(beeping) (upbeat music) - Welcome back to Portfolio Rescue, our show where you send us the questions, we try to provide some context, some research, maybe some answers if we can. Remember our email is askthecompoundshow@gmail.com. Today's show brought to you by Innovator ETFs. Duncan, my one rule of thumb when it comes to investing, if you don't understand something, don't invest in it.

So we've been talking about Innovator ETFs to find outcome strategies. I think some people probably don't understand these. Like what are the outcomes? So Innovator has this education tab on their website that walks you through the options. So they have these basically four different kinds of options strategies you can do.

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So hopefully like a downside and then an upside. And then they have a floor, which means a level that the portfolio won't be able to be below an outcome period. So they have all these things you can look at and you can click on each one of these tabs and it shows you kind of on the graph how it works.

So anyway, they have this huge education tab on their website. They have all these videos. It's worth checking out if you wanna understand more about these. To learn more, visit innovatoretfs.com. All right, Duncan, we've got some questions today that deal with people who have a decent amount of wealth in their life and they still have problems and they're worrying about what to do.

And I think some people look at these kinds of problems. You have a seven figure portfolio, you have a 50% savings rate or whatever. What's wrong with you? Why are you complaining? And I get that sentiment, but also as someone who's worked in wealth management long enough, I know that there's a psychological component to people who have a decent amount of wealth in their life and still can't force themselves to spend or enjoy it.

And as a financial advisor, it's bizarre, but that is almost part of your job is to help people enjoy their money a little bit. So I just wanna warn people, there's a couple not to brags on here. People still have problems, but everyone has their own cross to bear.

- Also, I don't know if you know, but there are plenty of wealthy people who are miserable. - It's true. I do know that. Listen, follow billionaires on Twitter. I know, none of them are happy. All right, so let's do the first one. - Okay, so first we have a question from Gabe.

We're used to seeing financial planning advice based on a constant savings rate over long periods of time, but I'm trying to reconcile this with the realities of life. For context, we are a married couple in our mid thirties who strive for a savings rate of 30% of gross income.

Prior to becoming parents and purchasing a home, ages 30 to 35, we were living significantly below our means and had a savings rate of 40 to 45%, far above our 30% goal. However, after purchasing a home and paying for childcare, our savings rate has dropped to 20 to 25%, and we were feeling guilty about this because it feels like we have succumbed to lifestyle creep.

Is this just a natural shift where the savings rate drops until children attend public school? We're curious to hear how savings rates evolve over time with life events, and want to make sure we stay on the right path. - I love this. - It sounds like they've done a good job overall.

- Yeah, I love this question. They seem to have things figured out pretty good. This doesn't sound like lifestyle creep to me. This sounds like life. This is kind of what happens, right? No one saves a certain percentage of their income starting at age 25 and saves until they're 65, that same exact amount, because life doesn't work in a linear fashion like that.

That's only in personal finance books and fire blogs, right? Life is messier than that. So Fidelity put out this report a few years ago, and they really got online people angry with them. John, let's do a chart on here. Fidelity did this study, and they said, "Basically, we figured out if you're gonna retire at 67, "you need 10 times your current income." And they said, "All right, along the way, "at 30, 35, 40, 45, this is how much you need to save." And so I think they said, "If you're 30, you need to have one times your salary, "35, two times." And people got really, really mad about this.

Now, they get to this answer by assuming you save 15% of your income beginning at age 25, invest more than 50% in a stock portfolio, and then maintain your pre-retirement lifestyle in retirement. That's a lot of assumptions, and they even give some caveats on here. People, of course, no one really read this study, maybe except for me, and they use a lot of assumptions, but it's important to remember that it's never this easy.

Everyone's life is way messier. You change jobs, you make more money, you make less money, you get a bonus, maybe you get laid off, you move into a house, you have kids, you have unexpected expenses, you have healthcare scares, all this stuff. Like, there's gonna be things that happen in your life that cause your savings rate to fluctuate, good or bad.

The first house I lived in came with an unfinished basement. We spent a year finishing the basement. It was expensive, and my savings rate dipped because of it. I've mentioned this many times on the show. People are probably sick of me talking about it. We had three kids in daycare for two years.

