

00:40:01.925 --> 00:40:04.785
what you're doing, like I know how to
make money by, day trading on a regular

00:40:04.785 --> 00:40:07.785
basis, you don't, and if you have made
money, it's because you got lucky.

00:40:08.235 --> 00:40:10.005
And in the last 10 years.

00:40:10.210 --> 00:40:13.960
You know, 12 years, maybe even 15
years, the economy's been so good.

00:40:14.015 --> 00:40:16.955
the stock market's been so good that
any fool could do that and make money.

00:40:17.395 --> 00:40:20.845
but I think Warren Buffet has a
quote that when the tide goes out,

00:40:20.845 --> 00:40:22.135
you see who's been swimming naked.

00:40:22.140 --> 00:40:22.620
Jon: Oh yeah.

00:40:22.645 --> 00:40:25.255
Louie: And I think, and what he's
referring to when he, he said that when

00:40:25.255 --> 00:40:28.435
he was referring to when the stock market
is going down or when the economy's in

00:40:28.435 --> 00:40:31.135
trouble, you see, who doesn't really
know what they're doing with their

00:40:31.135 --> 00:40:32.965
investments and with their stock strategy.

00:40:33.505 --> 00:40:38.685
And so, you know, I would say almost
everyone is not gonna be able to figure

00:40:38.685 --> 00:40:42.555
out the right stocks to buy and hold long
term and beat it and beat the market.

00:40:42.555 --> 00:40:44.205
And if you do, it's 'cause you got lucky.

00:40:44.265 --> 00:40:48.615
And it's not because you are just this
great stock analyzer or because you've

00:40:48.615 --> 00:40:52.485
seen the most stock memes on Wall
Street bets or something like that.

00:40:52.485 --> 00:40:56.575
So we, we're just saying that because
we're touting, it almost sounds like

00:40:56.575 --> 00:40:58.585
we're touting taxable brokerage accounts
and we're talking about all these

00:40:58.585 --> 00:41:00.090
benefits, but there is like a dark.

00:41:00.825 --> 00:41:03.855
Underbelly to the whole tax,
to the whole Robinhood thing.

00:41:03.885 --> 00:41:06.885
And I think you could listen to their
founders and talk about democratizing,

00:41:07.365 --> 00:41:11.640
but you can look at it from a skeptical
viewpoint, which I tend to do very often.

00:41:11.850 --> 00:41:15.570
And that is they gamified the system and
they wanted people, they enticed people

00:41:15.570 --> 00:41:20.100
in with free trades so that they can
buy and sell without necessarily doing

00:41:20.100 --> 00:41:24.520
it to make money, for their investors,
but instead to just make money for

00:41:24.520 --> 00:41:29.020
themselves and to get people attracted
to this idea of logging into your app

00:41:29.080 --> 00:41:33.700
30 times a day, buying and selling cool,
fun meme stocks and stuff like that.

00:41:34.060 --> 00:41:37.530
And so, you know, I don't know, may,
maybe Robinhood did have a, it was

00:41:37.530 --> 00:41:40.900
purely, for the good of the people,
but I do think that the other way

00:41:40.900 --> 00:41:42.400
to look at it is they really made.

00:41:43.270 --> 00:41:46.840
A game out of investing and if
you treat investing and saving for

00:41:46.840 --> 00:41:50.210
your retirement as a game, it's
probably not gonna be a good thing.

00:41:50.270 --> 00:41:50.600
Jon: Yep.

00:41:50.930 --> 00:41:52.700
No, that's kind of our 2 cents on that.

00:41:52.790 --> 00:41:55.880
So, you know, to kind of wrap up
on like the benefits though for

00:41:55.880 --> 00:41:57.140
going back to the brokerage account.

00:41:57.140 --> 00:41:59.600
So really think about
it's flexible, right?

00:41:59.600 --> 00:42:01.970
So you can take out the money
kind of whenever you want.

00:42:01.970 --> 00:42:06.130
There's no early withdrawal penalties that
you have to worry about, or restrictions.

00:42:06.370 --> 00:42:10.405
You can get preferential tax treatment
compared to what you would pay as like

00:42:10.515 --> 00:42:12.915
a W2 employee or a salaried employee.

00:42:12.915 --> 00:42:16.065
There are advantages that way
as far as leaving a legacy

00:42:16.065 --> 00:42:17.895
and estate tax advantages.

00:42:17.955 --> 00:42:21.435
the brokerage account definitely
holds true with that versus a

00:42:21.435 --> 00:42:22.755
traditional retirement account.

00:42:22.945 --> 00:42:27.625
and you just really have a ton of
investment options and choices inside

00:42:27.625 --> 00:42:30.005
whatever custodian your preference is.

00:42:30.005 --> 00:42:32.405
So there's a lot of, there's
a lot of opportunities there.

00:42:32.405 --> 00:42:32.615
So.

00:42:33.415 --> 00:42:37.105
Let's talk about then on the flip side
of that, and this is one that we've

00:42:37.105 --> 00:42:42.085
talked about before, but what are
maybe more advantages or why should

00:42:42.155 --> 00:42:46.955
our listeners and members think more
about contributing to a retirement plan?

00:42:46.955 --> 00:42:50.435
And specifically we're talking about
in this circumstance, their 4 57

00:42:50.435 --> 00:42:52.835
plan versus a brokerage account.

00:42:52.835 --> 00:42:54.515
what are the advantages of that?