My savings rate got, it suffered quite a bit from that, 'cause it was expensive. This person's dealing with that, too. I think the good thing is, it sounds like they're over the hump for these big things. Once you're in a house and you fix your payment, you can kind of plan better, right?

Obviously, a house is, there's other expenses that come along with it, but taxes don't move up all that much from year to year. It's pretty, it's below 2%, I think, for most places, and your mortgage payment's fixed. Hopefully, you got in under 4% or something before rates shot up too high, and if not, maybe you can refine this in a few years, but now you can plan a little better, and you know that in four to five years, the kids are gonna go to preschool and kindergarten, and when that happens, you're effectively giving yourself a raise, and the good thing about fixing your house payment is, it's not like rent, like you, sorry, Duncan, don't mean to twist the knife in the wound here, or salt in the wound, but that fixed payment is gonna be, that's something you can plan on now, and if you make more money over time, if your mortgage payment is fixed, hopefully, you can increase your savings over time, and that helps.

I still think that, it's probably what happened was, 40 to 45% is probably too high, especially for someone in their 30s, that's probably too high of a savings rate. You should be enjoying yourself a little more, and the good thing is, you left yourself a margin of safety, where you were able to go from 45% to 25%, and that's still higher than, I don't know, 98% of the population in terms of a savings rate, so I think you're probably just fine here, because you gave yourself that margin of safety, and you can always probably slowly tick it up over time.

I've mentioned on the show a few times, my goal for most people is just to get it to double digits, but life is messy like that, and it's gonna ebb and flow, and go up and down based on what happens, but I mean, if I just rented and didn't have kids, could my savings rate be way higher?

Sure, but that's not the life that I've chosen to live, so it kinda depends what you're trying to do here. - Yeah, and I mean, we're the compound, so I feel like we'd be remiss not mentioning, it sounds like they did a smart thing by saving a lot earlier on, right?

And so now, given that, something in the market that can compound, which is nice. - That's a good thing, because saving more early, we've looked at the examples of this, right? Saving more early can help you later on, because you get the compounding wind at your back, so that happens.

All right, people are saying that I look like a grizzly bear with my beard. - I like it, I think it looks good. - Do grizzly bears have this kind of white in their beard like me? I don't think so, all right. Let's do another one. Okay, up next, we have a question from John.

I heard Michael say recently that he had moved all of his cash on Marcus to a municipal bond ETF. Moving from a 1.6% yield to a 3.5% makes sense, but what about the total return? If rates keep rising, then the principle of those bond funds will go down. I've been buying a short-term bond fund recently, but the return continues to go down because of rising rates.

With an online savings account, you don't have that problem. Should I move all of my online savings to short-term bonds? Am I missing something? My math is always so confusing to me. I have so much trouble with this. - Well, here's the thing. All else equal, short-term bonds should protect you more against rising rates than long-term bonds.

Long-term bonds are getting hammered right now. Short-term bonds are getting hit a little bit. John, do a chart on here. This is two different short-term bond funds. Vanguard short-term bond fund and iShares, one to three-year treasury bond. And this is their drawdown since the start of the rate rise.

So you can see the Vanguard one is down 6%, iShares is down 4%. The reason for that difference is Vanguard holds some corporate bonds. I think 25% of the fund is in corporates and other types of bonds, whereas the iShares one is just strictly government. And so that's kind of the difference there.

But short-term bonds do protect you more against rising rates than long-term bonds. But you're still gonna have some interest rate risk if money, if rates rise. That can't be, sorry, that's never gonna go away unless you're ultra short. And that's what online savings accounts effectively are. There's no interest rate risk.

But the trade-off here is what do you want more, yield or safety? With an online savings account, you're going to get more safety 'cause there is no interest rate risk. They can lower and raise the rates, but they're not gonna be affected by bond yields changing and the prices changing.

So if you want no interest rate risk, put it in an online savings account, maybe a CD, because you know what that rate's going to be. And if you're willing to accept some minor fluctuations in prices and you want higher yields, that's the trade-off. So you could get three to 3.5% right now in a short-term bond fund, whereas I think the range for online savings accounts now is something like 1.75 to two, probably, depending on where you get it.

Ally, SoFi, Capital One, all those different places. You can chop around a little bit. So that's the trade-off. Are you looking for that yield that's higher and also gonna lead to some price fluctuations? Or do you want the safety of no interest rate risk and you're gonna have to accept a lower yield?