00:42:54.795 --> 00:42:55.965
let's start with number one, Louis.

00:42:56.025 --> 00:42:56.295
Yeah.

00:42:56.680 --> 00:43:00.200
Louie: So, One of the cool things
about contributing to a retirement

00:43:00.200 --> 00:43:03.050
account that you don't get with a
brokerage account is that you get

00:43:03.050 --> 00:43:07.520
a tax benefit if it's a traditional
4 57 that you're contributing to.

00:43:07.790 --> 00:43:11.720
You get a tax break this year, so you're
not paying taxes on any of the money that

00:43:11.720 --> 00:43:15.020
you put into that account, or as with
a brokerage account, like as we already

00:43:15.020 --> 00:43:16.340
mentioned, you're gonna have to pay.

00:43:16.595 --> 00:43:19.505
You're gonna have to use after
tax dollars to fund that account.

00:43:19.865 --> 00:43:23.375
So you get an immediate tax break
when you put money into a 4 57.

00:43:24.005 --> 00:43:26.675
Same thing with a Roth 4 57 if
you were to put money into it.

00:43:26.675 --> 00:43:28.445
It's also on an after tax basis.

00:43:28.445 --> 00:43:31.595
But the beautiful thing about it
is, instead of having to pay 15% on

00:43:31.595 --> 00:43:35.165
gains, when you eventually withdraw
that money, you don't pay anything.

00:43:35.285 --> 00:43:38.755
The government already got their money
and so they don't get anything after that.

00:43:38.875 --> 00:43:41.815
So you can see, like that shows
you a stark difference between a

00:43:42.325 --> 00:43:46.585
brokerage or a Roth I or a Roth 4 57
let's say, is that you're getting a

00:43:46.585 --> 00:43:50.395
huge tax benefit that you don't get
with a taxable brokerage account.

00:43:50.590 --> 00:43:51.760
Jon: No, that's correct.

00:43:51.760 --> 00:43:53.020
And that's definitely well said.

00:43:53.020 --> 00:43:54.760
So that's just something to consider.

00:43:54.760 --> 00:43:58.060
So whether you're not, you're thinking
about the tax deferred growth or if

00:43:58.060 --> 00:44:02.770
you're talking about paying taxes via
Roth right now, but then having, you

00:44:02.770 --> 00:44:07.070
know, absolute, tax free withdrawals,
when you get to the age in which you

00:44:07.070 --> 00:44:11.220
retire, Definitely things to consider and
definitely a leg up for the retirement

00:44:11.220 --> 00:44:16.060
plan, whether it is the traditional or
the Roth, excluding the brokerage account.

00:44:16.420 --> 00:44:19.970
Alright, so, there are, another,
yeah, I guess you would call it

00:44:19.970 --> 00:44:23.990
benefit of the four fifty seven
is, you can put in quite a bit of

00:44:23.990 --> 00:44:25.940
money inside of that account, right?

00:44:25.940 --> 00:44:28.430
So this year it was what, 23,000?

00:44:28.430 --> 00:44:33.830
I think 20 or next year it's
gonna be 24, 23 5 24, 24 5.

00:44:33.920 --> 00:44:34.705
I always get 'em.

00:44:35.090 --> 00:44:36.170
We should definitely check on that.

00:44:36.170 --> 00:44:39.260
But it's, I mean, for most of us,
like most of our members don't have

00:44:39.260 --> 00:44:41.540
that ability to totally max it out.

00:44:41.540 --> 00:44:42.620
But if you are great.

00:44:42.840 --> 00:44:45.370
and there also are, catch up
provisions that are allowed.

00:44:45.370 --> 00:44:49.120
So if you're over the age of 50, you
can contribute, you know, another

00:44:49.120 --> 00:44:51.490
seven or $8,000 on top of that.

00:44:51.770 --> 00:44:55.340
which is great, which is an unbelievable,
I mean, if we have members that are

00:44:55.340 --> 00:44:58.610
starting young or even middle age and
they're maxing that thing out, they're

00:44:58.610 --> 00:45:02.600
really gonna be setting themselves up
for success when they already retire,

00:45:02.880 --> 00:45:05.310
after hopefully 20 or 25 or 30 years.

00:45:05.310 --> 00:45:07.800
that's gonna be a nice little
chunk of change in there.

00:45:07.800 --> 00:45:07.860
So

00:45:08.370 --> 00:45:13.260
Louie: 23, 20 $4,000 of tax deferred
or tax free growth is phenomenal.

00:45:13.260 --> 00:45:14.610
Like that is gonna be amazing.

00:45:14.610 --> 00:45:16.590
And you don't get that with the
taxable brokerage account 'cause you're

00:45:16.590 --> 00:45:18.920
paying taxes on it and on the gains.

00:45:18.950 --> 00:45:22.700
So, and then the biggest, I'll say
this, I think this is the biggest one.

00:45:22.700 --> 00:45:23.840
John, you put this in here.

00:45:23.900 --> 00:45:26.330
this is the last thing to talk about
for this, but I actually think this

00:45:26.360 --> 00:45:30.530
might be number one in terms of the
importance is with a 4 57, whether it's

00:45:30.530 --> 00:45:35.600
traditional or Roth, you have, payroll
deductions to make savings automatic.