That's a trade-off. - Do you think we'll see, you were talking about this on yesterday's Animal Spirits. Do you think we'll see some regulation at some point on banks mandating a certain yield spread or something? 'Cause you were talking about what they're getting and then what they're giving to the consumer is very, very different.

- No, probably not. I don't think they-- - Probably not, okay. - No, the banks probably have enough money to, they can set the rates whatever they want. If they have enough deposits coming in, it's basically a function of deposits. Banks have so much money in deposits, they don't have to pay out high rates of savings right now.

Someone showed actually a conversion on Twitter this morning saying, "When the Fed funds rate was this high in 2018, "the online savings accounts "were like 25 to 50 basis points higher." So they've just kind of decided, "Hey, you know what? "We're not gonna raise the rates as much. "We have enough demand.

"We have enough deposits. "We're fine. "We don't need to pay." So when they need to bring more money in, then they raise the yields. It's kind of a function of supply and demand more than anything. - Gotcha. Makes sense, I guess. - Let's do another one. Yeah. - Okay, so up next we have a question from Tim.

Okay. I'm 50 years old and in my peak earning years. However, the pandemic has made me rethink my retirement plan. I want to move to a low-cost country where my parents live. They're in their 70s and relatively healthy. I want to spend more time with them before they become too old to do anything.

If I sell my house now, I will have roughly $2 million between my 401(k), IRA, and brokerage accounts. I intend to implement a three-bucket strategy with most equity investment and index funds. My living expenses in the low-cost country will be about $20,000 a year, assuming no big surprises. I already bought a small condo there.

I also plan to incur $20,000 of taxes per year to do a Roth conversion after I retire. You're gonna have to explain that part. I have no idea what they're talking about. I may move back to the U.S. after 10 to 20 years, but it's difficult to predict the exact timing.

I'm a bit scared to pull the trigger seeing the current market volatility and knowing I won't get another job with the same salary if I quit now. What are your thoughts? What am I missing in my plan? All right, so this is another lifestyle question. And again, someone might look at this and say, "Oh, you have $2 million.

"Boo-hoo, tough choice." But it's a choice nonetheless. This is a big shift, obviously. And I think good on this person for choosing family over work. I actually find that very noble. Here's the thing. I think if you make this type of move, you have 10 to 20 years to figure something out and think about your next step, that's a very long time.

And you're worried about finding another salary. Who knows what your life is gonna look like then? And it's possible with that much money, you may not have to find another job. You have plenty of time here. So the fact that your living standards are gonna drop so precipitously for moving to a low-cost country, that helps you a ton.

So $20,000 to live. I don't wanna get into the tax stuff. They're talking about doing a Roth conversion. They're following the Bill Sweet plan here. They're taking some of those traditional IRA or 401(k) balances and converting them to Roths. I'll leave that one to Bill someday. But I mean, I guess I don't know what the career has to be here, but remote work probably makes it easier than ever to find something.

But even if you don't, you're still with $2 million at age 50, you're fine. So if you take 20K out of a $2 million portfolio, that's 1% spending rate. That's absurdly low. And again, life doesn't happen in a straight line, but let's do a simple straight line calculation here because it's just easier.

So I know why they do that. So let's say you take that 20K and your lifestyle is gonna increase more than you think. So let's put in a 5% inflation rate every year, right? For spending because who knows what's gonna happen and maybe you just wanna enjoy yourself a little more in this new country.

So I'm building in a margin of safety. And let's assume you're investing this money relatively conservatively in your bucket. So we're only gonna assume a 4% annual return, right? I'm being very conservative here because I wanna leave a margin of safety if they're not gonna be working. And actually with bonds at 3% now, a 60/40 portfolio, Duncan, what would you have to earn in the stock market to get a 4% return?

Do some math. Is that Gal Panaka's gift? - I have no idea. - Four and a half percent in the stock market. It's not that bad. So if you took that $20,000 out initially in year one and then increased it by 5% every year, so you're spending like $250,000 over 10 years, you still have a portfolio worth $2.6 million after 10 years with that growth, only 4%.