00:45:35.750 --> 00:45:39.870
So I would say that, if we didn't have
this, if you had to actually choose to

00:45:39.870 --> 00:45:44.400
go in and put, pull money outta your
checking account to save in your 4 57,

00:45:45.030 --> 00:45:49.080
I bet our contribution rate here at West
Metro would plummet to the single digits.

00:45:49.080 --> 00:45:49.350
Like you

00:45:49.590 --> 00:45:50.250
Jon: Oh, for sure.

00:45:50.280 --> 00:45:50.610
Five

00:45:50.610 --> 00:45:52.980
Louie: to 5% of people or
something contributing.

00:45:53.370 --> 00:45:53.935
So the fact that.

00:45:54.570 --> 00:45:56.040
With a 4 57, you have it.

00:45:56.040 --> 00:45:59.130
You set it up with pay with payroll,
you set it up with hr and then

00:45:59.130 --> 00:46:02.040
money is automatically deducted
before you ever get your paycheck.

00:46:02.130 --> 00:46:08.220
Just eliminates any kind of temptation
to use that money for something else.

00:46:08.220 --> 00:46:09.750
It's gone before you even see it.

00:46:10.020 --> 00:46:11.160
It's in a different account.

00:46:11.160 --> 00:46:14.850
You don't have easy access to it, and
that's the best thing for investors.

00:46:14.880 --> 00:46:17.250
You set it, you forget it,
and it just keeps growing and

00:46:17.250 --> 00:46:18.390
growing behind the scenes.

00:46:18.570 --> 00:46:18.690
Yeah.

00:46:18.690 --> 00:46:20.040
You can't do that with
the taxable brokerage.

00:46:20.040 --> 00:46:24.430
You have to manually go into your checking
account and or go into your app and pull

00:46:24.430 --> 00:46:28.480
money into your brokerage account every
month and you can set it up for automatic,

00:46:28.510 --> 00:46:31.720
I guess you could do that, but it still
has to hit your checking account first.

00:46:31.975 --> 00:46:34.825
Jon: Yeah, no, that, I mean,
they call that friction, right?

00:46:34.825 --> 00:46:38.905
Anything that you make frictionless,
if you will, and just automatic,

00:46:38.975 --> 00:46:42.995
it, there has been study after
study that just shows what people's

00:46:42.995 --> 00:46:44.525
investment futures look like.

00:46:44.825 --> 00:46:48.275
If it's, if they never literally
see the money, it just automatically

00:46:48.275 --> 00:46:51.035
gets withdrawn and set up and
they don't touch it at all.

00:46:51.315 --> 00:46:54.855
that is definitely the best case
scenario for the majority of people

00:46:54.855 --> 00:46:59.295
is to not be an active investor, to
just have a plan, continue to set that

00:46:59.295 --> 00:47:01.135
up and then just don't mess it up.

00:47:01.195 --> 00:47:01.315
Yeah.

00:47:01.375 --> 00:47:03.715
Which is, doesn't sound great.

00:47:03.715 --> 00:47:06.475
'cause most people like to control,
feel like they have control

00:47:06.475 --> 00:47:07.615
and they want to make moves.

00:47:07.615 --> 00:47:09.925
Like they feel like that's
the better thing to do.

00:47:09.925 --> 00:47:13.695
But like, evidence says, and
anecdotal says like, the more

00:47:13.695 --> 00:47:17.235
people mess with their portfolios
and investments, the worse they do.

00:47:17.655 --> 00:47:20.385
And it doesn't matter what
investment you're talking about.

00:47:20.385 --> 00:47:22.455
that is just, that is the truth.

00:47:22.665 --> 00:47:25.450
Louie: maybe you can kind of help
fill in the fuzzy details for me.

00:47:25.450 --> 00:47:27.550
But there was a brokerage, I wanna
say it was like either Fidelity or

00:47:27.550 --> 00:47:32.500
Schwab that did this study, that
showed that people who were dead were

00:47:32.500 --> 00:47:35.800
better investors in their retirement
accounts than people that were alive.

00:47:35.830 --> 00:47:35.890
Yeah.

00:47:35.890 --> 00:47:38.110
And the reason why is because
they did not, the dead people

00:47:38.110 --> 00:47:39.430
did not touch their investments.

00:47:39.610 --> 00:47:41.170
So they just were, they just grew.

00:47:41.170 --> 00:47:43.240
They didn't change 'em, they
didn't reallocate 'em, they

00:47:43.240 --> 00:47:46.930
didn't try to, you know, open up a
brokerage account associated with

00:47:46.930 --> 00:47:48.010
it and try to do their own thing.

00:47:48.010 --> 00:47:50.200
They just left their investments
there 'cause they were dead.

00:47:50.530 --> 00:47:53.830
The people that were alive would
always change the allocation or change

00:47:53.830 --> 00:47:55.210
the investments or change the funds.

00:47:55.510 --> 00:47:58.420
And that led to worse outcomes
over time for those people.

00:47:58.420 --> 00:47:58.480
Yeah.

00:47:58.510 --> 00:47:59.380
Which is kind of funny.

00:47:59.620 --> 00:48:00.730
Jon: is, it's scary.

00:48:00.790 --> 00:48:03.970
I mean, to think that dead people are
better investors than professional

00:48:03.970 --> 00:48:07.510
money managers, but that's the
cold hard truth is just whatever

00:48:07.510 --> 00:48:09.460
strategy you have, it really is.