And what if you were able to find a job in that place that could cover your cost of living, $20,000, right? It might be a part-time job even. You leave your portfolio alone, earns that same 4%, you're close to $3 million now. 20 years, if you do the same thing, spend that money each year, take that 1% out and increase it by 5% for inflation, you're gonna have $3.6 million after 20 years.

If you don't touch it, you're gonna have more than $4 million. So this person, they've already saved enough to put themselves in such a good position that no matter what they do, they'd be fine. They might never have to find a job again, depending on their level of spending, if and when they decide to move back to the US.

I'm sure this is the kind of move that's pretty scary, but it sounds like they're doing it for the right reasons and also in a good financial position to do it. So it sounds to me like they're gonna be okay. And I think, again, depending on what the career is, a potential remote work could make it so they could bring in enough income on the side to cover those small living expenses and be fine and leave that portfolio alone for a while.

Duncan, question for you. How far would 20,000 a year get you in New York? Is that like Tuesday night happy hour once a week? - No, I mean, it's at least three or four months of that. - Okay. All right, but I think this person is probably in a better situation than they realize, especially, 'cause this is like geographic arbitrage, right?

They have a lot of money, they're selling their house, they're probably selling it for a decent chunk of change, and they're moving to a place with a low cost of living. This is the dream for a lot of people. - Do you have any guesses on where they're moving?

- A bunch of people say Central America or Mexico in the comments. That makes sense to me. - So I saw recently on a list for the number one best place to retire is Portugal. So I wonder, Portugal's, I mean, relatively low cost compared to a lot of places.

- Well, right now, the Euro's going down, the dollar's going up for right now, that might work. But yeah, I'm guessing it's somewhere in like Central or South America. - Right. - All right, let's do another one. - Okay. So up next, we have a question from Adam. A substantial portion of my wealth, 30 to 50%, is going to accumulate in public company RSUs over the next few years.

But my company is down like every other one right now. My original plan was to hold the stock for a few years, let it recover, and pay long-term capital gains. But now I'm wondering if I'm putting half of my eggs in one basket and it would be better to just accept the debt in RSU value and sell right away to convert to a broad market index fund and pay short-term capital gains for selling RSU grants as I get them to buy the dip in the overall market.

And for our young and new investors, maybe explain what an RSU even is. - All right, restricted stock unit. We get a lot of questions about this. And it's actually more complicated than you'd think. So let's bring an advisor in here who actually has dealt with this with a number of clients.

Please welcome to the show our very own Joey Fishman. Joey's an advisor here at RWM out in Oregon. - Hey, Joey. - See, his background looks just like Duncan's in Brooklyn. You can tell. So Joey, you've dealt with a number of clients that have this situation where a majority of their net worth is going to be in their company.

That could be a terrible situation if something goes wrong because not only is their income tied up there, but potentially their net worth. So how do you think about this in terms of, I know I need to diversify here, but I also have to deal with taxes and all this other stuff.

So how do you start off on this when planning something like this? - Yeah, let me just sort of like restate Adam's question to help sort of simplify, 'cause it sounds like he's getting part of his compensation includes RSUs or equity compensation. And so he's not accumulating these RSUs, he's being granted them as part of his compensation.

And so it sounds like the sum total of that comp of those RSUs are 30 to 50% of his total net worth. And at the same time, each time that they vest, they're vesting into a down market. So instead of like trying to triangulate a strategy for Adam here, I think the better approach is to look at the three considerations that Adam probably needs to first discuss.

And that is, A, is he saving enough? Like is he maxing out his 401k, his HSA, his IRAs, his taxable accounts in a way that's still keeping him on track so if these shares get vaporized, he's still on track to meet his retirement goals and objectives. The other thing to think about for Adam is that losses typically hit multiple times harder than the joy of gain.

And so if he's vesting into a down market, I mean that the value of these shares are declining each and every day. So that in and of itself is hard to stomach. And then the other component is being exposed to this much equity comp and this much of your net worth tied up in a single stock.

Is it putting you in a position where you're gonna, you know, a position of empowerment or strength? And the reality is is that, you know, most folks that we work with, I'd say that they sell about 90% of their RSUs as they vest. And the remaining 10%, we either have an edge or we just wanna fish and cut bait.