00:48:09.490 --> 00:48:13.750
it's just continuing to stay the course
and keep with that strategy and not

00:48:13.750 --> 00:48:17.130
mess it up and not, get in and outta
positions all the time and really

00:48:17.130 --> 00:48:18.630
feel like you're making a difference.

00:48:18.630 --> 00:48:22.230
'cause it is the one thing that
people have proven time and time

00:48:22.230 --> 00:48:24.420
again is they cannot time the market.

00:48:24.420 --> 00:48:27.750
And that's the one thing from the very
beginning, Louis and I have always

00:48:27.750 --> 00:48:31.430
advocated for, is do not think that
you are smarter than anyone else.

00:48:31.430 --> 00:48:34.920
And that you have a better skillset,
that you can all of a sudden get

00:48:34.920 --> 00:48:37.890
in and out of stocks and know
when they're gonna go up versus go

00:48:37.890 --> 00:48:39.390
down and sell high and buy a low.

00:48:39.390 --> 00:48:40.890
it just does not work that way.

00:48:40.890 --> 00:48:44.100
And this is for people that have
dedicated their lives to figuring

00:48:44.100 --> 00:48:46.680
out market structure and they
still are not able to do it.

00:48:46.680 --> 00:48:48.850
So, set up that index fund.

00:48:48.850 --> 00:48:49.285
Just continue.

00:48:49.565 --> 00:48:54.285
To contribute the max that you can and
then come have a drink a fire Captain

00:48:54.285 --> 00:48:56.535
ale with Louis and I after 25 years.

00:48:56.785 --> 00:48:58.105
and you're gonna be in really

00:48:58.215 --> 00:48:59.055
Louie: real good shape.

00:48:59.065 --> 00:48:59.365
Jon: Yep.

00:48:59.425 --> 00:49:02.635
So that, that, that ability
to make those automatic saving

00:49:03.295 --> 00:49:04.915
it just set up is critical.

00:49:04.915 --> 00:49:06.415
That's probably the, I
agree with you Louis.

00:49:06.415 --> 00:49:09.565
That's probably out of all the
benefits, that is by far the number

00:49:09.565 --> 00:49:11.905
one thing from a behavioral standpoint.

00:49:11.905 --> 00:49:11.995
Yep.

00:49:12.245 --> 00:49:16.235
once again, wrapping up 4 57,
think about it, is there's tax.

00:49:16.600 --> 00:49:21.590
deductions if you do, traditional or
there's, the ability to do a Roth account

00:49:21.590 --> 00:49:24.470
and then have tax withdrawals later, which
is great, which is something that you

00:49:24.470 --> 00:49:26.540
will not get with a brokerage account.

00:49:26.760 --> 00:49:29.600
you don't have to worry
about, early withdrawals.

00:49:29.660 --> 00:49:30.110
All right?

00:49:30.110 --> 00:49:31.430
From the 4 57 plan.

00:49:31.430 --> 00:49:35.670
If you leave, a traditional 4 57, you can
basically take that out as soon as you

00:49:35.670 --> 00:49:37.230
leave service, doesn't matter your age.

00:49:37.450 --> 00:49:39.520
there are pretty good contribution limits.

00:49:39.680 --> 00:49:42.620
and it really is that forced
discipline and structure that make,

00:49:42.650 --> 00:49:47.310
a retirement plan, specifically the
4 57 really, a good opportunity for

00:49:47.310 --> 00:49:49.380
our folks to invest and save money in.

00:49:49.845 --> 00:49:51.915
Louie: So then John, my big
question to you after that is

00:49:51.915 --> 00:49:54.675
you hear all these benefits of
the 4 57, like tax deferred Yeah.

00:49:54.735 --> 00:49:59.085
Or tax free in the case of the Roth 4
57, you know, contributions and growth.

00:49:59.575 --> 00:50:04.575
I guess, the question is, and I've been
asked this a lot, is, well then why

00:50:04.575 --> 00:50:06.705
would I invest in a brokerage account?

00:50:06.705 --> 00:50:11.565
Like what, in under what circumstances
should a person choose to invest

00:50:11.565 --> 00:50:14.875
in their brokerage account over
their, retirement accounts?

00:50:14.875 --> 00:50:16.975
And I know you said flexibility,
but what does that actually

00:50:16.975 --> 00:50:18.565
mean for me as a firefighter?

00:50:18.565 --> 00:50:22.655
Like when should I choose, the
brokerage over a retirement account?

00:50:22.655 --> 00:50:23.735
Do you have any thoughts on that?

00:50:23.735 --> 00:50:24.005
Yeah,

00:50:24.105 --> 00:50:27.345
Jon: if you need money, whatever
that money's gonna be used for.

00:50:27.345 --> 00:50:32.325
So, you know, probably the most common
for a lot of our listeners and members

00:50:32.325 --> 00:50:34.355
is like some type of, big purchase.

00:50:34.385 --> 00:50:37.065
So whether that's a down payment for
a house or something else like that.

00:50:37.295 --> 00:50:41.225
So something that you're gonna need
access to money before you retire.

00:50:41.535 --> 00:50:44.015
you're gonna wanna fund that
in a different way than using

00:50:44.015 --> 00:50:45.035
your retirement account.

00:50:45.275 --> 00:50:48.395
I mean, it sounds very obvious,
like one is even in the terminology

00:50:48.395 --> 00:50:51.995
retirement, but if you really want to
think about it, that's what I would add.

00:50:51.995 --> 00:50:53.195
Advise someone.

00:50:53.495 --> 00:50:57.305
So if you know that you're gonna need
some money, let's call it $25,000,

00:50:57.305 --> 00:51:01.385
and I know once again, I'm living in a
pretend land thinking $25,000 is gonna be

00:51:01.415 --> 00:51:02.165
Louie: a down payment

00:51:02.285 --> 00:51:04.085
Jon: anything more than a vehicle today.

00:51:04.395 --> 00:51:07.185
you're kidding yourself, but no, let's
just say, that's your goal is you wanna

00:51:07.185 --> 00:51:10.935
save up $25,000 and you're gonna need
access to it in the next couple years.

00:51:11.445 --> 00:51:12.585
A brokerage account.

00:51:13.080 --> 00:51:15.660
And even then you could probably
get into the semantics of maybe a

00:51:15.660 --> 00:51:16.770
savings account would be better.

00:51:16.770 --> 00:51:18.300
'cause I'm gonna need
that within a year or two.

00:51:18.350 --> 00:51:19.340
let's say it's five years.

00:51:19.610 --> 00:51:21.440
Five years, I'm gonna need $25,000.

00:51:21.440 --> 00:51:22.070
I'd be like, okay.

00:51:22.430 --> 00:51:25.750
Seems pretty reasonable to
invest that money in, a broad

00:51:25.990 --> 00:51:28.000
and a broad based index fund.

00:51:28.000 --> 00:51:30.730
And then, in, in five years, hopefully
you've gotten some growth off of that.

00:51:30.730 --> 00:51:32.860
That's a great opportunity
for a brokerage account.

00:51:33.610 --> 00:51:37.540
Anything else, like savings wise,
as you're thinking about like, you

00:51:37.540 --> 00:51:40.330
know, well I think after retire I
might want a second home, or I'm

00:51:40.330 --> 00:51:41.590
gonna do all these other things.

00:51:41.630 --> 00:51:45.980
I think you're much better gonna
be suited for maxing out your

00:51:45.980 --> 00:51:48.170
retirement account first and foremost.

00:51:48.170 --> 00:51:53.250
Funding that long-term down the road
from not only a tax strategy, but

00:51:53.250 --> 00:51:55.290
just an optimization of your finances.

00:51:55.290 --> 00:51:56.250
You're gonna be better suited.

00:51:56.250 --> 00:51:58.620
Whether that's a traditional
or whether that's a Roth.

00:51:58.620 --> 00:52:00.980
we could have, arguments on both ends.

00:52:00.980 --> 00:52:01.460
I got a good one.

00:52:01.580 --> 00:52:02.000
Ooh,

00:52:02.015 --> 00:52:05.495
Louie: what if, you know, I mean, these
big monster mega banks that I'm with,

00:52:05.675 --> 00:52:10.445
Wells Fargo and Chase, they don't give me
good savings account rates, but I needed

00:52:10.445 --> 00:52:12.155
my, have my emergency fund somewhere.

00:52:12.245 --> 00:52:12.335
Yep.

00:52:12.515 --> 00:52:14.645
Can I put my emergency fund
in a brokerage account?

00:52:14.645 --> 00:52:18.795
Because then I could buy some stocks,
maybe some, crypto and I could

00:52:18.795 --> 00:52:20.265
make a lot more on that savings.

00:52:20.265 --> 00:52:22.215
That's just sitting there
not making anything for me.

00:52:22.215 --> 00:52:23.175
What do you think about that?

00:52:23.295 --> 00:52:23.625
Yeah.

00:52:23.655 --> 00:52:24.765
Can I put my e fund in there?

00:52:24.810 --> 00:52:28.650
Jon: I think your e fund or your
emergency fund is best suited

00:52:28.650 --> 00:52:30.090
in something that is safe.

00:52:30.270 --> 00:52:30.630
Right?

00:52:30.840 --> 00:52:35.160
And what is safe is something that is
backed by the FDIC, which is backed

00:52:35.160 --> 00:52:39.130
by the government, that you're not
gonna lose that money and anything.

00:52:39.130 --> 00:52:43.420
And you'll see on every disclosure of
every investment and any stock, and

00:52:43.420 --> 00:52:47.330
even in bonds, that they will tell you
that this, that you have to basically

00:52:47.360 --> 00:52:51.290
acknowledge the disclosure that says,
this investment has the opportunity to

00:52:51.290 --> 00:52:53.030
lose money, including your principal.

00:52:53.030 --> 00:52:54.350
So the amount of money you put in.

00:52:54.860 --> 00:52:58.310
So the concept within an emergency
fund is that is specifically

00:52:58.360 --> 00:53:00.040
sacred and it has to be liquid.

00:53:00.040 --> 00:53:03.100
So you have to be able to access it
immediately, and you have to know

00:53:03.100 --> 00:53:06.580
what the value of that is gonna be at
all times or else what's the purpose.

00:53:06.610 --> 00:53:10.215
Louie: So, so John, I totally, I
asked you that question in that way

00:53:10.215 --> 00:53:13.125
'cause I've been asked that same
question that same way by countless,

00:53:13.405 --> 00:53:14.755
buddies at the, around the fire.

00:53:15.005 --> 00:53:16.235
Station dinner table.

00:53:16.775 --> 00:53:19.775
And I always tell them, no, it's
not an appropriate place for your

00:53:19.775 --> 00:53:23.075
savings or your emergency fund, like
just your regular emergency fund.

00:53:23.075 --> 00:53:24.725
You need to have three to six months.