The other thing that Adam may just wanna consider if he hasn't really done a full on financial plan is maybe just figuring out, you know, at what point or at what age does he wanna have enough money so he doesn't have to worry about working again. Maybe not retirement, but just at that age when he's gonna have enough money, he doesn't have to worry anymore.

Maybe that should be the mark of, you know, maybe that should be the goal if he doesn't have like a family and figuring out all those long-term. - So most people you work with, they wanna sell right away because they say, I know what this value is now. I don't know what it might be in three, six, nine, 12 months.

So I wanna just take what I have now. I'm not gonna have to worry about it and let it hang over me. And then they have that 10%, which we've talked about in the past as like almost like a fun account where you're kind of, so that gives you a little bit of upside if things turn around and go well for that company, right?

- Absolutely. And you know, look, if Adam's gonna continue to work there, and especially if he's gonna hold out long enough to go through the entire vesting period, which is about four years, he's probably gonna get an equity refresh anyhow. So if he sells, you know, what he's got now into weakness, what's to say that the next grant isn't gonna be at higher prices?

- Right, so he's, it sounds like a problem, but in a pretty good position here because there could be more of that backfill along the way if he misses out on some gains if the stock market comes back. - Yeah, he's in a great spot, he really is. - All right, we have another one.

Oh, go ahead. - I was gonna say, I wouldn't worry so much about the tax consequences in this scenario. It's, you know, it's not the worst thing in the world to have an accumulation of tax loss carry forwards that you can then use down the road to neutralize capital gains.

So I think Adam's better off figuring out like what his goals and objectives are and letting, and not letting the tax component mag the dog. - Well said. Okay, let's do another one, which is kind of similar, but in a different company environment. - Okay, I'm an employee at a private startup.

The company is in its growth phase, series C or D, and I've vested almost all of my stock. I'm in my 30s, earn a little over $100,000 a year, single with no kids. I have no debt and saved about $180,000, mostly in index funds. My dilemma is that I don't know how much of my stock options I should exercise.

I've already exercised some, but there's a lot left on the table. The cost of exercising wouldn't be that much, but I believe the tax bill could be very significant, potentially tens of thousands of dollars. Depending on the current valuation of a company, or yeah, depending on the current valuation of a company, if the company has a decent exit, I stand to make at least a few million dollars, but if the company goes under, the shares and tax burden of exercising wouldn't change my lifestyle, but would definitely sting quite a bit.

There's no science behind this, but gut feeling is that there's a 60% chance this company makes it to IPO. Any advice for startup employees like me? The whole system is ridiculously opaque for anyone not on the board, and advice on this topic is all over the place. Unless I can sell some shares, which requires board approval to cover the tax burden, then it seems like the only choice here is to either leave money on the table, or take a significant amount of risk.

Are there any other paths I'm overlooking? - Okay, see, I told you this stuff was complicated, and I think with a startup, it's even more complicated. The funny thing is, 15 months ago, I'm sure there was a lot of startup people just counting their money, and just waiting for the IPO to happen, or some sort of liquidity event, and they were ready to buy houses, and Lambos, or whatever, and now their shares are probably down 80% or something, and this person says, "Well, I still think we'd get to an IPO," so what do they have to do here?

Because the last question we were talking about was someone who works for a public company. Now, public companies can go to zero. It's happened before. Typically, it doesn't happen overnight. A startup could get vaporized overnight, almost, or you could lose your jobs. - Absolutely. - So this person is saying, "Listen, if I take these stock options, "and I pay the taxes on them, it could still be worthless, "and then I paid taxes, and now it's not worth anything, "so I'm getting screwed twice," so what did the thought process look like here?

- This is a hard one. Private companies are especially hard to work with. It's kind of like winning the financial lottery, only you can't access the money until you circumvent this needle threading and obstacle course in order to actually have access to it, so this is one area where, in financial planning, it's long on tactics, but it's really short on logistics, and I think our friend here, we'll call him private company friend, I think the point with which they should start taking action is when they know for sure that it's gonna IPO because the two objectives that they should have is A, figuring out ways to avoid AMT taxes, which potentially could present themselves, and then also, they wanna start the process of beginning qualifying for what's called a qualified disposition, and in that scenario, essentially, our friend here would be able to liquidate his or her shares at a preferred tax rate.