00:53:24.725 --> 00:53:24.875
Right?

00:53:24.875 --> 00:53:27.635
We always tell people three to six
months is a great mark to shoot for.

00:53:28.175 --> 00:53:31.895
And if you have that, you don't, you
wanna know, you can rely on it if things

00:53:31.895 --> 00:53:36.735
go bad, if you lose your job, if you're
injured, if you have, some big house

00:53:36.735 --> 00:53:37.995
expense that you were not expecting.

00:53:38.745 --> 00:53:40.965
What can happen in a brokerage
account, and this is true, whether

00:53:40.965 --> 00:53:44.775
you hold individual stocks or whether
you hold an index fund like we, that

00:53:44.775 --> 00:53:49.005
we always tout, you can experience
a 25 or 30% drop in one day.

00:53:49.065 --> 00:53:51.615
It's happened before, it
will probably happen again

00:53:52.010 --> 00:53:52.550
Jon: Oh, it will?

00:53:52.550 --> 00:53:52.880
Yeah.

00:53:52.970 --> 00:53:53.570
Guaranteed

00:53:54.180 --> 00:53:56.265
Louie: in the long run is the best
thing you can do with your money.

00:53:56.345 --> 00:54:00.935
buying index funds and stocks are great,
but in the short term, in the really

00:54:00.935 --> 00:54:03.725
short term, it could be very volatile
and you can lose a lot of money.

00:54:04.205 --> 00:54:09.245
The worst thing you can do is
have the market go down by 30%

00:54:09.365 --> 00:54:11.165
and then freak out and sell.

00:54:11.545 --> 00:54:16.765
You sell your stocks and take a 30% loss
because you need the money at that time.

00:54:17.005 --> 00:54:21.095
So for emergency funds, we would say
definitely don't put it in a brokerage

00:54:21.095 --> 00:54:24.455
account that needs to be in a savings
account or CDs or something like that.

00:54:24.575 --> 00:54:26.295
It should not go in a brokerage account.

00:54:26.625 --> 00:54:26.685
Yeah.

00:54:26.745 --> 00:54:28.065
Same thing with a house fund.

00:54:28.065 --> 00:54:30.435
Like I talk to a lot of people who
say, I'm gonna, I wanna use a brokerage

00:54:30.435 --> 00:54:32.415
account to save money for a house.

00:54:33.375 --> 00:54:36.585
The question that I always ask is, what
is your timeline for buying a house?

00:54:36.585 --> 00:54:40.115
And if they say it generally is always
like, well, my, my wife wants to buy

00:54:40.115 --> 00:54:41.645
one next year, this time, next summer.

00:54:41.675 --> 00:54:42.395
And I'm like, okay.

00:54:42.785 --> 00:54:43.235
So.

00:54:43.570 --> 00:54:47.050
your wife wants to buy a house next
summer, you've agreed to that, or at

00:54:47.050 --> 00:54:48.400
least she's coerced you into that.

00:54:48.820 --> 00:54:52.150
The worst thing you can do is put your
money in a brokerage account and then have

00:54:52.150 --> 00:54:56.320
your, whatever your down payment, that
you've been working hard for $50,000, go

00:54:56.320 --> 00:55:00.810
up and smoke when the market tanks and has
a, you know, black Monday kind of moment.

00:55:00.870 --> 00:55:04.260
And if that happens, then you're
not buying a house next year

00:55:04.470 --> 00:55:06.600
or you're selling at a loss and
you're putting less than you think.

00:55:07.200 --> 00:55:09.780
But if people say, I don't know when
I wanna buy a house just sometime

00:55:09.780 --> 00:55:12.750
in the future, maybe four or five
years down the road, I don't know.

00:55:12.750 --> 00:55:14.370
And then I'll say,
okay, so you don't know.

00:55:14.370 --> 00:55:16.560
You just know you wanna buy
at some point in the future.

00:55:16.950 --> 00:55:22.860
Do you, are you okay waiting if the
market goes down in four years right

00:55:22.860 --> 00:55:25.500
before you buy a house, could you
wait another year before you bought

00:55:25.500 --> 00:55:26.850
that house for the market to recover?

00:55:26.850 --> 00:55:29.520
And if people go, yeah, I don't mind,
like I, I'm flexible, then I'll say,

00:55:29.550 --> 00:55:34.390
okay, then you can put that house
fund in a, or that down payment in a

00:55:34.390 --> 00:55:35.740
brokerage account and write it out.

00:55:35.740 --> 00:55:39.010
But if you know you have a timeline and
it's in the short term within the first.

00:55:39.700 --> 00:55:43.060
Within the next like three years, I
would say probably a brokerage account

00:55:43.060 --> 00:55:46.540
is not a good time, a good place
to, to put that money, you wanna put

00:55:46.540 --> 00:55:49.840
it into a safe asset that you know
is gonna be there in a few years.

00:55:49.840 --> 00:55:51.160
And generally that's a savings account.

00:55:51.415 --> 00:55:53.335
Jon: I think that's a
pretty good rule of thumb.

00:55:53.335 --> 00:55:56.385
That's typically, and they
call it, time horizon, right?

00:55:56.385 --> 00:55:58.335
Is like, when are you gonna
wanna access this money?

00:55:58.725 --> 00:56:02.175
And you know, by definition most
people will say short term investing

00:56:02.175 --> 00:56:04.995
goals are things that are a
couple years, two or three years.

00:56:04.995 --> 00:56:07.785
Call it, if you need something that
money within two or three years,

00:56:07.785 --> 00:56:09.435
that's a short term investing goal.

00:56:09.435 --> 00:56:13.065
And you should not be investing
it aggressively in stocks because,

00:56:13.145 --> 00:56:16.325
potentially the stock market can
be depressed for multiple years.

00:56:16.445 --> 00:56:18.365
And that way you don't
have access to that money.

00:56:18.365 --> 00:56:20.915
If you do have access, it's gonna be at
a loss and you don't want to do that.

00:56:21.320 --> 00:56:22.280
Pretty much anything.

00:56:22.280 --> 00:56:26.060
once you start getting four or five,
six years, that's more longer term or

00:56:26.060 --> 00:56:29.360
midterm and then you can be a little
bit more aggressive and take a little

00:56:29.360 --> 00:56:31.040
bit more risk by investing in stocks.

00:56:31.040 --> 00:56:34.940
'cause historically the stock market,
even though it goes up and down throughout

00:56:34.940 --> 00:56:39.200
the course of a year, and even though it
can be down for a year or two, typically

00:56:39.200 --> 00:56:43.310
after, a year or two of the stock market
being depressed, it will go back up.

00:56:43.590 --> 00:56:46.020
and it will go higher than where
your original investment is.

00:56:46.020 --> 00:56:49.350
So I think that's rule of thumb if
you're thinking about it, as far as

00:56:49.350 --> 00:56:52.450
when your goals are for accessing
that money, anything less than

00:56:52.450 --> 00:56:55.730
three years should definitely be
safe, high yield savings account

00:56:55.730 --> 00:56:56.990
where you can immediately access it.

00:56:57.415 --> 00:57:01.055
The flip side of this, and this is where
people want to eat their cake too, is they

00:57:01.055 --> 00:57:03.605
want safety, but they also want growth.

00:57:03.785 --> 00:57:03.845
Yeah.

00:57:03.935 --> 00:57:04.865
And you just can't have it.

00:57:04.865 --> 00:57:06.485
that's the definition of risk.

00:57:06.755 --> 00:57:11.135
Like risk is defined by what your
expected return is gonna be, and it's,

00:57:11.135 --> 00:57:14.045
if you expect to get a lot of growth
or a lot of, you're gonna have to

00:57:14.045 --> 00:57:15.575
take a lot of risk and vice versa.

00:57:15.575 --> 00:57:17.205
So that's the nature of those.

00:57:17.205 --> 00:57:20.985
So we wanted to just unpack the,
brokerage account because we talk

00:57:20.985 --> 00:57:23.715
about it a lot, or we, at least we
hear a lot of people talking about it.

00:57:23.715 --> 00:57:26.055
So we just want to shed a
little bit of light on what

00:57:26.055 --> 00:57:27.835
it is, where it can be useful.

00:57:27.890 --> 00:57:29.600
For our folks and our listeners.

00:57:29.760 --> 00:57:32.880
and also, you know, because that
always gets put up against, well,

00:57:32.910 --> 00:57:37.260
what's more adv advantageous, the
4 57 or brokerage account, and how

00:57:37.260 --> 00:57:38.670
should I think about both of those?

00:57:38.670 --> 00:57:43.320
And I hope after this podcast people will
understand that at least there, there are,

00:57:43.360 --> 00:57:47.650
evidences for when it could be beneficial
for a multitude of different reasons.

00:57:47.710 --> 00:57:51.610
And just understanding that there are
options out there and flexibility and

00:57:51.610 --> 00:57:56.200
just being, educated on what are you
using the account for, what's your goals?

00:57:56.200 --> 00:57:59.560
And then matching that goal
with the appropriate account.

00:57:59.590 --> 00:58:00.710
I think that's what we were trying to do.

00:58:00.710 --> 00:58:00.925
Exactly.

00:58:01.285 --> 00:58:04.415
Louie: And we, John and I, we care
about firefighters future, so we're

00:58:04.415 --> 00:58:08.435
always gonna have an inclination
or a bend towards pushing people

00:58:08.435 --> 00:58:09.785
towards retirement accounts.

00:58:09.785 --> 00:58:11.495
And I think that's for a good reason.

00:58:11.495 --> 00:58:14.675
we want people to invest in their
four 50 sevens or their IRAs.

00:58:14.975 --> 00:58:17.455
Obviously we love people to do
that on the Roth basis so they

00:58:17.455 --> 00:58:19.045
can lock in some low tax rates.

00:58:19.415 --> 00:58:20.705
and so we're always gonna push that.

00:58:20.705 --> 00:58:22.895
But that doesn't mean John and
I both have brokerage accounts.

00:58:22.895 --> 00:58:24.305
We both use our brokerage accounts.

00:58:24.335 --> 00:58:26.745
He just said that he, used his
brokerage account to put some

00:58:26.745 --> 00:58:28.115
money down on a piece of land.

00:58:28.115 --> 00:58:29.915
I did the same thing when
I bought a house last year.

00:58:30.245 --> 00:58:33.575
I sold off some stock investments from
my brokerage account, some index fund

00:58:33.575 --> 00:58:38.585
investments I should say, and used the
proceeds to put a down payment on a house.

00:58:38.585 --> 00:58:40.235
And that is, that was a great thing.

00:58:40.235 --> 00:58:42.665
Like we were very lucky to have that.