The challenge with doing this or embarking upon this strategy has been just what you articulated, it's like, "Look, I could be converting "or exercising these shares, paying taxes on it, "only to see that money that I laid out "being completely vaporized." So what I like about this person's situation is that they make $100,000 a year.

I did some back-of-the-envelope calculations just to see like, okay, hypothetically, if they were to have an exit and they were to have to pay AMT taxes, look, at the end of the day, if there's a $2 million exit and this person walks away with 1.1, that's like 11 times their annual spending, so I guess what I'm saying is that I wouldn't let the uncertainty of it all overwhelm you.

I think I would really keep it simple, find someone to work with that can help take apart the actual tax liabilities. That, actually, that's the easiest part to do, dealing with the uncertainty of the various paths with which this company could exit, could IPO. - But you're saying if they have time to wait a little longer, depending on when they have to exercise these options, that makes sense because then you can get a little more certainty beyond that 60%, or whatever they're thinking right now.

- Yes, because they're so far down the road, like they're on series C or D, so they're pretty far down the road to go in towards IPO. It's late in the game, so my sense is that when those shares were originally granted, it was probably at a really low-cost basis relative to the value of the firm.

I'm sure now that they've had multiple rounds over and over again, the firm's value has increased significantly, so when they do go to exercise those shares, they've been granted, essentially, the opportunity to pay $10,000 for $100,000 worth of value. So in that scenario, they're gonna owe taxes on 90 grand because that's the spread between the current value versus what the share price is.

- And the other thing, the roll of the dice, if there's ever a person who's ready for a roll of the dice, it's someone who's making six figures, no kids, no debt, so it would obviously still sting if this went badly, but you're in a position, as a young person, and you already took a risk by working for a private startup, to take that other risk and then see the, the asymmetry is to the upside here, if things go well.

Like, your downside is capped, your upside is huge. Like, the downside compared to the upside, that's, we're not talking-- - Not necessarily. - Down subprime back here. - Yeah, not necessarily. I mean, if they go for a traditional IPO, those shares are gonna be locked up for six months.

Chances are, the value's gonna get absolutely shellacked after it does IPO, and then when the lockup comes, they could be realizing those shares at a significantly depressed value versus what it was pre-IPO. - Joey, Duncan is holding out for growth stock comeback here. (laughs) Have a little faith that some of those growth stocks on the IPO are actually gonna do well for once.

- Okay, that's the other thing, too, is you don't wanna look at the last 10 years and use that as your benchmark, or as your frame of reference, like this next decade-- - But yeah, but this whole process, this is like a shameless plug for the wealth management industry, but because this is such a stressful process, this is why you want someone working with you that can help you work through something like this and think about the different paths forward.

- We've taken this apart six ways to Sunday, and the reality is there's no direct path towards saying this is the specific strategy that you can undertake. Instead, it's going to be very much dependent upon the facts on the ground at the time with which the liquidity is going to be available to you, and then making the decision then, unfortunately.

- Yeah, I'm a little confused just reading the question. I can't imagine if I had a job at a startup and I was offered all this. - There are some startups that are helping out with this kind of stuff now, but this person is right. There is not a lot of help for people on the ground, especially who are just, people think of the CEOs of these places who are gonna be fine either way, but the regular rank-and-file employees who could be making a life-changing amount of money, it's not easy for them.

- When a lot of times-- - It's super frustrating. - It's a significant portion of our comp, right, at a lot of these companies. - Yeah, yeah, that's the upside thing, yeah. - Yeah, yeah. All right, Duncan, let's do one more on our favorite topic on portfolio risk. - Yeah, I was so excited to see iBonds.

I'm still waiting on us to get a sponsorship from iBonds. (laughing) Okay, so up last we have Amy writing, this year is the first time my husband and I have ever invested in Series I savings bonds, but the $10,000 limit is kind of a bummer. We don't have any kids yet.

Are there any other ways we could get around this limit to put more money into these bonds? - All right, Amy's been paying attention here. We've been talking about this a lot. We've covered in the past that you have this $10,000 limit. If you have kids, you could do one for each of them.

Joe, you've looked into this. What are some other options here if they want to get that sweet, what is it, 9.6% right now, annualized? - Yeah, 9.2%, something like that. Yeah, it's funny. There's two things that need to happen with Series I bonds. One is that we need to raise the fixed rate.