00:58:43.085 --> 00:58:45.755
And we have a chunk of money in our
brokerage account that is almost, it's

00:58:45.755 --> 00:58:47.675
not an emergency fund, but it's a.

00:58:48.050 --> 00:58:49.010
It's a comfort fund.

00:58:49.040 --> 00:58:50.960
'cause now we have this unallocated money.

00:58:50.960 --> 00:58:53.630
It's not in YA, it's not something
that I know I'm what I'm gonna do.

00:58:53.870 --> 00:58:55.160
I just know that I have this.

00:58:55.805 --> 00:58:59.135
Chunk of money to be
used for whatever it is.

00:58:59.135 --> 00:59:04.185
If I, if my car catches fire, and
station 13 has to put it out, I know

00:59:04.185 --> 00:59:07.845
that I could go buy another one with
the proceeds from my brokerage account.

00:59:07.845 --> 00:59:11.565
So there's just some good things about
that, that, that gives you some comfort

00:59:11.565 --> 00:59:13.305
to have money that I can access right now.

00:59:13.305 --> 00:59:15.585
So I think for a lot of people, even
though it's not an emergency fund, we

00:59:15.585 --> 00:59:17.175
still have that in a savings account.

00:59:17.505 --> 00:59:21.795
It could be a good way to just save
for some unknown event in the future.

00:59:22.275 --> 00:59:23.265
It's like a war chest.

00:59:23.265 --> 00:59:23.325
Yeah.

00:59:23.445 --> 00:59:23.715
Right.

00:59:23.715 --> 00:59:26.255
Like, you know, something crazy
could happen and I'm just gonna

00:59:26.255 --> 00:59:30.125
keep investing for 10, 15, 20 years
and see what's in that account

00:59:30.215 --> 00:59:31.895
eventually and use it when I need to.

00:59:32.060 --> 00:59:32.420
Jon: Yeah.

00:59:32.420 --> 00:59:35.480
We're at the age now where I know
a lot of people that unfortunately

00:59:35.480 --> 00:59:39.130
they're, they're getting inheritances
right now from parents or grandparents

00:59:39.130 --> 00:59:42.290
that are passing away and they're
getting bequeathed, stocks or whatever,

00:59:42.290 --> 00:59:43.160
and they're getting this money.

00:59:43.160 --> 00:59:46.880
And that's where I've seen a lot of people
start to use that and be like, okay,

00:59:46.880 --> 00:59:48.290
I've just got this pool of money now.

00:59:48.290 --> 00:59:49.340
What am I supposed to do with that?

00:59:49.340 --> 00:59:51.820
And then they'll open up a
brokerage account and use that for

00:59:51.820 --> 00:59:53.080
their investing, which is great.

00:59:53.080 --> 00:59:56.770
Which is a, an amazing opportunity, for
taking that money and hopefully using

00:59:56.770 --> 00:59:59.200
it wisely towards your financial future.

00:59:59.350 --> 01:00:00.790
So that was the goal.

01:00:01.030 --> 01:00:03.640
But other than that though,
man, big weekend coming up.

01:00:04.120 --> 01:00:04.630
go pack.

01:00:04.630 --> 01:00:05.230
Go baby.

01:00:05.230 --> 01:00:05.290
Go

01:00:05.395 --> 01:00:05.615
Louie: Go.

01:00:05.675 --> 01:00:06.315
Broncos country.

01:00:06.855 --> 01:00:07.595
Jon: Go pack, go.

01:00:07.840 --> 01:00:10.240
No, thanks again for everyone, listening.

01:00:10.600 --> 01:00:13.090
Hey, happy holidays,
however you celebrate that.

01:00:13.150 --> 01:00:14.170
I truly mean that.

01:00:14.170 --> 01:00:18.040
We hope to see many of you at
the, soiree coming up tomorrow

01:00:18.100 --> 01:00:22.030
on Saturday for the, the holiday
party, I should say, for West Metro.

01:00:22.030 --> 01:00:23.320
be safe out there.

01:00:23.420 --> 01:00:26.230
man, I just really hope you get
to spend, this, really cherished

01:00:26.230 --> 01:00:29.500
time of the year with, friends and
family and reflect back on all the

01:00:29.500 --> 01:00:30.790
things that are important to you.

01:00:31.210 --> 01:00:34.870
And, hopefully you can set your
financial goals and strategies to

01:00:34.870 --> 01:00:37.460
meet those, similar, priorities.

01:00:38.375 --> 01:00:38.675
Louie: Yep.

01:00:38.825 --> 01:00:39.935
Stay safe, keep saving.

01:00:40.085 --> 01:00:40.595
Merry Christmas.

01:00:43.465 --> 01:00:46.795
The Fiscal Firehouse Podcast is
a podcast curated specifically

01:00:46.795 --> 01:00:48.535
for local 1309 members.

01:00:48.655 --> 01:00:52.345
This podcast is for informational
and educational purposes only,

01:00:52.555 --> 01:00:55.465
and should not be construed as
professional financial advice.

01:00:55.615 --> 01:00:58.345
Should you need professional
advice, consult a licensed

01:00:58.465 --> 01:01:00.865
financial advisor or tax advisor.

01:01:01.045 --> 01:01:04.915
The opinions of John Beatty, Louis
Barilla and their castmates are

01:01:04.915 --> 01:01:08.155
solely their own, and don't reflect
that of West Metro Fire Rescue.