We have to find a way to lobby Yellen to raise the fixed rate. And then the second thing, they need to, they should definitely raise the amount of limit, you know, the contribution limits. - Yes, raise the cap to 25 grand, come on. - Yeah, at minimum. For these folks, just to sort of like reiterate, if you have, you know, an individual social security number, you're allowed to buy $10,000.

If you file your taxes and the IRS owes you up to $5,000 per entity or per spouse, you are allowed to take $5,000 from your refund from the IRS, have it sent to Treasury, and Treasury's gonna then issue $5,000 or up to of Series I bonds. They're gonna be paper bonds.

You'll have to go through the process of changing those paper bonds to electronics. That's a little bit arduous. It's not surprising if you've dealt with Treasury direct sweats. - How many years will that take for you to receive this? - No, it's actually, it'll come fairly quickly. It's the actual process of converting them from paper to electric.

That's the one, or electronic, I should say. That's the one that takes a while. So, you know, between the two of them, they can be doing $30,000 a year. The other entities that are probably more accessible to them is single managed member LLCs. You know, trust irrevocable or revocable are both eligible to open up Series I bonds accounts.

You know, Bill Sweet and I, and actually Bill Artsaruna and I, we've had a lot of discussions about this. You know, if this person has a hobby, I think her name is Amy. If Amy has a hobby where she ekes out just a little bit of money or some kind of business from it, I mean, technically she could open up an LLC, use whatever income that's fed through that hobby to afford the cost of opening up an LLC.

- As long as you have like the what, the EIN number? As long as you have one of those, you can- - EIN number, exactly, exactly. Now, in the state of California, it's $800 to incorporate or to open up an LLC. That's egregious. It's gonna be hard, I think, to execute on opening up a single managed member LLC.

- I think I pay like 170 a year to keep my LLC going. - In Michigan, yeah. - In Michigan. - That sounds about right, yeah. So it depends on which state you live in, but if it's relatively inexpensive to incorporate or create an LLC, why not? - Yeah, okay, yeah.

It would just be nice if they said, you know what, we're gonna throw people a bone and just for a year or two because inflation is so bad. But- - Yeah. - And the kids part of that question was, you're saying that, so people can buy in their kids- - You can buy in your kids, yeah, yeah.

- Okay, I see. - There are some caveats, like if you're gonna use it for college and your income is within a certain threshold, there's a certain way with which you have to title the Series I bond so that when they take distributions, it'll be tax-free 'cause it's gonna then be used for educational purposes.

It's a little bit of a different conversation that requires more nuance, but. - Okay, Joey, one more question from the chat here. People wanna know, where are you calling in from? 'Cause I see the beautiful background there. Where are we at? - Bend, Oregon. - That's not Brooklyn. - All right, so this is Bend, Oregon and I'm sitting on top of an eight by 10 trailer that's on, I think there's four wheels on it.

And so the reason that it's on a trailer is 'cause where it's presently parked is where a utility easement is. So like, I'm sure you guys have all seen like those big green electric boxes outside, like on your front lawn. I have something similar over here and the challenge was that the only place where I could put the office was where the easement is.

And so if the power company ends up needing to access this area, I just hook it up to the car and then pull it away. - You have a mobile office. - A mobile office, yeah. So my neighbor, Uncle D and brother Kyle are expert carpenters and so they did most of it for me.

I did the inside, but yeah, that's cool. - Tiny houses or tiny offices. All right, thanks to Joey for coming on and helping us with stock grants and Sears iSavings Bonds, we appreciate it. If you're watching on YouTube, remember hit that subscribe button. Leave us a comment, leave us a question on YouTube.

We've been getting a lot of them in the chat lately too. Got some compound merch. We have a new t-shirt, a chart on shirt. I'm waiting for mine in the mail still, Duncan, it's coming. I ordered it, it's not quite there yet. There you go, a nice new shirt.

Very '90s, it looks like "Saved by the Bell" themed possibly. - Yeah, we were talking like arcade, like yeah, '80s, '90s arcade kind of vibe. - I like it. Keep those comments and questions coming. Remember our email is askthecompoundshow@gmail.com and we will see you next week. - See you, everyone.

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